OIL INTELLIGENCE REPORT

Oil ended the week where it started as rising U.S. shale production and a bearish inventory report continued to put pressure on WTI and Brent. Urgent note: We have extended our offer on Inauguration day for our Energy & Resource Insider service. We're temporarily offering the service for $49 per year instead of the regular price of $229 per year. Since we started in October, we have had 10 picks and 9 winners. We just closed our leading pick, taking over 98% profit. Act fast, because the temporary discount is only valid until tonight 23:00 CT. Click here to sign up for Energy & Resource Insider Friday, January 20, 2017 Oil was flat this week as rising U.S. shale production and a bearish inventory report continued to put pressure on WTI and Brent. Crude oil inventories rose by another 2.4 million barrels, gasoline stocks jumped by nearly 6 million barrels, and upstream production figures provided further evidence that U.S. shale output is coming back, supported by today's huge rig count increase. Oil price to fall below $50 if OPEC fails to deliver. A new CNBC survey of energy forecasters finds that experts believe that oil prices will fall from today’s levels if the OPEC cuts do not materialize. Many analysts have pegged the expected compliance rate of OPEC members at about 80 percent, which translates to roughly 1 million barrels of oil per day taken off the market. Others argue that the oil market has become unduly optimistic. "The recent rally in oil prices above $50 rests more on faith than fact: no hard data on compliance around pledged supply cuts by OPEC and non-OPEC countries will emerge until February" Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told CNBC. He forecasts Brent to average just $47 per barrel in the first quarter. And he isn’t the only one. "I'm convinced that prices will fall through the year as the market recognizes that OPEC is not complying, Russia does not comply at all, U.S. shale recovers massively thanks to some steps of the Trump administration," Eugen Weinberg, head of commodities research at Commerzbank, said. IEA: shale coming back, will lead to oil price downturn. The IEA upgraded its estimate for rising U.S. shale production this year, projecting output will increase by 500,000 bpd by the end of 2017, which will translate to an increase of 170,000 bpd averaged over the year. In addition, Brazil and Canada will chip in another 415,000 bpd, mainly from large projects planned years ago. The Paris-based energy agency says that OPEC cuts could lead to significant inventory drawdowns of about 0.7 mb/d, tightening the market in the first half of the year and leading to increases in crude prices. But beyond that, rising non-OPEC production could cause oil prices to fall back again towards the second half of the year. At a minimum, greater price volatility is set to return, the IEA says.    Advertisement THE NO.1 ENERGY STOCK TO BUY RIGHT NOW A newly discovered super crystal is about to upend the entire energy sector and make solar as we know it obsolete. Our researchers have put together a video explaining this technology in more detail. Click here to watch the video U.S. spending to rise. An array of oil companies large and small are stepping up spending this year now that oil prices have seemingly stabilized. According to Barclays, U.S. E&Ps could increase capex by more than 50 percent in 2017, which could surprise OPEC with a strong rebound in production. “They’re about to find out how efficient the U.S. producers have become,” Barclays analyst J. David Anderson told the WSJ. Trump takes over with cabinet in flux. Donald Trump takes over the presidency today, at a time when much of his cabinet has not been approved by the Senate. Moreover, news reports have surfaced that hundreds of top positions at many agencies remain unfilled, including the Departments of Defense, State and Energy. However, his nominees fared relatively well during tough questioning this week, and as of now, it appears that few if any will have trouble winning confirmation in the Republican-controlled Senate. Harold Hamm, CEO of Continental Resources (NYSE: CLR), who has at times had the ear of the new President, says that a wave of deregulation will be coming to the energy sector in short order under the new administration, which could unleash more oil and gas production. Aramco: $25 trillion needed for oil supply to keep up with demand. The CEO of Saudi Aramco, Amin Nasser, said that the world will have to invest $25 trillion in upstream production over the next 25 years in order to satisfy rising demand. Any shortfall in investment will lead to a tightening of the market and will cause price spikes. He dismissed any notion that renewables will assume a dominant role in the global energy sector. Aramco wants to double its natural gas production over the next decade in order to free up more oil for export. China’s oil demand at risk from import quotas. China’s central government could cut import quotas for some of the country’s independent refiners, known as teapots. The move would hit teapots that did not use all of their quota last year. But demand growth in China centers around these refiners and the policy move could put a dent in China’s overall oil imports. “All these uncertainties around the teapot quota will weaken the nation’s oil demand in the first half of the year,” Guo Chaohui, an analyst at Beijing-based China International Capital Corp., told Bloomberg. “China’s oil imports hinge on one single big factor, and that is the teapots. And right now, they are facing policy risks.” Total set to drill for gas in Cyprus. The race for gas in the Eastern Mediterranean is heating up as Total (NYSE: TOT) is jumping into the fold, looking to drill off the coast of Cyprus not far from Eni’s (NYSE: E) 2015 discovery of the Zohr field, which was the largest gas discovery ever recorded in the Mediterranean. Now, many of the oil majors have a growing presence in the region. ExxonMobil (NYSE: XOM) and Eni are working with Total on Cyprus exploration; BP (NYSE: BP) and Eni are exploring in Egyptian waters; while the smaller Noble Energy (NYSE: NBL) has a strong presence along Israel’s coast. A few weeks ago Lebanon overcame political gridlock in order to lay out plans to hold an auction off of its coast, hoping to get its piece of the gas rush. As the discoveries come online in the next few years it could transform gas supplies and gas trade in the Middle East. Natural gas prices rise again. EIA data shows another sharp drawdown in natural gas inventories, leading to a rebound in prices after a few weeks of warm weather led to softer pricing conditions. Gas storage levels dropped by 243 billion cubic feet last week, steeper than analysts had predicted. Stockpiles are now below the five-year average for the first time since 2015, and as a result, spot prices have more than doubled from the lows seen in early 2016. In our Numbers Report, we take a look at some of the most important metrics and indicators in the world of energy from the past week. Find out more by clicking here. Thanks for reading and we’ll see you next week. Best Regards, Evan Kelly Editor, Oilprice.com P.S. – Veteran oil trader Dan Dicker has avidly followed the return of drilling rigs to the Permian and Eagle Ford. And while many analysts predict a bubble and are skeptical about the amount of recoverable barrels in the much heralded Permian hotspots, Dicker recommends two mid-sized Permian players as he sees the big move from ExxonMobil as a signal that the real boom only just started. Find out which companies Dan is talking about by claiming your risk-free 30 day trial to Oil & Energy Insider

