Energy

Everyone in Texas remembers the infamous Winter Storm Uri of three years ago. What started out as a simple cold snap for many quickly turned into something far more serious: the biggest power outage in state history, with billions of dollars in property damage and hundreds of lives lost. Since then, the expected arrival of frigid temperatures has been met with some trepidation, but the critical failures of February 2021 have so far been avoided in subsequent storms. In today’s RBN blog, we look at the steps the state has taken in recent years to weatherize its power grid, show why January’s cold snap turned out to be no big deal, and explain why renewables are playing an increasingly important role in grid reliability during extreme weather conditions. 

Think energy markets are getting back to normal? After all, prices have been relatively stable, production is growing at a healthy rate, and infrastructure bottlenecks are front and center again. Just like the good ol’ days, right? Absolutely not. It’s a whole new energy world out there, with unexpected twists and turns around every corner — everything from regional hostilities, renewables subsidies, disruptions at shipping pinch points, pipeline capacity shortfalls and all sorts of other quirky variables. There’s just no way to predict what is going to happen next, right? Nah. All we need to do is stick our collective RBN necks out one more time, peer into our crystal ball, and see what 2024 has in store for us. 

A year ago, as New Year’s Day approached, we were looking ahead into very uncertain market conditions, having lived through a pandemic, crazy weather events, collapsing and then soaring prices, and Russia’s horrific invasion of Ukraine. Our job was once again to peer into the RBN crystal ball to see what the upcoming year had in store for energy markets. We’ll do that again in our next blog. But another part of that tradition is to look back to see how we did with our forecasts for the previous year. That’s right! We actually check our work. And that’s exactly what we’ll do today: review our prognostications for 2023. 

The energy industry — everything from oil and gas production and transportation to oil refining, gas processing and NGL fractionation — has a myriad of variables influenced by dozens of factors. It’s a value chain so vast you’d think it would be impossible to explain in simple terms. But behind it all is a well-oiled machine for developing the resources that literally fuel our modern economy. And, by understanding what happens at each link in the value chain, you can ultimately gain a clearer picture of what’s happening in energy markets. In today’s RBN blog, we kick off a series aimed at examining and explaining the oil and gas value chain, starting with the upstream world of exploration and production — what happens in production areas, the types of companies that operate in that segment, and the critical role of oil and gas reserves.

If you want to get the energy world’s full attention, give it a global pandemic, a rush to decarbonize, and a brutal land war in Europe — all in quick succession. Bam! Bam! Bam! The past two-plus years have shaken the global oil, natural gas and NGL markets to the core, and forced just about everyone involved to rethink the expectations and plans they had before everything seemed to unravel. So what happens next? How do we provide energy security, put a lid on inflation, and save the planet? To answer those questions, a good place to start is to gain a better understanding of the fundamentals — how energy markets develop, work and interact. In today’s RBN blog, we discuss highlights from RBN’s recent School of Energy, a like-you-were-there replay of which is now available.

Here’s an idea. Let’s start up a new company that does energy market fundamentals linked to rock & roll songs. Do it with practical, commercial insights. Keep the quality top notch. Then give it away for free!  Sound crazy? Maybe so. But that’s how RBN Energy got started 10 years ago, and it’s worked out pretty well. Now, 2,540 blogs later and with 35,000 members receiving our morning email each day, it seems like we ought to celebrate in RBN style by telling a couple of backstories that shed light on our approach to energy markets, delving into the whole rock & roll thing, and of course divulging a few deep RBN secrets never before revealed. Until now, that is. And there’s more! You might end up receiving a free RBN 10th Anniversary Commemorative Mug. Warning: Today’s blog is a trip down memory lane for hard-core RBNers.

WTI crude finally closed above $70/bbl yesterday! Yup, change in energy markets is coming at us fast and furious. Whether it’s recovery from COVID, the return of Iranian supply, the changes in OPEC+ production, the majors being walloped by environmentalists, or a genuine upturn in crude prices, the big challenge is keeping up with what’s important, as it happens. That’s what we do at RBN, in our blogs, reports, conferences and webcasts. But many of our readers only know us through our daily blog, which confines us to only one topic each day. What if we had another no-cost service, where we would provide all our available info on energy news, market data, RBN analysis and just about anything that impacts oil, gas, NGLs, refined products, and renewables? Well, we’ve got that now. It’s called ClusterX Energy Market Fundamentals (EMF) channel. It’s an app for your phone or browser. It delivers to you everything our RBN team believes is important as soon as we can get the information into our databases. And all you need to get access to EMF is in today’s blog.

Over each of the past eight years, we’ve opened the doors at RBN’s School of Energy with updated analytical models, new subject modules, and timely special features that have reflected the evolution of energy markets from the early days of the Shale Revolution and $100/bbl crude oil, through the price crash of 2015-16 and the incredible 2017-19 rebound. But these market shifts pale in comparison with what’s happened so far in 2020: a global pandemic, crude crashing to negative $37/bbl, a wipeout in LNG exports, a Cat 4 hurricane into Lake Charles — it just seems to keep on coming. Which means there has never been a more important time to reassess market analytics in the context of these tectonic shifts in the energy industry. That is exactly what we’ll cover today in this blatant advertorial for RBN's Fall 2020 School of Energy.

