The nation’s seven major shale plays are producing nearly seven million barrels a day by this April. The bulk of this increase comes from the Permian Basin and Eagle Ford.
March 12, 2018 U S Energy Department
The International Energy Agency IEA believes the USA will be able to produce enough oil to provide 60% of the world needs over the next five years.
This has sent long time energy champs to form a new ‘Vienna Accord.’ OPEC and Russia depend heavily (50% of the Russian economy) on oil exports. The two groups have agreed to cuts of 1.5 million barrels per day MBPD to attempt to boost prices. But that puts each in a downward spiral. Price has certainly not advanced enough to make up for lost production, if in fact the two groups are abiding by their agreement. OPEC is now producing about 32 MBPD.
The IEA believes US production will rise by 3.8 MBPD over the next five years. That would bring total US production to some 13 MBPD.
Meanwhile Jim Rogers’ prediction about the disastrous socialist state of Hugo Chavez has come true. Oil output there has dropped for seven months in a row to multi-year lows. Like Mexico, Venezuela produces "heavy" Mayan crude. This requires a heavy injection of chemicals to refine into product. And that costs up front money which Venezuela does not have.
Russia now functions only as a disrupter. Britain convinced France, Germany, and the US to condemn Russia for various misdeeds. British Prime Minister Theresa May accused the Russians of attempting to murder former spy Sergei Skripal and his daughter Yulia Salisbury using Soviet produced Novichok chemical agent. Both the US and Britain gave multiple Russian "diplomats" the boot this past week. But the announcement that the British Royal Family would not attend the World Cup this summer in Russia seems Monty Python in effect. This sort of slap on the hand will not put an end to Russian world-wide interference.
Meanwhile the Federal Energy Regulatory Commission has disallowed certain income-tax deductions for pipeline-partnership companies. Shares of those Master Limited Partnerships tumbled with many down over 10%.
With the crude oil output up, and oil prices just over $60, why is the energy sector performing so poorly on Wall Street? The percent of energy companies in bullish formation has dropped from 85% January to 34.38% today. Granted the stock market has been undergoing a correction but not to this extent. The Energy ETF XLE has fallen to what looks like a support area of $67. That may be the case for the Energy Service ETF XES which is still mired at $15, just 2.50 above its 2009 low.
What about the stock market? We have noted that the Dow Industrials need to take out the former high of 26,616 recorded in late January. The Transports need to do the same for the January 12, 2018 high of 11,373. Both Industrials and Transports have returned to the mid line of the recent up channel pattern. Each now displays what technicians describe as triangle patterns. A series of lower high and higher lows causes price to form a triangle. A break up or down in the next two weeks should give an indication of whether price is up or down.
Meanwhile one can satisfy both a television and political itch by watching "The Apprentice" play out in real time at the White House. You’re fired directives have been issued in the last two weeks to Gary Cohn, Rex Tillerson, and now H. R. McMaster. Yet John Bolton has expressed interest in replacing McMaster. Meanwhile Donald Trump, Jr. and his wife are divorcing. We have no reliable reports on what First Lady Melania thinks about the Stormy stories but that cannot be going well. President Trump says he enjoys chaos. And that seems to be the one Presidential accomplishment on which all can agree.
Follow Dennis Elam at http://www.themarketperspective.com.