Oilvoice Magazine - Edition 46

Edition Forty Six – January 2016

What 2016 Holds for The Oil & Gas Industry How Far Can Costs Fall?

The Crude Oil Export Ban - What, Me Worry About Peak Oil?

Adam Marmaras Manager, Technical Director Issue 46 –January 2016

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Hello and welcome to the Forty Sixth edition of the OilVoice magazine.

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Table of Contents What 2016 Holds for The Oil & Gas Industry

by Alahdal A. Hussein

6

Did OPEC Just Give Up Being a Cartel

by Steve Brown

11

Are Low Crude Oil Prices a 'Boom Or A Curse' For The World Economy?

by Chris Vermeulen

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Next Year's Oil Price... Another prediction, or not

by Steve Brown

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Oil Price Scenarios for 2016

by Euan Mearns

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The Crude Oil Export Ban - What, Me Worry About Peak Oil?

by Art Berman

33

How Far Can Costs Fall?

by Steve Brown

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We are at Peak Oil now; we need very low-cost energy to fix it

by Gail Tverberg

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$25/bbl oil - probably now only a question of 'when', not 'if'

by Paul Hodges

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What 2016 Holds for The Oil & Gas Industry Written by Alahdal A. Hussein from Society of Petroleum Engineers (SPE) Trying to predict the future trends of oil prices is hard and the results are disappointing most of the time, especially when we ignore the facts and figures and rely on hope and wishful thinking. A year ago following OPEC's decision not to cut oil production and keep the oil market oversupplied, many of oil industry experts, analysts and CEOs were expecting oil prices to recover in a short time. Hence, the oil and gas industry's reaction to the current downturn was not as fast as it should have been and the consequences in many cases were catastrophic.

A few days remain to officially close the door on 2015. As the eagerly awaited December 2015 OPEC meeting is over, and as the outcome tells us that the cartel is not going to cut back its current actual output level unless non-members cooperate in doing so, many questions have arisen concerning the oil and gas industry and whether 2016 will be another 2015 or a better year. Where will oil prices be in 2016?

How will the 2016 supply and demand outlook look, and could it change the course of events? In general, what will 2016 hold for the oil and gas industry? Such questions are what many oil and gas companies, investors and professionals want answers to. Here few answers: Where Will Oil Prices Be In 2016?

It is definitely unrealistic to simply state a number. However, looking at the big picture and taking into account the long term goals of both OPEC and non-OPEC producers, a price range can be specified.

On the one hand, OPEC is currently focused on protecting its market-share and squeezing conventional oil producers' rivals out of the market - that is unlikely to change. On the other hand, the long term goal for non-OPEC producers such as U.S. shale oil producers is obviously surviving the current low-oil-price environment through cost-cutting measures and relying on innovation and technology that can increase efficiency and reduce the cost of production.

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Taking these long term goals of both OPEC and non-OPEC producers into consideration, it is time now to look at the big picture to get a clearer idea of where oil prices will be in 2016.

OPEC is currently trying to make the return of high oil prices dependent on the cooperation of non-OPEC members to cut production and this was made clear during its last meeting. That means OPEC will not cut oil production unless nonOPEC producers agreed to cooperate in cutting oil production as well. It is extremely important to highlight here that it is highly unlikely that oil prices will go up to levels above $80 per barrel again even if non-OPEC producers cooperated with OPEC to cut production. Why not?

The reason is very clear, it is about long term strategy. The return of high oil prices to be precise, the return of oil prices that are slightly above high-cost oil producers' break-even such as U.S. shale oil producers- means giving OPEC's rivals the chance to come back and make money. And this poses a long term threat to conventional oil producers such as OPEC members. What OPEC is doing right now is keeping oil prices at levels where its members make money and their rivals do not - that is how they squeeze them out of the market and kill the shale revolution. What we can draw from this is that high oil prices pose a long term threat to OPEC. While OPEC is determined to pursue its market-share strategy, U.S. shale oil producers are facing a harsh reality: die fast, or bleed to death. Amid the current lowoil-price environment, many U.S. shale oil producers are losing, but it seems that it's better to hope that a miracle will happen and oil prices will go up than to go out of the market. U.S. shale oil producers are relying on factors that will drive oil prices up such as the economic growth triggered by low oil prices, increased demand, and decreased supply due to the decline in upstream investment. But in the current circumstances this will take time, as economic growth is slow, demand is lagging, and the oil market continues to be oversupplied.

Regardless of how complex the situation is and the fact that oil prices are unpredictable, the bottom-lines are clear. The return of high oil prices to levels above the break-even of U.S. shale oil producers poses a long term threat to OPEC because it means allowing shale oil to be economical and consequently creating competition for OPEC. On the other hand, oil prices heading below $30/bbl is unlikely to happen due to the fact that OPEC will be losing much. Therefore keeping

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oil prices at levels between $35/bbl to $75/bbl is a key priority for OPEC to protect its market-share.

How 2016 Supply and Demand Outlook Will Look Like?

The supply and demand equation is a fundamental factor controlling oil prices.

Therefore, how oil prices will change in 2016 depends mainly on how the supply and demand outlook for 2016 will look. The problem here is that predicting oil prices based on the supply and demand outlook is very complex, and its complexity comes from the fact that there are a few vital variables that have a huge influence on supply and demand outlook. Those variables are, but are not limited to, geopolitical flashpoints, OPEC's next move, and economic growth- these variables are unpredictable most of the time. Therefore -besides the facts and figures of the current supply and demand- taking into account these variables is essential in predicting how the supply and demand outlook will look in 2016.

Regardless of how gloomy the oil market looks like right now, there are a few important signs that tell us a lot about how the supply and demand outlook may look in 2016. On the supply side, the global oil markets remain oversupplied, and OPEC will not be the one to rescue the market. In fact, OPEC's current actual production level is somewhere around 31.8 mb/d, which is more than the official target of 30 mb/d. Besides that, a few of OPEC members such as Iran, Iraq, UAE and Libya and aggressively working on increasing their oil output. For instance, Iran is planning to increase its production by 500,000 to 1 mb/d over the coming year or so. And it is clear now that OPEC is officially allowing its members to increase oil outputs above the 30 mb/d official target.

