OIL PRICE INTELLIGENCE REPORT
In today’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week.
We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.
- U.S crude oil exports averaged 1.1 million barrels per day (mb/d) in 2017, twice as high as 2016. It was the second full-year since the prohibition on crude exports had been lifted.
- Canada remained the largest buyer at 29 percent of total U.S. exports. But a notable development was the emergence of China as a major buyer of U.S. crude, representing 20 percent of the total.
- Breaking it down by product type, crude oil only accounts for 18 percent of total petroleum product exports, with hydrocarbon gas liquids (HGL) and distillates each accounting for 22 percent.
Market Movers
• TransCanada (NYSE: TRP) saw its stock dip after U.S. FERC cut a key tax break that benefits pipeline companies. TransCanada said it expects “no material financial impact.”
• SandRidge Energy (NYSE: SD) says it rejected the takeover offer from Midstates Petroleum (NYSE: MPO), eyeing other options.
• Eni (NYSE: E) raised its dividend by nearly 4 percent to 0.83 euros per share, the first change in its shareholder payout since 2015.
Tuesday March 20, 2018
Oil prices have climbed at the start of the week on Middle East tension, falling production in Venezuela and a weakening of the U.S. dollar.
Saudi Arabia scaling back Aramco IPO ambitions. The Wall Street Journal reports that Saudi Arabia is narrowing its ambitions for the public offering of Saudi Aramco, aiming for a domestic listing in 2019. For now, the international listing could be put on hold, with a final decision to be made at a later date. The WSJ says that the scaling down of ambitions is the result of legal concerns, particularly if the offering were based in New York. A U.S.-listing was the preference of Crown Prince Mohammed bin Salman, but the WSJ says he is “resigned to the idea that the legal risks of a U.S. listing could be insurmountable.” Meanwhile, with oil prices back in the mid-$60s, the need to raise cash is not as urgent as it once was.
MbS to Washington. Saudi Crown Prince Mohammed bin Salman is in Washington to visit President Trump on Tuesday. He will travel onto New York, San Francisco, Houston, Los Angeles and Boston. He is expected to meet with Silicon Valley and Wall Street titans, while also likely visiting with oil executives in Houston.
Azerbaijan discusses possible OPEC membership. Reuters reports that OPEC and Azerbaijan are discussing some cooperative arrangement, potentially including full membership into the group. OPEC Secretary-General Mohammad Barkindo traveled to Azerbaijan a few days ago to have discussions with the Azeri President and his energy minister. “Barkindo and the energy minister discussed prospects of future cooperation between Azerbaijan and OPEC,” a source told Reuters. “There are three options. First - OPEC membership, the second - to become an associate member and the third - to continue cooperation the way it is now.” Azerbaijan produces about 800,000 bpd.
Hedge funds trim bullish bets, but slowly. Hedge funds and other money managerscut their net-long position in oil futures last week, but only moderately. The quiet positioning suggests that many investors see oil prices at a more or less balanced level.
Trump admin bars trading of Venezuelan cryptocurrency. President Donald Trumpissued an executive order on Monday that prohibits U.S. citizens from purchasing Venezuela’s cryptocurrency, the “petro.” The currency was launched by Caracas to try to skirt sanctions put in place by the U.S. last year. The petro is also an effort to somehow deal with runaway hyperinflation, since the country’s real currency, the bolivar, has become essentially worthless. Most analysts have dismissed the launch of the petro as a hopeless last ditch effort by the Venezuelan government, and the U.S. sanctions on the petro could undermine the cryptocurrency even more.
GE pivots to offshore wind. GE (NYSE: GE) is investing heavily in offshore wind in order to make up for the poor performance of its gas turbine business. “The conventional wisdom, three, four years ago at GE was thermal power [will] keep growing and offshore wind is a fantasy,” Jerome Pecresse, CEO of GE Renewable Power, told the FT. “Now offshore wind is not a fantasy, it’s a market. And GE can positively adapt and invest into it.” GE slashed 12,000 positions in its gas and coal power plant equipment unit. GE is the fourth-largest wind turbine manufacturer after Siemens Gamesa (OTCPK:GCTAF),Vestas (OTCPK:VWDRY), and Goldwind.
Teekay says tankers will use distillates in 2020. The International Maritime Organization is rolling out significant regulations on sulfur from the fuel used in ships and tankers, which could force tanker companies to switch away from dirty fuel oil. The industry-wide switchover to other fuels will have global ramifications for the oil and products market. On January 1, 2020, IMO will require ship owners to only use fuel with 0.5 percent sulfur, down from the current 3.5 percent. As S&P Global Platts points out, “shipowners have a variety of options -- distillates, other 0.5 percent sulfur bunker fuels and blended fuels, marine gasoil, premium ECA category fuels, HSFO with scrubbers and alternative fuels such as LNG,” although it is unclear which way the industry will go.Teekay Tankers (NYSE: TNK) says it will likely switch to distillates instead of using scrubbers to process high sulfur fuel oil.
