Category Archives: Free Market

This article appeared online at TheNewAmerican.com on Monday, November 12, 2018:

Following the emergency meeting attended over the weekend by members of the OPEC cartel and its non-members in Abu Dhabi, Saudi Arabia’s Energy Minister Khalid al-Falih said “We need to do whatever it takes to balance the oil market.” That goal is indicative of OPEC’s increasing nervousness that it is running out of options to counter increasing U.S. oil production. Last month, the EIA (Energy Information Administration) announced that the United States now leads the world in crude oil production, ahead of both Saudi Arabia and Russia.

For many years, the cartel was able to dictate oil policy and prices globally, bending the world oil markets to the cartel’s needs and purposes. Ten years ago,

This article was published by The McAlvany Intelligence Advisor on Monday, November 12, 2018:  

In this space a week ago, this writer panned King Hubbard’s “Peak Oil” theory as fracking technology and favorable market conditions for U.S. producers continued to drive world crude oil prices lower. In early October, the price of oil for November delivery was over $76 a barrel. At the market close on Friday, November 2, the price for December delivery was below $63, pushing the oil market close to bear market territory.

The oil market continued its remarkable decline, with December oil futures trading at the close on Friday, November 9, below $60 a barrel.

This has gotten the attention of the oil ministers of OPEC and its hangers-on (like Russia and Oman), and on Saturday they held an emergency meeting in Abu Dhabi, UAE to see what could be done to stop the decline. On Sunday, Saudi Arabia’s oil minister told Oman’s oil minister that, come December, the cartel will cut oil production by a million barrels a day.

Everything was running along smoothly right up through August.

This article appeared online at TheNewAmerican.com on Monday, November 5, 2018: 

In an interview with CNNMoney in June, Pioneer Natural Resources Chairman Scott Sheffield said he expected U.S. crude oil production to surpass 11 million barrels a day by this fall, making the United States the world’s top oil producer. Right on schedule the Energy Information Administration announced on Thursday that the U.S. oil industry produced 11.3 million barrels of crude oil a day during August, an increase of 416,000 barrels from the previous month and topping production from Saudi Arabia and Russia. That level of crude oil production is more than 2 million barrels a day ahead of August 2017, the largest increase over any 12-month period in U.S. history.

Sheffield told CNNMoney that “we’ll be at 13 [million] very quickly” and predicted that that number could jump to 15 million in a very few years.

On Wednesday U.S. Interior Secretary Ryan Zinke told Fox News that officially “today we are the largest oil and gas producer on the face of the planet, rolling through 11 million … on our way to 14.”

In less than 10 years, thanks largely to the development of, and continued improvement to, fracking technology, U.S. crude oil production has more than doubled, from 5 million bpd (barrels per day) in 2008 to more than 11 million today.

This has immediate as well as long-term ramifications that extend far beyond gas prices at the pump.

This article was published by The McAlvany Intelligence Advisor on Monday, November 5, 2018: 

When M. King Hubbard concluded in 1956 that the world would shortly run out of oil, his theory was adopted by environmentalists and government meddlers as the basis for interference in the energy business.

Hubbard’s theory initially predicted that U.S. crude oil production would peak at around 1970. Revisions to the theory pushed the peak date out to 2000 when U.S. crude would hit 12.5 billion barrels per year and then start its inevitable and irreversible decline.

For 2018, U.S. crude oil production will hit 30 billion barrels. So much for Hubbard’s “peak oil” predictions.

But, as Eric Peters (who blogs at EricPetersAutos.com) laments, government interference based on the discredited “peak oil” theory remains firmly in place:

This article appeared online at TheNewAmerican.com on Wednesday, July 11, 2018:

The U.S. Energy Information Administration (EIA) proclaimed on Tuesday that, if its forecasts are correct, “the United States will average nearly 12 million barrels a day (mbd) … in 2019 … mak[ing] the U.S. the world’s leading producer of crude [oil].”

Those forecasts could understate the U.S. oil industry’s production, as it builds into its calculations the present bottlenecks of pipeline capacity, being experienced especially in the Permian Basin.