Bulls Willing To Play Waiting Game In NatGas

With the end of the month coming up and the last full month of winter right around the corner, let’s take a look at the natural gas market this week. March Natural Gas futures rallied early in the week on forecasts of colder temperatures the last week of January and into early February. Unfortunately for the bullish traders, this idea came and went, leaving them no choice but to lighten up on their long positions while awaiting perhaps the next piece of news that may trigger the final rally for the season. The bad news is that despite the rally earlier in the week on predictions of cold weather and a bigger weekly drawdown then estimated, natural gas futures are poised to settle lower for the week. The good news is the chart pattern suggests there may still be life in the contract because prices are still holding above a major support zone. According to the U.S. Energy Information Administration (EIA), natural gas stockpiles shrank by 243 billion cubic feet in the week-ending June 13. Traders were looking for a draw of 229 Bcf. The five-year average draw for this week of the year is only 170 Bcf. Technical Analysis On the Weekly March Natural Gas chart, you can see that four retracement zones have combined to hold the market in a range, creating choppy, two-sided trading conditions. Starting from the outside and working to the inside, the major support zone is the retracement zone bounded by $3.148 to $2.988. This zone provided support earlier in the month when the market reached a short-term bottom at $3.110. On the upside, the longer-term retracement zone at $3.537 to $3.789 provided resistance when the market reached a multi-year high at $3.828. The lower level of this zone at $3.537 has repelled the market the last three weeks. The intermediate range is $2.764 to $3.828. Its retracement zone at $3.296 to $3.170 is currently being tested. The short-term range is $3.828 to $3.110. Its retracement zone at $3.469 to $3.554 provided resistance earlier in the week. The market is trading in almost pendulum-type action inside these zones. The tighter the ranges become, the more volatility we can expect over the near-term. This week, the market bounced between a pair of 50% levels at $3.469 to $3.296. If it continues inside this range for a couple of more weeks then we can start to anticipate a huge breakout move. By then we should know if the warm weather will continue, or if the cold weather has returned. The key support and resistance areas are the price clusters. These are formed with 2 or 3 levels land within close proximity of each other. On the upside, the resistance cluster is $3.537 to $3.554. And on the downside, the support cluster comes in at $3.170 to $3.148. Violations of either one of these clusters will signal that bigger moves are coming. Conclusion Supply in January is down 2.4 Bcf from the same period a year ago, according to Platts Analytics. However, total demand is still down compared to last January, but this is largely due to the mild weather. This suggests a very tight supply and demand balance. However, this doesn’t mean much unless the weather turns cold. Natural gas prices could move higher if cold weather hits key demand areas. Not only will this lead to strong heating and power plant demand, but along with the recent surge in export demand, if it ever does get cold, we could be looking at record withdrawals. We’re going to start the new week still looking at low to very low natural gas demand over the next 7 days. However, the price action suggests traders are still trying to build a support base in anticipation of colder weather into late January or early February. Buyers are going to continue to underpin the market as long as there is hope for cold weather. We can continue to expect a choppy, two-sided trade over the near-term even if the forecasts don’t indicate the return of cold temperatures. However, warmer-than-average temperatures are put back into the forecast then I think we cold revisit $2.988 to $2.764. The chart pattern also suggests that the return of cold temperatures could underpin prices, but it is going to take a lingering Arctic blast to take the market back to $3.789 to $3.828