Oil optimism is the real deal
There is a wave of overt optimism rolling through the oil market, and I am seeing first-hand signs that confirm the optimism may lead to a new chapter for crude -- one that may include several out-of-the-box initiatives.
Much of the news is coming from the preeminent global energy summit CERAWeek, which is taking place in Houston. Named after Cambridge Energy Research Associates and its leader, Daniel Yergin, a Pulitzer Prize-winning author of the oil classic "The Prize".
Here's my take, as an attendee, on what’s ahead for oil, a key component of the U.S. economy and national security.
New data from around the world, including from the Paris-based International Energy Agency (IEA) and the US Energy Information Agency (EIA), shows that oil production and demand will continue to grow and that the two--supply and demand--will come more into balance than in recent years, creating somewhat higher oil prices.
The U.S. will also produce a record-high 10.6 million barrels of oil per day, roughly the same as Saudi Arabia, the number two oil-producing nation. By 2023, it's estimated that the U.S. will surpass Russia, the current number one oil country, which produces 11 million barrels per day.
But the optimism is more than just the numbers and data points. The optimism comes from the growing oil landscape and with increased global cooperation among nations and companies, which seems imminent.
Saudi Aramco, the state-owned oil company, just announced it will infuse $30 billion into its Port Arthur, Texas refinery by 2023, creating 12,000 new jobs. This ahead of its highly anticipated initial public offering, which could value the company around $2 trillion, making Exxon Mobil and Chevron look like the little guys. The average investor will also have a chance to buy into the IPO, which could be listed on the New York Stock Exchange. Winning this listing, or at least part of it, has received support from President Trump.
Plus, OPEC (the Organization of the Petroleum Exporting Countries) is seeking to diversify into new and novel oil and energy-related projects. I spent some time with both Aramco and OPEC officials discussing an oil-backed cryptocurrency. There's lots of out-of-the-box thinking, and the future seems wide open to many.
Not absent from the summit and hallway conversations are other energy sources, including but not limited to renewables like solar, wind, hydro and plant-based fuels, including as ethanol and bio-diesel.
The U.S. Secretary of Energy, and former Texas Governor, Rick Perry, gave a superb speech in which he said he wouldn't take a back seat to anyone on wind generation, which dates back to his time as governor. Still, he focused on oil as both a fundamental part of the U.S. economy and as a national security asset.
All in all, optimism reigned, and for these many good reasons. That said, prices for oil, which are hovering in the high $50s to low $60s per barrel for West Texas Intermediate (WTI), is pleasing most people involved in oil. That's especially true when we consider that those same per barrel prices were as low as $26, just two years ago in February 2016.
Should the price of oil fall, and it could do so if, for example, OPEC and Russia end their current production cap of 1.8 million barrels of per day, or any number of other unexpected actions which could impact production, the mood would certainly change dramatically. For now though, it is all smiles in Houston at CERAWeek.
Former US Trading Commissioner Bart Chilton is a political and policy commentator and author of Ponzimonium: How Scam Artists Are Ripping Off America. He can be reached at firstname.lastname@example.org)