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Similarly, non-OPEC countries like Russia are working on increasing their oil output as well to cover their losses due to the current low-oil-price environment that makes the situation even worse. On the other hand, it is important to note that regardless of the continuous drop in the U.S. rig count, which used to be a sign of decrease in oil production, the U.S. production is not decreasing as it was expected to. This is due to the advanced technology used to boost production and offset or delay the effects of decreasing rig counts. On the demand side, the current oil demand and forecasted demand growth do not signal any positive sign of price recovery. According to the International Energy Agency's Oil Market Report, global demand growth is forecast to slow to 1.2 mb/d in 2016 after surging to a five-year high of 1.8 mb/d in 2015.

Therefore, as many OPEC and non-OPEC countries work aggressively to increase their oil output to weather the effects of low oil prices on their oil revenues, and the fact that oil demand is lagging behind, the supply and demand outlook for 2016 tells us that the low-oil-price environment is here to stay. The oil industry in 2016 will continue to experience a slowing global crude oil consumption and definitely a

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oversupplied market. The only way it could be changed is if there is any collaboration between OPEC and non-OPEC on production cuts or in the event of any geopolitical flash-points which we do not hope for. Nevertheless, that may seem unlikely to happen as the competition for market share is very fierce and involving many producers even within the OPEC itself.

The oil and gas industry in 2016 will continue to experience the negative effects of the current low oil prices but with less intensity as it adapts to a low-oil-price environment. It will continue to consolidate and we will see many mergers and accusations taking place. Global exploration and production (E&P) activities will experience a slowdown as E&P spending that has so far declined by 20 percent will also fall by 11 percent in 2016, according to Evercore ISI's 'Global 2016 E&P Spending Outlook: An Industry Mired in Recession.'

Crude oil global stockpile levels will continue to increase and a phase out of fossil fuel subsidies in many parts of the world will also continue to emerge as many countries take advantage of the current low oil prices. Demand will increase slowly but that will be counterbalanced by the overabundance of oil supply and the huge stockpile. And lastly, oil prices will remain in levels between $35 to $60 per barrel unless a sudden geopolitical event takes place, or an oil production cuts agreement is reached between OPEC and non-OPEC.

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Did OPEC Just Give Up Being a Cartel Written by Steve Brown from The Steam Oil Production Company Ltd OPEC is the ultimate cartel, it was formed to get its members a better price for their product than the free market would allow, and the members did that by working together to restrict supply. There is a reason that governments outlaw cartels, they prevent prices finding their true level and they transfer wealth from consumers to producers.

But when the cartel is made up of governments, well there is no-one to outlaw them, so instead they become revered bodies charged with bringing stability to markets and protecting the interests of producers and consumers. That's OPEC. But there is only one reason for OPEC's existence and that is to make the oil price higher than it would be otherwise; everything else is window dressing.

In Vienna OPEC wrong footed everyone by abandoning the quota limit for OPEC production. Of course everyone knows that the quotas were widely ignored anyway but if you look back over the past few years, as Javier Blas has done, see his tweet below, there is at least a correlation between OPEC's actual production and the declared limit.

#OPEC doesn't look like the #oil cartel Kissinger once said was able to 'blackmail' the U.S. https://t.co/as1GiVaAGu pic.twitter.com/XLSmSfIk3U — Javier Blas (@JavierBlas2) December 5, 2015

Now the limit has gone missing, so does that mean the cartel is finished and that OPEC is a dead duck? Well I think it's not dead, it's just resting, or perhaps the better phrase is regrouping. You see one massive problem that OPEC has had for years has been the allocation of the overall quota amongst its members. Some

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countries claim this capacity or that capacity, or this reserves base or that reserves base, and when Iraq is rebuilding its productive capacity and Iran is claiming it will increase production by 500,000 bbls/day the instant sanctions are lifted, the whole problem gets more and more intractable.

You might wonder why they argue about the numbers but the great bonus of having OPEC recognise a productive capacity larger than one's actual capacity is that then a cut to that limit might not actually require a reduction in production at all, and all without the appearance of cheating - which is a tad harder now that satellites can track tanker movements at will.

So what I suspect may be going on is a recognition that, for good or ill, the Saudi strategy has become OPEC's strategy and that OPEC will pump (or is pumping) all it can; and given that, the organisation has no better opportunity for calibrating each member's potential oil production capacity than by measuring what everyone can actually produce when everyone is flat out.

Most OPEC production cuts in the past were really Saudi production cuts. To bring the market into balance a cut of 1.5 mmbbls/day would do the trick. If every member were honest and really did cut production that would only require a 5% reduction in production, and that could easily generate a 30% uplift in the oil price. But if the past is a guide to the future that would really be a 15% cut for Saudi Arabia and no cut at all for anyone else.

Whilst everyone thinks OPEC is in disarray and that it can no longer function as an effective cartel I rather suspect that the abandonment of the quota level for the organisation is a pre-cursor to the establishment of a new reality based set of quotas for everyone. Another six months of low prices may just be enough to convince the serial cheaters (I'm looking at you Venezuela and Nigeria) and the less disciplined members of the group that when Saudi relents and says 'it's time for a new set of quotas' that, at least for a while they should play fair.

So I suspect that rather than giving up being a cartel, OPEC is actually preparing itself for a new and perhaps more effective phase of its existence.

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Are Low Crude Oil Prices a 'Boom Or A Curse' For The World Economy?

Written by Chris Vermeulen from The Gold and Oil Guy The energy markets are tanking and are at levels that have not been seen since 'The Recession' of 2009. Opinions are divided on the effects of the fall. Some say it is good for consumers, whereas, others say it is bad for the global economy. This article will analyze the overall effects of low crude oil prices on the industry, the major oil-producing nations, consumers and the overall global economy. The severity of the fall can be seen in the chart below.

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Top 10 crude oil producers which are being affected: A glance at the charts of the top 10 crude oil producers shows the clear shift from Saudi Arabia to the US, as the largest energy producer in the world.

An analysis of the top producers of oil gives us a clear picture of the effects of this fall on the global economy. Does the drop in price have far-reaching effects, which may lead to geopolitical tensions in the world? Is the power to decide the pricing shifting from the hands of the OPEC nations, for the first time in decades? Are the low prices laying a base for a much larger uptrend in the future?

Effects of low crude oil prices on the US economy: The US is both the largest producer, as well as the largest user of crude oil, in the world. Domestic supply caters to 50% of the daily needs, and the other 50% is imported, from around the world. The production from the US Shale wells have increased rapidly, in the last few years, and the industries associated with shale oil are being crushed.

