Roller Coaster to nowhere continues.
Cheaper gas means it’s harder for frackers to frack. Cheap Oil makes Keystone Pipelines less attractive, and Tar Sands tougher to pencil out.
Meanwhile the uncertainty continues to be a headache for anyone seeking certainty in estimating costs going forward. Big advantage for renewables, as the fuel costs remain utterly predicable, the same 25 years from now as today – zero.
Wall Street Journal (paywall):
The benchmark U.S. natural-gas price tumbled to its biggest one-day decline since February 2014 on expectations of a deepening supply glut.
Forecasts for warm fall weather across swaths of the U.S. spurred the nearly 10% plunge on Monday. Above-average temperatures at the start of heating season will undercut seasonal demand, analysts say, boosting stockpiles that already are near record highs.
“The market is now in absolute free fall,” said Stephen Schork, editor of energy-trading newsletter The Schork Report. “There’s no real strong forecast for any weather-[related] demand in the near future.”
The North American natural-gas market has been mired in a supply glut for years amid robust output. Companies continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas and elsewhere, and they’re able to maintain production even as gas prices plumb three-year lows.
But Monday’s selloff nevertheless is another blow to energy producers, which now must grapple with falling natural-gas prices in addition to low oil prices. Producers have struggled with persistently low gas prices for years and are now seeing additional threats to their earnings due to the past year’s plunge in oil prices.
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Natural-gas prices typically rise ahead of the winter as colder weather sparks indoor-heating demand. But weather forecasts released Sunday night called for warmer-than-average temperatures in the next two weeks. Meteorologists widely expect moderate temperatures to persist through at least the first half of the winter due to El Niño, a weather phenomenon that tends to upend temperature and precipitation pattern world-wide.
Natural-gas inventories usually rise through the last week of October as producers store gas ahead of the winter season, when demand is highest. But analysts say producers could keep adding to storage into November this year, sparking concerns that storage facilities could near capacity if inventories continue to rise.
The sharp decline reflected the impact of the plunge in crude prices that has battered industry revenues and raised fears over whether the world’s oil companies will be able to maintain dividend payouts to investors. However, the performance beat analysts’ expectations and the shares rose 1.1 per cent.Brent crude has fallen nearly 60 per cent to $47 a barrel from a peak of more than $115 in June of last year — the result of weaker Chinese demand, record US production and Saudi Arabia’s decision not to cut output.
For the first time since the market collapse, BP has set out longer term plans to reposition the company for a prolonged period of lower prices.
It said that capital spending would fall from about $19bn in 2015, a figure already revised downwards from $24bn-$26bn a year ago, to $17bn-$19bn a year in the two years to 2017.
Project deferrals and falling supplier costs would contribute to the reduced expenditure.
Mr Dudley told the Financial Times that it had deferred a final investment decision on its Mad Dog project in the Gulf of Mexico, one of its biggest, until the middle of next year. But others were due to come online, adding some 800,000 barrels a day to production, now 2.2m b/d, within five years.
–Investors will be told more later on Tuesday. But deferring costlier projects has been a common industry response to the slide in oil prices, with more than $200bn already shelved. Pushing back expenditure makes it easier to absorb the hit to revenues and enables companies to wait for prices charged by suppliers to fall. Mr Dudley said the industry was seeing deflation of 15-20 per cent.
Have the economists started to write about when deflation sets in?
If you have too many assets, you’re eventually going to sell them at a hell of a loss…