OIL 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.
Trader Update: Imagine having the same intel as energy ‘insiders’ or even high level government officials. Information that traders and money managers pay $50,000 and more to access. Oilprice’s new service is doing just that. High quality, relevant, and actionable intelligence directly to your mailbox every month. Click here to get involved.
- More than 30 percent of global maritime oil trade, or about 15 million barrels per day,passes through the South China Sea. Of course, most of that oil has to first traverse the Strait of Malacca, one of the most vital chokepoints in the global oil trade.
- Three importers – China, Japan and South Korea – account for a combined 80 percent of the oil flow that passes through the South China Sea.
- China, in particular, saw 90 percent of its maritime oil imports pass through the South China Sea.
Market Movers
- Sinopec (NYSE: SNP) reported best quarter in years, driven by both strong upstream and downstream figures. Net Income in the first half of 2018 was up more than 50 percent compared to a year earlier, and at over $6 billion, it’s the best first two quarters ever for the company since its initial listing nearly two decades ago.
- Enbridge (NYSE: ENB) has agreed to buy the rest of Spectra Energy Partners (NYSE: SEP) for $3.3 billion in an all-stock deal. Enbridge already owns 83 percent of Spectra.
- BP (NYSE: BP) is considering selling some of its older U.S. oil and gas assets so that it can focus on its “high return assets” that it acquired from BHP Billiton (NYSE: BBL) for more than $10 billion.
Tuesday August 28, 2018
Oil prices have held onto gains in the last few trading sessions. “Brent is still holding its own above $76 per barrel, finding support from a weaker US dollar and hopes that the US and China will soon resolve their trade conflict,” Commerzbank said in a note.
More OPEC output in July. OPEC cut its compliance rate with the production curbs from 120 percent in June to just 109 percent in July, which means the group has added more barrels onto the market.
India hit by rising oil prices. India will take over from China as the largest source of demand growth in the global oil market by 2024, and between now and 2035 India will add around 3.5 million barrels per day in demand, a third of the global increase over that timeframe, according to Wood Mackenzie. However, in the short run, rising oil prices and a weakening rupee could undercut India’s oil consumption. "Due to India's heavy reliance on imported oil and gas, the impact of rising world oil prices has significantly increased the oil import bill. This is the key factor that is driving the deterioration in India's trade position, with July's trade deficit hitting a five year high," IHS Markit Asia-Pacific Chief Economist Rajiv Biswas, said in an email to CNBC.
U.S. and Mexico reach preliminary trade deal. Overcoming some outstanding issues, the U.S. and Mexico said they have reached a deal on a revised NAFTA trade deal, although President Trump wanted to call it the U.S.-Mexico Trade Agreement, not NAFTA. One of the sticking points was the issue of granting too much power to international oil and gas companies as part of the Investor-State Dispute Settlement chapter, which gives companies the right to sue governments if policies impact profits. The energy industry says that authority increases certainty and leads to higher investment while the incoming Mexican government, and members of the Trump team, were concerned about the provision, though for different reasons. The partial agreement reached on Monday softens this mechanism.
Saudi king scrapped Aramco IPO. According to Reuters, the Saudi king had the final word on scrapping the Aramco IPO. The main concern was that a public offering would open up the company to too much transparency, a problem since the details of Aramco’s operations and financial health are a closely guarded state secret.
European natural gas prices diverge from oil. Natural gas prices in Europe have historically been closely linked to crude oil prices. However, the correlation has fallen apart in the past few months, due to regional factors related to the European gas market, such as surging prices for carbon, depleted inventories and hot weather requiring more power demand. The end result is sharply higher natural gas prices at a time when crude oil prices fell. “Gas has become its own market, it is driven by forces which are very distinct from oil,” Muqsit Ashraf, managing director and global lead for energy for Accenture Strategy, told Bloomberg.
