What’s Affecting Oil Prices This Week? (April 3, 2017)
Prior to the beginning of last week, Stratas Advisors forecast that the price of Brent crude would bounce along sideways with support at $50.80. The forecast was based on the expectation that signals of strengthening demand would offset the negative perceptions pertaining to supply.
The forecast was aligned fairly well with the forecast floor, but was more optimistic than the actual price movement throughout the week. The price of Brent crude started the week at $51.76, then fell in the middle of the week to $50.46 before rebounding on Friday to close at $50.90.
Downward pressure came from the Energy Information Agency (EIA), which reported crude inventories increased by 4.954 million barrels the previous week. Additional pressure came from oil traders continuing to decrease their net long positions with decreases in each of the last four weeks.
The firm also forecastthat the Brent-WTI differential would trade between $2 and $2.50 with respect to the May contract. With the increase in crude inventories, the Brent-WTI differential widened beyond expectations. The Brent-WTI differential started the week at $2.45, widened to $2.71 on Monday, and narrowed on Wednesday to $2.60 before widening again to finish the week at $2.83. In comparison, the Brent-WTI differential at the end of February was at $1.58.
For the upcoming week Stratas Advisors is forecasting that the price of Brent crude will be under pressure with support at $50. The firm also expects the Brent-WTI differential will fall back into the range of $2 and $2.50 with respect to the June contract.
Innovation Related To Hydraulic Fracturing Dominates Oil, Gas Patent Arena
The 1876 story of the telephone still haunts: Alexander Graham Bell slid into the patent office with his design before the forgotten Elisha Gray.
As modern-day smartphone patent wars keep intellectual property in the spotlight, the lesson isn’t lost on companies, especially those whose stock and trade is in technology-driven shale plays.
Since 2006, nearly 1,000 patents related to hydraulic fracturing have been filed in the U.S., mostly technology, tools or processes aimed at creating or reinforcing fractures, according to a study released March 29 by the Deloitte Center for Energy Solutions.
“Although the pace of patent filings in the oil and gas sector slowed during the oil market downturn relative to the overall patent universe, it did not actually decline, showing that the sector continues to value innovation for long-term improvement,” Andrew Slaughter, executive director for Deloitte’s Center for Energy Solutions, told Hart Energy in an emailed statement. “In particular, patenting activity involving hydraulic fracturing related technologies actually increased in this most recent period, indicating that companies see scope for ongoing performance enhancement in unconventional resources.”
In 2015 alone, nearly 160 such patents were filed, more than double the number filed in 2006. Service companies show no signs of slowing down. So far in 2017, Schlumberger Ltd. has been awarded 119 patents ranging from directional drilling control devices and methods to monitoring oil based mud filtrate contamination, according to the Justia patents website. Many of the patents were initially filed during the time of Deloitte’s study and granted as recent as March.
Productivity Gains Are No Flash
In The Pan
In spring of 2016 nobody had much to say about the Bakken or Niobrara plays. With oil prices stalled and all eyes on the Permian Basin, these two former powerhouse shale plays were languishing, with very little activity and even less enthusiasm.
Fast forward a year, and that’s starting to change. Oil prices are consistently nudging above the $50 per barrel (bbl) mark, and operators in the shale plays have driven efficiencies to lower their breakeven requirements and remain competitive in a lower-for-longer environment. Two speakers at Hart Energy’s recent DUG Bakken & Niobrara conference in Denver had the numbers to show just how successful they’ve been.
Joe Quoyeser, a senior expert with McKinsey & Co., recalled his early days with ExxonMobil Corp. (NYSE: XOM) looking at the Red River play in North Dakota. “I remember sitting in a geologist’s office in Midland,” Quoyeser said. “I pointed at this section on a well log called the Bakken and said, ‘There’s a lot of oil in here, but we can’t figure out a way to get it out. Some people, mad scientist types, are talking about drilling it horizontally.’ That was 1985.”
Obviously in the intervening 32 years those mad scientists have figured out the recipe, and Quoyeser gave the industry credit for its perseverance.
“It’s obvious that perhaps the most seminal feature of the industry discussion of shale gas and tight oil has been the continuous operational improvement both in cost reduction and productivity improvement in initial rates and ultimate recovery,” he said, adding that he and his colleagues have been studying these “learning curve” dynamics.