US Shale Oil Continues to Decline, But Could Increase Under $50 Oil With DUCs

Yesterday, the EIA released its Drilling Productivity Report “DPR” [LINK], which is its look ahead one month to estimate Nov 2016 production levels for the major shale/tight oil and gas basins – Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica.

The EIA forecasts slightly declining production in the major basins in Nov vs Oct.  Oil production down to 4.429 million b/d (vs 4.459 in Oct), and natural gas production down to 45.958 bcf/d (vs 46.136 bcf/d in Oct).   The afternoon headlines on the DPR were that US shale production continues to decline.  The EIA’s forecasted Nov 2016 major basin oil production is down 13% YoY from 5.027 million b/d in Nov 2015, but natural gas production is up 3% YoY from 44.682 bcf/d in Nov 2015.

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Negative Call For Winter Weather – Browning Garriss Calls For Warmer Than Normal Winter

Heads up, the changing calls such that the winter won’t be cold should be negative to natural gas and keep some investors on the sidelines. Our Energy Tidbits memos have been warning that the forecasts for winter are being reduced. The July forecasts were for a strong La Nina winter, potentially as cold as the cold winter 2010/2011 that had a strong La Nina.

This week, well respected weather forecaster Evelyn Browning Garriss issued her new October forecast and it calls for a warm winter. There are two negatives in her call. First it will be a warmer than average winter. She says “Unless the La Niña strengthens, history suggests this winter will be slightly warmer than average for the US with short, stormy cold spells, especially in January and late February.” Second, she calls for a warm late Autumn ie. Nov, which means a slow start to winter weather demand. Other major weather forecast groups, such as NOAA, have also moved their winter forecasts to a more warmer outlook than a few months ago.

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Canada Sets Minimize Carbon Pricing Starting at $10/tonne in 2018, increasing to $50/tonne in 2022

There was a surprise announcement today, Canada introduced minimum carbon pricing for all provinces starting in 2018. [LINK] It was not expected that Canada would just announce this given they were supposedly working with the provinces on this issue. It isn’t a surprise that there are some immediate negative responses from provinces, who did not know it was coming.

Carbon pricing starts Jan 1, 2018 at $10/tonne, and increases each year by $10/tonne to reach $50/tonne for Jan 1, 2022. Here is how it compares to the Alberta and BC carbon tax rates.

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