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.
Investor Alert: Make sure you don't miss out on Thursday's new and improved Oil & Gas Insider, where we tackle the bearish implications of bullish news in the oil markets. Sign up today for your free trial.
- The U.S. saw electricity consumption rise to an all-time high in 2018 at 4,178 million megawatthours, according to the EIA. That was a 4 percent increase from the year before.
- The previous peak was in 2007, so it took until last year to bring consumption levels back to the pre-recession peak.
- Weather is a key factor. The higher levels in 2018 are largely due to a hot summer and cold winter.
Market Movers
- Royal Dutch Shell (NYSE: RDS.A) signed two offshore exploration contracts with the Colombian government. If it moves forward, Shell could spend as much as $650 million in exploration.
- Petrobras (NYSE: PBR) announced another $8.1 billion in planned cuts to operational costs through 2023. The highly-indebted oil company saw its share price jump on the news.
- Transocean (NYSE: RIG) saw its share price surge more than 5 percent on news that it had been awarded contracts for its deepwater drillships from Petrobras.
Tuesday March 12, 2019
Oil started off the week with strong gains, largely due severe disruptions in Venezuela from a widespread blackout. WTI and Brent rose to a two-week high.
Saudi Arabia to keep deep cuts in place through April. Saudi Arabia plans to keep oil production below 10 mb/d in April, extending its deeper-than-required cuts for another month. The move highlights Riyadh’s desire to rapidly drain inventories and boost prices.
Venezuela blackout disrupts oil exports. A widespread electricity blackout in Venezuela disrupted oil operations, impacting both production and exports. Data is opaque at this time, but Venezuela’s oil exports could be headed for a freefall. Energy Aspects estimates output may have temporarily plunged to as low as 500,000 bpd, or half the output level from January.
Citgo and Valero try to return oil shipments to Venezuela. Due to U.S. sanctions,Citgo and Valero (NYSE: VLO) are trying to send back oil cargoes to Venezuela. In total, more than 6 million barrels of oil are in limbo, Reuters reports.
U.S. presses India to stop buying oil from Venezuela. American officials are pressuring India to stop importing oil from Venezuela. “We say you should not be helping this regime. You should be on the side of the Venezuelan people,” Elliott Abrams, Trump’s point man on Venezuela, told Reuters in an interview. The U.S. has sent signals that it is considering “secondary sanctions,” in which it would target foreign banks who do business with Venezuela. A similar approach has been crucial in increasing pressure on countries not to do business with Iran.
Oil and gas sector facing “crisis of confidence. The oil and gas sector is sufferingfrom a “crisis of confidence,” according to Equinor (EQNR) CEO Eldar Sætre. Climate change and society’s lack of trust in the industry on environmental issues poses a long-term threat. "We are collectively not doing enough," Sætre said. He called on others to lower emissions and become more transparent. Equinor, for instance, invests heavily in renewable energy. The Wall Street Journal also reports that BP’s (NYSE: BP) CEO Bob Dudley will voice similar concerns in a speech Tuesday evening.
Libya restarts Sharara. Libya is bringing its largest oil field back online after a three-month hiatus. According to Bloomberg, the return of the Sharara field could help Libya’s output reach a six-year high.
Permian M&A to rise sharply. Analysts expect M&A activity to increase in the Permian, driven by aggressive growth plans on the part of the oil majors, as well as by financial pressure on small- and medium-sized drillers. “The ability of the larger companies to do an accretive acquisition is probably at its highest level since the beginning of the shale revolution,” Michael Roomberg, a fund manager at Miller/Howard Investments Inc., toldBloomberg. “M&A interest is at its highest in nearly a decade.” Meanwhile, Shell isscouring the Permian for deals, where it has lagged far behind Chevron (NYSE: CVX)and ExxonMobil (NYSE: XOM).
Traders unsure of long-term Canadian oil. Oil traders are reluctant to engage in Canadian oil futures beyond one year because of the uncertainty in the sector. The pipeline bottlenecks crashed Western Canada Select (WCS) last year, forcing Alberta to impose mandatory production cuts. Those were supposed to be temporary. But the recent delay of Enbridge’s (NYSE: ENB) Line 3 pipeline has created another layer of uncertainty. “Everything we heard from the government was that they were 100 percent relying on Line 3 coming into service at the end of 2019,” Tim Pickering, president of Auspice Capital Advisors in Calgary, told Reuters. The uncertainty has buyers and producers reluctant to secure hedges, exposing them more to the volatility of the spot market.