One month ago, IHS Markit, the global information marketplace, focused on what’s happening in the Permian Basin and concluded that, even with those bottlenecks currently slowing the flow of crude from wellheads to refineries along the Gulf Coast, it expects a “stunning” increase in production there between now and 2023. Total crude-oil production will nearly double over that time to 5.4 mbd once the 41,000 new wells and $308 billion in new investment have been completed. Said Daniel Yergin, IHS Markit’s vice chairman: “In the past 24 months, production from just this one region — the Permian — has grown far more than any other entire country in the world. Add in another 3 mbd by 2023 — more than the total present-day production of Kuwait — and you have a level of production that exceeds the current production of every OPEC nation, except Saudi Arabia.”

One key assumption IHS Markit is making is that oil prices will stay around $60 a barrel or higher. And its forecast is “far from a best case” scenario, according to Raoul LeBlanc, HIS Markit’s executive director, who added, “That the outlook still expects the Permian to exceed existing (and already lofty) expectations speaks to the region’s unique and growing prominence in the world’s oil market. The level of growth — from 0.92 mbd in 2010 to 5.4 mbd in 2023 — is truly stunning.

The New American made just such a prediction about the U.S. oil industry way back in 1990, as we noted in a 2015 article:

This article was published by The McAlvany Intelligence Advisor on Wednesday, July 4, 2018:  

Scott Sheffield, the Chairman of Pioneer Natural Resources, was interviewed by CNNMoney on June 20. At that moment in time, according to the U.S. Energy Information Administration (IEA), the U.S. oil industry was pumping 10.3 million barrels a day (bpd). By the time the interview ended and the article was published, the latest report for that week on U.S. crude oil production showed Sheffield and CNNMoney already dreadfully out of touch: U.S. production that week topped 10.9 million bpd, with little to keep new records from being set on a weekly basis going forward.

Sheffield, the head of an oil company with revenues exceeding $5 billion and assets in recoverable oil reserves approaching $20 billion, went on to say that he expects U.S. crude oil production to surpass 11 million bpd “within the next three or four months.” It looks like that milestone will be exceeded this month. He went on to predict that,

This article was published by The McAlvany Intelligence Advisor on Monday, June 25, 2018:  

It’s premature to consider the weekend meeting of OPEC in Vienna as the cartel’s final death rattle. However, it’s clear that its effort to end its production cut agreement amounted to little more than birthing a gnat.

The meeting was supposed to be contentious, with Iran, Libya, and Venezuela promising to scuttle any agreement to raise crude oil production. Oil ministers arrived in Vienna days before the official opening in order to quell that opposition and enlist support. Investors anxiously waited for the final announcement, ready to trade on the news.

Most expected the cartel to end the agreement by promising to raise production by a million barrels of oil a day, reversing the 1.8 million bpd production cut agreement that was installed in January 2017. But after all was said and done, the net “effective” increase is only about 600,000, and that agreement hadn’t been inked by the end of the meeting.

Call it a relief rally:

This article appeared online at TheNewAmerican.com on Sunday, June 24, 2018:  

Crude oil prices rose nearly five-percent in a single day Friday, when OPEC, meeting in Vienna, failed to raise production as much as many feared.

The last time the price of crude oil for future delivery jumped this much was when OPEC announced its decision in November 2016 to cut production. That agreement, met at the time with much skepticism that the cartel could enforce it, was to remove about 1.8 million barrels a day of world supplies. Trading at $50 a barrel in early November 2016, crude oil for future delivery jumped to $57 a barrel by January 1, 2016.

Then reality, helped along by U.S. share producers, set in, with new supplies pushing crude oil futures down to $45 a barrel by July 2016.

The same scenario could play out once again:

This article appeared online at TheNewAmerican.com on Wednesday, May 30, 2018:

Within minutes of comments made by Saudi Arabia’s oil minister on Friday, crude oil prices for present and future delivery dropped like a stone. By the end of trading on Tuesday, crude oil had lost more than six percent of its value, ending just above $65 a barrel, down from over $70.

What spooked the markets were these comments from energy minister Khalid Al-Falih, made during a panel discussion on energy on Friday: