While oil prices have stabilized somewhat in recent months, there are good reasons to believe they won’t return to the high levels that preceded their historic collapse two years ago. For one thing, shale oil production has permanently added to supply at lower prices. For another, demand will be curtailed by slower growth in emerging markets and global efforts to cut down on carbon emissions. It all adds up to a “new normal” for oil.

The “new” oil supply

Shale has been a game changer. Unexpectedly strong shale-oil production of 5 million barrels per day contributed to the global supply glut. That, along with the surprising decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep production unchanged, contributed to the oil price collapse that started in June 2014.

Although the price collapse led to a massive cut in oil investment, production was slow to respond, keeping supply in excess. What’s more, the resilience of shale production to lower prices again surprised market participants, leading to even lower prices in 2015. Shale drillers significantly cut costs by improving efficiency, allowing major players to avoid bankruptcy. While reduced investment is expected to result in lower production by non-OPEC countries in 2016, production still exceeds consumption. Many experts expect oil markets to balance in 2017, albeit with high level of inventory (Chart 1). That said, there is uncertainty regarding supply, especially regarding the cost associated with extraction as well as production from so-called shale “fracklog”—drilled but uncompleted wells. The latter can add to production flows in a matter of weeks and hence considerably change the dynamics of production compared to conventional oil—that features long lead times between investment and production.

Against that backdrop, OPEC countries and Russia have been increasing output, and Iran’s return to markets has added even more supply. (While OPEC members have recently agreed to cut production, that agreement is yet to be finalized.) There are other factors at play. Recent data suggest that shale-oil production may be once again more resilient than expected. And the anticipation of an OPEC production cut in cooperation with other exporters has boosted prices to the level that will further stimulate output by many shale producers.

The “new” oil demand

Falling prices spurred oil-demand growth, which rose to a record high of about 1.8 million barrels per day in 2015. That’s expected to slow to the trend level of 1.2 million barrels per day in 2016 and 2017. Using basic estimates for demand elasticity with respect to price suggests the “price effect” accounts for a 0.8 million-barrel per day increase in demand. A sizable share of oil demand growth is attributable to the price drop rather than income gains. With limited scope for further declines in prices in dollar terms, increases in oil demand will depend largely on prospects for global economic growth.

The outlook for demand growth isn’t encouraging. In the past couple of years, oil demand has been driven by China and other emerging-market and developing countries. While China accounts for just 15 percent of world oil consumption, its contribution to oil demand growth is significant (Chart 2) because its economy is growing much faster than those of advanced nations (the same is true of some other developing nations). Further slowdowns in emerging and advanced economies can change the demand picture significantly. Structural shifts in emerging economies, especially China’s effort to shift from an investment and export led growth model to a domestic demand led growth model, can also potentially have major implications.

Over the medium to long run, the transition away from oil and other fossil fuels further clouds the outlook for oil demand albeit lower prices may delay the transition. Energy policies will have to be altered significantly to meet the goals set at the December 2015 Paris Climate Conference (COP21), and a significant portion of oil reserves will have to remain under the ground and unburned. Lack of clarity about the specific actions needed to achieve those goals only adds to uncertainty about the oil-demand outlook.

Granted, futures markets point to slight gains in oil prices. But a glance at shifts in futures-price curves in the past few months suggests that the prospects for higher prices have been worsening (see Chart 3). That shouldn’t come as a surprise. Downward revisions to global growth forecasts, especially for emerging markets, offset supporting factors, such as the growth in oil demand buoyed by lower prices in the past year. Turmoil in financial markets, plus a strong dollar, has put downward pressure on oil prices. These trends, along with the secular drop in petroleum consumption in advanced economies and the growth of shale, all point to a “lower for longer” scenario for oil prices.

https://blog-imfdirect.imf.org/2016/10/27/a-new-normal-for-the-oil-market/

Oil declined for a second day as OPEC’s internal disagreements undermined efforts among major suppliers to reach an agreement in Vienna on trimming output to support prices.

Futures fell as much as 1.1 percent in New York after sliding 2.1 percent at the end of last week. The Organization of Petroleum Exporting Countries ended a meeting on Friday without reaching a deal on country quotas, according to delegates who took part in the discussions. Non-OPEC nations finished talks with the group on Saturday without any supply commitments, Brazil’s Oil and Gas Secretary Marcio Felix said. Brazil attended as an observer.

