Oil touches multi-year high with tight supply and Iran sanctions

Global Stock Markets

Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned U.S. sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East. 

Brent crude oil LCOc1 reached $79.22 a barrel, up 99 cents and its highest since November 2014. By 1100 GMT, Brent was up 90 cents at $79.13. U.S. light crude was 60 cents higher at $71.56 a barrel, also close to its highest since November 2014.

World oil prices have surged by more than 70 percent over the last year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russia.

Now the United States has announced it will impose sanctions on Iran over its nuclear programme, raising fears that markets will face shortages later this year when trade restrictions come into effect.

In China, the world’s biggest oil importer, refinery runs rose nearly 12 percent in April compared with the same month a year ago, to around 12.06 million barrels per day (bpd), marking the second-highest level on record on a daily basis, data showed on Tuesday.

The tightening market has all but eliminated a global supply overhang which depressed crude prices between late 2014 and early 2017.

OPEC figures published on Monday showed that oil inventories in OECD industrialised nations in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

U.S. crude is trading at a hefty discount to Brent, the international marker, thanks to sharp rises in

U.S. production to 10.7 million barrels per day, which has left the American domestic oil market well supplied.

U.S. shale oil production is expected to rise by about 145,000 bpd to a record 7.18 million bpd in June, the U.S. Energy Information Administration said on Monday.

The Permian basin in Texas, the biggest U.S. oil patch, is expected to see output climb 78,000 bpd to a fresh record of 3.28 million bpd.

Shell focussed on increasing U.S. shale oil production

Oil Stock Markets

Royal Dutch Shell Plc is focussed on increasing its U.S. shale operation’s oil production while slowing investment in lower-margin natural gas.

 

The Anglo-Dutch company aims to boost its overall shale production by 200,000 barrels of oil equivalent per day (boe/d) to 500,000 boe/d between 2017 and 2020, mostly in the United States with some production in Argentina. 

Although the shale business has yet to generate a profit, it is expected to do so next year, Greg Guidry, who heads Shell’s shale operations, told Reuters on the sidelines of the CERAWeek energy conference in Houston. 

Shell, like Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), aims to make shale production a driver of growth in the next decade. But today most of its output is natural gas, where profit margins are lower. 

As a result, around 85 percent of Shell’s shale budget for at least the next two years will go towards new oil resources, particularly in the Permian oilfield of West Texas and Canada’s Duvernay Basin.

After years of faltering performance and increased spending in shale, Shell has in recent years transformed the business to adapt to the sharp drop in oil prices since 2014. 

Shale oil wells today can be profitable with oil prices above $40 a barrel and gas above $2 per million British thermal units.

Shell has earmarked between $2 billion and $3 billion per year, roughly 10 percent of its capital expenditure, for shale until 2020. 

Gas production will remain largely flat in the coming years and would be boosted in Canada’s Montney basin once Shell decides to go ahead with a major natural gas liquefaction plant in British Columbia known as LNG Canad.

In its eastern U.S. Appalachia gas fields, an increase in output would require construction of pipelines to deliver fuel to demand hubs.

Shell also is advancing shale production in Argentina’s Vaca Muerta basin and will make a decision on developing a production well later this year.

Shell’s 2016 acquisition of BG Group in 2016 boosted the share of natural gas to 50 percent of its global fossil fuels output and made it the world’s largest natural gas trader.

Oil prices edges at $65 as U.S. shale output gains

Global Stock Markets

Oil prices edged higher towards $65 per barrel on Monday but predictions of a major spike in U.S. oil output in the next five years capped the market’s gains. 

International benchmark Brent crude was up 36 cents, or 0.6 percent, at $64.73 a barrel by 1028 GMT. The contract was well below this year’s highs of over $71 per barrel that it hit in January. 

U.S. West Texas Intermediate (WTI) crude rose 42 cents, or 0.7 percent, to $61.67 per barrel. 

The International Energy Agency on Monday revised U.S. oil output growth up sharply, saying the country would be producing a total of nearly 17 million barrels per day in 2023, up from 13.2 million last year, eating into OPEC’s market share and moving closer to self-sufficiency. 

