Eight factors determining the price of oil

Eight factors determining the price of oil

As put by Kimberly Amadeo in her article on The Behind-the-Scenes Role of Commodities Traders,  Oil prices are controlled by traders who bid on oil futures contracts in the commodities market. That’s why oil prices change daily. It all depends on how trading went that day.

Other entities can only affect the traders’ bidding decisions. These influencers include the U.S. government and the Organization of Petroleum Exporting Countries. They don’t control the prices because traders actually set them in the markets.

The oil futures contracts are agreements to buy or sell oil at a specific date in the future for an agreed-upon price. They are executed on the floor of a commodity exchange by traders who are registered with the Commodities Futures Trading Commission (CFTC). Commodities have been traded for more than 100 years. The CFTC has regulated them since the 1920s in the US and by equivalent institutions in every developed and / or developing country.  It is also function of the following:

The eight factors determining the price of oil

According to the September monthly report of the International Energy Agency (IEA), in August 2018, for the first time, the bar of 100 million barrels produced per day was crossed. World oil consumption represented 97.4 million barrels per day (MBJ) in 2017 (including 57 MBJ by non-OPEC countries), equivalent to 1,127 barrels or 179,000 liters per second. Also, despite the commitments of the Paris Agreement (COP21) of December 2015 (entered into force in November 2016), global awareness for the climate does not seem to reach the oil sector. A list of eight reasons that determine the current course.

  • The first reason, as noted in international reports would be a recovery of growth for 2018, but with a slowdown forecast for 2019 and 2020. Many international experts, as well as international institutions such as the IMF and the World Bank, foresee a possible global crisis horizon 2020/2025 in case of acceleration of protectionist measures between the US and Europe, as well as between the US and China.  Moreover, the latest report of the IEA of October 2018 warns the countries dependent on the oil revenues, due to a change in the trajectory of growth based on a new configuration of the global energy demand (Energy efficiency, renewable energies, hydrogen inlet horizon 2030 all based on the Knowledge economy) that will impact the demand for traditional hydrocarbons.
  • The second reason is respect for the quota of each member of the OPEC as decided upon in December 2016 in Vienna with notably Saudi Arabia representing 33% of OPEC’s. It is worth noting that OPEC in its entirety represents 33% of global marketing, even though the current tensions between Iran and Saudi Arabia can lead to a disagreement between unsatisfied OPEC’s members.
  • The third reason is the agreement between OPEC’s Saudi Arabia and non-OPEC Russia; these two countries producing each more than 10 million barrels per day. Moreover, any different decisions from these two countries would impact the price of hydrocarbons downwards.
  • The fourth reason is the political situation in Saudi Arabia, the world not seeing yet evident in the action of the kingdom’s Crown prince, with the fear of internal political tensions, but above all the sale of 5% shares of the country’s largest company ARAMCO, to maintain its shares at a high level; sale that has been postponed.
  • The fifth reason is the tension in Kurdistan (this area producing about 500,000 barrels/day), declining Venezuelan production, socio-political tensions in Libya and Nigeria.
  • The sixth reason is the American president’s speech on the US having second thoughts on the agreement on Iran nuclear deal; with sanctions beginning to be applied on November 5th, 2018. This would certainly be mitigated by the European position that decided to set up a barter system to circumvent the transactions in Dollars, and the Chinese market or the Iranians can get paid in Yuan.
  • The seventh reason is the weakness of the Dollar in relation to the Euro.
  • The eighth reason is the decline or rise of US stocks, while not forgetting the Chinese stocks.

In the short term, the above eight reasons may influence the price of oil either upward or downward, with some factors being more predominant than others.  The Minister of Energy of Saudi Arabia reported on October 30th, 2018, under American pressure to raise its oil production to 12 million barrels per day against 10.7 million currently, to fill in for the Iranian production and in this case, it will be followed by Russia that does not want to lose market share.  In this hypothesis, the price of Brent should, except for a significant global crisis where the prize could fall below 60 Dollars, fluctuate between 65 and 75 Dollars, 70 Dollars a barrel, being the price of equilibrium in order not to penalise either the consumer countries or the producing ones.  The oil price went lower than $60 mainly as consequent to the massive entry of U.S. shale oil and gas with a production exceeding 10 million barrels/day.

