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Oil Prices Hit High, Before Sliding, Amid Disrupted Supply

​Kayrros analysis on Iraq production disruptions, in The Wall Street Journal.

KAYRROS BRINGS CLARITY AND TRANSPARENCY TO GLOBAL ENERGY MARKETS

Select Kayrros data and analysis now available on the Bloomberg Terminal

NEW YORK, SAN FRANCISCO, PARIS, 29 November 2017—Kayrros today announced that it will publish a selection of Kayrros global oil and gas energy market reports and analyses on the Bloomberg Terminal.

Kayrros energy market reports have already attracted a fast-growing customer base and through the Bloomberg Terminal, will now provide new insights to leading financial professionals who seek increased transparency in understanding the global oil and gas markets. Bloomberg Terminal users will be able to consult key Kayrros data reports and analyses that result from state-of-the-art processing at increasing granularity across geographies and resource types.

“The global energy markets have long suffered from a lack of transparency that has hindered financial decision-making in the past,” said Antoine Rostand, Kayrros president. “The rapidly increasing number of alternative sources of data that add new and pertinent information can now be integrated with traditional supply and demand data to provide a near real-time picture of market drivers and behavior across platforms including the Bloomberg Terminal. This novel approach will be of value to analysts and investors alike.”

Kayrros possesses a unique combination of oil and gas market knowledge and experience with advanced data analytical capability. Kayrros extracts value from alternative and market data across the energy space to improve estimates and deliver more accurate forecasts.

Additional information about Kayrros can be found at www.kayrros.com or on the Bloomberg Terminal by typing KROS <GO>.

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The Oil Games Episode 3 - OPEC Market Share Explained by Game Theory

In the first two episodes of the Oil Games, we met the Players, discovered the Rules of the Game, and began to understand the strategies of the various Players. We understood that oil and gas discoveries just like any other technological innovation were first and foremost a matter of financing. We asked ourselves the question what drives investors to allocate funding to the pursuit of discovery and found that the answer was just the same as in any other business, namely the expected return on investment. But we also understood that shale oil changed the rules. Is shale oil indeed the ultimate realization of Schumpeter’s promise? Is it really a break from the past, or is it a flash in the pan and just like any other source of oil?

Episode 3 starts addressing these crucial questions. We will go step by step to understand how both game theory and economic analysis move the invisible hand that guides the behavior of the Players to lead to a remarkably stable OPEC market share. Read full article here.

Kayrros COO speaks at the Codex Conference

​In September 2017, Simone Pugliese spoke about how alternative data can change the energy markets. Watch his presentation here.

Permian Dynamics Shifting As Drillers Double Down

Kayrros research on well productivity in the Permian mentioned in the Newsbase. Read the full article here

Oil Edges Higher on Geopolitical Tensions

Kayrros analysis of satellite data reflecting of oil field activity in North Iraq mentioned in the Wall Street Journal.

In charts: has the US shale drilling revolution peaked?

​Kayrros analysis on Permian well productivity mentioned in The Financial Times

Kayrros mentioned in The Financial Revolutionist

​Read article here

KAYRROS ANNOUNCES NEW GLOBAL CRUDE OIL INVENTORY TRACKING CAPABILITY

Unique analytics platform aggregates crude oil inventory volumes from worldwide locations

PARIS, NEW YORK, SAN FRANCISCO, 4 October 2017—Kayrros today announced the release of a new product offering for its growing subscriber base. The Kayrros Global Crude Oil Inventory Tracker aggregates data derived from proprietary satellite imagery from 43 worldwide locations in the US, China, India, MENA, Venezuela and the Caribbean. This unique proprietary method allows Kayrros to track a total of approximately 1.5 billion barrels of crude oil storage capacity. Before the end of this year Kayrros will add approximately 200 other locations around the globe.

“Kayrros coverage of the global crude oil storage market with this level of granularity allows better visibility on actual crude oil inventory levels and more clarity on regional imbalances that were hidden up to now”, said Antoine Rostand, Kayrros president. “When added to our existing coverage of oil and gas supply and demand worldwide, this new research capability makes Kayrros the only energy alternative data company that integrates near real-time data across the value chain thus bringing greater transparency via actionable market intelligence and insight.”

Kayrros possesses a unique combination of oil and gas market experience and advanced data analytics capability backed by substantial industry knowledge. Kayrros products have proven that publicly available data can be supplemented with alternative data and advanced technology to identify information gaps, achieve additional market transparency, and establish a predictive edge over standard industry benchmarks.

About Kayrros

Kayrros is an information service company that helps global energy market participants make better investment decisions. Kayrros experts extract value from combining alternative and market data across the energy chain. Working from offices in Paris, New York, and San Francisco, Kayrros experts deliver actionable information in near real time. Kayrros solutions are rapidly scalable and continually expanded to new geographies and new sources of data. For more information please visit www.kayrros.com.

Kayrros media contact: Thiago Costas, +33 (0)6 78 54 12 55, t.costas@kayrros.com

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Unfinished Business: Why Oil Output May Surprise

Estimates of U.S. crude-oil production were probably too high because drilling didn’t translate into completion, but the news isn’t all good for oil prices. More in The Wall Street Journal.