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Shale oil drilling is unprofitable at these levels: The boom in oil prices, and an improvement in fracking technology, has led to a rapid growth in the number of shale oil wells. However, according to various reports, most of the shale oil wells are profitable only when priced above $60/barrel. Some of these companies have taken large loans, in order, to expand their production, and with prices remaining low, these loans are likely to become unserviceable. A failure of the companies with heavy loans is likely to strain US Banks, which have loaned the monies to said companies. Along with the crude oil producers, the associate industries ie: the equipment suppliers, the hotel industry, the truck companies, etc. are also struggling, due to a decline in prices.

With many drillers cutting costs, unemployment within this sector is on the rise, and wages are either stagnant or being reduced. New investments are being postponed.

Associate companies, which supply to the oil producers, are slowly going 'out of business'. As the US economy is very diverse, the overall impact is not alarming, however, US States that are dependent on the shale oil drilling, will almost certainly take a hit.

Advantage to the Consumers and the Auto Industry and the Airline Industry: Auto and airline industries are welcoming the drop in prices. Consumers, also have more disposable income to spend for their holiday shopping this year, due to lower gas prices at the pumps. According to Goldman Sachs, US households have around $150 billion to spend this year, due to the fall in crude oil prices. If the price remains low, the domestic consumer will become the beneficiary!

Deflation: The FED is struggling to increase the inflation figures to around 2%, but with low energy prices, fears of deflation are ever increasing.

Effects of low crude oil prices on the Russian economy: Russia is another major exporter of crude oil in the global economy. The high price of crude oil during 2009-2014, assisted them in recovering from the crisis. However, with oil prices 'tanking', the Russian economy is now struggling. According to

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bbc.com, oil and gas contribute 70% of the export income for Russia. Every dollar drop in the price of crude oil impacts the Russian economy by $2 billion worth of losses.

With the Russian economy struggling, due to low crude oil prices and Western sanctions, it raised its interest rates to 17% this year, in order to stem the run on the Ruble. Refer to: chart of the Russian interest rate as shown. If the oil prices continue to stay low, Russia will struggle with its federal budget, since it mainly depends on the profits of crude oil. Some believe that President Putin is likely to resort to actions which will divert the attention from his struggling economy, and thus create geopolitical tensions in the world wide.

Source: Central Bank Of Russia and tradingeconomics.com Effects of low crude oil prices on OPEC: OPEC consists of twelve countries that produce 40% of the world's crude oil demand. Saudi Arabia has been the leader of the OPEC nations and its change in production has significantly impacted the price of crude oil. For the first time in years, it looks like Saudi Arabia is losing its status as the decision maker of crude oil prices in the world. The divergence in price and the increase in production of crude oil, by Saudi Arabia in 2015 in the chart below is an indication of its declining power as price and their production have moved together in the past.

The recently concluded meeting of OPEC, on December 4th, 2015, showed the divide among the OPEC nations. The smaller nations like Algeria, Venezuela and

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Ecuador are all reeling under the effects of low crude oil prices, and their efforts to force a ceiling on the total production was rejected. Though Saudi Arabia has strong foreign reserves, which can support its economy and aid in pumping oil at these low price rates over a long time, it too has begun to feel the pain. The Saudi stock market is down 27% from its high of this year.

Lower oil prices can lead to a crisis in the middle east region similar to 2010: The international rating agency of Stand & Poor's reduced the sovereign rating of Saudi Arabia by one notch in October 2015, with a negative outlook. Stand & Poor's expects Saudi Arabia to have a budget deficit of 16% of its GDP, in 2015. There are unconfirmed reports of an internal power struggle of the throne, in the oil-rich nation.

Any power struggle in the Kingdom of Saudi Arabia is likely to destabilize the entire Middle East region.

The Study of the price needed by various countries in order to balance budgets:

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The chart below clearly shows that the current price of crude oil is not favorable to most of the nations. Many are bleeding heavily, due to the lower oil price and are struggling to fund their budgets. It won't be long before the chinks in the armor of the weaker nations will begin indicating whether prices remain low, for a long time.

Low crude oil price is not a negative for all countries: Oil importing countries like India, Japan, China, and some Western European countries have actually benefited from lower crude oil prices. China has been a major net importer of crude oil in recent years. With the Chinese economy slowing

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down, a fall in crude oil prices will help by increasing its foreign exchange reserves.

However, only a fall in crude oil may not be sufficient enough to prop up the Chinese economy. For a few countries, like India, the fall in crude oil prices is good news, as it will help them control their current account deficit.

Another Crisis in the making: However, the major ill effect of this fall has been the fears of deflation in Japan, Europe and the US. The ECB, the FED, and the BOJ are all struggling to bring inflation to around 2% so as to avoid deflation, but thus far they have failed. If prices remain low for a considerable period of time, it may lead to another crisis with deflation at the core.

Conclusion: Saudi Arabia likely wants to keep the price down so the US Shale producers to go 'out of business'. However, the US Shale production has been resilient so far. Russia is also at its highest output and Iran is expected to increase its output in the coming months and therefore, many oil-dependent countries are finding it difficult to handle their budgets. The strain among the countries taking opposing sides was evident during the recently completed OPEC meeting on December 4th, 2015.

If price remains low for too long, it is sure to cause geopolitical tension, lead the economies of Europe, the US and Japan towards deflation. Oil producers will have to cut production, in the future, as the low price is unsustainable in the long-term. When this starts to occur crude oil price will find a bottom. I will keep you updated regarding the time to enter oil, for long-term gains in the future. But until then follow my analysis and forecast.

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Next Year's Oil Price...

Another prediction, or not Written by Steve Brown from The Steam Oil Production Company Ltd Once or twice I make predictions and sometimes I get them spot on and sometimes they are so spectacularly wrong I think it best to crawl under a rock and abandon the recently adopted profession of seer.

Let me take another look at the one which is so far off the mark it is embarrassing.

Back in May I predicted that by the end of June the oil price would be $75/bbl. Well I gave myself an out in the title of the piece, '$75/bbl for Brent by June... or not, one of the two' but it would be sophistry to claim that I had really not been predicting a price that looks so far out of reach now that I wonder what on earth I was thinking.