In August 2018, according to the US Energy Information Agency (EIA), the US has even turned into the world’s leading producer of oil, in front of Russia and Saudi Arabia, with 10.9 million barrels per day and this production should even exceed 11.5 million barrels per day in 2019.

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Development of Shale Gas in the Algerian South-Western basins

Development of Shale Gas in the Algerian South-Western basins

In Algiers, the official press agency APS announced in a communiqué that the CEO of SONATRACH, the Algerian State oil company signed an agreement with British Petroleum and Equinor of Norway representatives on the exploration and development of Shale Gas in the Algerian South-Western basins.

Meanwhile, in the US where Shale Gas production has managed to reach unprecedented heights, INSIDE CLIMATE NEWS produced this article of Phil McKenna back on August 15, 2018 “as drillers compete for oil and natural gas, more fluids are going into and out of each fracking well. Researchers warn it’s headed for a tipping point.”

Water Use in Fracking Soars — Exceeding Rise in Fossil Fuels Produced, Study Says

By Phil McKenna

The amount of water used per well jumped as much as 770 percent between 2011 and 2016, researchers say. As fracking expands, its water and wastewater footprints are forecast to continue to balloon. Credit: Mladen Antonov/AFP/Getty Images

As the fracking boom matures, the drilling industry’s use of water and other fluids to produce oil and natural gas has grown dramatically in the past several years, outstripping the growth of the fossil fuels it produces.

A new study published Wednesday in the peer-reviewed journal Science Advances says the trend—a greater environmental toll than previously described—results from recent changes in drilling practices as drillers compete to make new wells more productive. For example, well operators have increased the length of the horizontal portion of wells drilled through shale rock where rich reserves of oil and gas are locked up.

They also have significantly increased the amount of water, sand and other materials they pump into the wells to hydraulically fracture the rock and thus release more hydrocarbons trapped within the shale.

The amount of water used per well in fracking jumped by as much as 770 percent, or nearly 9-fold, between 2011 and 2016, the study says. Even more dramatically, wastewater production in each well’s first year increased up to 15-fold over the same years.

“This is changing the paradigm in terms of what we thought about the water use,” Avner Vengosh, a geochemist at Duke University and a co-author of the study, said. “It’s a different ball game.”

Monika Freyman, a water specialist at the green business advocacy group Ceres, said that in many arid counties such as those in southern Texas, freshwater use for fracking is reaching or exceeding water use for people, agriculture and other industries combined.

“I think some regions are starting to reach those tipping points where they really have to make some pretty tough decisions on how they actually allocate these resources,” she said.

Rapid Water Expansion Started Around 2014

The study looked at six years of data on water use, as well as oil, gas and wastewater production, from more than 12,000 wells across the U.S.

According to Vengosh, the turning point toward a rapid expansion of water use and wastewater came around 2014 or 2015.

The paper’s authors calculated that as fracking expands, its water and wastewater footprints will grow much more.

Wastewater from fracking contains a mix of the water and chemicals initially injected underground and highly saline water from the shale formation deep underground that flows back out of the well. This “formation water” contains other toxics including naturally radioactive material making the wastewater a contamination risk.

The contaminated water is often disposed of by injecting it deep underground. The wastewater injections are believed to have caused thousands of relatively small-scale earthquakes in Oklahoma alone in recent years.

Projected Water Use ‘Not Sustainable’

Jean-Philippe Nicot, a senior research scientist in the Bureau of Economic Geology at the University of Texas at Austin, said the recent surge in water use reported in the study concurs with similar increases he has observed in the Permian Basin of West Texas and New Mexico, the largest shale oil-producing region in the country.

Nicot cautioned, however, against reading too much into estimates of future water use.

The projections used in the new study assume placing more and more wells in close proximity to each other, something that may not be sustainable, Nicot said. Other factors that may influence future water use are new developments in fracking technology that may reduce water requirements, like developing the capacity to use brackish water rather than fresh water. Increased freshwater use could also drive up local water costs in places like the Permian basin, making water a limiting factor in the future development of oil and gas production.

“The numbers that they project are not sustainable,” Nicot said. “Something will have to happen if we want to keep the oil and gas production at the level they assume will happen in 10 or 15 years.”

