Permian Basin resource doubled; U.S. oil and gas proved reserves set record
In December, the U.S. Geological Survey (USGS) revised the technically recoverable resource in the Wolfcamp formation in the Permian Basin to 46.3 billion barrels of crude oil and 281 trillion cubic feet of natural gas. The new estimate more than doubled the amount of estimated recoverable crude, and increased the amount of recoverable natural gas by a factor of more than 17. The new assessment included the Bone Spring formation for the first time. The EIA also announced that proved reserves (a more restrictive category than “recoverable resource”) of crude oil in the U.S. increased 19.5% to 39.2 billion barrels, setting a new U.S. record for crude oil proved reserves. The EIA also announced a new record for proved reserves of U.S. natural gas.
Natural gas prices break out
After spending the past four years almost exclusively below $3 per million British thermal units (MMBtu), I warned in August that low inventories could cause prices to spike. Indeed, over the next three months natural gas futures rose by 60%, and set a monthly average above $4/MMBtu for the first time since 2014.
IMO 2020
The International Marine Organization (IMO) actually announced in 2016 that it would limit sulfur content in all marine fuels from the current 3.5% to 0.5% by 2020. But this year that issue entered the mainstream as concerns arose that there won’t be sufficient supplies available in time to meet demand. As I noted in an article earlier this year, the last time a major rule limited sulfur was implemented, it had a big impact on diesel prices.
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