April 12, 2019 08:46 PM / By Tom Kool Editor, Oilprice.com
Crude prices have climbed for a sixth
straight week as uncertainty in Libya drives bullish sentiment and OPEC
production cuts continue to hit global supply.
Friday, April 12, 2019
Despite losses on Thursday, oil is set to close out a sixth consecutive week of
price gains. The market has been steadily tightening for quite some time, but
the instability in Libya this week was the main contributor. “Demand is mixed”
but “the tightness of the market is going to win out,” Amrita Sen, chief oil
analyst at consultants Energy Aspects Ltd., said in a Bloomberg television
OPEC production falls 534,000 bpd. OPEC production
in March fell by 534,000 bpd, led by a massive 324,000-bpd reduction from Saudi
Arabia, putting overall output at just below 9.8 million barrels per day
(mb/d), well below its 10-mb/d ceiling as part of the OPEC+ deal. Meanwhile,
Iraq lowered output by 126,000 bpd, and Venezuela saw a sharp 289,000-bpd
decline in output, due in large part to power outages. On the other hand, Libya
saw 196,000 bpd come back online, owing to the ramp up of the Sharara oil
field. However, fighting in Libya now puts those gains at risk.
IEA: Oil supply and demand fundamentals relatively bullish. The
IEA said that supply declines and steady demand have helped tighten up the oil
market. However, the agency noted that there are some concerns about demand,
and even as the agency maintained its 1.4-mb/d demand growth estimate, it
conceded that there are downside risks to that forecast.
ExxonMobil in talks on floating LNG in Israel. ExxonMobil
(NYSE: XOM) is reportedly in talks
with Noble Energy (NYSE: NBL) and Delek
Drilling (OTC: DKDRF) on building a floating LNG gas ship to
help develop the Leviathan gas field in Israeli waters. Such a project would
allow gas to be exported beyond the region and it would also avoid having to
build infrastructure to connect the field to Egypt.
Investors see climate change as threat to profits.
Investment advisory firm Mercer LLC says that climate change could cut into
profits in entire sectors. While coal, oil and gas lose out if the world gets
serious about addressing carbon emissions, sectors such as industrials and
agriculture could lose out if there is inaction. “Asset owners should consider
climate change at every stage of the investment process, from investment
beliefs, policy and process to portfolio construction decisions,” said Deb Clarke,
global head of investment research for Mercer.
New gas pipeline could help Permian, and Mexico. Kinder
Morgan received a greenlight from
federal regulators to begin construction on its Sierrita Compressor Expansion,
which would expand the existing Sierrita Gas Pipeline from Arizona to Mexico.
More capacity could ease gas bottlenecks in the Permian.
IMF downgrades global GDP. The IMF warned about slower economic growth in an April 9 report, downgrading estimated GDP growth to 3.3 percent
this year, down from 3.6 percent in 2018. Previously, the Fund expected growth
of 3.5 percent.
Trump issues executive order on pipelines. President
Trump signed an executive order
intended to streamline the permitting of new energy infrastructure, an effort
to strip states of their authority to regulate projects. The effect of the
order is unclear since many legal experts think that the order cannot get
around federal Clean Water Act legislation that grants states such
Texas flaring enough gas to power the entire state. The
Permian natural gas crisis has become so acute that oil producers were flaring
gas at the end of 2018 in volumes equivalent to Texas’ entire residential gas
demand, according to Bloomberg. The lack
of pipelines has resulted in a glut of gas, but because drillers are focusing
exclusively on oil, the associated gas continues to come out of the ground.
With nowhere to go, natural gas prices have crashed to zero and companies have
increased their rates of flaring. “It’s a black eye for the Permian basin,” Pioneer
Natural Resources Chief (NYSE: PXD) CEO Scott Sheffield said at
a conference at Columbia University this week. “The state, the pipeline
companies and the producers -- we all need to come together to figure out a way
to stop the flaring.”
Singapore said it will have enough supply for IMO regulations. Forthcoming
regulations on marine fuels have raised fears that ship-owners may not have
enough low-sulfur fuels, but Singapore, which is home to the world’s largest
maritime refueling port, said that it
will have ample supply when the IMO regulations take effect at the start of
Chevron to buy Anadarko for $33 billion. Chevron
(NYSE: CVX) has agreed to purchase
Petroleum (NYSE: APC) for $33 billion in a cash-and-stock deal.
The acquisition will boost Chevron’s shale assets, as well as some offshore and
natural gas plays. Chevron agreed to purchase all of Anadarko’s shares at $65,
a 39 percent premium. Chevron said it would dispose of $15 to $20 billion worth
of assets between 2020 and 2022 as a result.
ExxonMobil accuses DOE of selling tainted oil from SPR.
(NYSE: XOM) said that some oil it purchased from the federal
government’s strategic petroleum reserve (SPR) last year was tainted,
containing “extremely high levels” of hydrogen sulfide, according to Bloomberg. That
follows complaints from other companies, and raises the concern that the SPR
may not offer the supply assurance that the government and the market have long
U.S. approves 40 percent more drilling permits under Trump.
The U.S. government has approved nearly 40 percent more oil and gas drilling
permits on public lands in 2018 because of an automated online system, helping
to clear a backlog, according to Reuters. Notably,
however, the online system was setup in the last days of the Obama
administration. Meanwhile, Politico reports that the
Trump administration is considering opening up the eastern Gulf of Mexico near
Florida to offshore drilling, a politically dangerous move that both parties
have steered cleared from for a long time.
1. GACN Issues Gas
Purchase Order to Axxela and NGMC Joint Mini LNG Project
2. Smart Money Is
Piling Into Oil
3. Oil Hits $70 On
Libya Unrest, Crisis In Venezuela – OIR 050419
4. Sahara Group
Canvasses Intra-Africa Solution for Petroleum Sector Challenges
5. Axxela Now 100
Percent Owned by Helios
6. 5.32bn Litres of
PMS Imported Into Nigeria in Q4 2018 - NBS
7. Oil Hits 2019
High On Shale Slowdown - OIR 020419
8. Oil Breaks $60
As Bullish News Mounts - OIR 290319
9. Sahara Group
Advocates Adoption of Uniform Petroleum Products Standards in Africa
10. The World's
Largest Oil Company And Petrochemical Company Merge
11. Oil Prices Dive
On Economic Fears - OIR 220319