U.S. oil drillers idled the most rigs in almost two years as they face oil trading below $60 a barrel and escalating competition from suppliers abroad.

Rigs targeting oil dropped by 29 this week to 1,546, the lowest level since June and the biggest decline since December 2012, Houston-based field services company Baker Hughes Inc. (BHI) said on its website yesterday.

As OPEC resists calls to cut output, U.S. producers including ConocoPhillips (COP) and Oasis Petroleum Inc. (OAS) have curbed spending. Chevron Corp. (CVX) put its annual capital spending plan on hold until next year. Rigs targeting U.S. oil are sliding from a record 1,609 after a $50-a-barrel drop in global prices, threatening to slow the shale-drilling boom that has propelled domestic production to the highest level in three decades.

“It’s starting,” Robert Mackenzie, oilfield services analyst at Iberia Capital Partners LLC, said by telephone from New Orleans. “We knew this day was going to come. It was only a matter of time before the rig count was going to respond. The holiday is upon us and oil prices are falling through the floor.”

ConocoPhillips said Dec. 8 that would cut spending next year by about 20 percent. The Houston-based company is deferring investment in North American plays including the Permian Basin of Texas and New Mexico and the Niobrara formation in Colorado. Oasis, an exploration and production company based in Houston, said Dec. 10 that it’s cutting 2015 spending 44 percent.

Lower Capex

“Our capex will be lower,” Roger Jenkins, chief executive officer of Murphy Oil Corp. (MUR), an El Dorado, Arkansas-based exploration company, said during a presentation Dec. 10. “I think this idea of lowering capex 20-something percent is going to be pretty common in the industry.”

Even as producers cut budgets and lay down rigs, domestic production is surging, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show. Oil output climbed to 9.12 million barrels a day in the week ended Dec. 5, the highest in EIA data going back to 1983, and is projected to increase to 9.3 million barrels a day next year.

“You still have a lot of spending that went on in 2014 that will take effect in 2015,” Joe Overdevest, who helps manage about $4.4 billion at Fidelity Investments and is co-portfolio manager of its natural resources fund, told reporters in Toronto yesterday. “There’s a delay in that production. It will probably take at least a year to start seeing major effects.”

Production Decline

Oil production probably won’t drop until mid-2015, James Williams, president of energy research company WTRG Economics in London, Arkansas, said by telephone. “U.S. shale is unstoppable at $100 a barrel, but it’s clearly stoppable at $60,” he said.

Chevron, the largest U.S. energy producer except for Exxon Mobil Corp. (XOM), is still evaluating its capital plans and will probably release them early next year, company spokesman Kurt Glaubitz said by phone Dec. 9. The company usually has its budget out in mid-December.

The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s oil supply, decided Nov. 27 to maintain its collective crude output target, resisting pressure for cuts to shrink a global glut. “Why should I cut production?” Saudi Arabia oil minister Ali Al-Naimi asked Dec. 10, while speaking to reporters as he attended United Nations global warming talks in Lima.

Rigs Forecast

The international benchmark North Sea Brent oil and its U.S. counterpart West Texas Intermediate crude are trading at their lowest levels since 2009. WTI for January delivery tumbled 3.6 percent yesterday to settle at $57.81 a barrel on the New York Mercantile Exchange. The 2014 peak was $107.73.

U.S. oil rigs will fall below 1,100 for the first time in three years, bottoming out at 1,073 in August, forecasts prepared by the Louisville, Kentucky-based energy data company Genscape Inc. show.

The Permian Basin lost the most rigs this week, falling by 20 to 548. Counts rose in natural gas-rich plays such as the Marcellus in the eastern U.S. and the Haynesville in the South.

Natural gas for January delivery increased 16.1 cents to settle at $3.795 per million British thermal units on the Nymex yesterday, down 14 percent in the past year. Stockpiles of the fuel dropped 51 billion cubic feet last week to 3.359 trillion, according to the EIA.

http://www.bloomberg.com/news/2014-12-12/u-s-oil-rigs-drop-most-in-two-years-baker-hughes-says.html

atlwireles:

“U.S. shale is unstoppable at $100 a barrel, but it’s clearly stoppable at $60,” he said.



http://www.bloomberg.com/news/2014-12-12/u-s-oil-rigs-drop-most-in-two-years-baker-hughes-says.html

Nigeria better budgets at about $55/barrel.
Jonathan and Iwella have sown incredibly poor leadership in this matter.
this is why Tambuwal can get millions of dollars per year as salary and Aso Rock can budget 1 billion naira for food and entertainment.
Ao Rock food budget should be slashed by 75%
National Assembly renumeration should be slashed by 90%

tit:


Nigeria better budgets at about $55/barrel.
Jonathan and Iwella have sown incredibly poor leadership in this matter.
this is why Tambuwal can get millions of dollars per year as salary and Aso Rock can budget 1 billion naira for food and entertainment.
Ao Rock food budget should be slashed by 75%
National Assembly renumeration should be slashed by 90%

I have to agree, the budget benchmark must be between $45-$55.