Oil has fluctuated near $50 a barrel amid uncertainty over whether OPEC can implement the first supply cuts in eight years at its official November meeting. As the gathering opened in Vienna last week, OPEC Secretary-General Mohammed Barkindo warned of the consequences if producers don’t follow through on an agreement to reduce output. The price recovery has already taken far too long and suppliers can’t risk delaying it further, he said.

“Talks over the weekend make it seem less likely there will be an agreement on production cuts,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market has probably made a fair bit of the adjustment, but I wouldn’t be surprised to see oil fall further into the $47 range.”

OPEC agreed in Algiers last month to trim output to a range of 32.5 million to 33 million barrels a day and is due to finalize the deal at its Nov. 30 summit in Vienna. The accord helped push prices to a 15-month high above $50 a barrel earlier this month, although they have subsequently fallen amid doubts the group will follow through on the pledge. More than 18 hours of talks over two days in the Austrian capital this weekend yielded little more than a promise that the world’s largest producers would keep on talking.

Some progress was made at the Friday meeting on the methodology to be used for allocating output quotas to OPEC members, said one delegate, who asked not to be identified because the talks were private. Russia reiterated that it’s willing to freeze production, rather than cut, but only if there is an OPEC agreement first, according to participants in Saturday’s meeting.

http://www.bloomberg.com/news/articles/2016-10-30/oil-extends-decline-as-opec-splits-prevent-deal-to-curb-supply

THIS WEEK WE ARE NOT GOING TO PUBLISH THE #OPEC EXPORT FIGURES........THEY'RE TOO STRATOSPHERIC FOR OUR CREDIBILITY.

@Samir_Madan

Libya Crude Oil Production Rises to 640k B/D: NOC Official

@staunovo

Iraq published data showing a rare level of detail for its oil production and exports, a week after inviting energy reporters to Baghdad to make a case that the country is pumping more crude than analysts and OPEC acknowledge.

The country’s state oil marketing agency released a statement on Sunday showing September production figures for each of the 26 fields it controls, plus a single output figure for the semi-autonomous Kurdish region, which manages its crude independently. Previous monthly statements showed just two figures: total production and total exports. The Oil Marketing Co., known as SOMO, also provided detailed data on exports and domestic consumption.

OPEC’s second-largest producer says it pumped more than 4.7 million barrels a day last month, several hundred thousand barrels a day more than oil-industry watchers recognize. The Organization of Petroleum Exporting Countries assesses output for its 14 members based on such secondary sources. Iraq wants the group to accept the ministry’s figures before a Nov. 30 meeting at which OPEC could limit production for its members.

Oil Minister Jabbar al-Luaibi complained about OPEC data at a meeting in September in Algiers. He adopted a milder approach last week, inviting reporters to Baghdad for a tour of the national museum and a detailed discussion of production figures. “We want you to see for yourselves what our production is,” he said on Oct. 23.

Transparency Push

The field-specific data for September sheds light on how SOMO calculates Iraqi production. However, it doesn’t provide a breakdown of Kurdish production, which accounts for much of the difference between the data cited by SOMO and secondary sources.

“It’s an effort of transparency and backing up their numbers, but I’m not quite sure how effective it’s going to be,” Robin Mills, chief executive officer of consultant Qamar Energy, said by phone from Dubai. “The biggest discrepancy is likely to be in the Kurdish fields.”

Production from the Kurdish enclave in northern Iraq averaged 546,000 barrels a day last month, according to SOMO. That figure is an estimate because the central government has not received the latest production data from Kurdish authorities, SOMO Director General Falah Al-Amri said last week. SOMO bases its estimate on what Kurdish production was in 2013 and 2014, he said.

In the north of the country, the Kirkuk and Baba Gurgur fields produced 93,000 barrels a day for the federal North Oil Co., SOMO said. The nearby Bai Hasan and Avana fields pumped 275,000 barrels a day for the NOC.

The BP Plc-operated Rumaila oil field, Iraq’s largest, pumped an average of 1.4 million barrels a day in September, SOMO said. The two fields at West Qurna produced a combined 870,000 barrels a day, while output from Zubair was 390,000; Majnoon, 214,000; and Halfaya, 204,000.

http://www.bloomberg.com/news/articles/2016-10-30/iraq-reveals-oilfields-output-to-win-over-opec-ahead-of-meeting

Russia’s Gazprom is on the verge of striking a deal with EU regulators to settle a half-decade old dispute over natural gas pricing, and the resolution could change the way Gazprom does business and lead to lower gas prices for much of Eastern Europe.