The IEA, which advises industrialised nations on energy policies, also said it expected oil demand growth to average a fairly robust 1.1 percent a year to 2023 and said OPEC would fail to significantly increase its production capacity. 

According to EIA's mid-term market report, oil production growth from the United States, Brazil, Canada and Norway can keep the world well supplied, more than meeting global oil demand growth through 2020

One thing hasn’t changed over the past year, however. Upstream investment shows little sign of recovering from its plunge in 2015-2016, which raises concerns about whether adequate supply will be available to offset natural field declines and meet robust demand growth after 2020, it added. 

Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other global oil players are set to gather in Houston as CERAWeek, the largest energy industry conference, begins on Monday. 

OPEC Secretary General Mohammad Barkindo and other OPEC officials are expected to hold a dinner on Monday with U.S. shale firms on the sidelines of the conference. 

Suhail Mohamed Al Mazrouel, the United Arab Emirates oil minister and OPEC’s current president, said on Sunday that the oil cartel has not discussed rolling over production cuts next year. 

U.S. crude oil production has already risen past that of top exporter Saudi Arabia, to 10.28 million barrels per day (bpd).

Oil prices rise ahead of OPEC meeting with U.S. shale firms

Oil Stock Markets

Oil prices rose early on Monday ahead of a meeting between OPEC and U.S. shale firms in Houston, raising expectations that oil producers would discuss further how to clear a global oil glut.

International benchmark Brent crude was up 44 cents, or 0.68 percent, at $64.81 a barrel by 0135 GMT. 

U.S. West Texas Intermediate (WTI) crude rose 41 cents, or 0.67 percent, to $61.66 per barrel.

Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other global oil players are set to gather in Houston as CERAWeek, the largest energy industry conference, begins on Monday. 

OPEC Secretary General Mohammad Barkindo and other OPEC officials are expected to hold a dinner on Monday with U.S. shale firms on the sidelines of the conference. 

Suhail Mohamed Al Mazrouel, the United Arab Emirates oil minister and OPEC’s current president, said on Sunday that the oil cartel has not discussed rolling over production cuts until next year. 

Rising U.S. shale oil production has been a drag on the OPEC’s commitment to erode a prolonged global oil glut and prop up prices. 

U.S. crude oil production has already risen past that of top exporter Saudi Arabia, to 10.28 million barrels per day (bpd). 

Only Russia pumps slightly more, but the International Energy Agency (IEA) said last week it expects the United States to take Russia’s seat as the world’s biggest crude oil producer by 2019, at the latest. 

The number of oil rigs drilling for new production in the United States [RIG/U] rose to 800 for the first time since April 2015 in early March, pointing to more increases in output to come. 

Speculators raised their bullish bets on U.S. crude futures and options in the week to Feb. 27 for the second consecutive week, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Money managers also upped their bullish bets on Brent crude, InterContinental Exchange (ICE) data showed.

U.S. Shale Surge Offsets Lowest Saudi Oil Imports Since 1980s

Global Stock Markets

 America’s role in the global oil market was flipped on its head in 2017. As shale producers cranked out more and more crude, the U.S. relied less and less on some of its traditional sources of oil. 

At the same time, exports of crude, gasoline and other refined fuels surged higher than ever before.

The U.S. bypassed Saudi Arabia late last year and is nipping on the heels of Russia to be the world’s biggest oil producer.

November output hit a record of 10.057 million barrels a day after the Energy Information Administration revised its data upward. U.S. frackers ramped up production as prices rose toward $60 a barrel late in the year, drawing more drillers to the market.

Two of the most-watched members of the Organization of Petroleum Exporting Countries sent less crude to the U.S. -- one by choice, and one not so much.

Saudi deliveries fell as planned production cuts were implemented to help balance the market and support prices. Venezuela’s hit came amid U.S.-imposed financial sanctions and shrinking production. Meanwhile, imports from Iraq jumped to help keep OPEC steady.

Last year, exports of crude, gasoline and distillates all rose to record highs, and combined shipments abroad finished off the year at 7.3 million barrels a day in December, the largest volume ever in EIA data.

The export machine will likely keep running at full steam in 2018. Demand for refined products may continue to strengthen from Latin America as local refineries struggle to stay in good keep.