Egypt pays more for oil and gas independence. Egypt has “inverted” the petrostate model, the Wall Street Journal writes. Unlike Saudi Arabia and other oil-producing countries, where oil production funds a generous social safety net, Egypt has done something of the reverse. Egyptians are paying elevated prices to international oil and gas companies in order to attract their investment. The Egyptian government has set high domestic prices for oil and natural gas, making Egypt attractive to outside companies.Royal Dutch Shell (NYSE: RDS.A), BP (NYSE: BP) and Eni (NYSE: E) have poured billions into the country. Egypt could soon be a net exporter of gas and even has dreams of setting up an Eastern Mediterranean gas hub. But if it does so, it will be financed by ordinary Egyptians.
Total’s Iran exit gives China opportunity. Total SA (NYSE: TOT) has withdrawn from Iran amid the threat of U.S. sanctions. That gives China an opportunity to take on a greater role in Iran’s South Pars gas field, the largest natural gas field in the world. China’s CNPC already has a stake in the project.
North Sea revival due to new management. Since 2010, oil fields that were handed over to new management in the North Sea have seen higher growth in reserves compared to the average, according to Rystad Energy. In the past decade, the oil majors have discarded a lot of oil projects, selling them to smaller companies that have managed to revive older fields. Industry insiders say that the oil majors have both capital and attention allocated elsewhere, and smaller companies that are hyper-focused on just a handful of assets in the North Sea can produce better results.
ExxonMobil wants renewables in Texas. ExxonMobil (NYSE: XOM) sent out a request for proposals for solar and wind projects, looking to secure power for 12, 15 or 20 years, according to Bloomberg. The company wants projects with between 100 and 250 megawatts for delivery in Texas. “I have never seen an oil and gas company doing a corporate PPA anywhere near that size,” said Kyle Harrison, a New York-based analyst at Bloomberg NEF. “If you’re seeing the biggest oil and gas companies going out and making investments in clean energy, it shows that renewables are cost-competitive.”
Oilfield services firms see stocks rise along with rig count. The U.S. rig count has climbed by more than 100 over the past year and the share prices of more than a dozenoilfield services companies have seen the benefit.
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.
Trader Update: Imagine having the same intel as energy ‘insiders’ or even high level government officials. Information that traders and money managers pay $50,000 and more to access. Oilprice’s new service is doing just that. High quality, relevant, and actionable intelligence directly to your mailbox every month. Click here to get involved.
- More than 30 percent of global maritime oil trade, or about 15 million barrels per day,passes through the South China Sea. Of course, most of that oil has to first traverse the Strait of Malacca, one of the most vital chokepoints in the global oil trade.
- Three importers – China, Japan and South Korea – account for a combined 80 percent of the oil flow that passes through the South China Sea.
- China, in particular, saw 90 percent of its maritime oil imports pass through the South China Sea.
Market Movers
- Sinopec (NYSE: SNP) reported best quarter in years, driven by both strong upstream and downstream figures. Net Income in the first half of 2018 was up more than 50 percent compared to a year earlier, and at over $6 billion, it’s the best first two quarters ever for the company since its initial listing nearly two decades ago.
- Enbridge (NYSE: ENB) has agreed to buy the rest of Spectra Energy Partners (NYSE: SEP) for $3.3 billion in an all-stock deal. Enbridge already owns 83 percent of Spectra.
- BP (NYSE: BP) is considering selling some of its older U.S. oil and gas assets so that it can focus on its “high return assets” that it acquired from BHP Billiton (NYSE: BBL) for more than $10 billion.
Tuesday August 28, 2018
Oil prices have held onto gains in the last few trading sessions. “Brent is still holding its own above $76 per barrel, finding support from a weaker US dollar and hopes that the US and China will soon resolve their trade conflict,” Commerzbank said in a note.
More OPEC output in July. OPEC cut its compliance rate with the production curbs from 120 percent in June to just 109 percent in July, which means the group has added more barrels onto the market.