But I had made the mistake of thinking we were on our way out of the slump and I hadn't, in truth, done much more than assume that a six week old trend would carry on for another six weeks. Of course there was a bit more to it than that, I had also been expecting US shale output to slump. That was right too in the Eagle Ford and in the Bakken but the Permian has held up and with every other producer wringing every last drop of production out of their systems, a collapse in US production that had started so promisingly (for someone like me that is an oilman through and through) has lately been stubbornly resistant.

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I also didn't expect the Saudis to be quite so determined to flood the market, I thought, as long as a recovering oil price didn't drive the rig count up too far, the Saudis would prefer to capture a moderate price rather than do what they actually did and drive the price right down. Their boot is right on the necks of the shale producers and they aren't letting up.

But what of next year, what will the oil price be? Well I think the first quarter is not going to be pretty, and I'll be surprised if there isn't a wave of bankruptcies and restructurings. Whoever hedged 2016 early in 2015 is looking pretty smart now, and those who left it too late are going to be casualties. It is casualties that the Saudi's want to see, they want Wall Street to force the US independents to repay their debts and divert cash from rigs to bonds. But eventually, they will realise the job is done and there will then be just the small matter of 500 million barrels of excess stocks to work through. So no big recovery in 2016 I am afraid... but I wouldn't be surprised to see that $75/bbl in June 2017, I don't think I ever did say which year.

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Oil Price Scenarios for 2016 Written by Euan Mearns from Energy Matters Every year I have a bet with a good friend on where the Brent oil price will be in December the following year. Last year I estimated $56.50, my friend $99, so this year I am a clear winner, even though I'm out by about 49%. Brent is trading at $38 as I write. I can extract little satisfaction from this since I got 'close' for the wrong reasons.

Let's cut to the quick. My forecast for Brent at around this time next year in my BAU (business as usual) scenario is $37. This is grim reading for all those involved in and around the oil industry. Worse still, I think there is high probability that we see sub$20 oil before the first quarter is out. But this is great news for consumers. The reason is gross over-supply sustained throughout 2016, helped by Iran coming back to full market with an additional 800,000 bpd.

In addition to BAU I present two other scenarios. Capitulation where OPEC throws in the towel and cuts 5 million bpd that sends the price back to $100. And Event where terrorist activities in Saudi Arabia (or elsewhere) sends the price towards $100. The world has 3 billion barrels in storage and this may hang over the market for years to come.

This article first appeared on the Energy Matters blog. Third parties are welcome to cross post but must leave this sentence and link in place.

BAU Demand Model IEA quarterly supply and demand data are used as a basis for the forecasts. Here, production less oil sent to storage = demand, i.e. consumption. Demand goes through an annual cycle where Q3&4 are typically higher than Q1&2. The quarterly data typically define a linear trend rising at about 1.5% per annum. These linear regressions (Figures 1 and 2) are used to predict quarterly demand in 2016 (Figure 3). This assumes no major upset to the global economy and that economic malaise in many quarters is offset by low oil price stimulating demand in others.

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Figure 1 IEA Q1 demand data 2010 to 2015.

Figure 2 IEA Q2 demand data 2010 to 2015.

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Figure 3 Demand summary. 4Q 2015 is estimated. The forecast for 2016 is based on the quarterly regressions shown in Figures 1 and 2. 3Q and 4Q regressions not shown.

BAU Supply Model Forecasting supply is more tricky. Throughout 2015, supply has been amazingly robust in the face of collapsing price. The global oil market has tremendous momentum built on the back of several years of $100 oil. This momentum is not easily switched off since new conventional oil projects may have a 5 to 10 year lead time. There will be dozens of new fields around the world at various stages of development that will continue to come on stream in the years ahead.

One consequence of this is that most of the major producers are maintaining production plateaus where new supply is sufficient to cancel natural declines. See for example Saudi Arabia, OPEC, Russia, Asia and the North Sea in the November

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edition of Vital Statistics. None of these areas are showing any sign of retreat and I anticipate this will continue through 2016.

The one region that is more responsive to price collapse is LTO (light tight oil) drilling in North America where the US rig count has collapsed from 1609 (10 October 2014) to 524 (11 December 2015). But even here production has been robust with only modest declines posted thus far. One reason for this is that there are still 524 rigs drilling. These are drilling better wells targeting sweet spots and for example LTO production in The Permian has continued to rise offsetting some of the declines elsewhere.

Figure 4 The supply forecast perhaps looks a bit simple but is based on N American LTO production going down 600,000 bpd offset by Iran going up 800,000 bpd while the rest of the world trends sideways.

The US oil rig count has resumed its plunge and this must leave its mark in 2016 although this will be partly offset by an enormous back log of drilled but uncompleted wells. I am guestimating that LTO production falls 600,000 bpd in 2016.

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But the joker in the pack is Iran, widely expected to rejoin with full exports in early 2016 and I anticipate that production may rise by 800,000 by year end, a bit higher than IEA estimates. Hence my summary forecast sees a net rise of 200,000 bpd, to produce what is effectively a production plateau (Figure 4).

The resulting stock additions are shown in Figure 5. This picture is similar to that provided by the IEA. The forecast sees another 547 million barrels going to storage.

Figure 5 Deducting the demand model from the supply model produces this picture of stock change for 2016. The World is still awash in surplus oil by the end of the year.

The IEA in December's OMR says: New and spare storage capacity should be able to accommodate the projected extra

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300 mb of stocks.

So I, and the IEA, see a situation where gross over-supply is maintained throughout 2016. It is difficult to see a price recovery with that backdrop. But how to convert these numbers into a price forecast? Past relationships between supply, demand and price is all I have to go on and I therefore use the same empirical model as used last year (Figure 6). This has many limitations, amongst other things it is grounded in the trends defined in the period Jan 2002 to May 2011. The relationship may since have changed. But this is all I have to go on. Setting the supply curve to 97 M bpd and demand to 96.1 M bpd provides an indicative price for Brent of $37 in December 2016, very close to today's price.

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Figure 6 Based on an original idea by Phil Hart. I'm not sure I fully understand the dynamic here any more, but an explanation is given here. Large time lags between price signal and market response cloud the picture. Oil supply was inelastic to price up to May 2011, but then supply responded and has been responding ever since.

However, in the interim, it is possible the oil price goes much lower since these things have a habit of being overdone. The last time we saw a crash like this was in 1999 and the price then went sub $20 in today's money (sub $10 in money of the day). If history repeats, that's where the market is heading. Demand will after all soften 1Q 2016.

