The cracker plant being built in Pennsylvania has passed another hurdle: Potter Township has approved permits to begin construction.  The process took longer than what one might have expected, with the Township holding extra meetings and requesting additional documents from the company on a couple of occasions.  The Township gave it’s approval with several important conditions, including compliance with a noise ordinance, traffic analyses, and the commission of a lighting study.  It seems the Township is actually concerned about effects other than economic effects.  That’s wise.

I have thing for small-scale stuff and for oil and gas tech, so I’m posting this here.  Up in north-central PA a company has put a small-scale liquefaction plant into use.  Since it seems to be a relatively new technology it’s probably rather expensive and so won’t see extensive deployment across the Marcellus/Utica region.  For clients whose minerals are in areas without pipeline infrastructure in place, this would be a solution to suggest to your oil and gas producer.

The analogy isn’t perfect, but this writer puts into words what I’ve been thinking about the current struggle between OPEC and U.S. frackers.

January 23: An oil leak in a major oil field in Kuwait has affected the production of oil.  Just like that, oil prices have jumped $1.00.  Let’s see what happens tomorrow, shall we?

I fully expect renewables to cut in to fossil fuel use eventually, and compete on the open market on price.  Every time I turn around, though, it turns out that some renewable project or other is not working the way it was supposed to.  The most recent one is out in California.  It was supposed to be primarily solar, with some natural gas to assist at night.  Turns out it’s using more gas than advertised.  Renewables are the future, but that future still looks to be distant.

January 25: Libya is opening up to outside investment to help with development of its oil fields.  Since Ghadaffi was deposed, oil development has been minimal, and closed to foreign investment.  This could help Libya start producing a lot of oil again in the long-term.  This news shouldn’t have much effect on the price of oil in the short-term.

President Trump has signed an executive order that will allow both the Keystone Pipeline and the Dakota Access Pipeline to move forward.  Both will transport oil, so shouldn’t have a direct effect on natural gas prices.  It may take some of the attention away from the Atlantic Coast and the Mountain Valley pipelines, so we may see less news about them in the near future.

January 26: The price at the pump went down ten cents today in Buckhannon.  I was not expecting that, as the price of oil hasn’t dropped significantly lately.

The US dollar is strong and likely to stay strong for the foreseeable future.  A strong dollar will always drive the price of oil down a bit.  However, since it’s strong and will likely stay strong, the real determining factor for the price of oil in the near future will be simple supply and demand.

Renewable energy has weathered an oil bust for the first time in my memory.  That suggests to me that renewable energy has reached a critical mass of sorts.  I expect renewables to become a larger source of electrical energy generation.  This article at the IEA suggests that worldwide power generation from renewables will be at 60% of worldwide power use by 2021.  I’m a little skeptical, but I’ll be watching renewables closely.

The folks over at oilprice.com see lots of money pouring in to the oil and gas industry.

American companies are putting rigs back in the patch, and investors expect an additional 315,000 barrels per day by the end of the year.  That won’t catch up with the 1.8 million barrels per day cut by OPEC.  It looks like OPEC’s cut is going to work for the time being.

Jan 4: Just like that, natural gas prices have dropped below $3.30/MMbtu.  Upcoming weather is expected to be warmer than normal, so the market is responding.  What the market seems to be forgetting is that natural gas production is still pretty low, and storage levels have been dropping more than expected.  It will be interesting to see what happens in the next week or two.

Cheap natural gas has been driving a resurgence in American manufacturing.

High natural gas prices are good for my clients–mineral and royalty owners.  One thing I’ve been concerned about lately is whether Trump’s policies are going to drive prices up, or drive prices down.  I’ve thought about it a lot but I haven’t been able to figure it out.  I’ve been thinking about whether coal might come back and challenge natural gas on price.  This article argues that coal is not coming back.  If that’s the case, my clients’ mineral and royalty rights will continue to be valuable.

This article comes from the American Petroleum Institute, so it’s probably at least a little slanted in favor of the oil and gas industry.  There’s probably a counter-argument of some sort.  Regardless, it says that the increased use of natural gas has lead to a reduction in carbon emissions related to electricity production.  The last time carbon emissions from electricity production were this low was 25 years ago.  Conclusion: natural gas is better for the environment than coal or oil.

Here’s some good speculation about the future of oil and gas prices.  Like all speculation, it’s probably not entirely right, but it’s probably not entirely wrong either.  It’s fun to read and think about.

This Forbers article is also some good speculation, but it’s more focused on natural gas and consequently, the American side of things.  Enjoy with a good does of salt.

This article is good speculation too, but only regarding the next calendar year so it’s less likely to be completely inaccurate.  It’s also a little more dense with industry and investment lingo, so it’s a little harder to read.  Enjoy……if you want.

