OIL INTELLIGENCE REPORT
| Oil traders appear to be taking gains this Friday after both Brent and WTI hit their highest levels since before the 2014 oil price crash. This pullback in the oil price rally raises questions over the possibility of a much larger selloff in the near future. Important Note for Energy Investors: The World Economic Forum, the Institute of Electrical and Electronics Engineers, the MIT Technology Review, prestigious national laboratories, and a slew of other experts are buzzing about this new element that will transform the energy industry. Early investors are already reaping the benefits. Are you in?        Friday, January 5, 2017 Oil prices fell back on Friday during early trading after posting strong gains for much of the week. The tension in Iran has helped push prices up, and a strong U.S. crude inventory drawdown added some momentum on Thursday, although that bullish data was slightly offset by the large build in gasoline stocks. Overall, by Friday, it appeared that oil traders had sold off some positions to pocket some of the recent gains. The breather raises questions about the durability of the current rally. Trump admin seeks to open nearly all U.S. coastal areas to drilling. The Trump administration has proposed to open up vast new territory for offshore oil and gas drilling, going so far as to push drilling in areas currently off limits, including the Atlantic, Arctic and Pacific Oceans, as well as parts of the Gulf of Mexico that haven’t seen drilling. The five-year plan for 2019-2024 would replace the Obama-era plan for 2017-2022, and it would include 47 possible auctions that encompass more than 90 percent of the U.S. outer continental shelf. The proposal will take time to finalize and would be vulnerable to legal challenges. Rising confidence in oil stocks. Energy stocks have significantly lagged behind the broader stock market, underperforming even in a period in which oil prices rebounded. But 2018 could be different. With oil prices at their highest level since mid-2015, the outlook looks better for energy stocks than it has in some time. On top of that, a long list of companies have trimmed costs and the oil majors have returned to positive cash flow. This has more investors gaining confidence in the investment case of oil and gas stocks. “2017 was a challenging year for investors but there are now real opportunities in the energy sector,” Olivia Markham, portfolio manager at BlackRock Commodities Income Investment Trust, told Reuters. According to Reuters, investment banks UBS, RBC and JP Morgan issued strongly positive outlooks for the oil and gas sector in recent weeks, while Barclays predicted European integrated oil companies could rise 20 percent from the third quarter. Others agree. “Annus Mirabilis. Highest free cashflow in a decade bodes well for 2018,” Bernstein said, referring to its prediction for European oil majors. EV sales in Norway outpace gasoline and diesel. In Norway, EVs captured 52 percent of auto sales last year, beating out conventional vehicles fueled by gasoline and diesel. With EVs taking a majority of auto sales, Norway is cementing itself as a global leader in the switch to EVs. Norway offers generous incentives for EVs, which make them cheaper than buying a conventional vehicle. Norwegian auto experts told the New York Times that the market share for EVs would have been even higher except that some potential buyers are waiting for Tesla’s (NYSE: TSLA) Model 3. Tesla reports setback in Model 3 production. Tesla (NYSE: TSLA) released production figures on Wednesday, which revealed a disappointing performance for the fourth quarter. "As we continue to focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time, we expect to have a slightly more gradual ramp through Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles," Tesla said in a press release. "We intend to achieve the 5,000 per week milestone by the end of Q2." It is the latest delay in its production schedule, and yet another downward revision. Tesla’s shares fell by 2 percent on the news, but Wall Street has yet to sour on the electric car company. Still, as Bloomberg Gadfly notes, these delays are material, particularly for a company burning through as much cash as it is. Cold weather sweeps U.S.; natural gas prices surge 60x. The deep freeze hitting much of the eastern half of the U.S. has provided a jolt to demand for energy of all types. Regional natural gas prices have spiked, particularly in the New England. While Nymex futures remain subdued, spot prices in New York briefly surged to $175/MMBtu. Higher gas prices have made coal temporarily more competitive. And in some areas, even diesel is in higher demand. That has altered trade flows, with diesel shipments that tend to go from the U.S. to Europe heading in the other direction. JBC Energy predicts that U.S. diesel demand will be 90,000 bpd higher in January and February than a year earlier. Meanwhile, at least five refineries along the East Coast reportedoutages because of frozen equipment, although there hasn’t yet been any significant hit to production. OPEC production steady in December. OPEC produced 32.47 mb/d in December, according to a Bloomberg News estimate, essentially flat from a month earlier. Some notable declines came from Libya (pipeline outage), Saudi Arabia and Venezuela, while Nigeria boosted output. OPEC’s compliance rate for December stood at 121 percent, the same as November. China to overtake Japan as world’s largest natural gas importer. As China continues to swap out coal for natural gas, its demand for gas is rising sharply. That likely means that China will claim the mantle of the world’s largest importer of natural gas this year, surpassing Japan. Japan will still be the largest importer of LNG, but China’s combined imports of LNG and pipeline gas will make it the world’s largest importer. China is already the largest importer of coal and oil, but gas is increasingly central to the country’s energy plans. $820 million for oil drilling startup. Investment firm NGP put up $820 million for Luxe Energy LLC., money that will be used to build an oil exploration company from the ground up. It is one of the largest sums ever committed for an oil startup. Luxe had previously acquired acreage in the Permian and sold it, and NGP is reloading the firm with more cash to build another exploration company. The logic behind the investment is for the company to acquire acreage that will be sold off by other oil firms in the Permian who are looking to take a more conservative approach. In our Numbers Report, we take a look at some of the most important metrics and indicators in the world of energy from the past week. Find out more by clicking here. Thanks for reading and we’ll see you next week. Best Regards, Tom Kool Editor, Oilprice.com P.S. In this week’s Inside Investor, Dan Dicker looks at the potential in energy stocks this year, claiming that 2018 is shaping up to be one of the best energy investment opportunities that he has seen in the past 15 years. Find out what has made Dan so bullish on oil by signing up for a free trial of Oil and Energy Insider |