Phil McKenna, is a Boston-based reporter for InsideClimate News. Before joining ICN in 2016, he was a freelance writer covering energy and the environment for publications including The New York Times, Smithsonian, Audubon and WIRED. Uprising, a story he wrote about gas leaks under U.S. cities, won the AAAS Kavli Science Journalism Award and the 2014 NASW Science in Society Award. Phil has a master’s degree in science writing from the Massachusetts Institute of Technology and was an Environmental Journalism Fellow at Middlebury College.

 

People’s Rebellion is the only way to fight Climate Breakdown

People’s Rebellion is the only way to fight Climate Breakdown

There seems to be some race between the USA and Europe with France’s TOTAL that recently signed with Algeria a contract for a polypropylene plant in the country.  There were afterwards two days of public demonstrations in different localities close to the country’s oil bases in the South. Locals were out and about shouting out their frustrations of possibly turning into passive witnesses to fracking within walking distance to their familiar and naturally unkind environment.  Far from being left behind, Exxon Mobil also signed a gas contract with SONATRACH that was immediately followed by more public anger. Far north, along the 1000 miles long shores, Italy with its oil company ENI is rumoured to most probably sign a historic agreement in Algiers that will allow it to officially win the operation of two offshore oil blocks East and West of the capital city. It looks as if the absent and dormant elites, political or business alike got together, and that people’s rebellion is the only way to fight climate breakdown.

Whether it is a legitimate offshore operation with diversification as its goal or merely a costly stunt to divert attention from the potential fracking of those ginormous pockets of shale oil in the deep Saharan south would remain to be seen.
Meanwhile in the UK, George Monbiot’s thoughts dated October 18, 2018, on the same issue of the country’s future being tossed alternatively between the capital’s plush offices and the countryside’s and villages bucolic streets.

As the fracking protesters show, a people’s rebellion is the only way to fight climate breakdown

Our politicians, under the influence of big business, have failed us. As they take the planet to the brink, it’s time for disruptive, nonviolent disobedience

It is hard to believe today, but the prevailing ethos among the educated elite was once public service. As the historian Tony Judt documented in Ill Fares the Land, the foremost ambition among graduates in the 1950s and 60s was, through government or the liberal professions, to serve their country. Their approach might have been patrician and often blinkered, but their intentions were mostly public and civic, not private and pecuniary.

Today, the notion of public service seems as quaint as a local post office. We expect those who govern us to grab what they can, permitting predatory banks and corporations to fleece the public realm, then collect their reward in the form of lucrative directorships. As the Edelman Corporation’s Trust Barometer survey reveals, trust worldwide has collapsed in all major institutions, and government is less trusted than any other.

As for the economic elite, as the consequences of their own greed and self-interest emerge, they seek, like the Roman oligarchs fleeing the collapse of the western empire, only to secure their survival against the indignant mob. An essay by the visionary author Douglas Rushkoff this summer, documenting his discussion with some of the world’s richest people, reveals that their most pressing concern is to find a refuge from climate breakdown, and economic and societal collapse. Should they move to New Zealand or Alaska? How will they pay their security guards once money is worthless? Could they upload their minds on to supercomputers? Survival Condo, the company turning former missile silos in Kansas into fortified bunkers, has so far sold every completed unit.

Most governments, like the UK, Germany, the US and Australia, push us towards the brink on behalf of their friendsTrust, the Edelman Corporation observes, “is now the deciding factor in whether a society can function”. Unfortunately, our mistrust is fully justified. Those who have destroyed belief in governments exploit its collapse, railing against a liberal elite (by which they mean people still engaged in public service) while working for the real and illiberal elite. As the political economist William Davies points out, “sovereignty” is used as a code for rejecting the very notion of governing as “a complex, modern, fact-based set of activities that requires technical expertise and permanent officials”.

Nowhere is the gulf between public and private interests more obvious than in governments’ response to the climate crisis. On Monday, UK energy minister Claire Perry announced that she had asked her advisers to produce a roadmap to a zero-carbon economy. On the same day, fracking commenced at Preston New Road in Lancashire, enabled by the permission Perry sneaked through parliament on the last day before the summer recess.

The minister has justified fracking on the grounds that it helps the country affect a “transition to a lower-carbon economy”. But fracked gas has net emissions similar to, or worse than, those released by burning coal. As we are already emerging from the coal era in the UK without any help from fracking, this is in reality a transition away from renewables and back into fossil fuels.