Total SA would seek waiver if U.S. sanctions on Iran come back. Total (NYSE: TOT)has a significant investment in Iran’s South Pars gas project on the line, and the French oil company said it would seek a waiver from the U.S. if Washington re-imposes sanctions on Iran.
Europe proposes new sanctions on Iran. The UK, France and Germany areconsidering new sanctions on Iran as a way of assuaging the concerns of the Trump administration, hoping to keep the U.S. on board with the Iran nuclear deal. President Trump has said that the U.S. would pull out of the deal if it wasn’t “fixed.” A U.S. State Department official voiced some optimism that European measures could work with the U.S., but “the deal now hangs by a thread,” said Ali Vaez, the International Crisis Group’s director of Iran policy.
Enbridge Line 3 clears crucial hurdle. Enbridge (NYSE: ENB) received an approval on an environmental review from Minnesota regulators last week, setting the stage for final approval of the project in June. The Enbridge Line 3 replacement would overhaul the existing oil pipeline that runs from Alberta to the U.S., essentially doubling the system’s capacity to 760,000 bpd. The approval would be critical to the Canadian oil industry, which is suffering from steep discounts for its oil due to pipeline bottlenecks.
Eni says it will lower Libya output. Eni (NYSE: E) CEO Claudio Descalzi said that the Italian oil company’s production in Libya would drop over the next few years, falling from 320,000 bpd to 200,000 bpd by 2022. He said Eni has no plans to leave Libya, but that new projects were not possible in the country.
FERC scraps key tax provision for pipelines. Master limited partnerships (MLPs) became a hot investment vehicle a few years ago because of the promise of higher returns to shareholders. However, U.S. FERC said last week that MLPs can no longer get credit for income taxes that they don’t pay, undercutting one of the features of MLPs. A lot of pipeline companies in the U.S. have setup as MLPs, so the decision led to a selloff in pipeline stocks on Thursday. Many of them, including Energy Transfer Partners (NYSE: ETP) and TransCanada (NYSE: TRP) rushed out statements to reassure investors that nothing would change.
We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.
- U.S crude oil exports averaged 1.1 million barrels per day (mb/d) in 2017, twice as high as 2016. It was the second full-year since the prohibition on crude exports had been lifted.
- Canada remained the largest buyer at 29 percent of total U.S. exports. But a notable development was the emergence of China as a major buyer of U.S. crude, representing 20 percent of the total.
- Breaking it down by product type, crude oil only accounts for 18 percent of total petroleum product exports, with hydrocarbon gas liquids (HGL) and distillates each accounting for 22 percent.
Market Movers
• TransCanada (NYSE: TRP) saw its stock dip after U.S. FERC cut a key tax break that benefits pipeline companies. TransCanada said it expects “no material financial impact.”
• SandRidge Energy (NYSE: SD) says it rejected the takeover offer from Midstates Petroleum (NYSE: MPO), eyeing other options.
• Eni (NYSE: E) raised its dividend by nearly 4 percent to 0.83 euros per share, the first change in its shareholder payout since 2015.
Tuesday March 20, 2018
Oil prices have climbed at the start of the week on Middle East tension, falling production in Venezuela and a weakening of the U.S. dollar.
Saudi Arabia scaling back Aramco IPO ambitions. The Wall Street Journal reports that Saudi Arabia is narrowing its ambitions for the public offering of Saudi Aramco, aiming for a domestic listing in 2019. For now, the international listing could be put on hold, with a final decision to be made at a later date. The WSJ says that the scaling down of ambitions is the result of legal concerns, particularly if the offering were based in New York. A U.S.-listing was the preference of Crown Prince Mohammed bin Salman, but the WSJ says he is “resigned to the idea that the legal risks of a U.S. listing could be insurmountable.” Meanwhile, with oil prices back in the mid-$60s, the need to raise cash is not as urgent as it once was.
MbS to Washington. Saudi Crown Prince Mohammed bin Salman is in Washington to visit President Trump on Tuesday. He will travel onto New York, San Francisco, Houston, Los Angeles and Boston. He is expected to meet with Silicon Valley and Wall Street titans, while also likely visiting with oil executives in Houston.
