37.5 F
Fort Worth
Friday, December 4, 2020
Energy Investor honeymoon with OPEC falters as shale drilling booms

Investor honeymoon with OPEC falters as shale drilling booms

Other News

Closing prices for crude oil, gold and other commodities

The Associated Press Benchmark U.S. crude oil for September delivery rose 31 cents to settle at $41.60 a barrel Monday. Brent crude oil for...

Trump to discuss energy, tour oil rig, raise money in Texas

By DARLENE SUPERVILLE Associated PressWASHINGTON (AP) — President Donald Trump will shift his focus to American energy dominance during a stop in Texas later...

Basic Energy Services makes organizational changes

Fort Worth-based Basic Energy Services, Inc. (OTCQX: BASX) in late May announced the implementation of changes to the organizational structure of the company, reducing...

Texas oil producers were cutting output before Railroad Commission chose not to, Commissioner Christi Craddick says

By Cassandra PollockMay 12, 2020 Texas Railroad Commissioner Christi Craddick on Tuesday doubled down on the agency’s recent decision to not cut oil production and...

There are limits to investors’ love affair with OPEC.

After unprecedented optimism that the Organization of Petroleum Exporting Countries will manage to ease a global supply glut, money managers reduced their bets on rising West Texas Intermediate prices for the first time in a month. While the group and other major exporters are pumping less crude, U.S. inventories and production are on the rise, and shale drillers keep adding rigs. The U.S. benchmark has traded mostly between $50 and $55 a barrel for the last two months.

“There’s starting to be fatigue about the range we’ve been trading in,” John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said by telephone. “It won’t be summer until we break out to the upside.”

OPEC achieved the best compliance rate in its history at the outset of its accord to cut production, a plan that’s being supported by strong demand, the International Energy Agency said in a Feb. 10 report. In the past, OPEC often struggled to fully deliver promised cuts due to a reluctance to lose income and market share. Former Saudi Oil Minister Ali al-Naimi said on Dec. 2 that, in the history of OPEC deals, “the unfortunate part is we tend to cheat.”

Meanwhile, U.S. producers last week extended the biggest surge in oil drilling in more than four years as the prolific shale plays of Texas and Oklahoma lure investment from Exxon Mobil Corp. and Continental Resources Inc.

U.S. crude output climbed to 8.98 million barrels a day in the week ended Feb. 3, according to the Energy Information Administration. That’s an increase of about half a million barrels a day from last year’s low, and the agency expects production to keep climbing to reach 9.53 million a day next year, the most since 1970.

Hedge funds cut their net-long position, or the difference between bets on a price increase and wagers on a decline, by 5.4 percent in the week ended Feb. 7, U.S. Commodity Futures Trading Commission data show. WTI slipped 1.2 percent to $52.17 a barrel in the report week, and closed at $53.86 on Feb. 10. It was trading at $53.53 a barrel, down 33 cents, on Monday at 11:15 a.m. London time.

Money managers’ net-long position in WTI decreased by 20,540 futures and options to 359,387. Longs fell 1.8 percent, while shorts climbed 26 percent, the biggest gain in three months.

“The shorts increased, which shows that there are investors willing to bet that the OPEC production cuts are fully priced into the market and that the oil bulls are vulnerable to bearish news,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by telephone.

As they boost output, U.S. oil producers are hedging their price risk for this year and 2018. Producers’ short positions, protecting against a drop in prices, increased to 707,498 futures and options, the most since August 2007, according to the CFTC.

Pioneer Natural Resources Co. plans to continue being a “heavy hedger,” Chief Operating Officer Tim Dove said last week. The company raised its drilling budget more than expected and is expanding its fleet of rigs in the Permian Basin. Pioneer’s hedges provide upside to about $62 a barrel, Dove said.

OPEC implemented 90 percent of promised output cuts in January, the first month of its agreement, according to the IEA. Eleven non-OPEC members who joined the agreement have made about half their pledged reductions, the agency said.

“I think that we will be looking at the reverse of this report in a week,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “The IEA report on compliance has dispelled doubts about OPEC’s adherence.”


close






Oh hi there 👋 It’s nice to meet you.

Sign up to receive awesome content in your inbox.

We don’t spam! Read our privacy policy for more info.


close






Oh hi there 👋
It’s nice to meet you.

Sign up to receive awesome content in your inbox.

We don’t spam! Read our privacy policy for more info.

Latest News

New Mexico research group adds ExxonMobil as sponsor

LAS CRUCES, N.M. (AP) — A research group focused on the potential for reusing wastewater produced during oil and gas operations is getting some...

Legendary Fort Worth oil man, TCU supporter Dick Lowe dies

Legendary Fort Worth oil man and TCU supporter Richard L. "Dick" Lowe passed away Sunday, Nov. 29. He was 92. Lowe made and lost fortunes...

Members of oil cartel to meet as coronavirus rattles demand

By CATHY BUSSEWITZ AP Business WriterNEW YORK (AP) — Leaders of the OPEC cartel are meeting virtually to decide, once again, how much oil...

New Mexico to require details of water for oil well drilling

ALBUQUERQUE, N.M. (AP) — New Mexico oil and gas operators will be required to report the amount and quality of water used to drill...

Venezuela judge convicts 6 American oil execs, orders prison

By SCOTT SMITH ASSOCIATED PRESSCARACAS, Venezuela (AP) — Six American oil executives held for three years in Venezuela were found guilty of corruption charges...