The conflict began back in 2011 when EU antitrust regulators began investigating Gazprom for anticompetitive behavior, citing Gazprom’s practice of pricing natural gas differently to different countries depending on how compliant they were to Moscow. The EU Commission launched a formal investigation that ultimately led to negotiations, which were temporarily put on ice after Russia’s takeover of Crimea.

The details are arcane, but Gazprom is about to offer concessions to the EU in order to avoid potentially having to pay billions of dollars in fines. These include allowing recipients of Russian gas to resell that gas. Gazprom has opposed that practice because it undercuts their ability to demand certain prices from individual customers and countries. Gazprom and Russia were much happier under the old system, in which they could sign an array of bilateral deals on an individual basis, rather than negotiating with European countries collectively. That allowed the company to tie gas contracts to political aims – should a European country lend its support to a Russian cause, such as a pipeline, they would receive better terms.

That leads to the second concession that Gazprom will have to grant Europe: they will have to charge customers similar rates for natural gas. But the agreement stops short of entirely breaking Gazprom’s practice of linking gas prices to oil prices.

“We are now putting the final touch to our commitment proposal. It will be sent to the European Commission shortly,” Alexander Medvedev, Gazprom’s deputy chairman, said this week after meeting with the EU’s top antitrust official, Margrethe Vestager. The deal is not yet secured – it still needs to be reviewed by European countries – but if it is, Gazprom will avoid having to pay billions of dollars in fines. However, the agreement could then become legally binding, subjecting Gazprom to European law, something it has objected to up until now. Gazprom would have to pay fines if it violates the terms of the agreement.

The settlement would seem to bolster relations between Russia and Europe, which had become strained in recent years after the conflict in Ukraine. Some countries in Eastern Europe are wary of such a thaw and have demanded a much tougher line from European officials. Others in Europe that are at odds with Russia’s actions in Ukraine and Syria are not eager to soften the tone either. To be sure, the settlement over the antitrust charges still needs to survive input from European governments. Poland, in particular, is not happy with the deal. “These decisions pose a real threat to the stability of gas supplies to central and eastern Europe,” the Polish state-owned oil and gas company PGNiG said in a statement.

Resolving the conflict could also lead to more Russian gas flowing into Europe, which already depends on Russia for about one-third of its gas needs. Russia is hoping to double the gas flows through the Nord Stream pipeline, hoping to gain some market share in a market that is no longer growing. Again, European officials, especially in Eastern Europe, are not keen to see a greater reliance on Russian gas. But the business interests involved in building the expansion of the Nord Stream pipeline, as well as German officials who feel comfortable with Russia as a reliable source of energy, are pushing the deal forward.

“Another missing point of these puzzles is the future of Nord Stream 2,” a Polish official told the FT. “Now, it looks like they give the Russians too much.”

Overall, though, the deal would solidify some changes already underway. Gazprom has already begun to link its gas prices closer to hub prices. It needs to do that anyway because it is seeing increased competition from other sources of natural gas, particularly LNG. The U.S. began sending LNG to Europe, and several new LNG ships and import terminals are allowing a few European countries, such as Lithuania, to gain leverage over Gazprom. No longer at the mercy of one supplier, parts of Europe are becoming emboldened to demand lower gas prices from Russia. Whether EU officials will force Gazprom’s hand or not, the Russian gas giant will be forced to keep a lid on its gas prices if it wants to avoid losing market share.

http://oilprice.com/Energy/Natural-Gas/The-Beginning-Of-The-End-For-Europes-Natural-Gas-War.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29

Gazprom has approved the 2017 – 2019 programme for the construction of gas filling infrastructure at the industrial sites of Gazprom subsidiaries, as well as the development programme for small scale LNG production and use.

Gazprom stated that the broader use of gas as a vehicle fuel was a priority for in the company’s domestic market. The current share of natural gas vehicles (NGVs) throughout Gazprom subsidiaries accounts for 26% (approximately 7200 vehicles) of the group’s vehicle fleet. Gazprom plans to increase this share up to 70% by the end of 2020.