I am not even going to attempt a forecast for 2017. Figure 5 suggests the market will return to balance in 2017 but already has a record 3 billion barrels in storage, equal to about 32 days of consumption. This stock volume will hang over the market for a long while after the fulcrum is crossed. And it is difficult at this point to predict how the US LTO industry will respond to the prospect of rising price. Will the industry be killed stone dead by the events of 2015 and 2016. Or will drillers return when the price begins to inch up?

With the World in turmoil there is of course no guarantee of BAU and two other scenarios are briefly outlined below.

Capitulation The countries hardest hit by the ongoing price rout are in OPEC closely followed by Russia. The possibility remains that OPEC decides to abandon the market share policy and revert to protecting price. I estimate that to regain $100, about 5 M bpd would need to be withheld from the market. Remember that stocks will last 1000 days with stock draws of 3 M bpd.

I just don't see either Saudi Arabia, Iraq, Iran or Russia agreeing to such massive production cuts and therefore give this option a very low probability.

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Event With conflict raging across the Middle East, it is somewhat miraculous that oil production has not been disrupted, apart from in Syria and Libya. Impoverished Saudi Arabia, Iraq and Algeria look increasingly vulnerable to insurgency.

Destabilisation of Saudi Arabia in particular, leading to a Libyan style of civil war, could of course have a profound impact on oil markets.

Onshore fields, processing and export facilities in Saudi Arabia are particularly vulnerable, although well guarded. The Abqaiq processing facility, that processes around 5 M bpd was attacked by 4 al-Qaeda terrorists in February 2006. And a terrorist was shot in Abqaiq as recently as September 2015.

While an event such as this looks increasingly possible it is at the same time impossible to assign a probability. But even if 5 M bpd production was lost, that 3 billion barrel cushion of oil in storage would cover 600 days. The price may bounce to $100, sending the shale drillers back to work.

Concluding Comment It has always been impossible to predict the oil price. The supply, demand and security dynamic today is as high as it can be. Anything can happen in the next 48 hours. But my estimate for December 2016 is that oil prices will be around where they are today having gone much lower in the intervening months. $37 causing much pain to 'The Industry' today will be seen as a relief in a year's time.

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The Crude Oil Export Ban - What, Me Worry About Peak Oil? Written by Art Berman from The Petroleum Truth Report Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that's narrative that reality-averse politicians and their bases prefer.

The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo.

The EPCA not only banned the export of crude oil but also established the Strategic Petroleum Reserve. Both measures were intended to keep more oil at home in order to make the U.S. less dependent on imported oil. A 55 mile-per-hour national speed limit was established to force conservation, and the International Energy Agency (IEA) was founded to better monitor and predict global oil supply and demand trends.

Above all, the export ban acknowledged that declining domestic supply and increased imports had made the country vulnerable to economic disruption. Its repeal last week suggests that there is no longer any risk associated with dependence on foreign oil.

What, Me Worry?

The tight oil revolution has returned U.S. crude oil production almost to its 1970 peak of 10 million barrels per day (mmbpd) and imports have been falling for the last decade (Figure 1).

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Figure 1. U.S. crude oil production, net imports and consumption. Source: EIA and Labyrinth Consulting Services, Inc. But today, the U.S. imports twice as much oil (97%) as in 1974! In 2015, the U.S. imported 6.8 mmbpd of crude oil (net) compared to only 3.5 mmbpd at the time of the Arab Oil Embargo (Table 1).

Table 1. Comparison of U.S. crude oil imports, production and consumption for 1974 (Arab Oil Embargo) and 2015 (Today).

Source: EIA and Labyrinth Consulting Services, Inc. Production of crude oil is higher today by 7% but consumption has grown to more than 16 mmbpd, an increase of 32%. At the time of the Arab Oil Embaro, consumption was only 12 mmbpd.

So, consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher?

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We are far more economically vulnerable and dependent on foreign oil today than we were when crude oil export was banned 40 years ago.

What, me worry?

Figure 1. Alfred E. Neuman.

Source: moneyandmarkets.com Peak Oil While the world was focused on an over-supply of oil and falling prices over the last 18 months, world liquids production peaked in August 2015 at almost 97 mmbpd (Figure 2).

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Figure 2. World conventional and unconventional liquids production. Source: EIA, Drilling Info, Statistics Canada and Labyrinth Consulting Services, Inc. Average daily production of 95.5 mmbpd for 2015 exceeds EIA's Annual Energy Outlook 2015 forecast (April 2015) by 2.6 mmbpd!

Conventional oil production peaked in February 2011 at 85.3 mmbpd (Figure 2) and non-OPEC conventional production peaked in November 2010 at 49.8 mmbpd (Figure 3).

Figure 3. World conventional and unconventional liquids production showing OPEC and non-OPEC conventional production.

Source: EIA, Drilling Info, Statistics Canada and Labyrinth Consulting Services, Inc. It's not important whether this is the final, maximum world production peak or not. It is a signal about a trend that needs to be acknowledged and incorporated into our evolving paradigm about oil supply.

Peak oil production was accelerated by a confluence of factors. Zero interest rates in the U.S. and Middle East supply interruptions before 2014 caused high oil prices.

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Easy money caused over-investment in the oil business. Over-production and weakened demand resulted in the collapse in world oil prices. OPEC's reaction and decision to produce at maximum rates have created the 'perfect storm' for peak oil production several years before it would have occurred otherwise.

All oil producers are losing money at current prices but companies and countries are producing at high rates. Indebted conventional and unconventional players need cash flow to service debt so they are producing at high rates. OPEC is producing at high rates to maintain or gain market share. Everyone is acting rationally from their own perspective but from a high level, it looks like they have all lost their minds.

Peak oil is not about running out of oil. It is about what happens when the supply of conventional oil begins to decline. Once this happens, higher-cost, lower-quality sources of oil become increasingly necessary to meet global demand.

Those secondary sources of oil include unconventional (oil sand and tight oil) and deep-water production. The contribution of unconventional and deep-water production has grown from about 15% in 2000 to approximately one-third of total supply today, and it will probably represent more than 40% by 2030.

Despite a popular belief that tight oil is price-competitive with conventional oil production, it is not (Figure 4).

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Figure 4. Slide from Schlumberger CEO Paal Kibsgaard's presentation at the Scotia Howard Weil 2015 Energy Conference.