Oil shale in terms of derivative products other than as an energy source is still highly limited than conventional crude.

Even if America wants to depend on Shale as an energy source it can not sustain other high yielding finished products needed in production.

Shale is an interim product the Americans are desperate in relying on to reduce energy dependence from imports. Most of this energy ends up powering clunky yank junk.

Nigerians naturally should not be worried about the development of shale as an alternative energy source as this will get the greasy yanks of our back for the mean time. We must look at how we can develop the down stream sector to produce refined petrochemical products within our local economy.

We export our crude and in return we get virtually all finished products at the detriment of our own local economy, industries and jobs.

It is time we developed our petrochemical industry to service our own local needs, wean us off imports, save forex and create much needed jobs.

This is opposite what one gerriatic general proposed which was to stabilize crude prices in order to continue the lazy Saudi petrodollar mono economy.

Bakken oil pipeline project slammed shut, this was a major project to move crude oil from North dakota



Enterprise Products Partners is shelving a proposed pipeline that would have transported crude from North Dakota to Oklahoma, the company announced on Friday.

The news came in the midst of a brutal slide in global oil prices that have raised concerns about whether U.S. companies will continue to build on the expansion of oil production. Middle East oil producers have yet to announce a cut in production to offset the drop in crude, in what some analysts say is a slow-bleed strategy designed to make pumping crude as uneconomic as possible for the world's fastest growing non-OPEC oil producer.

Enterprise Products—a publicly traded partnership designed to provide financing on oil and gas infrastructure projects — said in a terse statement that investors had "decided not to move forward with development of its proposed Bakken to Cushing crude oil pipeline."

Commitments from potential partners "were not sufficient to support the project," Enterprise Products added. The company did not immediately respond to an inquiry from CNBC on whether the project's closure was related to the drop in oil prices and other factors.

"Enterprise Products Partners management has been consistent in communicating this was a low probability project," said Adam Karpf, a portfolio manager for Atlantic Trust's master limited partnership strategies.

Karpf said that the firm appeared to lose a competitive battle with a different partnership, Energy Transfer Partners, which was also bidding for contracts on a Bakken pipeline. Those commitments left Enterprise the odd man out, he added. Atlantic Trust owns shares of Enterprise in its investment portfolio.

However, oversupply of crude has led to fears that oil's sharp decline could claim U.S. shale production as a victim, as smaller operators may be forced to scale back expansion plans. In recent weeks, oil prices have been in free fall, with U.S. crude settling at its lowest level since May 2009 under $58 per barrel.
Read MoreUS oil ends below $58 for first time since May 2009

North Dakota's Bakken region and Oklahoma's Cushing are two of the most prolific oil-producing regions in the U.S. shale revolution. Pipeline construction projects have taken on increasing prominence as the crude boom picks up speed, sending domestic oil production skyrocketing to more than 9 million barrels per day.

Read MoreElite oil fields redefine meaning of crude's 'Big Three'
Infrastructure partnerships such as Enterprise Products' have raised billions in private capital, in expectation that the U.S.' growing energy independence would create more opportunities to transport domestically produced oil and gas. With Enterprise's actions, that assumption appears in some doubt.
"It's a clear indication that the lowering of oil prices and the dialing down of crude demand for 2015 is taking its toll," said Vincent DeVito, partner at the law firm of Bowditch & Dewey.
http://www.cnbc.com/id/102265279

Even the financing of shale production is taking a major hit.

atlwireles:


I have to agree, the budget benchmark must be between $45-$55.

The budget should not consider crude earnings. We should stop exporting crude and look for a way in developing our downstream sector. This will create jobs and boost the economy.

tit:


Nigeria better budgets at about $55/barrel.
Jonathan and Iwella have sown incredibly poor leadership in this matter.
this is why Tambuwal can get millions of dollars per year as salary and Aso Rock can budget 1 billion naira for food and entertainment.
Ao Rock food budget should be slashed by 75%
National Assembly renumeration should be slashed by 90%

Seconded

atlwireles:
Even the financing of shale production is taking a major hit.

Shale can be an alternative energy source from conventional crude but you must consider that the real value of conventional crude is not as an energy source alone but for the high value yield of several synthetic resins that can be used in virtually every manufacturing process to fertilizers and even medicine.

Junk Bonds Backing Shale Boom Facing $11.6 Billion Loss

Bond investors who helped finance America’s shale boom are facing potential losses of $11.6 billion as oil prices plummet by the most since the credit crisis.