Gulf Coast crude exports have more potential, too, now that the Louisiana Offshore Oil Port can load supertankers.

U.S. shale investors still waiting on payoff from oil boom

Global Stock Markets

U.S. oil production has topped 10 million barrels per day, approaching a record set in 1970, but many investors in the companies driving the shale oil revolution are still waiting for their payday.

 Shale producers have raised and spent billions of dollars to produce more oil and gas, ending decades of declining output and redrawing the global energy trade map. But most U.S. shale producers have failed for years to turn a profit with the increased output, frustrating their financial backers.

Wall Street’s patience ran out late last year as investors called for producers to shift more cash to dividends and share buybacks.

And yet such calls for payouts remain a debate in the industry as oil prices have recently creeped up to four-year highs. Investors demanding immediate returns could risk forcing firms to curb expansion that could have a higher long-term payoff if oil prices continue to rise.

For now, share prices of shale producers have yet to fully recover from the 2014 oil price CLc1 collapse, when many investors took losses as hundreds of firms went bankrupt and those that survived struggled.

The energy sector has lagged the rally that took the broader stock market to record highs. The S&P 500 Energy Index .SPNY remains nearly a third off its peak in mid-2014, when oil prices CLc1LCOc1 topped $100 a barrel. The broader S&P 500 index .INX is up 39 percent during the same period.

This year, five of the 15 largest U.S. independent shale firms have started paying or raised quarterly dividends, the documents show. But six of the firms have never offered a dividend or have not restored cuts implemented since the 2014 oil price collapse.

Anadarko Petroleum Corp (APC.N) earlier this month added $500 million to an existing buyback program and raised its dividend by 20 percent, sending its shares up 4.5 percent the next trading day. Buybacks reduce the number of shares outstanding, boosting the value of stock that remains.

Shares in Pioneer Natural Resources Co (PXD.N) also rose 4 percent immediately after raising its dividend four-fold and posting better-than-forecast fourth quarter results earlier this month.

Companies that have resisted boosting dividends, by contrast, have seen their valuations fall.

Of the six, shares in four - Cimarex Energy Co (XEC.N), Devon Energy Corp (DVN.N), Parsley Energy Inc (PE.N) and Noble Energy Inc (NBL.N) - have lost at least 19 percent in the last 12 months. Only one, Continental Resources Inc (CLR.N), is higher than a year ago.
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Four producers, including Hess Corp (HES.N), kept dividends steady through the downturn.

Recent oil price gains have eased the pressure from shareholders.

In January, U.S. oil futures CLc1 jumped to $66.14 a barrel, up 56 percent from last year’s low and at a level not seen in four years.

Since then, prices have cooled to about $63 a barrel, but remain 17 percent above a year ago, boosting cash flow for firms that have expanded output.

Shale output growth continues to outpace forecasts. The U.S. Energy Information Administration this month said United States production could top 11 million barrels per day by the end of 2018, a year earlier than it had expected just a month ago.

Producers have pushed up spending plans for all of 2018 by 10 percent over last year, according to a tally of 41 of the 65 producers tracked by financial services firm Cowen & Co.

Some companies have maintained conservative assumptions for the average oil price for 2018, budgeting for prices between $50 and $55 a barrel.

A higher price will mean they can cover new drilling investments and still pay dividends.

Investors are searching for firms that can find the optimal balance between the conflicting goals of controlling costs, paying dividends and increasing production.

Oil stable on weaker dollar and healthy economic growth

Oil Stock Markets

Oil prices were stable on Wednesday, supported by healthy economic growth and expectations that a weaker dollar could spur fuel demand. 

Despite this, crude prices remain well below recent highs due to signs of lingering oversupply, including rising U.S. inventories and ample physical flows globally.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $59.17 a barrel at 0123 GMT, down 2 cents from their last settlement. WTI was trading above $65 in early February.

Brent crude futures LCOc1 were at $62.77 per barrel, up 5 cents from their last close. Brent was above $70 a barrel earlier this month.

Ongoing weakness in the U.S. dollar, which potentially stokes demand from countries using other currencies at home, as well as healthy economic growth were supporting oil markets, traders said.

The American Petroleum Institute said on Tuesday that U.S. crude inventories rose by 3.9 million barrels in the week to Feb. 9, to 422.4 million.