Figure 4 is from Schlumberger, a company that knows the costs of its global customers. It shows that tight oil is the most expensive source of oil, followed by deep-water and other offshore oil. Conventional oil from onshore and OPEC middle eastern sources is the lowest cost oil.

Schlumberger did not include oil sands in its chart because it is difficult to compare the costs of a manufacturing operation to the cost of drilling individual wells. Existing mined and SAGD oil sands projects, however, break-even at approximately $50 per barrel although new SAGD projects require about $80 per barrel.

Figure 4 reflects costs in 2014. Although cost and efficiency improvements since 2014 probably apply equally to all plays, Table 2 shows late 2015 costs and reserves for key tight oil operators.

The principal tight oil plays-Bakken, Eagle Ford and Permian basin-break even at $65 to $70 per barrel oil price today.

Table 2. Key operator weighted-average estimated ultimate recoveries (EUR) in barrels of oil equivalent and break-even oil prices. Drilling and completion (D&C) costs used in the economic calculations are shown. Economics also include an 8% discount. Details may be found at the following links: Bakken, Eagle Ford and Permian.

Source: Drilling Info & Labyrinth Consulting Services, Inc. Although EUR is higher and break-even prices are lower for certain operators and core areas of the plays, Table 2 reflects representative average values for operators with the highest rates and cumulative production. If the price of oil increases, service costs will also increase and the production cost will be higher. Efficiency gains are largely behind us as new well production per rig has flattened in the last quarter of 2015 (Figure 5) so it is unreasonable to expect costs to decrease much further.

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Figure 5. Tight oil new well production per rig. Source: EIA & Labyrinth Consulting Services, Inc. The economics of tight oil plays require spot oil prices that are double and wellhead prices that are triple current face values. Excluding new SAGD projects, tight oil is the world's most-expensive and, therefore, marginal barrel of oil and its cost of production today is more than $70.

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How Far Can Costs Fall?

Written by Steve Brown from The Steam Oil Production Company Ltd Back in February, I wrote about how I expected upstream capital costs to fall as the oil price collapsed, and then in July, I wrote again with an update on how the IHS UCCI (Upstream Capital Costs Index) had actually fallen up to that time.

Well, this is a further update on that, mixed in with a bit of speculation on how far the fall in costs might go before we touch bottom.

This is how the updated chart looks, I have left in the points I speculated might result from this oil price fall when I first looked at the numbers back in February and I have also highlighted in red the new data since then. Costs have come down quicker than I thought but then prices went lower than I hoped and stayed down longer than I feared. Some might say prices have been lower for longer, to which I say: enough already.

IHS UCCI Index, deflated by US BLS CPI & Brent Oil Price

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The index is not the raw index that IHS publishes, you can find that data here, I have deflated it by US CPI to take the background inflation rate out of the system. The virtue of doing that is that you can clearly see that there is a real hard floor to how far this index could possibly fall. We are down by about 20% relative to the average costs oil companies were paying back in 2014, the total fall can't be more than 40%, or we will have costs that are lower than we have seen for nearly twenty years, and to get that low it seems oil prices would need to be in the $30's.

The ramp up in costs that started in 2006 was driven by the need for more contracting capacity, people, rigs and vessels. A 70% jump in the cost of doing business in about two years was enough to drive investment into the oil service sector in a way we hadn't seen in years. Count all the brand new rigs, from super heavy duty jack-ups to sixth generation semisubmersibles that can drill in literally thousands of metres of water to the multitude of land rigs manufactured to drive forward the US Shale oil boom. Well, they are all built now and with projects being cancelled left right and centre the drilling contractors are hungry enough to rent them to you or me at a modest margin above the operating day rates.

This is the oil service cycle and the capital destruction in this sector has only just begun, contractors with too much debt will go bankrupt, the more prudent ones will survive to reap the rewards when the cycle turns in their favour again. Check the balance sheet before investing, and be cautious about what the actual value of the tangible assets are. Just because someone has spent $600 million on a heavy duty jack-up doesn't mean it is worth that value today.

So, we are probably two thirds of the way through the cycle, costs are down 20%, if prices stay 'lower for longer' at about $50/bbl, there is maybe another 10% reduction to come, but much sooner than I had thought before - probably by 1Q 2016. This will cause consternation amongst oil service companies, however we are definitely in the phase of the cycle where oil companies with the nerve and the capital to commit to development projects will get their projects constructed and wells drilled for a bargain price.

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We are at Peak Oil now; we need very low-cost energy to fix it Written by Gail Tverberg from Our Finite World This past week, I gave a presentation to a group interested in a particular type of renewable energy-solar energy that is deployed in space, so it would provide electricity 24 hours per day. Their question was: how low does the production cost of electricity really need to be?

I gave them this two-fold answer: 1. We are hitting something similar to 'Peak Oil' right now. The symptoms are the opposite of the ones that most people expected. There is a glut of supply, and prices are far below the cost of production. Many commodities besides oil are affected; these include natural gas, coal, iron ore, many metals, and many types of food. Our concern should be that low prices will bring down production, quite possibly for many commodities simultaneously. Perhaps the problem should be called 'Limits to Growth,' rather than 'Peak Oil,' because it is a different type of problem than most people expected.

2. The only theoretical solution would be to create a huge supply of renewable energy that would work in today's devices. It would need to be cheap to produce and be available in the immediate future. Electricity would need to be produced for no more than four cents per kWh, and liquid fuels would need to be produced for less than $20 per barrel of oil equivalent. The low cost would need to be the result of very sparing use of resources, rather than the result of government subsidies.

Of course, we have many other problems associated with a finite world, including rising population, water limits, and climate change. For this reason, even a huge supply of very cheap renewable energy would not be a permanent solution.

This is a link to the presentation: Energy Economics Outlook. I will not attempt to

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explain the slides in detail.

Slide 1

Slide 2 Some people falsely believe that energy supplies are 'only needed for industrial purposes.' Energy supplies are, in fact, needed for many things: cooking our food, keeping our homes warm, and creating the clothing we expect to wear. It would be impossible to feed, house, and clothe 7.3 billion people without supplemental energy of some kind.