The $90 billion of debt issued by junk-rated energy producers in the past three years has fallen almost 13 percent since crude oil peaked in June. Halcon Resources Corp. (HK), SandRidge Energy Inc. and Goodrich Petroleum Corp. have been among the hardest hit as OPEC’s refusal to ease a supply glut pushed prices to a five-year low of $66.15 a barrel last week.

The oil selloff is deepening concern among bond investors that the least-creditworthy oil explorers will struggle to pay their obligations and prompt bankers to rein in credit lines as revenue slumps. Halcon, SandRidge and Goodrich are among about 21 borrowers operating in the costliest U.S. shale-producing regions that will be unprofitable if crude oil falls below $60 a barrel, according to data compiled by Bloomberg.

“We are concerned that there will be defaults and that was even before oil fell as much as it has,” Ivan Rudolph-Shabinsky, a New York-based money manager at Alliance Bernstein Holding LP, said in a telephone interview. “There was too much money going into this space that would have resulted in problems long term -- now that timeline has been accelerated.”

http://www.bloomberg.com/news/2014-12-02/junk-bonds-funding-shale-boom-htmlface-8-5-billion-of-losses.

BackDatAssUp:


Shale can be an alternative energy source from conventional crude but you must consider that the real value of conventional crude is not as an energy source alone but for the high value yield of several synthetic resins that can be used in virtually every manufacturing process to fertilizers and even medicine.

There's nothing wrong with shale as a conventional source of energy, the US needs to control production. That's all OPEC is seeking. The US needs to take a million barrels off the market and OPEC will most likely match them. OIL should sold for $80, that's a fair market price for producers and consumers

BackDatAssUp:


The budget should not consider crude earnings. We should stop exporting crude and look for a way in developing our downstream sector. This will create jobs and boost the economy.

If we can ever get to the level, where crude oil is excluded from our budget numbers, then Nigeria has finally arrived. . Crude oil should only be used for infrastructural financing.

And the Americans thought they hit a gold mine with shale oil. Shale oil production is very costly, I don't see them making any significant gains from it considering the rapidly falling oil prices. OPEC should maintain the Status Quo.

That was fast! Didn't expect prices to fall below $60 this fast. Only two weeks ago, shale producers were beating their chest that they were ready to outwait OPEC, I guess they miscalculated. I hope the managers of the Nigerian economy have learnt their lessons, that oil revenue is too unstable to be relied upon as the prime source of revenue for funding national budgets.

major466:
And the Americans thought they hit a gold mine with shale oil. Shale oil production is very costly, I don't see them making any significant gains from it considering the rapidly falling oil prices. OPEC should maintain the Status Quo. I see the Americans coming back for our oil in the future.

I want us to stop exports totally and make it illegal for any govt or private company or individual to export crude from our shores.

That will keep the greasy yanks off our backs.

This petrodollar state we find ourselves is the bane of our problem. It reminds me of the colonial trade era in which timber, cotton and other cash crops were exported only for us to import clothes and furnishings from Europe.

Let us close the taps to outside exports.

"His reasoning: Saudi Arabia, OPEC's biggest producer, is now basing its[b] national budget on $60 oil[/b]. Kuwait, another heavy hitter in the cartel, is budgeting for $55. That means they're digging in for the long haul. "

http://money.cnn.com/2014/12/12/investing/oil-prices-job-cuts/index.html?hpt=hp_t4

BackDatAssUp:


I want us to stop exports totally and make it illegal for any govt or private company or individual to export crude from our shores.

That will keep the greasy yanks off our backs.

This petrodollar state we find ourselves is the bane of our problem. It reminds me of the colonial trade in which timber, cotton and other cash crops were exported only for us to import clothes and furnish from Europe.

Let us close the taps to outside exports.

Good point.

since1914:
That was fast! Didn't expect prices to fall below $60 this fast. Only two weeks ago, shale producers were beating their chest that they were ready to outwait OPEC, I guess they miscalculated. I hope the managers of the Nigerian economy have learnt their lessons, that oil revenue is too unstable to be relied upon as the prime source of budget of budget funding.

Okonja has been warning them since early last year. They fought her on the benchmark with their fence jumping legislators, their governors opposed the benchmark and also the funding of the Excess Crude Account , ECA and the Soverign Wealth Fund.

Here is Rauf Aregberascal talking trash.

BackDatAssUp:


Okonja has been warning them since early last year. They fought her on the benchmark with their fence jumping legislators, their governors opposed the benchmark and also the funding of the Excess Crude Account , ECA and the Soverign Wealth Fund.

Here is Rauf Aregberascal talking trash.

