Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
Where did all the oil go? Long time passing! A 7.06 million-barrel drop, the seventh drop in a row in a crude adding oil supply drawdown of historic proportions. Record refinery runs operating at 96.7% of their operable capacity last week running 17.6 million barrels of crude oil per day. This comes against a back drop of a report by Rystad Energy that shows the lowest ever volumes of oil discoveries in 2017 and another report by Energy Consultancy Wood Mackenzie that said investment will fall 7% this year to $37 billion vs. 2016 and will be down 60% from a peak in 2014. The Investor’s Business Daily reported that spending by oil majors is expected to fall 4% and will be focused on deepwater basins in Mexico, Brazil and Guyana, but drilling is expected to rise slightly.
As I told Gillian Rich at Investor’s Business Daily that “When you get a glut of supply and prices are low, companies pull back because they are starting to lose money,” said Phil Flynn, senior market analyst at the Price Futures Group. “But they tend to cut back and be too conservative because the perception is that the glut will last forever. Flynn said this happened in 1999 and the early 2000s. He said shale’s kingmaker status might be overdone. Everyone was saying once they get to $60 everyone is going to start investing again but that’s not the case; we are still seeing a pullback in spending. I think that we overestimated shale’s ability to be a global swing producer, being able to raise and lower production at the drop of a hat. Traditional projects take longer to come online but can produce for longer than shale wells.”
Rystad Energy, in their report as reported by Oil Price, said that the low-level of discoveries is not an immediate threat to global oil supply, it could become such ten years down the road. In ten years’ time, U.S. shale production may have peaked, at least according to OPEC that sees shale peaking after 2025, although the cartel has conceded that U.S. tight oil has defied previous forecasts and has increased production more than initially expected and will continue to do so in the short-term.
In the meantime, with strong global demand and not replacing reserves we are sowing the seeds of future oil shortages and oil price spikes. Shale oil’s steep decline rate and the fact you must drill and keep drilling to keep production levels steady make it harder for shale to replace traditional projects.
The EIA also reported a whopping 8.889-million-barrel increase in distillate which was welcome as the Northeast is getting hit with the “Winter bomb cyclone”. We will see strong demand as this blast tests the limits of supply. Transportation of heating fuels, like heating oil and propane, may also be a problem as the combination of snow and cold may make it impossible to deliver. Gasoline supply also rose by 4.813 million barrels as cars were parked during the cold holiday weekend. U.S. crude production did bounce back rising by 28.000 barrels after a couple of weeks of declining production.
Coin Desk is reporting that Bitcoin is gaining altitude today, amid a sharp drop in prices of alternative currencies. Prices on CoinDesk’s Bitcoin Price Index jumped 7 percent to an intraday high of $15,906.51 (09:29 UTC) in the last two hours. The cryptocurrency has appreciated by 10 percent in the last 24 hours, according to data source CoinMarketCap. Meanwhile, Ripple’s XRP token has depreciated by 9 percent in the last 24 hours, having soared to new heights on Jan. 3. Other alternative currencies like NEM (XEM), Cardano (ADA) and Stellar (STR) are down at least 12 percent each. More importantly, the RP/BTC (ripple-bitcoin) pair has taken a beating in the last couple of hours. While XEM/BTC, ADA/BTC, ETH/BTC (ethereum-bitcoin) and LTC/BTC (litecoin-bitcoin) are also losing altitude.
Another technology says that it is going to be better than the Blockchain that BITCOIN has made famous. CloudCoin.Global says “bye-bye blockchain”
Their lead scientist and cryptocurrency developer, Sean Worthington of CloudCoin.Global, has announced the availability of CloudCoin, a new digital currency which he says is based on an innovative technology that will challenge the future of Bitcoin and the blockchain, the underlying technology used in most cryptocurrencies. Worthington says the new technology, called RAIDA, solves the physical integrity problem found in digital currencies, but does it much faster, more efficiently, and more securely than blockchain. “The RAIDA technology allows any CloudCoin user to determine within milliseconds if the coin in their possession is genuine or counterfeit by submitting the coin’s 400-bit authentication number to the RAIDA cloud-based global authentication system. Once authenticated, the coin’s authentication number can be transferred to any recipient, who then takes ownership of the coin by requesting a new authentication number, which is known only to them. The CloudCoin transfer is completed in just seconds with a few mouse clicks.
“Whoever knows the coin’s authentication number owns the CloudCoin,” says Worthington, who invented the RAIDA authenticity detection protocol. Worthington says the new CloudCoin currency has none of the problems associated with blockchain technology. As is well-known, blockchain isn’t scalable and it gets slower as more people use it. It can take hours, sometimes days to confirm a transaction. The technology also has a serious issue with energy consumption as it requires thousands of high-powered, refrigerated servers and armies of maintenance personnel to keep the blockchain up and running. That gets hugely expensive,” says Worthington. It’s crazy but it’s a crypto crazy world out there!
Questions? Ask Phil Flynn today at 312-264-4364
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The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018
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