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Slide 3

Slide 4

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Slide 4 suggests that the world economy is heading into recession, because recent growth in the use of energy supplies is very low recently. Another sign that we are headed into recession is that fact that CO2 emissions fell in 2015. They usually don't fall unless a global crisis exists. Emissions fell when the Soviet Union collapsed in 1991, and they fell during the economic crisis in 2008. Perhaps the world economy is hitting headwinds that are not being picked up well in conventional calculations of GDP growth.

Slide 5 Slide 5 shows a chart I put together, using data from several different sources, showing how growth in energy consumption has compared with growth in GDP. Growth in GDP tends to be somewhat higher than growth in energy consumption.

Economic growth (and growth in energy use) was low prior to 1950. There was a big jump in economic growth immediately after World War II, in the 1950-65 period.

There was almost as much growth in the 1965- 75 period. Since 1975, economic growth has generally been slowing.

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Slide 6 Between the years 1900 and 1998, the use of electricity rose (black line) as the cost of electricity fell (purple, red, and green lines). Electricity consumption could rise because it was becoming more affordable. Rising electricity consumption allowed the economy to make more goods and services. Workers (with the use of electricity) were becoming more efficient, so wages could rise. With higher wages, workers could afford more products that used electricity, such as electric lights for their homes and radios.

If electricity prices had risen instead of fallen, it seems doubtful that this pattern of rising consumption could have taken place.

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Slide 7 The comments in Figure 7 represent my own view. It is based on both theoretical considerations and historical relationships. Many who have studied the economy believe that energy is important for economic growth. In my view, the real need is for cheap-to-produce energy, not just any energy. If cheap energy is not really available, then adding more debt can somewhat make up for the high cost of energy production.

Debt is important because it makes goods affordable that would not otherwise be affordable. For example, having a loan for a house or a car makes a huge difference regarding whether such an item is affordable.

Even when energy products are cheap, debt seems to be needed to get oil or coal out of the ground, or to make a new device such as a wind turbine. Part of the problem is the cost of the capital equipment needed to extract the oil or coal, or the cost of the wind turbines themselves. Another part of the problem is paying for factories to make devices that use the energy product. A third problem is making it possible for users to afford the end products, such as houses and cars. It is much easier to borrow the money for a new tractor, and pay the loan off as the tractor is put to use, than it is to save money in advance, using only the funds earned when farming with simple hand-held tools.

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Slide 8 I mentioned the need for $20 per barrel oil on Slide 7. This is a very inexpensive price. Slide 8 shows that the only time when oil prices were that low was prior to the mid-1970s. The cost of oil production is now far above $20 per barrel. The sales price now is about $37 per barrel. This is below the price producers need, but still above my target price level.

Slide 9

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Slide 9 explains where I got my $20 per barrel price target. Back prior to 1975-in other words, back when oil prices were generally low, $20 per barrel or less-the increase in debt more or less corresponded to the growth in GDP. Once prices rose above $20 per barrel, the amount of debt needed to produce a given amount of GDP growth rose dramatically.

Slide 10 Slide 10 shows interest rates for US debt with 10-year maturity. These interest rates often underlie mortgage rates. As interest rates fall, homeowners can afford increasingly expensive homes. If shorter-term interest rates fall as well, auto loans become cheaper too.

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Slide 11 The value to society of a barrel of oil is determined by how many miles it can make a diesel truck go, or how far it can make an airplane fly. This value to society is more or less fixed. The only change is the small increment each year from efficiency changes, making a barrel of oil 'go farther.'

In the 2000-14 period, the cost of new oil production was increasing very rapidly-by more than 10% per year, by some estimates. The rising cost of oil production occurred much more quickly than efficiency changes. The result was a falling difference between the value to society and the cost of production. When oil prices are high, oil-importing nations tend to suffer recession. When oil prices are low, oilexporting nations find it hard to collect enough taxes to support their many programs.

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Slide 12 The fact that we need energy for economic growth means that we somehow must obtain this energy, even if doing so costs more. The big run-up in oil prices is a major reason for the historical run-up in debt levels. China's big build-out of homes, roads, and factories was also financed by debt.

The higher cost of oil affects many things that we don't think are related, including the cost of building new homes, the cost of building cars, and the cost of building roads. As consumers are forced to buy increasingly expensive homes and cars, and as governments find that the building of roads is increasingly expensive, more debt is used. The terms of loans are often longer as well, to hold down monthly costs.

If we still had cheap oil, this oil by itself could provide a 'lift' to the economy. An increasing amount of debt can 'sort of' compensate for the absence of cheap oil.

The problem we encounter is that neither cheap energy nor the continued run-up of debt is sustainable. Cheap energy tends to change to expensive energy, because we use the cheapest sources first. The continued debt run-up becomes more and more difficult to handle, unless interest rates fall lower and lower. At some point, interest rates can't fall enough, and the whole pile of debt tends to collapse, like a Ponzi scheme.

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Slide 13 I gave this talk on December 15; the first increase in interest rates took place on December 16. With rising interest rates, we suddenly have 'the prop' that was attempting to hold up economic growth taken away.

We need ever expanding debt-that is, debt rising faster than GDP levels-to try to keep the world economy growing, so that the whole pile of debt doesn't fall over and collapse. If we are to have non-debt growth in the future (because we are reaching limits on debt), it needs to again come from cheap energy alone. We need to get back to something similar to the low-cost energy that fueled the economy before the debt run-up.

Slide 14

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Most of us have heard the Peak Oil story, and assume it represents a reasonable view of where we are headed. I think it is close to 180 degrees off course.

Slide 15 M. King Hubbert talked about a very special situation-a situation where another cheap, abundant fuel took over, before fossil fuels began to decline. In this particular situation (and only in this particular situation), it is reasonable to assume that production will follow a symmetric 'Hubbert Curve,' with half of the production coming after the peak, and half beforehand. Otherwise, the down slope is likely to be much steeper.

Many peak oilers missed this important point. We certainly are not in a situation today where another very cheap fuel has taken over.

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Slide 16 Slide 16 represents what I see as the predominant 'Peak Oil' view of the oil limits situation. Some individuals will of course have different opinions.

Slide 17

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Peak oilers certainly did get part of the story right-at some point, the cost of oil extraction would rise. What they got wrong was how the whole scenario would play out. It turns out, it plays out pretty much the opposite of what most had supposedthat is, with stagnating wages, loss of buying power, and prices of all commodities falling because of lack of 'demand.'

We seem to be hitting energy limits, right now. That is why debt is such a problem, and it is why prices of many commodities, including oil, are far too low compared to the cost of production.