I have been waiting for them to cry for more funding. Even their leader Buhari, promised to stabilise crude prices, without telling us how. Their entire Nigerianess is all about crude oil.

atlwireles:


I have been waiting for them to cry for more funding. Even their leader Buhari, promised to stabilise crude prices, without telling us how. Their entire Nigerianess is all about crude oil.

Change the tittle to: Patience Jonathan Goes on Shopping Spree in Paris, Buys 500 Gucci bags for Xmas.

Let's get the Janjawiids and Buharists opinion on this.

BackDatAssUp:


Okonja has been warning them since early last year. They fought her on the benchmark with their fence jumping legislators, their governors opposed the benchmark and also the funding of the Excess Crude Account , ECA and the Soverign Wealth Fund.

Here is Rauf Aregberascal talking trash.

I think the reason the Legislators were fighting to increase the benchmark was because of the the way the 36 State Governors were abusing the ECA. They were simply showing up in Abuja with their Accountant Generals and Finance Commissioners to harass the Federal Government to share money from the ECA, whenever there was 'surplus' money in that account. And this is one issue where there is neither APC nor PDP, the Governors all gather in Abuja as a united front and collect their cheques as a family. Unfortunately, the Legislators only did their jobs by half, because after increasing the budget benchmark, they simply cashed their share and failed to oversight the budget as they should.

BackDatAssUp:


Change the tittle to: Patience Jonathan Goes on Shopping Spree in Paris, Buys 500 Gucci bags for Xmas.

Let's get the Janjawiids and Buharists opinion on this.

since1914:


I think the reason the Legislators were fighting to increase the benchmark was because of the the way the 36 State Governors were abusing the ECA. They were simply showing up in Abuja with their Accountant Generals and Finance Commissioners to harass the Federal Government to share money from the ECA, whenever there was 'surplus' money in that account. And this is one issue where there is neither APC nor PDP, the Governors all gather in Abuja as a united front and collect their cheques as a family. Unfortunately, the Legislators only did their jobs by half, because after increasing the budget benchmark, they simply cashed their share and failed to oversight the budget as they should.

How about the PIB? Tambuwal's house of represent-A-Theif was more notorious in creating commotion than passing a single motion towards this bill.

The PIB would have given the legal framework towards ensuring local content thereby creating jobs, promoting corporate responsibility, developing the downstream sector and finally easing govt dominance within the petroleum industry.

Nigerians like living in denial. The federal government is pretending not to realise the dangers ahead of nigeria by adopting over $60 per barrel benchmark in the revised budget proposals. A more realistic and sustainable benchmark should be $40 - $45 per barrel. Crude oil prices are still expected to drop further in the early part of 2015.

atlwireles:


I have to agree, the budget benchmark must be between $45-$55.

Tit backdatassup




$35 is better especially when the excess is invested into agriculture, mining, electrical/ electronic/ mechanical industries, new rail ways, power stations and 10 lanes highways.

tit:


Nigeria better budgets at about $55/barrel.
Jonathan and Iwella have sown incredibly poor leadership in this matter.
this is why Tambuwal can get millions of dollars per year as salary and Aso Rock can budget 1 billion naira for food and entertainment.
Ao Rock food budget should be slashed by 75%
National Assembly renumeration should be slashed by 90%

This is correct. Note however that the oil price slash is only curbing CAPEX not operational spending. There will be rig rationalisation and reduction just to support production. US onshore producers can endure a margin of $10 a barrel and still produce. Also a lot of.crude.oil.is.still.going.to.the.us from canadian oil sands so they are still not going to be importing oil.

Meanwhile PENGASSEN union strike loading. . .

atlwireles:


If we can ever get to the level, where crude oil is excluded from our budget numbers, then Nigeria has finally arrived. . Crude oil should only be used for infrastructural financing.

Gbam

Also industrialization of Nigeria making us the China of Africa

BackDatAssUp:


How about the PIB? Tambuwal's house of represent-A-Theif was more notorious in creating commotion than passing a single motion towards this bill.

The PIB would have given the legal framework towards ensuring local content thereby creating jobs, promoting corporate responsibility, developing the downstream sector and finally easing govt dominance within the petroleum industry.

The fear of removing government from the oil sector, makes Tambuwal and his supporters have nightmares. What will they become without their feeding bottle.

Oil producing countries should not worry , because very soon, buhari will stabilize the price of oil.

Loss of jobs worldwide is gonna be on a massive scale. In the CNN link posted above ....Halliburton/baker hughes is cutting 1000 jobs. BP hasn't specified the amount of job it would be cutting as part of a billion dollar restructuring. A friend in Conoco Phillips here in Canada just got is appointment changed to contract from permanent.

The depression would be worse in countries highly dependent on crude, the oil industry would pull other industries down with it.

atlwireles:

The fear of removing government from the oil sector, makes Tambuwal and his supporters have nightmares. What will they become without their feeding bottle.

Mosque rats