@GeorgeMonbiot

Read more on The Guardian

Re-activating Algeria’s National Energy Council

Re-activating Algeria’s National Energy Council

 Algeria has the institutions that it needs to energize if it wants a State with the rule of Law; a sine qua non condition for a sustainable development and above all for its credibility at both national and international levels. Could Re-activating Algeria’s National Energy Council for a robust energy strategy be an absolute necessity and at the earliest of times?
For starters, the National Energy Council (CNE) alone could set Algeria’s energy strategy but it is itself  in great need to be, as it were, re-energized.

This contribution looks in depth at the National Energy Council and the management of SONATRACH (SH).  

Legal texts are a necessity but an insufficient condition: the important thing is to act on the functioning of Algerian society, as a function of the power relations of the various political, economic and social components, themselves as linked to the world economy so that these laws are applicable.

The National Energy Council

The National Energy Council, as a supreme organization for the country’s energy strategy, set up by Presidential Decree on April 8th, 1995, in its Article 6, stipulates

·      “The Council shall meet periodically on the convening of its president”, the President of the Republic whose secretariat (article 5) is provided by the Minister of Energy and composed of the so-called sovereignty ministers (National Defence, Foreign Affairs, Energy and Finance), the Governor of the Bank of Algeria and the planning delegate.  This Article 6 states also that:

  • ·      The National Energy Council is responsible for monitoring and evaluating the long-term national energy policy, including the implementation of a long-term plan to ensure the energy future of the country.
  • ·      An energy consumption model to be based on all national energy resources, external commitments and the country’s long-term strategic objectives;
  • ·      The preservation of the country’s strategic reserves in the field of energy; Long-term strategies for the renewal and development of national oil reserves and their recovery;
  • ·      The introduction and development of renewable energies; strategic alliances with overseas partners involved in the energy sector and long-term trade commitments.

As far as prerogatives are concerned, it is no longer SH to grant the operating perimeters under the new Oil Act of April 28th, 2005 as amended on July 29th, 2006 together with January 2013 Law extending the rule of 49/51% ownership and Introducing the exploitation of Shale Gas and reconducting the same procedures but onto ALNAFT, a Ministry of Energy dependent agency, thus maintaining functional relations with this structure as well as with another agency, the Authority of Regulation to monitor prices mechanisms.

The new law established at least 51% of SONATRACH’s shares of the perimeters granted by ALNAFT and less than 49% to the various other oil companies.

Other SONATRACH’s organizations

The General Assembly Is composed of the Minister of Energy and Mines, the Minister of Finance, the Bank of Algeria’s Governor, the delegate from the Planning Department, a representative of the Presidency of the Republic.

Article 9.3 specifies that the General Assembly shall meet “at least twice a year in ordinary session” and in “special session on the initiative of its Chairman or at the request of at least three of its members, of the auditors or of the President and CEO of SH”. At the end of each session, the General Assembly is required to send its report to the President of the National Energy Council, who is the President of the Republic.

The Board of Directors is composed of the President and chief executive officer of SH, the CEO of SONELGAZ, the utility provider the vice-president of pipeline Transport, vice-president of marketing, the department’s director general of hydrocarbons, another departmental representative and of two representatives of the SH Union.

The Executive Committee is the real working ankle of SH and comprises the CEO of SH, the secretary general of SH, the Vice-Presidents of upstream, downstream, pipeline and marketing-of the executive director of Finances, the director Executive of Human Resources and of the executive director of all central activities (DAG), the Director of strategy, Planning and Economics-of the Executive Director Health, safety and environment. And not to mention the holdings that are annexed to the Vice-Presidents. Thus, upstream is attached to the holding oil and paratanker services; For downstream, holding refining, chemical hydrocarbons (example Naftec) ; For the commercialization of the holding Sonatrach, it is attached to it the holding Sonatrach/valuation of hydrocarbons (example Naftal). At the international level, the Sonatrach group has set up a system of reorganization of its activities through the grouping of subsidiaries abroad around an international holding company (S.I.H. C) created in July 1999 which operates in different countries.

For a new strategic management of SH

Transparency in the management of SH should be based on a scientific and operational approach, from the general to the particular, to seize the interactions and be able to carry out actions through successive steps. 