Kayrros Series A deal mentioned in Fortune

Read article here

The impact of Harvey

How the tropical storm in Texas has left the oil industry facing multiple difficulties. Another mention to Kayrros co-founder Antoine Halff in the Financial Times.

Storm Harvey raises awkward questions over US energy ambitions

Concentration of oil and gas infrastructure on Gulf Coast leaves it vulnerable to weather events. Read Kayrros co-Founder Antoine Halff’s article in the Financial Times.

Storm Harvey exposes Achilles heel for global energy market

Kayrros co-founder Antoine Halff mentioned by the Financial Times article on the exposure of US energy infrastructure to Gulf cost storms. Read more here.

From Katrina to Harvey: Storm Resilience in the Age of Shale

“Three days after Hurricane Harvey made landfall near Houston, rains continue to lash the region, unleashing catastrophic flooding. Apart from the human suffering, the storm’s devastating impact should also serve as a powerful reminder that no country, no matter how large its oil and gas production may be, is fully insulated from the risk of an energy supply disruption.” Read more about Harvey’s impact and associated risks to the energy supply here.

Overestimation of US Gas Production Growth

“Kayrros projects that domestic output will average 73.7 billion cubic feet per day in October, far lower than the US Energy Information Administration’s (EIA) prediction of 76.9 Bcf/d.” Full article available in the Natural Gas Week from Energy Intelligence.

Kayrros anticipated shift in US lower 48 oil supply and storage

Kayrros anticipated shift in US lower 48 oil supply and storage confirmed by latest market data. See note ​here.

The Oil Games Episode 2

In the first episode of the Oil Games we met the Players and discovered the Rules of the Game. A surprising discovery of that first episode was that a ‘discovery’, whether in the world of innovation or in the search for oil and gas, doesn’t rhyme with ‘surprise.’ It might indeed come as a surprise that discoveries have nothing to do with the legend of the great scholar or the magic of serendipity. Oil and gas discoveries, like technological innovation, are first and foremost a matter of budget. In the search for underground deposits, just as in the race for the next disruptive technology, funding is the key. The business of discovery is a business like any other. So what drives investors to allocate funding to the pursuit of discovery? As always, it is the expected return on investment. And the return on investment itself depends on the structure of the industry in which we are working—monopolistic, competitive, or somewhere in between. Which brings us back to game theory, and the strategies adopted by the various Players. Read the full article here.

Bottlenecks Are Holding Back a Second Shale Boom

“The U.S. is now less than 200,000 barrels per day off its June 2015 high of 9.6 million barrels per day, and analysts expect production to keep growing. But as good as all of that sounds, it could be even better. As the FT reports, shortages of drilling rigs and roughnecks to operate them are holding back even more impressive output increases” See article here

La production de pétrole de schiste victime de son succès aux États-Unis

“Décidément, le marché pétrolier n’en finit pas de déjouer les pronostics. Le rebond de la production de brut aux États-Unis pourrait être moins important que prévu, note le Financial Times.” Selon Le Figaro.

Shortage Of Fracking Crews Slows The Shale Boom

“Some of the constraints that shale companies will run into are on the access to oilfield services (OFS), including rigs, equipment and personnel, according to Kayrros, a French research firm backed by the former CEO of OFS giant Schlumberger, and reported on by the FT”. Read the full article here.

French Consultancy Warns of Slower US Oil Growth

The main theory that we have is that there is more inertia in the ramping-up of the fracking sector,” Antoine Rostand, president of Kayrros, told Oil Daily. “We see, obviously, production growth, but probably slower than what most analysts are projecting.” Full article available in the Oil Daily from Energy Intelligence.

US oil output growth hit by lack of operators and equipment

Kayrros President, Antoine Rostand, on the US crude oil production growth in the Financial Times.

The Oil Games - Chapter 1

The Oil Games are as a series of interconnected episodes in which we will try to explain and predict market behavior using Kayrros’ extensive knowledge of the energy industry, the world economy, mathematics and game theory in particular. The series’ target audiences include the practitioners, investors, and observers of the oil industry who are interested in finding new ways of understanding this fascinating business. The authors are Jean-Michel Lasry, Antoine Halff and Antoine Rostand. This is an ongoing story with future episodes being published in sequence by Kayrros. Here is the inaugural installment, in which we propose to apply the economic model of innovation to the oil and gas sector.Read the full article here.

Transparency used to be a dirty word in energy — now it’s turning into the norm

Article on the need for greater transparency in the energy sector and how Kayrros is helping in that space, in the Business Insider UK

Offshore rig operators reel from oil price rout

Antoine Rostand, President of Kayrros, comments on the impact of low oil prices for offshore rig operators in the Financial Times.

Oil veterans’ new frontier

Kayrros revolutionizing energy markets - Andrew Gould, Chairman of Kayrros’ Advisory Board and Antoine Rostand, Kayrros President, on their new venture, in the Financial Times.