Slide 18 Slide 18 shows the fall of commodity prices up through 2014. The fall in commodity prices has continued in 2015 as well. The story we frequently hear is about low oil prices, but there is also a problem with low natural gas prices. Coal prices are low now too, and, in fact, many coal producers are near bankruptcy. Prices of iron ore, steel, copper, and many other metals are very low, as are prices of many kinds of

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staple foods traded internationally.

Slide 19 The problem with low commodity prices is that there are many loans that have been taken out to support their production. There is a significant chance of default, if prices remain low. Also, low commodity prices affect asset prices-for example, prices of coalmines, or prices of agricultural land. As the prices of commodities fall, the price of the land used to produce those commodities falls. When this happens, it becomes difficult to repay the loans on the property.

Slide 20 Peak Oilers were right about the cost of production continuing to rise. What they

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missed was the fact that prices would at some point fall behind the cost of production because of affordability issues. Low prices would then bring the economy down, as it did in the Depression in the 1930s, and in quite a few earlier collapses.

I think of increased demand, provided by debt, as being like a rubber band. Just as a rubber band can stretch for a while, the price of oil can rise for a while, fueled by more and more debt. At some point, debt can't rise any higher-the rate of return on investments made using debt is too low, and defaults become too frequent. Instead of continuing to rise, commodity prices fall back. Market prices of commodities fall to much lower prices than the costs of production.

In order to get oil prices up higher, the wages of factory workers, restaurant workers, and other non-elite workers need to rise, so that they can afford to buy nice cars and nice homes. Commodities of many types are used both in making homes and cars, and in operating them.

Slide 21 If space solar (or for that matter, any renewable energy) is to be helpful, it needs to be very cheap, so that products made using renewable energy are affordable.

If the replacement energy source is cheap enough, perhaps there will not be a huge run-up in debt to GDP ratios, to finance the new devices used to provide electricity or other energy.

We are encountering problems now, so we need a replacement now, not 20 or 50

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years from now.

Slide 22 We cannot expect the cost of electricity production to be more than the current wholesale selling price of electricity. Thus, it needs to be four cents per kWh or less.

Ideally, the price of electricity should be falling, as in Slide 6.

Another consideration is that we need to be able to operate our current vehicles using a liquid fuel, made with electricity, because of the time and materials involved in switching over to electric vehicles. This requirement likely reduces the maximum cost of electricity even below four cents per kWh.

Slide 23

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It is possible to run into many different kinds of limits, over a period of time. In my view, the first limit we reach is an affordability limit. We can tell we are hitting this limit when high prices reverse to low prices, as they have done since 2011. The fact that prices are continuing to fall is especially worrisome.

Slide 24 There has been a popular myth that it is OK for energy costs to rise. We will just choose the least costly of the high-priced alternatives. This approach doesn't really work, because wages do not rise at the same time.

Also, we have to compete with other countries. If their energy costs are cheaper, their manufacturing costs are likely to be lower.

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$25/bbl oil - probably now only a question of 'when', not 'if' Written by Paul Hodges from ICIS

Oil prices are just $1 or so away from falling back into the $10 - $35/bbl range that has dominated most of history.

Thus we are now reaching a second critical moment in oil markets since Stimulus began in 2009, as the chart shows: 

The first was the end of the Stimulus rally which ran until mid-August last year



It created the longest 'flag' shape I have ever seen, ensuring a major move would occur when the pattern broke Since then, the market has been moving steadily downwards, as it tries to return to price discovery mode



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

Many have tried to manipulate it back upwards, but after initial success they



have been crushed Now we have returned to the levels seen at the bottom of the market in 2008 so which way will prices now go?

It is a critical question. Brent closed on Friday night at $36.88/bbl. The only support now left for prices is the December 2008 low of $36.20/bbl. If prices fall below this level, then the Great Unwinding of stimulus policies will be complete as far as oil prices are concerned.

This is why we are at the second critical moment. Can prices hold at the December 2008 lows, or will they continue lower? The second chart puts this recent performance in the historical context: 

It shows that a break of the December 2008 low, will take us back into the price ranges established before 2005



Its as simple as that - we would be back in the long-term historical range below the black line The lowest price seen during that period was $9.55/bbl in 1998 and the highest was $35.30/bbl in 2000 This why the December 2008 low is so critical - it effectively divides the 2 pricing worlds

 

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Which way will it go? My own view, as readers will know, is that we are seeing the oil market trying to return to its true role of price discovery. Without the impact of policymaker stimulus over the past decade - first the subprime bubble, and then the central bank liquidity bubble - prices would never have moved higher.

But this supply of cheap and limitless cash did not only boost demand. It also boosted supply, and so we now have an emerging energy supply glut. This is pushing all energy prices lower.

US natural gas prices settled Friday night at $1.77/MMBTU, back at the levels last seen back in September 2001. Soif oil wants to compete with natgas, it needs to be close to its energy equivalent value to natgas at around $10.60/bbl (oil has around 6x the energy value of natgas).

Impossible, you will say. But people have been telling me my price outlook was impossible, or mad, or stupid or a combination of all 3 descriptions ever since I forecast in August last year that oil prices would collapse.

Their mistake has been to believe in the false market created by policymakers understandably, since it has now been running for a decade. I, however, believe that the market is trying to return to its true role of balancing supply/demand fundamentals via price discovery. Stimulus only postponed this development after December 2008.

Maybe policymakers will intervene again, or some major geo-political event will occur, and take prices higher. If not, then I would argue it is only a matter of 'when', not 'if', prices will break back below $35.30/bbl and hit $25/bbl.

The next question is then how low they will go after that? With the volume of oil in storage - land and floating - it would only take one major player to panic sell, and we could move down towards $10/bbl very quickly indeed.

WEEKLY MARKET ROUND-UP 

My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments:

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

Brent crude oil, down 64%

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Naphtha Europe, down 55%. 'Naphtha demand among European petrochemical producers is healthy on the back of strong cracker margins' Benzene Europe, down 58%. 'The wider economic landscape is still keeping some players uncertain about how the market will fare in Q1 2016' PTA China, down 44%. 'Chinese domestic spot prices mostly fell during the week on pressure from falls in crude oil and feedstock values' HDPE US export, down 37%. 'Ample supplies with little trading activity' ¥:$, down 18% S&P 500 stock market index, up 3%

    

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

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