US Oil Boom Taking Turn Towards Quality

Posted by James Stafford -

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Washington this week has been engulfed in the natural gas export conundrum, with a Senate energy committee’s first in a series of natural gas forums starting off on 14 May. They’re just testing the waters here, but next week we’ll get down and dirty on this one: the entire meeting will be devoted solely to the natural gas export question.

What we’re really waiting for here is the confirmation of Ernest Moniz as the new energy secretary. This will be the decisive moment, and the confirmation hearing is next week. While Moniz has remained tight-lipped on the issue, the general consensus among analysts is that the new secretary will support an expanded US natural gas export initiative. Things will become clearer next week … so stay with us.

On the crude oil side of this equation, the International Energy Agency (IEA) has also weighed in: The verdict: the US should stop dragging its feet and let the crude flow as US oil production continues its sharp ascent.

It’s a bit of a regulatory dilemma, since the 1979 Export Administration Act banned the sale of US crude abroad, with the exception of exports to Canada and Mexico. But it’s not 1979 anymore, and the shale boom has rendered these old restrictions unsuitable. If crude export restrictions aren’t addressed, the IEA says, the industry will find a way around them at any rate. The loopholes start with processed products that can no longer be considered “crude”.

The world of big energy acronyms had more in store for us this week, with the US Energy Information Administration’s (EIA) release of new data showing that developments in hydraulic fracturing and horizontal drilling have contributed to the rise in US oil output to 6.5 million barrels/day in 2012 from just under 5.7 million bbls/d in 2011.

Back to the IEA’s 2013 Medium-Term Oil Market Report … the agency is boosting its forecast for non-OPEC oil supply growth to 3.9 million barrels/day from 2012 to 2018, with the US accounting for 1.4 million bbl/d and Canada 1.3 million.  

But we’re not just talking about quantity. The US oil boom is taking an unexpected turn towards quality, as well. The boom is actually boosting production of light, sweet crude and field condensate, not just heavier, sourer grades. Of course, this also means a bit of a headache for refineries that were putting all their eggs in the heavy crude basket.

And if you haven’t been following our coverage of the conflict in Syria, you should. This is all about petro-politics, the more so with the passage on Tuesday of a dubious Qatari-Saudi-sponsored resolution that will effectively rule out any dialogue with Assad.

In this week’s special report below we borrow from our premium publication and look at why Geothermal is starting to really heat up and a couple of stocks that investors should be keeping an eye on. More below…

I hope you find the below piece of analysis interesting and once again I urge you to take a look at our presentation on the value of energy intelligence over energy “information” and why there really is no comparison between the two when you have access to genuine on the ground intelligence – you can see the presentation here (again I urge you to read to the end to get a full understanding of the benefits.)

Have a great weekend.

Best regards,

James Stafford