In 2019, there has been a significant shift in crude oil and natural gas markets. Prices have remained stubbornly low, even when faced with the risk of significant turmoil like the Saudi drone attacks. Investors are far less forgiving, and energy-related equity values continue to lag most other sectors, despite most companies returning more of their earnings to shareholders. Oil and gas producers are focused on their sweetest of sweet spots, wringing every crumb of financial return from their investments. The risk-return equation has changed. All this makes now a good time to examine the strategies and tactics necessary for survival in this challenging phase of the Shale Era. That is especially true for the players who seem to be doing everything right, because some of the worst management mistakes can occur when performance is good.

As exports of crude oil, natural gas and NGLs have surged, U.S. markets for these energy commodities have undergone radical transformations. Exports now dominate the supply/demand equilibrium. These markets simply would not clear at today’s production levels, much less at the volumes coming on over the next few years, if not for access to global markets. It is more important than ever to understand how the markets for crude, gas and NGLs are tied together, and how the interdependencies among the commodities will impact the future of energy supply, demand, exports and, ultimately, prices. Making sense of these energy market fundamentals is what RBN’s School of Energy is about. Warning! Today’s blog is a blatant commercial for our upcoming Houston conference. But we hope you will read on, because this time around, our curriculum includes all the topics we have always covered at School of Energy, PLUS five all-new sessions dedicated to export markets.

All this talk of trade wars is one more thing for U.S. oil and gas producers to worry about. That’s because overseas exports are the only thing balancing natural gas and NGL markets, and increasingly crude oil also relies on exports to clear light-sweet volumes from U.S. shale plays. More than half of propane produced in the U.S. already moves out of the country via ship, with China, Japan and South Korea among the highest-volume destination markets. Only about 3 Bcf/d of natural gas has been exported as LNG over the past few months, but there was only one lower-48 LNG export terminal operating until last week. In a year there will be six terminals pumping out LNG to overseas markets. And so far this year, an average of 1.4 MMb/d of crude oil — one-seventh of U.S. production — has reached the waterborne export market, not including all the gasoline and distillate exports. As exports assume an ever-larger role in U.S. hydrocarbon markets, it is important to consider ramifications of possible constraints on exports, including the potential for trade retaliation in response to President Trump’s recently announced tariffs on steel and aluminum. Exports, one of the key topics we’ll consider at our upcoming School of Energy — Spring 2018, is the subject of today’s blog.

Crude oil production over 10 million barrels per day, just a fraction of a percent away from the November 1970 all-time record. Natural gas and NGLs already well above their respective record production levels.  And for all three commodities, the U.S. market has only one way to balance: exports. One-third of all NGL production is getting exported, 15% of crude production now regularly moves overseas, and the completion of several new LNG export facilities will soon have more than 10% of U.S. gas hitting the water. The implications are enormous. Prices of U.S. hydrocarbons are now inextricably linked to global energy markets. It works both ways — U.S. prices move in lock step with international markets, and international markets are buffeted by increasing supplies from the U.S. It’s a whole new energy market out there, and that’s the theme for our upcoming School of Energy — Spring 2018  that we summarize in today’s blog.   Warning — this is a subliminal advertorial for our upcoming conference in Houston.

For the past three years, the price for U.S. WTI crude oil at Cushing has remained close to $50/bbl while natural gas at the Henry Hub has gravitated in a range around $3.00/MMbtu. It has been one of the most stable periods of energy prices in decades. But below the surface of stability at the major hubs, prices at the regional level have been wildly volatile, driving dramatic swings in geographic basis.  Alternating cycles of basis blowouts followed by basis collapses have become standard fare for U.S. oil, gas and NGLs as producers ramp up production, local prices get hammered due to capacity constraints, midstream companies respond by (over) building infrastructure, and regional price differentials implode due to overcapacity. With more production growth and infrastructure on the way, these basis cycles will keep on coming.  In today’s blog, we’ll consider a few of the market sectors particularly susceptible to basis volatility, and provide a subliminal advertorial for our upcoming School of Energy, where we explore both the underlying causes and the outlook for future basis cycles.

Today’s energy markets are being rocked by new technologies, massive flow shifts to exports, and a myriad of new midstream infrastructure projects — to say nothing of the continuing onslaught of Mother Nature. It is more important than ever to understand how the markets for crude oil, natural gas and NGLs are tied together, and that is why it is time again for RBN’s School of Energy. But … this is not the best time for our Houston conference venue. So we’ve made the decision to GO VIRTUAL!  We will webcast the entire School in real-time, with the same content, the same faculty and the same models. And since an understanding of the new realities of today’s energy markets is so essential, we have renewed, restructured and rebuilt our curriculum to CONNECT THE DOTS across our content, data and models. That’s the theme for our upcoming School of Energy 2017 – Virtual Edition, which we summarize in today’s advertorial blog.

If you missed the Golden State Warriors’ NBA Championship win last week, or an unbelievable putt at the U.S. Open this weekend you can always see it on ESPN’s SportsCenter. But what if you missed the most recent RBN School of Energy? Well, you’re in luck — we’re now offering 11 hours of video from SOE, which unlike other natural gas, crude oil or NGL conferences covers all three markets with hands-on course work. In each of the seven streaming-video modules, we drill down on an important aspect of the markets, explain how it works and provide spreadsheet models accompanied with instructional videos. Fair warning: Today’s blog is an unabashed advertorial.