Oil majors rebounding strongly. Bloomberg reports that the oil majors are demonstrating their ability to adapt to the “lower for longer” oil market, five years after the downturn. The majors are making more money now with oil in the $60s than they were when oil traded above $100 prior to 2014. The world’s eight largest integrated oil and gas companies spent $118 billion last year, down 45 percent from the $215 billion they spent in 2013, according to Bloomberg.
Tesla in talks with Chinese battery giant. Tesla (NASDAQ: TSLA) is in talks with Contemporary Amperex Technology Co. Ltd., a Chinese battery company, to provide batteries for Tesla’s Model 3 cars.
EPA to unveil biofuel trading plan. The Trump administration is set to impose restrictions on trading biofuels credits, according to Bloomberg, which could cut off a revenue source for banks and oil companies. The proposal is aimed at reducing volatility in prices that refiners use to satisfy federal requirements.
Trump administration divided over NOPEC bill. The NOPEC bill, which would allow the U.S. government to sue OPEC members for antitrust violations, is working its way through Congress. The Trump administration is reportedly divided on the issue and so far has not taken a position. But experts believe that if President Trump supports it, the bill has a high chance of passing.
Occidental a key oil exporter. Occidental Petroleum (NYSE: OXY) has become one of the largest exports of oil from U.S. shale, according to Reuters. By 2020, the company plans to double crude exports to 600,000 bpd.
VW to launch 70 EV models. Volkswagen announced plans to launch 70 new electric vehicle models by 2028, an aggressive campaign to electrify its fleet.
Alaska LNG takes another step forward. Alaska Gasline Development Corp. (AGDC)signed an agreement with BP (NYSE: BP) and ExxonMobil (NYSE: XOM) to advance the state-owned LNG project. The $43 billion project involves a long distance pipeline and LNG export terminal, but it is still far from becoming a reality.
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.
Investor Alert: Make sure you don't miss out on Thursday's new and improved Oil & Gas Insider, where we tackle the bearish implications of bullish news in the oil markets. Sign up today for your free trial.
- The U.S. saw electricity consumption rise to an all-time high in 2018 at 4,178 million megawatthours, according to the EIA. That was a 4 percent increase from the year before.
- The previous peak was in 2007, so it took until last year to bring consumption levels back to the pre-recession peak.
- Weather is a key factor. The higher levels in 2018 are largely due to a hot summer and cold winter.
Market Movers
- Royal Dutch Shell (NYSE: RDS.A) signed two offshore exploration contracts with the Colombian government. If it moves forward, Shell could spend as much as $650 million in exploration.
- Petrobras (NYSE: PBR) announced another $8.1 billion in planned cuts to operational costs through 2023. The highly-indebted oil company saw its share price jump on the news.
- Transocean (NYSE: RIG) saw its share price surge more than 5 percent on news that it had been awarded contracts for its deepwater drillships from Petrobras.
Tuesday March 12, 2019
Oil started off the week with strong gains, largely due severe disruptions in Venezuela from a widespread blackout. WTI and Brent rose to a two-week high.
Saudi Arabia to keep deep cuts in place through April. Saudi Arabia plans to keep oil production below 10 mb/d in April, extending its deeper-than-required cuts for another month. The move highlights Riyadh’s desire to rapidly drain inventories and boost prices.
Venezuela blackout disrupts oil exports. A widespread electricity blackout in Venezuela disrupted oil operations, impacting both production and exports. Data is opaque at this time, but Venezuela’s oil exports could be headed for a freefall. Energy Aspects estimates output may have temporarily plunged to as low as 500,000 bpd, or half the output level from January.
Citgo and Valero try to return oil shipments to Venezuela. Due to U.S. sanctions,Citgo and Valero (NYSE: VLO) are trying to send back oil cargoes to Venezuela. In total, more than 6 million barrels of oil are in limbo, Reuters reports.