That was largely due to soaring U.S. crude production C-OUT-T-EIA, which has jumped by over 20 percent since mid-2016 to over 10 million barrels per day (bpd), surpassing output of top exporter Saudi Arabia and coming within reach of Russia, the world’s biggest producer.

U.S. crude is increasingly appearing on global markets.

More is set to come as the Louisiana Offshore Oil Port in the Gulf of Mexico starts testing supertankers for exports.

The surge in U.S. production and exports means oil may be in oversupply again soon, flipping a deficit from 2017 induced by supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.

The International Energy Agency said on Tuesday oil demand would grow by 1.4 million bpd in 2018, but added output growth could outpace demand.

The physical market is already reacting, with prices for regional crudes from the North Sea, Russia, the United States, and Middle East becoming cheaper as producers struggle to remain competitive amid ample supplies.

Despite the warning lights from within oil markets, economic fundamentals remain healthy.

High consumer spending drove Japan’s economy to eight straight quarters of growth in October-December, its longest continuous expansion since the 1980s bubble economy, Cabinet Office data showed on Wednesday.

Oil prices fall more than 1 percent amid global market rout

Oil Stock Markets

Oil prices dropped by more than 1 percent on Tuesday, extending falls from the previous session as global financial markets headed south in the wake of one of the biggest intra-day falls ever registered on Wall Street. 

Brent crude oil futures were at $66.88 per barrel at 0446 GMT, down 74 cents, or 1.1 percent, from the previous close. That was more than $4 below their high-point for 2018, hit last month.

U.S. West Texas Intermediate (WTI) crude futures were at $63.38 a barrel, down 77 cents, or 1.2 percent, from their last settlement and more than $3 off their 2018-high.

Financial markets went into a tailspin on Monday after a sharp rise in U.S. bond yields that raised alarms over rising inflation and potentially higher interest rates.

The Dow Jones Industrial Average’s 4.6 percent loss on Monday was its largest in percentage terms since August 2011, and the day’s 1,175 point loss was its biggest ever in absolute terms. The index was briefly down more than 6 percent.

U.S. S&P 500 futures tumbled 2.5 percent to 4-month lows in Asian trade on Tuesday, as the sell-off triggered by worries about inflation showed no sign of abating.

However, the correction in oil is also being driven by fundamentals, traders said.

Despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold production since January last year in order to tighten the market and prop up prices, crude supplies remain relatively ample.

That’s largely due to soaring U.S. shale oil production, which has jumped by almost 18 percent since mid-2016 to 10 million barrels per day (bpd) - surpassing output by leading exporter Saudi Arabia.
Only Russia produces more, averaging 10.98 million bpd in 2017.

What’s more, there are indications that U.S. oil output will rise further: the amount of rigs drilling for oil fields rose to 765 by late January, easily more than double the 316 that were in operation during 2016’s production lull.

There is also a seasonal downturn to demand, as many refineries shut for maintenance following the upcoming end to the peak-consumption winter heating season in the northern hemisphere.

The largest U.S. refinery, Motiva Enterprises’ 603,000 bpd Port Arthur facility in Texas, began a planned one-month overhaul on Monday of its key crude oil processing unit.

Consequently, hedge fund managers have cut their bullish exposure to petroleum for the first time in six weeks.

Despite this, overall oil demand remains healthy, with U.S. bank Goldman Sachs estimating 2018 growth of 1.8 million bpd, with 40 percent of this coming from China and India alone.

Texas shale challenges North Sea crude as world oil benchmark

Global Stock Markets

Surging shale oil production in Texas and North Dakota is being felt on trading desks in Chicago, Houston and New York, where a brisk business in West Texas Intermediate crude futures is far outpacing contracts for London-based Brent crude. 

As the United States approaches a record 10.04 million barrels of daily production, trading volumes of so-called “WTI” futures exceeded volumes of Brent crude in 2017 by the largest margin in at least seven years.

A decade ago, falling domestic production and a U.S. ban on exports meant that WTI served mostly as a proxy for U.S. inventory levels.