Since we’re speculating, we should include the EIA’s speculation.  They are, after all, usually reasonably accurate.  Of course, when you’re predicting a price of between $35/bbl and $93/bbl in December of 2017, it’s not too hard to be right.  The good news is that oil and gas prices are expected to slightly increase.  That’s far better than large movements in price either direction.

This interesting Bloomberg article says there is way more gasoline in the United States than we actually need.  We’re exporting tons of the stuff.  Oddly, prices at the pump have gone up here in Buckhannon in the last few weeks.  Maybe they’ll go down in the next few weeks.  Who knows?  I’ve decided I have no idea how gasoline prices work.  It’s not going to stop me from trying to figure it out though.

Magnum Hunter went through bankruptcy last year.  The company has made a lot of important changes in the process.  The only thing that our clients really need to know about is that the company is changing its name to Blue Ridge Mountain Resources.  So if Magnum Hunter owns a lease you signed you will start to see correspondence from them under the new name.  You would think that as a part of that process they would notify people, but oil and gas companies are notorious for not notifying lessors when changes happen.  It’s nice to know who owns your lease.  That’s one of the reasons we ask them to add a clause to leases which requires them to notify you if the entity responsible for the lease changes.

Turns out production is going up in the Marcellus/Utica region.  Who’d a thunk it?  Prices go up.  Production goes up.  My hope is that producers can keep their development in line so that they don’t push us into another unsustainable price bubble.  The good news is that the number of DUCs (Drilled but UnCompleted wells) has gone down.

This Seeking Alpha article by HFI Research does the math and determines that we’re going to need some increased production and decreased demand this year for natural gas or we’ll end the year without enough gas in storage for the winter.  That sounds like a recipe for higher prices and increased production.  That means there will be more leasing, and more people calling us to help them understand what their lease says.  We’re gearing up to help everybody we can.

This MarketWatch article deals with the question that a lot of people have regarding the oil markets this year: will U.S. shale oil be able to replace the cuts in production that OPEC has made?  Their answer, no.  Shale oil is expected to take too long to ramp up production, and even when it does the market should have already rebalanced.  It’s hard for me to say whether that will be the case.  I think we’ll just have to wait and see on that one.

Saudi Arabia says the current OPEC production cut isn’t going to last.  It’s intended to be a six month deal, and won’t be extended.  Since a lot of the cut was production that was unsustainable, according to some sources, this may just mean that OPEC countries will slowly bring new production online once the deal has expired.  Interestingly, Saudi Arabia is said to have cut more than what they agreed to, and says that other countries have done the same.

Jan 18, 2017: Prices since the beginning of the year have been as low as $3.09 and as high as $3.50.  It’s been volatile.  Warm weather coming up will probably drive prices down again, but the outlook for the year is that prices will remain above $3.00/MMbtu and may push into the $4.00 range a little at times.

Happy New Year everyone!  We hope your Christmas was excellent and that the coming year will be better than the last one.

Dec 20, 2016: The U.S. dollar has hit a 14 year high.  This affects the oil and gas industry because oil is purchased in U.S. dollars.  When it’s strong, the conversion rate for other currencies is unfavorable.  That means other countries don’t have as much purchasing power.  One of two things has to happen, either other countries don’t buy as much oil, or the price of oil drops to make it possible for other countries to buy the oil they need.  A third option is for the other countries to pony up more of their currency to buy the oil they need, but that will eventually drive demand down.

With some political stability in place, Libya is increasing oil production.  This was expected by those agreeing to cut production in the last OPEC deal, however, it’s a much bigger increase than expected.  This doesn’t seem to have affected the market much, as prices are still at over $53/bbl.

WVU has finished a study on the noise pollution produced by fracking.  It says that the noise levels produced can increase sleep disturbance, cardiovascular disease, and annoyance.  Seriously, annoyance.  The article over at WVU’s web site goes into it a little bit, and it’s interesting.

Jan 3, 2017: We saw natural gas prices get up over $3.90/MMbtu before the New Year break, but today they are down at $3.30.   Essentially, the market hit a high point that was unsustainable, and is on its way back down.  January weather is not expected to be as cold as it was expected to be a week or two ago, and oil drilling is picking up, so there is plenty of gas.

There are a number of articles out there trying to predict the future of oil and gas, specifically for 2017.  While it’s extremely difficult to predict what’s going to happen with any degree of certainty, lots of people still try to do it.  So far, it seems that most everyone agrees that oil prices won’t rise much, and will likely fall at some point this year.  Natural gas prices will probably remain above $3.00/MMbtu, but are unlikely to go above $4.00. So, not a bad year, but not a good year either.  The real problem for West Virginia mineral and royalty owners is the same one we’ve seen for years.  We don’t have enough pipeline capacity to move the gas out of the area.  If there were more pipelines, we would see increasing bonus amounts and royalties.  I think all my clients would be happy with that.