The approved Program for the construction of gas filling infrastructure outlines a set of measures for converting Gazprom’s vehicle fleet to natural gas and installing gas filling units at the industrial sites of the group’s subsidiaries.

Gazprom added that LNG production and marketing remains an important part of the company’s efforts aimed at expanding the domestic NGV market. The company sees vast potential for using LNG as a fuel in motor vehicles for long-distance passenger and cargo transportation, in water and rail transport, and in mining and agricultural industries.

The development programme for small scale LNG production and use includes a list of gas distribution stations (GDSs) and liquefaction technologies most suitable for LNG production. The document provides for the construction of new marketing infrastructure, namely fixed cryogenic filling facilities and mobile LNG filling stations.

The company is currently working on a number of pilot projects for using LNG in transport.

https://www.lngindustry.com/small-scale-lng/28102016/gazprom-approves-small-scale-lng-production-development-programme/

The European Commission confirmed on Friday it had lifted limits on Gazprom's use of a key link from its offshore Nord Stream pipeline to Germany, allowing Russia to pump more gas supplies to Europe bypassing traditional routes via Ukraine.

The decision allows Gazprom to bid for an additional 7.7 and 10.2 billion cubic meters (bcm) more volumes at auction on top of its existing access to half of the Opal pipeline's capacity, a Commission official said.

As Reuters exclusively reported, it requires at least 10 percent and as much as 20 percent of capacity be made available to other suppliers. If there is no demand, Gazprom would then also be allowed to bid for those volumes as well.

The Commission's decision modifies a proposal by German regulators in May that would have given Gazprom almost full access to the pipeline, with only between 4 and 8 percent reserves for rivals.

"The European Commission has today adopted stricter exemption conditions for the operation of the Opal gas pipeline," it said in a statement.

Under an EU ruling to prevent energy suppliers from dominating infrastructure, Gazprom has only been allowed to use 50 percent of Opal, which provides a land link from Russia's undersea Nord Stream pipeline to Germany and the Czech Republic.

A condition for Gazprom to have full access to Opal, under the earlier exemption, was for it to implement a gas release program for 3 bcm.

http://www.reuters.com/article/us-eu-gazprom-opal-decision-idUSKCN12S21Y

Exxon Mobil Corporation (NYSE:XOM) today announced estimated third quarter 2016 earnings of $2.7 billion, or $0.63 per diluted share, compared with $4.2 billion a year earlier. Results reflect lower refining margins and commodity prices.

“ExxonMobil’s integrated business continues to deliver solid results,” said Rex W. Tillerson, chairman and chief executive officer. “While the operating environment remains challenging, the company continues to focus on capturing efficiencies, advancing strategic investments, and creating long-term shareholder value.”

During the quarter, Upstream earnings were $620 million. Volumes for the quarter declined 3 percent to 3.8 million oil-equivalent barrels per day compared with a year ago, due to unplanned downtime, primarily in Nigeria, and field decline partially offset by increased production from recent project start-ups.

Third quarter Chemical earnings of $1.2 billion, comparable with prior year results, reflect higher maintenance costs, partially offset by increased specialty product sales. Downstream earnings declined to $1.2 billion primarily due to weaker refining margins.

During the quarter, capital and exploration expenses were reduced by 45 percent to $4.2 billion.

The corporation distributed $3.1 billion in dividends to shareholders in the third quarter.

Third Quarter 2016 Highlights

 
•Earnings of $2.7 billion decreased $1.6 billion, or 38 percent, from the third quarter of 2015.
 
•Earnings per share assuming dilution were $0.63.
 
•Cash flow from operations and asset sales was $6.3 billion, including proceeds associated with asset sales of $1 billion.
 
•Capital and exploration expenditures were $4.2 billion, down 45 percent from the third quarter of 2015.
 
•Oil-equivalent production was 3.8 million oil-equivalent barrels per day, with liquids down 5.1 percent and natural gas up 0.8 percent.
 
•The corporation distributed $3.1 billion in dividends to shareholders.
 
•Dividends per share of $0.75 increased 2.7 percent compared with the third quarter of 2015.
 
