Domino Effect

After enduring 2015-16 it is about time for some good news, right?  And that’s just what 2017 is shaping up to be—a relatively good news year for energy markets.  But don’t go crazy with this.  The key word in that sentence is “relatively’” —which means better than 2015-16, but if you are looking for that other “R” word (“recovery”) you won’t see it here.  Crude prices will be up some, but nothing like the first few years of this decade.  Natural gas and NGL prices will be stronger too.  But both may have to wait still another year before seeing a real upswing in 2018.   Nevertheless, 2017 is looking good for most of the energy market.  Not for everyone, mind you.  Many will struggle because their assets are in the wrong places, they are at the wrong end of the food chain, or they were simply unprepared for this new market reality.  How will you know the difference between the winners and losers?    Well of course, by looking deeply into the RBN crystal ball to see what 2017—Year of the Rooster—has in store for us.  Cock-a-doodle-do!

A long-standing tradition at RBN is our annual Top 10 RBN Energy Prognostications blog, where we lay out the most important developments we see for the year ahead.  Unlike so many forecasters, we also look back to see how we did with our forecasts the previous year.  That’s right!  We actually check our work.  Usually we can get that all into a single blog.  But a lot will be coming at us in 2017, so this time around we are splitting our Prognostications into two pieces.  Tomorrow’s blog will look into the RBN crystal ball one more time to see what 2017 has in store for energy markets.  But today we look back.  Back to what we posted on January 3, 2016.  Recall back in those days that crude production had not started to decline materially, West Texas Intermediate (WTI; the U.S. light-crude benchmark) was at $37/bbl, natural gas was $2.33/MMbtu in the middle of winter, Congress had just OK’ed crude exports, and weak exploration and production companies (E&Ps) were dropping like flies. Now let’s look at RBN’s Prognostications for 2016.

From the depths of despair in the first quarter when WTI crude collapsed to $26.21/bbl on February 11 and Henry Hub gas crashed to $1.64/MMbtu on March 3, we are back, sort of.   Growth in the rig count has been nothing short of spectacular, up 249 or 62% from the low point in late May. Crude oil, natural gas and NGL prices have all more than doubled since the lows of Q1.  Yes, 2016 has been quite a roller coaster ride for energy markets.  Here in the RBN blogosphere, we’ve documented this saga every step of the way. Now at the end of the year, as we’ve done for the past five years, it is time to look back.  Back over the past 12 months––to see which blogs have generated the most interest from you, our readers.  We track the hit rate for each of our daily blogs, and the number of hits tells you a lot about what is going on in energy markets. So once again we look into the rearview mirror at the top blogs of 2016 based on numbers of website hits in “The 2016 Hydrocarbon Top 10 RBN Blogs”.

<p>Energy market volatility in 2015 was neither the result of random market fluctuations nor geopolitical orchestration.&nbsp; The market pressures had been building for years, as one market event triggered another, leading inexorably to the carnage of Q4 2015.&nbsp; In fact, there were thirty such market eve</p>

2015 was a transformational year for the U.S. shale revolution.  Act I of the Shale Revolution is now behind us.  We’ll look back at the first decade -- 2005-2015 as the halcyon days – when there was always another market just around the corner.  Shale started with dry gas in Texas, but those prices were crushed by the economics of wet gas and NGLs.  In just a few years, that market too was annihilated, but economically attractive Appalachia dry gas and the big kahuna, crude oil took center stage.   Now after a year of being beaten senseless by low prices, it is clear that those markets too have succumbed to the scourge of shale oversupply.  That’s the end of Act I.  There is nowhere else for producers to turn.  The market dynamics facing Act II of the shale revolution are unprecedented.  There is simply no way to predict what is going to happen next.  Right?  That’s silly.  Of course we can!  It is the perfect time to roll out RBN’s crystal ball one more time for 2016 - Year of the Monkey.  Yup, there is more monkey business coming to energy markets.

Did you miss our School of Energy a few weeks back in Houston? Not a problem! The entire School of Energy conference is now available online in streaming video format. The conference video, presentation slides and spreadsheet models are available for purchase as individual Modules or as a full conference package. It’s the next best thing to being there!  School of Energy is unlike other natural gas, NGL or crude oil conferences.  It combines all three!  And the curriculum includes a comprehensive analysis of current energy markets and in-depth instruction on how to use RBN spreadsheet models covering everything from production economics to gas processing.  We walk through key developments for each of the three hydrocarbons including the increasingly important links between them.  Fair warning – today’s blog is a blatant advertorial. 

Last week we held the first RBN School of Energy at the St. Regis hotel in Houston.  Based on the feedback we received it was a huge success, achieving the goals we laid out for the conference.  Today we’ll report on the conference itself, and review some of the most important points covered in the curriculum.  Warning, this blog could (and should) be considered an advertorial, so read at your own risk.