Two changes drove the resurgence of the U.S. benchmark. One was the boom in shale production, which spawned a multitude of small producers that sought to hedge profits by trading futures contracts. Then two years ago, the United States ended its 40-year ban on crude exports, making WTI more useful to global traders and shippers.

U.S. exports averaged 1.1 million barrels a day through November 2017, rising to an average 1.6 million bpd in the final three months. That compares to just 590,000 bpd in 2016.

As U.S. production and exports grow, global firms that increasingly buy U.S. oil are offsetting their exposure by trading in U.S. financial markets. That also gives U.S. shale producers more opportunity to lock in profits on their own production.

For ICE and CME, energy represents the second-biggest source of revenue, trailing only stocks and interest rate trading, respectively. ICE is based in Atlanta, but is known for its European contracts after it bought London’s International Petroleum Exchange and its Brent futures contract in 2001.

About 310 million U.S. crude futures contracts - worth about $16 trillion in oil - changed hands on CME’s New York Mercantile Exchange (NYMEX) in 2017, far more than the about 242 million contracts in Intercontinental Exchange’s Brent crude futures.


The increasing liquidity in U.S. oil futures stems partly from the surge in hedging by domestic shale producers but also from growing overseas interest, which pushed outstanding contracts to new records in 2017.

Average daily volumes in WTI futures from outside the U.S. jumped nearly 40 percent in 2017 over 2016, according to CME Group data. Foreign participation in WTI now represents about 30 percent of CME’s average daily volume.


A key reason for the Middle East’s and Asia’s failure to create an oil futures benchmark is that
financial commodity trading is not well established in either region.

In December 2017, the NYMEX introduced a new contract aimed at the growing market of Asian buyers importing U.S. crude, such as China, the second biggest importer in 2017. The contract prices the spread between WTI and Middle-East benchmark Dubai, leaving the United States, with its established commodity markets, operating as “the Wal-Mart of the oil market.

BHP Billiton Limited’s US$10 billion divestment program kicks up a notch

Australian Stock Markets

Shares in BHP Billiton Limited (ASX: BHP) is leading the market this morning and talk that it may announce the sale of its shale assets sooner than most were expecting won’t hurt sentiment either.

The world’s largest miner rallied 0.5% to $30.81 as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) struggles to hold its head above breakeven.


A report from Bloomberg said that BHP is prepared to break its US shale oil business into seven packages to accelerate the sales process, which could reap US$10 billion or more in total.
The miner is also willing to consider an asset swap for offshore conventional oil wells in the Gulf of Mexico.

The shale division is regarded as the ugly duckling in BHP’s portfolio, but as I wrote yesterday, this dog could steal the earnings season spotlight later this month when the miner hands in its results.

The price of oil has bounced strongly since BHP’s board came under intense pressure from activist shareholder Elliott Management Corp to divest its unconventional oil and gas assets that the miner overpaid for in 2011 (US$20 billion to be more exact) when the oil price was hovering around US$100 a barrel.

Fears of a glut in oil supply due to the sharp ramp-up in production from shale oil producers and falling demand from the electrification of vehicles have also abated somewhat and US President
Donald Trump is dismantling regulations and taxes to make US oil exports more competitive.

This leaves BHP effectively firing on all cylinders with surprisingly resilient commodity prices and strong cost control bolstering its bottom line.

The oil price recovery also bodes well for other oil and gas producers although I am expecting a pick-up in corporate activity that will provide a big kick to the sector.

There are rumours of takeover interest in Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL), although cashed-up Woodside could also be a buyer of assets.

As it stands, there is already a bidding war for AWE Limited (ASX: AWE) with Mineral Resources Limited (ASX: MIN) as one of the bidders, and there’s a suitor in the wings for Santos Ltd (ASX: STO).

High commodity prices won’t be the only thing investors will need to keep an eye out for in 2018!
But resources aren’t the only winning game in town. The experts at the Motley Fool are particularly bullish on one sector of our market.

Oil hits $70 a barrel for the first time in three years

Oil Stock Markets

Prices edged higher as Opec nations and their allies cleared the glut caused by the growth of US shale 

Oil topped $70 a barrel in London for the first time in three years as production cuts by Opec and rising demand whittle away a global surplus.

