June 20, 2016: Energy Matters: Conventional

Courtesy of American Energy Society and Eric Vettel.

Petroleum

- The number of oil rigs in the US rose by 3 to 328; the number of gas rigs rose by 3 to 85. This brings the total active rig count to 413. This is the first time rig-counts have risen two weeks in a row in about a year. (Note: in January 2015 there were 635 active oil rigs and 221 gas rigs.)

 - Assuming no further surprises, oil markets appear to have balanced. However, there are about 50 US-based oil drillers that are in bankruptcy and yet have not slowed down their production. The phenomenon makes sense at the micro-level; given that creditors want to be paid, they expect drillers to continue to produce. At the macro level, however, zombie producers are the primary force that is keeping oil markets off-balance.

 - The decline of oil prices had its greatest impact on Vnesheconombank, Russia's largest bank and the one that Vladimir Putin used to finance mega-projects like the Sochi Olympics and his secret aid to Russian loyalists in Ukraine. The VEB has stopped new lending, cut off financing, and requires government emergency assistance to avoid default.

 Natural Gas

 - For the first time since 1957, exports of US natural gas will outstrip imports in a shift that could occur as soon as the end of this year.

 - In a recent survey of energy executives from all sectors, 92 percent said they expect natural gas prices to stay below $3/MMBtu in 2016.

 Coal

 - To raise cash amid an unprecedented downturn in the global coal sector, non-US coal producers have placed $1.23 billion of coal assets on the market in the last year.

   1st place: Australia - $757 mm, or about 61.5% of the total

   2nd place: Poland  - $585 mm, or about 33% of the total

   3rd place: Canada  -  $34 mm, or about 2.7% of the total

 Nuclear

 - The Tennessee Valley Authority's Watts Bar nuclear plant has been synced to the grid and will next undergo systems and controls testing. The plant will supply power to roughly 1.3 million homes in the TVA service area. This is the first nuclear reactor to come online in about two decades.