U.S. presses India to stop buying oil from Venezuela. American officials are pressuring India to stop importing oil from Venezuela. “We say you should not be helping this regime. You should be on the side of the Venezuelan people,” Elliott Abrams, Trump’s point man on Venezuela, told Reuters in an interview. The U.S. has sent signals that it is considering “secondary sanctions,” in which it would target foreign banks who do business with Venezuela. A similar approach has been crucial in increasing pressure on countries not to do business with Iran.
Oil and gas sector facing “crisis of confidence. The oil and gas sector is sufferingfrom a “crisis of confidence,” according to Equinor (EQNR) CEO Eldar Sætre. Climate change and society’s lack of trust in the industry on environmental issues poses a long-term threat. "We are collectively not doing enough," Sætre said. He called on others to lower emissions and become more transparent. Equinor, for instance, invests heavily in renewable energy. The Wall Street Journal also reports that BP’s (NYSE: BP) CEO Bob Dudley will voice similar concerns in a speech Tuesday evening.
Libya restarts Sharara. Libya is bringing its largest oil field back online after a three-month hiatus. According to Bloomberg, the return of the Sharara field could help Libya’s output reach a six-year high.
Permian M&A to rise sharply. Analysts expect M&A activity to increase in the Permian, driven by aggressive growth plans on the part of the oil majors, as well as by financial pressure on small- and medium-sized drillers. “The ability of the larger companies to do an accretive acquisition is probably at its highest level since the beginning of the shale revolution,” Michael Roomberg, a fund manager at Miller/Howard Investments Inc., toldBloomberg. “M&A interest is at its highest in nearly a decade.” Meanwhile, Shell isscouring the Permian for deals, where it has lagged far behind Chevron (NYSE: CVX)and ExxonMobil (NYSE: XOM).
Traders unsure of long-term Canadian oil. Oil traders are reluctant to engage in Canadian oil futures beyond one year because of the uncertainty in the sector. The pipeline bottlenecks crashed Western Canada Select (WCS) last year, forcing Alberta to impose mandatory production cuts. Those were supposed to be temporary. But the recent delay of Enbridge’s (NYSE: ENB) Line 3 pipeline has created another layer of uncertainty. “Everything we heard from the government was that they were 100 percent relying on Line 3 coming into service at the end of 2019,” Tim Pickering, president of Auspice Capital Advisors in Calgary, told Reuters. The uncertainty has buyers and producers reluctant to secure hedges, exposing them more to the volatility of the spot market.
Oil majors rebounding strongly. Bloomberg reports that the oil majors are demonstrating their ability to adapt to the “lower for longer” oil market, five years after the downturn. The majors are making more money now with oil in the $60s than they were when oil traded above $100 prior to 2014. The world’s eight largest integrated oil and gas companies spent $118 billion last year, down 45 percent from the $215 billion they spent in 2013, according to Bloomberg.
Tesla in talks with Chinese battery giant. Tesla (NASDAQ: TSLA) is in talks with Contemporary Amperex Technology Co. Ltd., a Chinese battery company, to provide batteries for Tesla’s Model 3 cars.
EPA to unveil biofuel trading plan. The Trump administration is set to impose restrictions on trading biofuels credits, according to Bloomberg, which could cut off a revenue source for banks and oil companies. The proposal is aimed at reducing volatility in prices that refiners use to satisfy federal requirements.
Trump administration divided over NOPEC bill. The NOPEC bill, which would allow the U.S. government to sue OPEC members for antitrust violations, is working its way through Congress. The Trump administration is reportedly divided on the issue and so far has not taken a position. But experts believe that if President Trump supports it, the bill has a high chance of passing.
Occidental a key oil exporter. Occidental Petroleum (NYSE: OXY) has become one of the largest exports of oil from U.S. shale, according to Reuters. By 2020, the company plans to double crude exports to 600,000 bpd.
VW to launch 70 EV models. Volkswagen announced plans to launch 70 new electric vehicle models by 2028, an aggressive campaign to electrify its fleet.
Alaska LNG takes another step forward. Alaska Gasline Development Corp. (AGDC)signed an agreement with BP (NYSE: BP) and ExxonMobil (NYSE: XOM) to advance the state-owned LNG project. The $43 billion project involves a long distance pipeline and LNG export terminal, but it is still far from becoming a reality.
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