Brent crude futures, used in the pricing of more than half the world’s oil, rose as much as 1.2 per cent to the highest since December 4, 2014.

Prices rallied after the longest stretch of declines in US inventories during winter in a decade.

Oil’s rally shows that the Organisation of Petroleum Exporting Countries and its allies are succeeding in clearing the glut triggered by the growth of US shale oil.

Prices have also been supported by concerns that supply disruptions could stem from rising political tensions in Opec members Iran and Venezuela.

Brent for March settlement advanced to $69.90 a barrel on the London-based ICE Futures Europe exchange at 11:28 Eastern time.

With the climb in crude, there are growing signs that Opec could be falling into a trap it had sought to avoid.

Rising prices are putting US production on track to rival both Saudi Arabia and Russia, with output likely to exceed 10 million barrels a day as soon as next month and top 11 million before the end of 2019, according to Energy Information Administration forecasts.

Surge in U.S. shale hedging to boost drilling in 2018

Global Stock Markets

More than 144 million barrels were added to hedges, after global oil markets LCOc1 rallied by as much as $13 in the quarter. Higher prices help producers lock in profits for future sales. 

That should guarantee that total production exceeds 10 million bpd in 2018, which would be an all-time record for U.S. drilling. Traders say growth next year will likely exceed government forecasts, heralding a record year that could pressure prices in the near term.
For oil traders, hedging data from shale companies serves as a leading indicator of future supplies.

In total, 17 companies increased outstanding oil options, swaps or other derivatives positions by 144 million barrels between the second and third quarter. Another 10 companies decreased their hedging positions by 31 million barrels; three others did not hedge at all.
Together, the companies have nearly one-third more barrels hedged, or the equivalent of 129 million barrels, compared to the previous quarter.

Citigroup analysts said the third-quarter hedge ratio - the percentage of production where shale companies have locked in future sales - for 2018 jumped from 12 percent to 27 percent. For the same period in 2015 and 2016, producers had locked in 15 and 18 percent of the coming year, they said.

Several firms, including Hess Corp (HES.N), Newfield Exploration Co (NFX.N) and Marathon Oil Corp (MRO.N) loaded up their hedges, and more than doubled volumes last quarter. Together, they added 74 million barrels. Among the companies that rolled off the most include Anadarko Petroleum Corp (APC.N) and EP Energy (EPE.N).

Shale firms are said to have continued adding to hedges in the fourth quarter. Swap dealer gross shorts data from the Commodity Futures Trading Commission [3067651SSHT], an indicator of producer hedging activity, touched a record in the most recent week.

Last week, a Texas-based producer was said to have hedged some 30,000 barrels per day (bpd) for 2018 in U.S. crude futures, according to two sources familiar with money flows.

U.S total oil production is expected to rise by 780,000 bpd to 10.02 million bpd next year, which would be a new annual record, according to the U.S. Energy Information Administration (EIA).

Traders estimate that growth could be as high as 1.2 million bpd, with at least 500,000 bpd to 600,000 bpd out of Texas’s prolific Permian basin alone.
That could complicate an extension by OPEC to curb global supplies through 2018 to keep prices low.

Drilled but uncompleted wells rose for a 12th straight month to a record in November, according to EIA data dating to December 2013.

Despite greater levels of hedging, and the rise in production, the U.S. crude forward curve remains in backwardation, a market structure where near-term prices are higher than those in the future.

On Wednesday, WTI for December 2019 was trading around $2.46 a barrel over WTI for December 2018 CLZ8-Z9. That spread, a popular trade, signals the health of the oil market.

Pressured for profit, oil majors bet big on shale technology

Global Stock Markets

For the last decade, smaller oil companies have led the way in shale technology, slashing costs by as much as half with breakthroughs such as horizontal drilling and hydraulic fracking that turned the United States into the world’s fastest-growing energy exporter.

Now, oil majors that were slow to seize on shale are seeking further efficiencies by adapting technologies for highly automated offshore operations to shale and pursuing advances in digitalization that have reshaped industries from auto manufacturing to retail.

The technological push comes amid worries that U.S. shale gains are slowing as investors press for higher financial returns. Many investors want producers to restrain spending and focus on generating higher returns, not volume, prompting some to pull back on drilling.

