Another Drop in Oil Rig Production

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Baker Hughes is showing another 43 oil rigs taken out of production which means it now has passed the “500 Mark” of rigs out of production. The total count of rigs out of production compared to this time last year now stands at 502.

Oil Rig Production Continues Plunge

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Oil rig production continues its plunge and gas prices are starting to show that. Here is the latest data on oil rigs:

The number of active U.S. land rigs plunged by 98 this week in one of the biggest declines in the past three decades as fallen oil prices continued to pummel the industry’s drilling ambitions.

Baker Hughes’ 71-year-old U.S. rig count, one of the industry’s go-to indicators of future oil production and demand for rigs, was down by 406 drilling units compared to Feb. 13, 2014. The last time the rig count fell by 98 was in January, 2009 – the two declines are tied for the biggest drops since 1987.

H/T Fuel Fix

Oil Rig Production Drastically Drops

Gasoline prices are slowly rising which is correlating with oil rig production. Baker Hughes Inc. released data showing ninety four more oil rigs taken out of production.

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RenewEconomy.com had this write up about the production of oil being shut off:

In just three months, the rig count has fallen by 24 per cent, or 389 from the all-time high of 1,609 recorded for the week of 10 October last year. As Mark Lewis, from Paris-based analysts Kepler Chevreux notes: “In all of the historical Baker Hughes data stretching back to July, 1987, there is no precedent for a drop of this speed or severity.”

Why Gas Prices Will Go Back Up Part II

In December I posted a blog about why gas prices will go back up and it received numerous hits. The content of that post is now playing out.  Mark J. Perry just released some data of oil rigs being shutdown due to the drop in price of crude oil.  Here is what he found:

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US Oil Rigs Fell Last Week to 1,317, Down 292 and 18% from October Peak of 1,609

This is a quick reversal so I wouldn’t be surprised if 500 shutdowns happen before March. With production falling and the strength of the dollar in question, crude oil will eventually start rising.

Middle East Controls American Oil Refinery Business

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While many media pundits are on tv celebrating the U.S. leap in oil production there is another side not talked about, Middle East countries Saudi Arabia and Qatar own most of the oil refinery business in the United States. Here is more from a 2013 Washington Times article:

Today, the largest oil refinery in the United States, Motiva in Texas, is owned by Saudi Aramco (a state-owned company) and Royal Dutch Shell (a British and Dutch company). The refinery recently completed a major expansion project, originally driven by growing American demand for Saudi oil in 2007.

Since the expansion began, however, U.S. demand for oil has fallen and production of North American oil has risen. Saudi Aramco has, therefore, repositioned Motiva to accept this change in the market. In addition to importing Saudi oil, the Motiva expansion allows Saudi Aramco to refine and export petroleum products to Latin American markets. Most important, though, the expansion enables Saudi Aramco to refine the heavy crude oils now being extracted from Canadian and American oil sands and shale fields.

Saudi Arabia is also being joined by Qatar in not only the U.S. but also in Canada:

Qatar is also positioned to extract significant profits from the American energy industry. According to the U.S. Energy Information Administration, Qatar holds the third-largest natural-gas reserve in the world and has been the world leader in liquefied natural-gas technology and exportation since 1997. Yet Qatar Petroleum International (also a state-owned company) owns a 70 percent stake in the Golden Pass re-gasification terminal in Texas. The terminal was previously intended to import Qatar’s natural gas into the United States, but with the boom in North American natural gas, Qatar is now seeking to repurpose the facility to export liquefied natural gas and profit from North American resources. Qatar Petroleum International’s CEO, Nasser al-Jaidah, recently stated that the company is seeking to invest in North American shale, a highly touted source of America’s potential energy independence, and on April 15, the company acquired a stake in Suncor Energy’s natural-gas holdings in Canada.

Why Gas Prices Will Go Back Up

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As crude oil prices have collapsed over the last few months oil producers have taken notice here in the US. Once oil prices reach a certain point, oil rig operators start shutting down rigs because it cost more to run them then what it’s worth in pumping oil.

Oil tycoon Boone Pickens is a guy you want to follow on predictions in the oil market and he just came out with one reason why oil prices will likely go back up in 2015. Robert Wenzel from Economic Policy Journal pointed to this interview for reference:

Boone Pickens was on CNBC this morning and he noted that some 75 rigs have been laid down, out of a total of around 1,500 rigs operating in the US. He expects that another 500 rigs will be taken out of operation over the next few months.

This is a big swing in oil production and something that needs to be monitored along with the strength of the dollar.

Texas Ranch For Sale: $725 Million or Best Offer

Per Associated Press:

One of the largest ranches in the U.S. and an icon for Texas horse and cattlemen has been listed for $725 million, marking the end of a decades-long courtroom battle among the heirs of cattle baron W.T. Waggoner, who established the estate in 1923.

The estate includes the 510,000-acre ranch spread over six North Texas counties, with two main compounds, hundreds of homes, about 20 cowboy camps, hundreds of quarter-horses, thousands of heads of cattle, 1,200 oil wells and 30,000 acres of cultivated land, according to Dallas-based broker Bernie Uechtritz, who is handling the sale along with broker Sam Middleton of Lubbock.

I did a little calculating on what a 30 Year Mortgage would be on this property if you put a $30 Million dollar downpayment on it and secured a loan for 4.25%. Your monthly payments would be just a shade over $3.4 Million a month.