Making SH more efficient would imply several strategic actions: starting with repositioning it in the international and national context immediately followed by a system of real-time organization based on networks and no longer on the current hierarchical vision type of organization. Transparent cost centers including the management of any partnership; rational management of human resources, an essential element of strategic management, involving executives listening to the collective of workers through a permanent and constructive dialogue.

All these actions refer in fact to the establishment of the rule of law and the urgency of renewed governance. If we want to fight against overbilling, illegal transfers of capital, make more efficient control of SH (this concerns all sectors), there is an urgent need to revive the now completely collapsed information system, posing the problem of transparency of accounts and accounts. Having had in the past, lead a financial audit on SH with an important team of executives of SH and experts, it was impossible for us to accurately identify the structure of the costs of Hassi R’mel and Hassi Messaoud whether for the barrel of oil and the MBTU of gas as delivered to ports, because of all those consolidation and transfer accounts of SH distorting any visibility.

In any case, the business management is inseparable from global internal and global governance.  The growth or not of the world economy in the field of hydrocarbons, the geostrategic factors and the new model of global energy consumption play as an essential vector in the increase or decrease in revenue from SH, to avoid isolating the micro-governance of the national and global macro-governance that are inextricably linked. That is why it is necessary to revise the current ‘oil law’ which has not attracted potential foreign investment, for it is unsuitable for the new economic and to rethink the strategic management of SH in order to reduce costs by better management and hopefully position amongst the TOP global companies.  ademmebtoul@gmail.com

U.S. shale oil drillers boosted by efficiency and drilling intensity

U.S. shale oil drillers boosted by efficiency and drilling intensity

The Global Warming Policy Forum citing The Wall Street Journal on how The New Shale Tech That Terrifies OPEC has become reality where the U.S. shale oil drillers boosted by efficiency and drilling intensity, are lowering prices to a point that could soon hurt exporters like Saudi Arabia.
What doesn’t kill you makes you stronger.

Two years ago, it looked like Saudi Arabia was winning its fight against the U.S. shale oil industry by furiously pumping crude to drive down prices. Some drillers went bust and many more flirted with bankruptcy while oil drilling in places like West Texas and North Dakota collapsed.

The Saudi effort backfired. Instead of killing shale it spurred a wave of innovation that transformed drilling in the U.S. into a highly efficient industrial process, dramatically lowering costs and boosting output. During the next oil bust, it will be the Saudis who have to worry.

“High prices tend to create sloppiness in this industry because people focus only on growth,” says Doug Suttles, chief executive of shale driller Encana. “Downturns make you focus on cost because it’s the only thing you can control—the oil price is out of your hands.”

Meanwhile, something remarkable is happening. The U.S., where production was once thought to have peaked nearly 50 years ago, will become the largest oil producer on the planet by next year.

One region alone, the prolific Permian Basin, recently passed 3.1 million barrels a day of output. Stretching from West Texas to New Mexico, it would now rank No. 4 of the 14 members of the Organization of the Petroleum Exporting Countries and may soon produce more than No. 3, Iran.


The amount of oil being pulled from the ground there is already driving global markets. But what should really frighten energy ministers in Riyadh, Tehran and Moscow is how that oil is produced. The number of drilling rigs now active in the Permian is the same as back in October 2011, yet the region is producing three times as much crude.

Just a few years ago, a well would be drilled and then the rig would be disassembled and moved to a new location—a time- and labor-intensive process. Today it is more common for rigs to sit on giant pads, which host multiple wells and the necessary infrastructure, and for them to move on their own power to a new well yards away. These rigs drill over a wider area and increasingly are being guided by instruments developed for offshore drilling that see hundreds of feet into the rock. They inject more sand underground to break open the rocks, boosting output.

Those small gains add up. Between 2010 and 2016, the average number of drilling days per rig including transport time fell at a pace of about 8% a year in the Midland section of the Permian, while initial well production grew by 33% in just two years, according to McKinsey Energy Insights.

The efficiency and drilling intensity is clear from just one site owned by Encana. The pad in the Permian started out with 14 wells, recently had 19 more added to it and may reach 60 wells—a once unimaginable concentration.

That also may make America’s reserves last longer. Encana’s approach, which it calls “the cube,” targets different layers simultaneously, which can boost the amount that can be recovered economically by about 50%, Mr. Suttles said.

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