•ExxonMobil and InterOil Corporation announced an agreed transaction worth more than $2.5 billion, under which ExxonMobil will acquire all of the outstanding shares of InterOil. The acquisition will give ExxonMobil access to InterOil’s resource base, which includes interests in six licenses in Papua New Guinea covering about four million acres. The transaction is pending the outcome of a shareholder appeal of the court decision approving the transaction.
 
•ExxonMobil Kazakhstan Ventures Inc., a 25 percent shareholder in Tengizchevroil LLP, has approved the final investment decision for the Future Growth and Wellhead Pressure Management Project as part of the next expansion phase of the Tengiz oil field.
 
•In Guyana, the Liza-3 appraisal well was successfully completed in October, confirming a world-class resource discovery in excess of 1 billion oil-equivalent barrels. Also in October, the Owowo-3 exploration well, located offshore Nigeria, confirmed a discovery of 500 million to 1 billion barrels of oil.
 
•ExxonMobil announced plans to increase production of ultra-low sulfur fuels at the Beaumont, Texas, refinery by approximately 40,000 barrels per day. The new unit will use proprietary technology to remove sulfur while minimizing octane loss, and will ensure gasoline meets the latest environmental standards.
 
•The company announced plans to expand its specialty elastomers plant in Newport, Wales. The project is expected to be completed in late 2017 and will result in a 25 percent increase in global capacity to manufacture Santoprene thermoplastic vulcanizate, high-performance elastomers used for automotive, industrial and consumer applications.
 
•ExxonMobil and Saudi Basic Industries Corporation (SABIC) are considering the potential development of a jointly owned petrochemical complex on the U.S. Gulf Coast. The project would include a steam cracker and derivative units, and would be located in Texas or Louisiana near natural gas feedstock. A final investment decision will be made upon completion of necessary studies.
 
•During the quarter, the company announced new developments in its relationships with the Georgia Institute of Technology, Princeton University and the University of Texas at Austin to pursue technologies to help meet growing energy demand while reducing environmental impacts and the risk of climate change.

http://www.businesswire.com/news/home/20161028005445/en/ExxonMobil-Earns-2.7-Billion-Quarter-2016

PetroChina Co. posted a 77 percent decline in third-quarter profit as a suppressed international oil market and lower domestic natural gas prices eroded earnings at the country’s biggest producer.

Net income fell to 1.2 billion yuan ($177 million) in the July-September period, the Beijing-based company said in a statementto the Hong Kong stock exchange on Friday. Higher earnings from refining and chemicals were overwhelmed by losses on production and weaker performance from its natural gas and pipelines units. Revenue dropped 3.8 percent to 411.4 billion yuan.

“PetroChina has done a good job controlling costs and managed to get a small profit despite lower crude prices in the third quarter,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Oil prices should be significantly higher in the fourth quarter, which will help improve PetroChina’s profit in the winter, especially if the government raises natural gas prices.”

The state-owned company dominates the oil and gas industry of the world’s largest energy consumer. It pumps more crude than its domestic rivals, China Petroleum and Chemical Corp. and Cnooc Ltd., and is the country’s second-biggest refiner. It imports the bulk of the country’s natural gas and operates a pipeline system that stretches from China’s western borders with Central Asian nations to the population centers along the east coast.

During the third quarter, the company swung to an operating loss of 1.5 billion yuan from exploration and production, according to Bloomberg calculations based on the company’s half-year and nine-month data. PetroChina doesn’t release third-quarter operational figures. Earnings from natural gas and pipeline operations fell 39 percent to 6.4 billion yuan, while refining, chemicals and marketing surged to a 9 billion yuan gain from a 5.4 billion yuan loss a year ago, Bloomberg calculations showed.

‘Decrease Substantially’

As the country’s largest natural gas producer and distributor, the company is vulnerable to changes in government-set prices. The administration of President Xi Jinping cut prices twice last year in an effort to encourage consumption, most-recently in Novemberwhen they were lowered by roughly one-quarter.

PetroChina, which posted its first-ever quarterly loss in the January-March period this year, barely managed to break even in the first half of the year even after booking a 24.5 billion yuan one-off gain from pipeline sales. Net income during the first nine months of the year fell 94 percent to 1.73 billion yuan, the company said Friday. Full-year results are expected to “decrease substantially” from 2015, it said in the statement.

Brent oil, the global oil benchmark, averaged about $47 a barrel during the third quarter, down roughly 8 percent from the same period a year ago. PetroChina in August cut its domestic crude output target for this year to 103 million tons (about 755 million barrels), from 106 million tons set at the beginning of the year, as it shut some high-cost fields.