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Global Energy Advisory 5th January 2017 |
| Oil prices hit highs last seen before the 2014 slump thanks to continuing violent protests in Iran as well as the momentum from production outages that occurred last month in Libya and the UK. On top of that, preliminary data about OPEC’s production in December suggests the cartel has stayed below its self-imposed ceiling of 32.5 million bpd, keeping with its production cut pledge. But there is now a worry that all this good news could turn into too much good news. The OPEC figures, for instance, were achieved not thanks to a conscious effort on the part of its members, but to external factors, including the pipeline blast that took an estimated 30,000 bpd off Libya’s December production and the 50,000-bpd slide in Venezuela’s output – a slide that has been ongoing for a few years now with no sign of a reversal in the near future. At the same time Nigeria, Kuwait, and Iraq increased their oil production, while Saudi Arabia once again cut deeper than it was supposed to, seeking to make sure prices stayed high. In spite of the Kingdom’s efforts, however, we could see a price correction soon, some analysts have warned. Net long positions on WTI, gasoline, and heating oil hit their highest in the week to December 26, reaching 1.183 billion barrels. This means that there is little space to buy anymore but a lot of space to sell and a selloff is unavoidable. At the same time, the effect of such a move by speculators would be limited, as long as the bullish factors for oil remain. Deals, Mergers & Acquisitions • A U.S. Appeals court has dismissed the lawsuit Canadian miner Crystallex brought against Venezuela’s PDVSA, seeking to take control over its U.S. business, Citgo, as compensation for the nationalization of assets under the late Hugo Chavez. A World Bank tribunal had awarded Crystallex $1.2 billion plus interest in 2016 but Venezuela has only made part of the payments. Contrary to Crystallex’s hopes, the court this time sided with the Venezuelan attorneys, who argued PDVSA and Citgo are entities separate from the country, which was the defendant in the original lawsuit. • Russian Alrosa, the world’s top producer of rough diamonds has put up for sale gas assets in the Yamal-Nenets region, in northwestern Siberia, which Novatek plans to bid for next month. The starting price of the package is $520 million. In December, Novatek launched the first shipment of LNG from its Arctic LNG project, also in Yamal-Nenets. • Shell has finalized the first phase of the divestment of its LPG marketing business in Hong Kong and Macau for $150 million. The buyer of the company is DCC, the international sales and marketing group. The supermajor will remain operator of the Hong Kong LPG plant. Its sale will be completed in the second phase of the divestment plan. • Suncor and Teck Resources have settled a commercial dispute over the Fort Hills oil sands project by raising their stakes in it. Suncor will now hold 53.06% in Fort Hills, up from 50.8%, and Teck will have a 20.89% interest, up from 20%. The two companies are partners with Total in the Fort Hills project. Tenders, Auctions & Contracts • Tullow Oil’s Ghana unit has awarded Danish Maersk Drilling a four-year contract for the Maersk Venturer drillship, to be deployed at the Jubilee and TEN fields offshore Ghana. The two are among the most promising new fields discovered in Africa in the last few years Discovery & Development • Spain’s Repsol has begun commercial production from the Sagari natural gas field in Peru. The field, according to Repsol, will produce 5.6 million cum of gas daily, which will represent a quarter of Peru’s natural gas demand. The launch of production at the field will also raise the overall output from Block 57, in which it is located, by a fourth. The Sagari field holds an estimated at 1-2 trillion cu ft of gas. • Transneft has completed the expansion of the East Siberia-Pacific Ocean crude oil pipeline, doubling the export capacity for China to 30 million tons of crude annually or an average 600,000 barrels daily. China has become the world’s top crude oil importer and Russia last year became its largest supplier, overtaking Saudi Arabia. • TransCanada has commissioned the construction of the Leach Xpress natural gas pipeline that will run between West Virginia and Ohio. The $1.6-billion project will have a capacity to transport some 1.5 billion cubic feet of gas daily from the Appalachian fields to the national market. In addition to this news, TransCanada also said this week the FERC had greenlit another two gas projects: the Mountaneer Xpress and the Gulf Xpress. The two will cost a combined $3.2 billion. • The U.S. administration has plans to open up more Arctic and Atlantic waters for oil and gas exploration, cancelling the five-year leasing program approved by the Obama administration. This could offer explorers a lot more drilling opportunities, although it remains doubtful to what extent they would be willing to exploit the opportunity in the face of high offshore project development costs and strong environmental opposition. Company News • Petrobras has agreed to cough up almost $3 billion to put an end to shareholder lawsuit it got hit with because of its involvement in what has turned out to be a major corruption scandal that toppled former Brazil president Dilma Roussef. As part of the investigation into the corruption scheme, senior Petrobras executives were implicated of receiving bribes in exchange for inflating the prices for services performed by companies working for Petrobras. Politics, Geopolitics & Conflict • A U.S. court found Turkish banker Mehmet Hakan Atilla guilty of participating in a money-laundering scheme aimed at helping Iran circumvent U.S. sanctions. Turkey’s PM Erdogan has called the ruling “unprecedented interference” in Turkey’s internal affairs. • Protests in Iran continue and the army is ready to step in, its chief told local media. He added, however, that it is unlikely this will become necessary. • Israel’s parliament passed a bill that aims to effectively make Jerusalem an Israeli-only city. The law is bound to aggravate tensions with the Palestinians as well as with Israel’s Arab neighbors. • Sudan has extended a unilateral ceasefire with rebel groups until the end of March as part of an agreement with the U.S. to resolve its internal political conflicts in exchange for the lifting of sanctions that have been in place for two decades. |
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