Is The Oil Price Rally Already Over? - OIR 080120

Oil & Gas
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Wednesday, January 08,  2020 /08:18 AM / By Tom Kool of / Header Image By: Oil Price


Today, 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.

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Chart of the Week

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  • The energy portion of the S&P Goldman Sachs Commodity Index (GSCI) rose more than other commodities in 2019, climbing by 22 percent.

  • WTI closed out the year up 31 percent and Brent gained 20 percent.

  • Natural gas was the only energy commodity to drop last year, with NYMEX prices falling by 26 percent.    

Market Movers

  • Amazon (NASDAQ: AMZN), ExxonMobil (NYSE: XOM) and Fiserv (NASDAQ: FISV) announced the launch of a new voice experience for pumping gas, letting drivers use Alexa to pay at the pump.

  • Occidental (NYSE: OXY) is partnering with Total SA (NYSE: TOT) on a carbon capture project in Colorado, using the captured CO2 for enhanced oil recovery.

  • Laredo Petroleum (NYSE: LPI) jumped by 5 percent on Monday after it said that its production in 2019 exceeded its guidance. 

Tuesday, January 7, 2020

Oil prices fell back late Monday and in early trading on Tuesday. Goldman Sachs had predicted that the rally following the prospect of war in the Middle East would be temporary unless oil supplies were actually disrupted. Traders apparently are taking note, selling off oil at the start of the week. However, events are fluid and developing quickly.

Iran cuts nuclear commitment. Iran said that it would abandon limits on uranium enrichment following the assassination of General Qassem Soleimani. The U.S. withdrew from the 2015 nuclear agreement in 2018, and Iran has gradually ratcheted back its commitments in response. Iran said its moves were reversible upon U.S. returning to the nuclear deal. 

U.S. mulls Iraq sanctions. Some reports suggest the Trump administration is drawing up sanctions on Iraq as revenge for the Iraqi parliament pushing for a U.S. troop withdrawal. 

Moody's: "Protracted" Iran conflict could hit global economy. "A lasting conflict would have wide-ranging implications through broad economic and financial shock that significantly worsen operating and financing conditions," Moody's said Monday. "A protracted conflict would potentially have global repercussions, in particular through its effect on oil prices."

Chevron pulls staff out of Iraq. Chevron (NYSE: CVX) withdrew its expatriate staff from Kuridstan, the company said, but left behind local workers to keep operations uninterrupted. The oil majors are on edge, and BP (NYSE: BP) and Royal Dutch Shell (NYSE: RDS.A) have not disclosed details yet. 

BP invests in low-carbon "unicorns." BP (NYSE: BP) has created a subsidiary that aims to stand up five $1 billion businesses by 2025 that produce low-carbon energy. "We are trying to build unicorns in the energy business," said Stephen Cook, managing partner of Launchpad and chief commercial officer in BP's technology division, according to the FT

Hottest Permian takeover targets. The U.S. energy sector saw $39 billion in M&A deals last year, excluding the massive $57-billion purchase of Anadarko by Occidental Petroleum. But the pace of deal-making could increase in 2020, with much of the focus on the Permian. With the sector arguably bottoming out, the majors could be on the hunt for acquisitions. Top targets include Laredo Petroleum (NYSE: LPI), Centennial Resource Development (NASDAQ: CDEV), Matador Resources (NYSE:MTDR), QEP Resources (NYSE:QEP), SM Energy (NYSE:SM), WPX Energy (NYSE:WPX) and Halcon Resources (privately held).

Equinor to cut emissions by 40 percent. Norwegian oil giant Equinor (NYSE: EQNR) plans on cutting greenhouse gas emissions from its domestic operations by 40 percent this decade, with an aim to hit zero emissions by 2050.

Shell to miss clean energy targets. Royal Dutch Shell (NYSE: RDS.A) could fall short of investing $6 billion in clean energy between 2016 and 2020 as promised. The company has only spent $2 billion to date, according to The Guardian.

ExxonMobil warned of poor Q4 results. In a regulatory filing, ExxonMobil (NYSE: XOM) said that its fourth-quarter operating results would be hit by weakness in chemicals and refining, although that could be offset by asset sales. The update "is like Groundhog's day - once again chemicals and downstream weakness will drag down overall earnings," Jennifer Rowland, analyst at Edward Jones, told Reuters. "The asset sale proceeds will help cover the dividend, but that's not a sustainable strategy," she said.

PDVSA hands over control to foreign companies. A former Venezuelan oil minister said that because PDVSA has deteriorated due to a lack of cash and a worker exodus, the company has essentially handed over control to foreign partners. "PDVSA is no longer producing. It's signing contracts for others to produce in a de facto privatization," Ramirez told Reuters. Ramirez singled out Rosneft and CNPC as the main beneficiaries. 

Haftar seizes Sirte. The Libyan National Army (LNA) has taken control of Sirte, a blow to the internationally-recognized Government of National Accord (GNA). It's unclear what the effect on the country's oil sector will be. The civil war has become a larger proxy war between the UAE, Egypt and Russia, which are supporting Khalifa Haftar and the LNA on the one hand, and Turkey and the GNA in Tripoli on the other. 

Rig count falls below 800. The U.S. oil and gas rig count is down below 800 for the first time since the spring of 2017. The shale industry continues to shed rigs, as pressure from investors grows. 

2020: Decade of energy storage. Declining battery costs are setting up the 2020s to be the decade of energy storage. Energy storage installations across the world are expected to soar to 1,095GW, or 2,850GWh, by 2040, compared to a modest deployment of just 9GW/17GWh as of 2018, according to BNEF's forecasts.

Big Tech backing Big Oil. Tech giants are growing their business ties with the oil industry, despite increasing scrutiny on fossil fuels. 

Mexico's president seeks reroute for gas pipeline. The Mexican government will request a gas pipeline be rerouted to avoid indigenous lands. The Tuxpan-Tula pipeline is being developed by TC Energy (NYSE: TRP). "Even if we have to pay, the gas pipeline will not go through the sacred hills," Mexican President Andres Manuel Lopez Obrador said

U.S. considers more Venezuela sanctions. The U.S. may finally let the sanctions waiver for Chevron (NYSE: CVX) expire later this month in order to increase pressure on the Venezuelan government. Chevron and top oilfield service companies play an important role in keeping around 200,000 bpd online in the country.

Saudi support pushes Port Arthur LNG forward. Sempra Energy (NYSE: SRE) and Saudi Aramco announced the signing of an interim project participation agreement, a pre-FID agreement that inches a major LNG export terminal forward. 

Apache and Total announce Suriname discovery. Apache Corp. (NYSE: APA) and Total SA (NYSE: TOT) announced a "significant" oil discovery in offshore Suriname.

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