Production at a majority of publicly traded shale producers rose just 1.3 percent over the first three quarters this year, according to Morgan Stanley

Chevron Corpis using drones equipped with thermal imaging to detect leaks in oil tanks and pipelines across its shale fields, avoiding traditional ground inspections and lengthy shutdowns.

Ryan Lance, chief executive of ConocoPhillips  - the largest U.S. independent oil and gas producer - sees ample opportunity to boost both profits and output. Conoco also oversees remote drilling operations in a similar way to Shell. 

Shell, in an initiative called “iShale,” has marshaled technology from a dozen oilfield suppliers, including devices from subsea specialist TechnipFMC Plc  that separate fracking sand from oil and well-control software from Emerson Electric Co , to bring more automation and data analysis to shale operations.

Oil firms currently spend about $5.9 million to drill a new shale well, according to consultancy Rystad Energy. Shell expects to chop that cost to less than $4 million apiece by the end of the decade.  

 Anadarko Petroleum Statoiland others are using DNA sequencing to pinpoint high potential areas, collecting DNA from microbes in oil to search for the same DNA in rock samples. 

ConocoPhillips next year will start using magnetic resonance imaging (MRI) to analyze Permian rock samples and find the best drilling locations, a technique the company first developed for its Alaskan offshore operations.

EOG Resources Inc last year began using a detailed analysis of the oil quality of its fields. The analysis, designed by Houston start-up Premier Oilfield Laboratories, helps to speed decisions on fracking locations and avoid less productive sites.

U.S. import prices post largest drop in seven months in March

U.S. import prices recorded their biggest drop in seven months in March as the cost of petroleum declined, but the underlying trend pointed to a moderate rise in imported inflation as the dollar's rally fades. 

The Labor Department said on Wednesday import prices fell 0.2 percent last month, the largest drop since August, after a 0.4 percent increase in February.

That lowered the year-on-year increase in import prices to 4.2 percent from 4.8 percent in February.

Economists polled by Reuters had forecast import prices slipping 0.2 percent last month. U.S. financial markets were little moved by the report.

The drop in import prices is unlikely to be sustained with oil prices pushing higher in recent days amid rising geopolitical tensions following last week's U.S. missile strike on Syria and reports that Saudi Arabia wants to extend production cuts enacted in January for another six months.

Prices for imported petroleum fell 3.6 percent last month, the biggest drop since August, after increasing 1.3 percent in February. Import prices excluding petroleum increased 0.2 percent after rising 0.3 percent the prior month.

Import prices excluding petroleum have now increased for three straight months, in part reflecting an ebb in the dollar's rally. Prices for imported capital goods edged up 0.1 percent in March after rising 0.2 percent in February.

Imported consumer goods prices excluding automobiles fell 0.2 percent last month after gaining 0.3 percent in February. The cost of imported food fell 0.7 percent last month after increasing 1.0 percent in February.

Oil surplus or scarcity? Shale makes it even harder to predict

The shale oil boom has transformed the U.S. and global energy sector to such an extent that it has upended traditional supply dynamics and made forecasts far more polarised.

Investment banks, many of which finance new projects, along with oil majors such as Total and Eni, have warned that huge spending cuts caused by a plunge in oil prices since 2014 would lead to a supply crunch in the next two years.

Yet Goldman Sachs, the only bank to make more than $1 billion a year from commodities trading, believes a looming recovery in U.S. output on the back of higher oil prices combined with an avalanche of new conventional projects will create a substantial surplus by 2019.

Prior to the shale revolution, conventional oil was the only game in town. Estimating future supply essentially involved calculating the project pipeline and factoring in the "unknown knowns" such as political risk in oil-producing nations.

The ability of the shale sector to adapt quickly and nimbly to a lower-price environment means production cycles have shortened as fields can be switched on and off in a matter of weeks.

Most forecasters including OPEC and the International Energy Agency underestimated shale's decline during the oil price collapse and its production increases as prices recovered.

Goldman predicts the coming two years will see a huge burst of development, complicating OPEC's efforts to rebalance the market and ease a global glut with the help of output cuts.

Goldman estimates that new projects and rising shale output could add 1 million barrels per day (bpd) to global supply by 2018-2019.