Increased Demand / Decreased Supply Drive Oil Higher The April 15, 2019 Oil Price Dynamics Report, published by the Federal Reserve Bank of New York, tracks supply and demand-related changes to oil price (given their national focus, Brent Crude prices are tracked instead of West Texas Intermediate).  Year to date, changes in the nation’s oil…

ValueScope’s Oil and Gas Price Outlook: March 15, 2019 Don’t trust Wall Street soothsayers—if you want to predict the future of oil and gas prices, rely on probabilities and not a crystal ball.  Wall Street analysts can run large macroeconomic models to predict future prices, but they are all predicated on numerous assumptions, both macro…

A Tale of Two Permian’s While much of the press is focused on “the Permian,” current activity in the Permian is focused on two different sub basins: the Delaware Basin to the West and the Midland Basin to the East.  While there is a Central Basin Platform in between, most of the current activity is…

Satellite Imagery in the Permian The December 2018 issue of the Journal of Petroleum Technology (the Society of Petroleum Engineers’ monthly magazine) had a very interesting piece on the use of satellites to track activity in the Permian basin.1 Companies such as Sourcewater, Planet, and Westwood Global Energy Group are stepping up to monitor the…

Decomposing Oil Prices The Federal Reserve Bank of New York’s Research & Statistics Group publishes a weekly Oil Price Dynamics Report1 which provides some interesting insights into global oil price movements. The chart below shows the relationship between supply and demand on a cumulative basis for the last half of 2018.  Given this analysis considers…

Lions, Bears and Ducks, Oh My!1 Well there are no lions, but Bear Markets and Drilled Uncompleted wells (“DUC wells” pronounced “Ducks”) in the Permian are moving oil prices this month.  Bear Markets for Oil Prices: WTI and Brent Oil prices are in Bear Market territory this month, having had a 2 standard deviation downward…

Oil Prices: Supply, Demand and the S&P 500 It is common knowledge that oil is a commodity, with what economists describe as “elastic pricing” set by the markets.  The following supply and demand factors consistently move oil (and natural gas) prices and are the focus of Wall Street analysts and academics, both in the long…

Permian Activity Flattening / Growth is Moderating Given Pipeline Constraints Although the Permian rig count has continued to climb to over 500 drilling rigs running, new well completions in the play have flattened out month over month as in-basin transportation constraints begin to materialize.1   As shown in a recent EIA report graphics below, the…

Oil Price Forecasts Diverge According to a recent Credit Suisse analyst report,1 the investment bank forecasts longer term oil and gas prices at $65.00 per barrel, approximately $9.00 above the Nymex Futures strip pricing and the Bloomberg Consensus forecast.  All three of the forecasts, however, show that the markets expect oil prices to remain in…

Geopolitics and the Strategic Petroleum Reserve On May 8, 2018, The Trump administration declared that the United States was withdrawing from the Joint Comprehensive Plan of Action (the Iran nuclear deal) that lifted economic sanctions upon Iran, most notably restriction on Iran’s oil imported to the US.1  Furthermore, the U.S. threatened to put pressure on…

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