Azerbaijan discusses possible OPEC membership. Reuters reports that OPEC and Azerbaijan are discussing some cooperative arrangement, potentially including full membership into the group. OPEC Secretary-General Mohammad Barkindo traveled to Azerbaijan a few days ago to have discussions with the Azeri President and his energy minister. “Barkindo and the energy minister discussed prospects of future cooperation between Azerbaijan and OPEC,” a source told Reuters. “There are three options. First - OPEC membership, the second - to become an associate member and the third - to continue cooperation the way it is now.” Azerbaijan produces about 800,000 bpd.
Hedge funds trim bullish bets, but slowly. Hedge funds and other money managerscut their net-long position in oil futures last week, but only moderately. The quiet positioning suggests that many investors see oil prices at a more or less balanced level.
Trump admin bars trading of Venezuelan cryptocurrency. President Donald Trumpissued an executive order on Monday that prohibits U.S. citizens from purchasing Venezuela’s cryptocurrency, the “petro.” The currency was launched by Caracas to try to skirt sanctions put in place by the U.S. last year. The petro is also an effort to somehow deal with runaway hyperinflation, since the country’s real currency, the bolivar, has become essentially worthless. Most analysts have dismissed the launch of the petro as a hopeless last ditch effort by the Venezuelan government, and the U.S. sanctions on the petro could undermine the cryptocurrency even more.
GE pivots to offshore wind. GE (NYSE: GE) is investing heavily in offshore wind in order to make up for the poor performance of its gas turbine business. “The conventional wisdom, three, four years ago at GE was thermal power [will] keep growing and offshore wind is a fantasy,” Jerome Pecresse, CEO of GE Renewable Power, told the FT. “Now offshore wind is not a fantasy, it’s a market. And GE can positively adapt and invest into it.” GE slashed 12,000 positions in its gas and coal power plant equipment unit. GE is the fourth-largest wind turbine manufacturer after Siemens Gamesa (OTCPK:GCTAF),Vestas (OTCPK:VWDRY), and Goldwind.
Teekay says tankers will use distillates in 2020. The International Maritime Organization is rolling out significant regulations on sulfur from the fuel used in ships and tankers, which could force tanker companies to switch away from dirty fuel oil. The industry-wide switchover to other fuels will have global ramifications for the oil and products market. On January 1, 2020, IMO will require ship owners to only use fuel with 0.5 percent sulfur, down from the current 3.5 percent. As S&P Global Platts points out, “shipowners have a variety of options -- distillates, other 0.5 percent sulfur bunker fuels and blended fuels, marine gasoil, premium ECA category fuels, HSFO with scrubbers and alternative fuels such as LNG,” although it is unclear which way the industry will go.Teekay Tankers (NYSE: TNK) says it will likely switch to distillates instead of using scrubbers to process high sulfur fuel oil.
Total SA would seek waiver if U.S. sanctions on Iran come back. Total (NYSE: TOT)has a significant investment in Iran’s South Pars gas project on the line, and the French oil company said it would seek a waiver from the U.S. if Washington re-imposes sanctions on Iran.
Europe proposes new sanctions on Iran. The UK, France and Germany areconsidering new sanctions on Iran as a way of assuaging the concerns of the Trump administration, hoping to keep the U.S. on board with the Iran nuclear deal. President Trump has said that the U.S. would pull out of the deal if it wasn’t “fixed.” A U.S. State Department official voiced some optimism that European measures could work with the U.S., but “the deal now hangs by a thread,” said Ali Vaez, the International Crisis Group’s director of Iran policy.
Enbridge Line 3 clears crucial hurdle. Enbridge (NYSE: ENB) received an approval on an environmental review from Minnesota regulators last week, setting the stage for final approval of the project in June. The Enbridge Line 3 replacement would overhaul the existing oil pipeline that runs from Alberta to the U.S., essentially doubling the system’s capacity to 760,000 bpd. The approval would be critical to the Canadian oil industry, which is suffering from steep discounts for its oil due to pipeline bottlenecks.
Eni says it will lower Libya output. Eni (NYSE: E) CEO Claudio Descalzi said that the Italian oil company’s production in Libya would drop over the next few years, falling from 320,000 bpd to 200,000 bpd by 2022. He said Eni has no plans to leave Libya, but that new projects were not possible in the country.
FERC scraps key tax provision for pipelines. Master limited partnerships (MLPs) became a hot investment vehicle a few years ago because of the promise of higher returns to shareholders. However, U.S. FERC said last week that MLPs can no longer get credit for income taxes that they don’t pay, undercutting one of the features of MLPs. A lot of pipeline companies in the U.S. have setup as MLPs, so the decision led to a selloff in pipeline stocks on Thursday. Many of them, including Energy Transfer Partners (NYSE: ETP) and TransCanada (NYSE: TRP) rushed out statements to reassure investors that nothing would change.
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