Sliding Output

Total oil and gas production in the third quarter dropped about 4 percent from the same period last year to 353 million barrels of oil equivalent, according to Bloomberg calculations. The company refined 224.5 million barrels of crude, down 8.7 percent from a year ago.

China’s total crude output fell 6.1 percent in the first nine months of the year, helping spur record-high imports as the country’s reliance on overseas supply rises. Output by the world’s biggest consumer after the U.S. will stabilize with prices around $50 a barrel and may not rebound until they are above $60, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said earlier this month.

PetroChina’s domestic crude production in the third quarter slid almost 7 percent at 189.9 million barrels, Bloomberg calculations showed, while production during the first nine months of the year totaled 575 million barrels, down 5.1 percent.

Capital expenditures during the third quarter dropped 27 percent to 63 billion yuan, according to Bloomberg calculations. Spending during the first three quarters totaled 114 billion yuan, down 23 percent from the same period last year, according to the statement Friday. Lifting costs during the nine-month period were down 9.9 percent to $11.56 a barrel, while the company’s realized oil price during that period was down 30 percent at $35.79 a barrel, it said in filing Friday.

PetroChina shares fell 0.6 percent to HK$5.38 before the release of its earnings. The stock has gained 5.9 percent this year, compared with a 4.8 percent rise in the city’s benchmark Hang Seng Index.

China Petroleum, known as Sinopec, said Thursday that third-quarter profit rose sixfold to 10.2 billion yuan as refining gains helped overcome deepening losses from oil and gas production. Cnooc, China’s biggest offshore oil and gas producer, reported Wednesday a 15 percent fall in third-quarter sales as output and capital spending declined.

http://www.bloomberg.com/news/articles/2016-10-28/petrochina-quarterly-profit-drops-77-amid-oil-s-sustained-slump

"We have made progress toward our goals of lowering the cash breakeven in our upstream business and getting cash balanced," Chairman and CEO John Watson said in a statement. "Capital spending and operating and administrative expenses have been reduced by over $10 billion from the first nine months of 2015 as a result of a series of deliberate actions we have taken."

The oil company reported third-quarter earnings of $1.3 billion, or 68 cents a share, on revenues of $30.14 billion. That profit was down 37 percent from a year ago, when Chevron reported earnings of $2 billion, or $1.09 a share, on revenue of $34.3 billion.

Analyst had forecast earnings of 37 cents on revenue of $30.3 billion.

Chevron has reduced capital spending and expenditures on exploration by about $8 billion year to date. Spending on upstream exploration and production operations accounted for 91 percent of all expenditures in the third quarter.

Production of oil, natural gas and other fossil fuels ticked down slightly from a year ago. Chevron narrowed its loss in its U.S. upstream business by nearly $400 million due to lower expenses and taxes. The loss was offset by a profit of $666 million in Chevron's international drilling segment, which was up slightly from a year ago.

Earnings in Chevron's U.S. downstream business — which includes refining fuels and products that are marketed to consumers — fell by $727 million from a year ago due to lower margins for refined products. Integrated oil companies such as Chevron have seen their refining margins contract as crude oil prices rise. Crude is the raw material for many fuels.

On Wednesday, Chevron raised its quarterly dividend by a penny to $1.08 a share.

One day earlier, a militant group known as the Niger Delta Avengers claimed responsibility for an attack on a pipeline to the Escravos offshore terminal operated by a Chevron subsidiary. Chevron briefly closed the facility in the spring due to militancy Nigeria's restive southern delta region. The company declined to comment.

Chevron is better-positioned than its larger U.S.-peer ExxonMobil to reap upside from rising oil prices, but a number of large-cap exploration and production companies are likely to outperform both majors, analysts told CNBC's "Power Lunch" on Thursday.

"We think that Chevron just has too much risk right now. It's trying to balance pretty … hefty dividend spending, along with trying to streamline the company, along with trying to grow production. We're worried that production is eventually going to turn into a shortfall," CFRA energy analyst Stewart Glickman said.

Last quarter, a group of integrated oil companies led by Chevron announced it would invest $36.8 billion in a project that will boost production at Kazakhstan's Tengiz field, marking one of the largest investment decisions since the beginning of the oil price downturn.

