Wednesday, September 11, 2019
/08:57AM / By Tom Kool of Oilprice.com / Header Image
Credit: National Review
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.
- Natural gas spot prices in West Texas at the Waha hub are
on the rise in anticipation of the startup of the 2 Bcf/d Gulf Coast Express
Pipeline, which will carry Permian gas to the Gulf Coast.
- Waha hub prices rose as high as $1.55/MMBtu in mid-August,
after trading in negative territory at times over the past year. In the first
eight months of 2019, Waha prices averaged just $0.65/MMBtu, according to the EIA.
- Waha prices were only $0.59/MMBtu below Henry Hub prices
- Freeport LNG says it has raised more than $1 billion
to add a fourth production unit to its LNG export facility along the Texas Gulf
- EQT (NYSE: EQT) is set to
announce layoffs that could affect 200 people at the company, according to Pittsburgh Business Times.
The shale gas giant is in the midst of a restructuring after a change of
- Antero Resources (NYSE: AR) was
downgraded by Goldman Sachs to Neutral from Buy due to lower natural gas
Tuesday September 10, 2019
Oil prices rose again on Tuesday, adding to the latest bout of bullish
sentiment. Traders grew more confident about the trajectory of the OPEC+ cuts
after the shakeup in Saudi Arabia. Meanwhile, some recent economic data soothed
some of the more acute concerns about a slowdown, although it should be noted
that economic cracks have not gone away. Trump's surprise firing of Bolton on
Tuesday morning hurt bullish sentiment, driving fears that Washington may ease
off on its hard stance against Iran.
Saudi oil minister replaced. Saudi Arabia replaced its energy minister
with King Salman's son, Prince Abdulaziz bin Salman, now at the top of the
ministry. On its face, the move does not immediately change oil policy for the
kingdom. But it is the first time that a royal family member will run the
powerful ministry, bringing more control to crown prince Mohammed bin Salman.
The immediate priority is the IPO of Saudi Aramco, which underscores the
Kingdom's need for higher oil prices.
Institutional investors divest from fossil fuels. The
number of institutional investors that have cut fossil fuels from their
portfolios has sharply increased, rising from 180 in 2014 to 1,100 today,
according to the FT. Pressure on investors to cut ties with oil and gas due to
the industry's role in fueling climate change is having a notable effect, the FT says. For instance, Royal Dutch
Shell (NYSE: RDS.A) disclosed in its annual report that climate
divestment campaigns are a "material risk" to its business.
Natural gas to be killed by renewables. A new
study finds that roughly 90 percent of the gas-fired power plants in the U.S.
will be more expensive than renewables by 2035. The study from Rocky Mountain
Institute concluded that gas plants now on the drawing board will become
uneconomic before they are even paid off. "Our story for gas plants is, if you
build it, they won't run - they won't run at their expected capacity factors," Mark Dyson, a co-author of the report, told Bloomberg. "And that
filters down to pipelines, too."
Activist investors seek to block Callon Petroleum's acquisition. A
group of investors that own roughly 9.5 percent of Callon
Petroleum (NYSE: CPE) wrote a letter stating that
they would try to block the company's acquisition of Carrizo Oil
& Gas (NASDAQ: CRZO), calling the deal "value-destructive."
Indian and Chinese car markets post more bad news. Car
sales in India declined by the most on
record in August, plunging by 41 percent year-on-year. Slowing growth is
negatively impacting auto sales. In China, car sales fell in August once again,
the 14th time in the last 15 months.
Gas industry alarmed by bans. Berkeley, California
became the first city to ban natural gas systems in new buildings in July, but
many more cities are looking at adopting similar provisions. The trend is spreading alarm in the
natural gas industry and among the oil majors, who have made long-term bets on
rising gas demand. "We are trying to get ahead of it," Stuart Saulters, the
Director of Government Affairs of the American Public Gas Association, told
Reuters. "We think there is a chance this can domino."
Moody's: Railroads could see $5 billion loss from coal's decline. According
to Moody's, the U.S. railroad industry could see $5 billion in revenue
disappear over the next decade due to the decline of coal use. The credit
ratings agency sees coal demand falling by half by 2030.
Shale buzzwords shift from "ramp up" to "free cash flow." The
Wall Street Journal analyzed transcripts of
earnings calls from more than 40 U.S. shale companies, and the rhetoric used
focused on "capital discipline." "free cash flow" and "live within cash flow," whereas executives used to speak of a "ramp up" in activity or "production
growth." EV demand could boost metal producers. Rising demand for metals used in
the batteries in electric vehicles could increase six-fold by the mid-2020s,
according to Moody's. That only assumes that EVs capture 8 percent of road
traffic, highlighting the opportunity and potential windfall that could visit
major suppliers, such as the Democratic Republic of Congo. These metals include
cobalt, as well as lithium, nickel and copper.
Natural gas prices to stay low through 2024. U.S.
natural gas prices are expected to stay low through 2024, according to S&P Global Platts Analytics.
Gas prices are projected to average just $2.66/MMBtu over the next five years,
down 8 percent from last year's forecast. "This is in response to softening
global market conditions, increased associated gas production and muted
domestic demand-side gains," the report read.
Mexico unveils budget that rests on production growth. Mexico's
budget assumes oil production
growth of 17 percent this year, an unrealistic prospect after roughly 15 years
Repsol in talks to buy Gulf of Mexico assets from ExxonMobil. Spanish
oil company Repsol (BME: REP) is considering purchasing deepwater
assets from ExxonMobil (NYSE: XOM) in the Gulf of Mexico for $1
billion. Talks are in an advanced stage but have not been finalized.
Oil prices could rise on shale slowdown.
Production problems and slowing investment in U.S.
shale could result in a dramatic undershoot for U.S. oil output relative to
consensus market forecasts. That, in turn, could lead to an oil price rally as
the market finds itself short on oil.
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