India hit by rising oil prices. India will take over from China as the largest source of demand growth in the global oil market by 2024, and between now and 2035 India will add around 3.5 million barrels per day in demand, a third of the global increase over that timeframe, according to Wood Mackenzie. However, in the short run, rising oil prices and a weakening rupee could undercut India’s oil consumption. "Due to India's heavy reliance on imported oil and gas, the impact of rising world oil prices has significantly increased the oil import bill. This is the key factor that is driving the deterioration in India's trade position, with July's trade deficit hitting a five year high," IHS Markit Asia-Pacific Chief Economist Rajiv Biswas, said in an email to CNBC.
U.S. and Mexico reach preliminary trade deal. Overcoming some outstanding issues, the U.S. and Mexico said they have reached a deal on a revised NAFTA trade deal, although President Trump wanted to call it the U.S.-Mexico Trade Agreement, not NAFTA. One of the sticking points was the issue of granting too much power to international oil and gas companies as part of the Investor-State Dispute Settlement chapter, which gives companies the right to sue governments if policies impact profits. The energy industry says that authority increases certainty and leads to higher investment while the incoming Mexican government, and members of the Trump team, were concerned about the provision, though for different reasons. The partial agreement reached on Monday softens this mechanism.
Saudi king scrapped Aramco IPO. According to Reuters, the Saudi king had the final word on scrapping the Aramco IPO. The main concern was that a public offering would open up the company to too much transparency, a problem since the details of Aramco’s operations and financial health are a closely guarded state secret.
European natural gas prices diverge from oil. Natural gas prices in Europe have historically been closely linked to crude oil prices. However, the correlation has fallen apart in the past few months, due to regional factors related to the European gas market, such as surging prices for carbon, depleted inventories and hot weather requiring more power demand. The end result is sharply higher natural gas prices at a time when crude oil prices fell. “Gas has become its own market, it is driven by forces which are very distinct from oil,” Muqsit Ashraf, managing director and global lead for energy for Accenture Strategy, told Bloomberg.
Egypt pays more for oil and gas independence. Egypt has “inverted” the petrostate model, the Wall Street Journal writes. Unlike Saudi Arabia and other oil-producing countries, where oil production funds a generous social safety net, Egypt has done something of the reverse. Egyptians are paying elevated prices to international oil and gas companies in order to attract their investment. The Egyptian government has set high domestic prices for oil and natural gas, making Egypt attractive to outside companies.Royal Dutch Shell (NYSE: RDS.A), BP (NYSE: BP) and Eni (NYSE: E) have poured billions into the country. Egypt could soon be a net exporter of gas and even has dreams of setting up an Eastern Mediterranean gas hub. But if it does so, it will be financed by ordinary Egyptians.
Total’s Iran exit gives China opportunity. Total SA (NYSE: TOT) has withdrawn from Iran amid the threat of U.S. sanctions. That gives China an opportunity to take on a greater role in Iran’s South Pars gas field, the largest natural gas field in the world. China’s CNPC already has a stake in the project.
North Sea revival due to new management. Since 2010, oil fields that were handed over to new management in the North Sea have seen higher growth in reserves compared to the average, according to Rystad Energy. In the past decade, the oil majors have discarded a lot of oil projects, selling them to smaller companies that have managed to revive older fields. Industry insiders say that the oil majors have both capital and attention allocated elsewhere, and smaller companies that are hyper-focused on just a handful of assets in the North Sea can produce better results.
ExxonMobil wants renewables in Texas. ExxonMobil (NYSE: XOM) sent out a request for proposals for solar and wind projects, looking to secure power for 12, 15 or 20 years, according to Bloomberg. The company wants projects with between 100 and 250 megawatts for delivery in Texas. “I have never seen an oil and gas company doing a corporate PPA anywhere near that size,” said Kyle Harrison, a New York-based analyst at Bloomberg NEF. “If you’re seeing the biggest oil and gas companies going out and making investments in clean energy, it shows that renewables are cost-competitive.”
Oilfield services firms see stocks rise along with rig count. The U.S. rig count has climbed by more than 100 over the past year and the share prices of more than a dozenoilfield services companies have seen the benefit.
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