Chevron has flagged a US$5 billion cost blowout at the under-construction Wheatstone gas-export facility, a further blow after the overrun and delays seen at the energy company's other large gas project in Western Australia.

Read more: http://www.nasdaq.com/article/chevron-lifts-cost-estimate-for-australian-lng-project-20161030-00040#ixzz4OeGnFltR

http://www.cnbc.com/2016/10/28/chevron-earnings-beat-big-trouncing-estimates-by-31-cents-a-share.html?utm_source=twitterfeed&utm_medium=twitter

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India is scouting for new liquefied natural gas contracts globally as part of a push to secure cheap supplies for its under-utilized gas-fired power plants.

Australia, Qatar and Iran could all act as potential suppliers of long-term LNG contracts, Power Minister Piyush Goyal said in Sydney on Thursday. The global search for LNG comes as India’s gas-fired plants, which can generate nearly 25 gigawatts of power, run at less than a quarter of their capacity because of a shortage of the fuel at affordable prices.

“I think gas needs to be between $5 and $5.50 landed at my power plant. That is what I’m looking for in the medium- to long-term,” Goyal said in an interview. “Otherwise I won’t be able to start those gas plants.”

NTPC Ltd., India’s biggest power producer, is said to be seeking to terminate a long-term supply contract for LNG because the fuel is too expensive to be used in power generation. That highlights the country’s difficulty in switching from coal to natural gas for power generation, undermining Prime Minister Narendra Modi’s efforts to cut carbon emissions and promote clean energy.

“As of now I don’t have any credible offer on the table but I’m fairly confident from talking to people across the world that if not Australia, maybe Qatar will give it to me, or Iran might be able to get me something,” Goyal said. “I’ll go to Europe next week to discuss the same thing. I am sure I’ll find a seller.”

Energy consultant Wood Mackenzie Ltd. said India may struggle to attract the interest of LNG producers at those prices.

Australia Investments

“From a LNG producers perspective, India has always been seen as a very price sensitive buyer and not a premium buyer like Japan, Korea or Taiwan,” said Saul Kavonic, an analyst at Wood Mackenzie. “It is a struggle to see why producers would want to lock in such a low price.”

Spot LNG in Singapore rose to $6.542 per million British thermal units this week, the highest since December, according to the Singapore Exchange Ltd. Prices are up more than 65 percent from a low in April.

India is also targeting investments in Australian LNG projects and coking coal mines to secure fresh sources of supply, Goyal said.

“We could buy stakes, we could buy the whole LNG plant itself, we could look at coal mines,” Goyal said.

Petronet LNG Ltd., India’s biggest LNG importer, signed a pactwith Exxon Mobil Corp. in 2009 for supply of 1.5 million tons of the super-chilled fuel for 20 years from the Gorgon LNG project in Australia. Supplies are expected to begin next month.

Goyal also expects Indian companies to boost their investments in Australia despite delays to Adani Enterprises Ltd.’s Carmichael mine in Queensland, which was hampered by environmental protests. The Queensland government earlier this month invoked special powers to accelerate the project.

http://www.bloomberg.com/news/articles/2016-10-27/india-in-global-hunt-for-new-lng-contracts-to-fire-power-plants

Inpex Corporation announced Friday that gas has been found at an exploration well offshore the Shimane and Yamaguchi prefectures in Japan.

Drilling operations, which began on June 5, consisted of drilling to a depth of 9,514 feet below the sea floor at a location approximately 80 miles northwest of Shimane Prefecture and approximately 86 miles north of Yamaguchi Prefecture.

These operations resulted in the discovery of a thin gas reservoir in a shallow zone, as well as some gas indications in deeper zones. Inpex also said that it encountered unexpected, strong gas indications suggesting the presence of a high pressure gas column in the deepest zone.

Based on the findings of a gas reservoir in the shallow zone and gas indications in the deeper and deepest zones in this area, which has not been drilled since the 1980s, Inpex revealed that it will conduct a detailed analysis and evaluation of data obtained in order to continue the exploration of prospects in this region.

http://www.reuters.com/article/jfe-results-idUSL4N1CY1KZ

General Electric Co is nearing an about $30 billion deal to merge its oil and gas business with Baker Hughes Inc., the Wall Street Journal reported on Sunday.