Oil Field Services – A seller’s market in the making?

Oil Field Services – A seller’s market in the making: Antoine Rostand, President of Kayrros , explains how the current landscape is likely to impact mergers, acquisitions and consolidation in the oil field services sector.

The recent increase in oil price to slightly above $50 is a welcome development for the oil and gas industry, but I do not foresee any dramatic short term changes in the direction taken by oil and gas companies to implement aggressive cost reduction measures and tighter management of new projects. One of the sectors severely impacted by these sweeping changes is oil field services - a vital segment in securing the longevity of the industry as a whole.

Oil field service providers have historically jostled for lucrative contracts with international and national oil companies (IOCs and NOCs) but with the oil price decline, these companies have reduced CAPEX and OPEX and squeezed service providers on their margins.

While for each individual oil and gas operator this may make perfect sense in the short term, what may not be as evident is that when the whole industry acts in this way it causes years of disruption for the oil field service industry. In response, oil field service firms are forced to take drastic measures. Measures, which cannot easily be undone and a have far-reaching impact on four key drivers required to meet any future increase in demand for oil field services as and when production increases.

People

With personnel being at the heart of any oil and gas operation, it is never an easy decision to let people go in order to drive down costs. Nevertheless in the current market, oil and gas companies are resorting to curbing recruitment or implementing hiring freezes which have had knock-on effects on the global oil and gas recruitment pool. Universities are having to shrink their curriculums, leaving fresh graduates frustrated with their career choices and most likely seeking alternative career paths in the long run. This will no doubt have hard-hitting medium-to-long-term consequences for an industry that has for years been preparing itself for the ‘big crew change’.

Rigs

At the sharp end of upstream oil and gas, we are witnessing the very real impacts of persistently low oil prices with all but the latest 6th and 7th generations of technologically advanced rigs being retained (stacked) for a much-anticipated future uptick in the workload. For the rest, unfortunately the scrap yard beckons. It is a tough decision to make as even by stacking expensive drilling rigs and platforms, oil and gas operators face losing thousands of dollars daily for crew and equipment upkeep – upwards of $40,000 a day in regions like the Gulf of Mexico for instance.

Fracking

The US shale market – seen as the proverbial canary in the coalmine for the rest of the conventional oil and gas industry – has been hit hard by low oil prices. Between 2012 and 2015 key shale oil and gas producing regions in the US have witnessed drilling activity drop off dramatically. Oil service majors who serve these regions and who are already under immense cost-reduction pressure, are opting to dig into and cannibalize existing inventories. Additionally, in the current market, these companies are likely to hike up their rates to recover costs before considering investment in new hardware.

Engineering Procurement and Construction

Current research suggests that the order books of engineering procurement and construction (EPC) companies could potentially dry up within the next two years due to projects being cancelled or put on hold. Without the availability of a minimum level of oil and gas project work and with no new projects on the horizon, capacity is being eroded among EPCs as well.

As oil prices are anticipated to rise so too will the need for oil service companies by NOCs and IOCs, however, when that happens, the fear is that there is likely not going to be the required service capacity in the market.

There will also be a lack of qualified people, rigs and fracking equipment. Add to the mix, the impact on EPC contractors and you have a perfect scenario for a seller’s market for services. It’s a scenario of collective suicide for oil and gas companies who will not be able to ramp up production as rapidly as they think as they will have to wait for service companies to catch-up and rebuild the industry.

This new landscape has the potential to create fertile ground for a new round of mergers, acquisitions and consolidation in the oil services sector. The picture for the industry is anything but rosy going forward but all is not lost - there are clear steps oil and gas operators can employ to remedy the current situation.

*The findings in this post have been presented to the OPEC R&D Forum

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Kayrros Forecasts 101

Kayrros utilizes a comprehensive machine learning methodology to forecast future supply and demand.

The first stage involves collecting data from a wide variety of sources and applying corrections when data is missing.

For Supply forecasting, the main inputs of the model include economic indicators like prices, activity measurements such as the rig count, fracking and drilling rates together with external factors such as weather forecasts. Demand forecasts are based on features including but not limited to macroeconomics data (population, GDP growth, unemployment, CPI, imports/exports), industrial indicators (production index, vehicle production, vehicle sales, car energy efficiency, air passenger and freight traffic), weather data, financial data (market prices of crude oil, gas and other petroleum products).

The next phase involves feature engineering, where raw data are transformed and combined to find the best predictive representation of the inputs. The best features and models linking data to the predictions are selected by an adaptive back-testing procedure, where the Kayrros algorithm learns the best link between the data and the relevant benchmark.

Specific to consumption forecasts, and as demand data is highly seasonal, Kayrros uses an additive model to separate the effects of trends and seasonality from the main consumption. Algorithms include both a linear and a non-linear forecast, to best capture the trend changes.

Finally, the performance of the model is evaluated through a thorough back-testing approach which simulates the output of the model from past data to predict out-of-sample future benchmark values, just like a trading strategy would do for prices.

Published on 10/20/17

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