The combined entity will be controlled by GE and would have publicly traded shares, the Journal reported, citing people familiar with the matter.

The deal is to be announced on Monday, the Journal said.

GE said in a statement last week that it was in talks with the oilfield services provider on potential partnerships but none of those options included an outright purchase.

Baker Hughes' planned merger with bigger rival Halliburton Co.  fell through in May due to opposition from regulators.

A partnership with Baker Hughes could help GE to transform its oil and gas division and emerge a larger player in the sector to better compete with oilfield services leader Schlumberger.

Also, this partnership could give Baker Hughes a chance to redefine itself following the failed merger.

http://uk.businessinsider.com/r-ge-nears-about-30-billion-deal-with-baker-hughes-wsj-2016-10?r=US&IR=T

GE to combine Oil and Gas business with Baker Hughes, GE to own 62.5% of new Baker Hughes

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The number of oil rigs in U.S. fields fell by two this week, the first decline in 18 weeks, the Houston oilfield services company Baker Hughes reported Friday. At the same time, U.S. gas drillers collectively sent six more rigs to the patch.

The total rig count climbed to 557, up from a low of 404 in May, the eighth collective rise in 10 weeks. Totals still lag the same period last year, when 775 drilling rigs were operating in U.S. oil and gas fields.

This week, the number of active oil rigs fell two to 441. Gas rigs rose six to 114. The number of offshore rigs slipped one to 22.

Drillers operated 256 rigs in Texas, up two from the week prior. North Dakota added five, Pennsylvania two, Wyoming one. Colorado lost two; New Mexico, three.

Drilling activity has followed the modest rebound in prices, from February’s low of about $26 a barrel to more than $50 over the past week.

http://fuelfix.com/blog/2016/10/28/gas-drillers-send-six-more-rigs-to-patch-oil-loses-two/

The one agreement players seem to have reached is that oil isn’t able to go much higher.

That oil's upside is capped at this point is clear; in fact as both Goldman and Citi have warned, unless OPEC can come to a definitive and auditable agreement - no just another verbal can kicking - in which the member states, by which we mean almost entirely Saudi Arabia as most of the marginal producers are exempt or want to be, immediately curtail production, oil will promptly crash to $40 or below.

But an even more amusing twist is that a plunge in oil prices may be just what US shale producers are waiting for. The reason for that is that while OPEC has been busy desperately jawboning oil higher, US producers have been thinking of the inevitable next step, oil's upcoming reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high.

According to a recent EIA report, short positions in West Texas Intermediate (WTI) crude oil futures contracts held by producers or merchants totaled more than 540,000 contracts as of October 11, 2016, the most since 2007, according to data from the U.S. Commodity Futures Trading Commission (CFTC). Banks have tightened lending standards for some energy companies as crude oil prices declined throughout 2014 and 2015, and some banks require producers to hedge against future price risk as a condition for lending.

Short positions of WTI futures increased at a faster pace than futures contracts of Brent (an international crude oil benchmark) since summer 2016, suggesting U.S. producers are able to drill for oil profitably in the $50 per barrel range. In the Crude Oil Markets Review section of the October Short-Term Energy Outlook(STEO), the U.S. Energy Information Administration (EIA) discusses an increase in U.S. onshore producers’ capital expenditures that is contributing to rising drilling activity, which EIA projects will lead to an increase in U.S. onshore production by the second quarter of 2017.

Which closes the circle of irony: almost exactly two years ago, Saudi Arabia set off a sequence of events with which it hoped to crush US shale producers and its high cost OPEC competitors. It succeeded partially and briefly, however now the remaining US shale companies are more efficient, restructured, have less debt, a far lower all-in cost of production; and - best of all - they will all make a killing the next time oil plunges, as it will once OPEC's hollow gambit is exposed.

Meanwhile, the last shred of OPEC credibility will be crushed, the truly high cost oil exporters within OPEC will suffer sovereign defaults and social unrest, as will Saudi Arabia. The good news for Riyadh is that at least it got a $17.5 billion in fresh cash from a bunch of idiots who will never get repaid. We are curious just how long that cash will last the country which burned through $98 billion just last year, before the threat of social unrest and financial system collapse returns? Two months? Three?#

http://www.zerohedge.com/news/2016-10-27/let-crude-crash-us-oil-producers-are-hedging-levels-not-seen-2007

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