Wednesday, July 17, 2019 /08:22AM / By Tom Kool of Oilprice.com / Header Image Credit: South China Morning Post
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.
Chart of the Week
Argentina’s natural gas production from shale has
climbed significantly in the last few years, driven by increased drilling in
the Vaca Muerta shale.
Production from the Vaca Muerta surpassed 1 billion cubic
feet per day (Bcf/d) at the end of 2018.
Higher production has allowed Argentina to resume gas
exports. Argentina’s first LNG shipment departed in June.
Market Movers
Energy Transfer Partners (NYSE: ETP)
is considering the sale of its
33 percent stake in the Rover Pipeline, which carries natural gas from the
Marcellus shale to the U.S. Midwest. The sale could be worth as much as $2.5
billion.
Analysts and investors panned the Callon-Carrizo
deal (more below). Callon Petroleum’s (NYSE: CPE) share price plunged by
15 percent on the news.
American Electric Power (NYSE: AEP)
says it will buy three wind projects in
Oklahoma at a cost of $2 billion. AEP says it will save ratepayers $3
billion.
Tuesday July 16, 2019
Oil prices started off the week on a quiet note, but retreated on Tuesday
afternoon after Secretary of State Mike Pompeo said that Iran is ready to
negotiate its missile program. .
Callon
Petroleum to buy Carrizo for $1.7 billion.Callon
Petroleum (NYSE: CPE)agreed to purchase Carrizo
Oil & Gas (NYSE: CRZO) for $1.7 billion, marking the latest sign of
consolidation for the U.S. shale industry. With so many shale drillers failing
to post profits, investors are increasingly pressuring companies to pursue
consolidation deals. Carrizo’s decision to agree to be taken over at a low
point for its share price is a sign that drillers have lost confidence in their
ability to rebound.
China’s
growth slows to 27-year low. New data shows that China’s
GDP growth fell to just 6.2 percent in the second quarter, the worst
performance in nearly three decades. In the first quarter, growth stood at 6.4
percent. “Economic conditions are still severe both at home and abroad, the
global economic growth is slowing down, the external instabilities and
uncertainties are increasing, the unbalanced and inadequate development at home
is still acute, and the economy is under new downward pressure,” said Mao Shengyong, a
spokesman for China’s National Bureau of Statistics, in a news conference.
European
carbon prices could rise on Exxon court decision. The
European Union’s Court of Justice ruled that a natural gas processing facility
owned by ExxonMobil (NYSE: XOM) should be classified as an
electricity generator, subjecting it to the carbon market. If that decision
applies to some 3,000 factories that transfer heat or electricity to the public
grid, it could bring in a lot more polluters, which could drive up the cost of
carbon. Carbon prices are already at an 11-year high. “It’s backfiring not just
on Exxon, but on many companies receiving free allowances for power stations
located at factories,” Mark Lewis, global head of sustainability research at
BNP Paribas SA’s asset management unit, told Bloomberg.
EIA:
U.S. CO2 emissions to fall in 2019. The EIA expects U.S. energy-related
carbon emissions to fall this year by 2.2 percent, largely due to the decline
of coal-fired power plants. Last year emissions rose 2.7 percent compared to
2017 levels. Meanwhile, NASA said that the world just saw the hottest June on
record.
Coal
plant retirements continue. Power plant owners do not
expect to alter their plans to shut coal plants in the years ahead, despite the
Trump administration’s efforts to prop up the industry, according to S&P Global Platts.
Permian
slowing down. Top U.S. shale basins may only add 49,000 bpd
in August over a month earlier, according to the EIA, a slower-than-usual
pace. As Bloomberg noted, one example of the
slowdown is Parsley Energy (NYSE: PE), which slashed its 2019
growth rate by as much as 40 percentage points below its 2018 figures.
Fracklog
declines as drillers cut costs. In an effort to slash
costs, drillers are drawing down their inventory of drilled but uncompleted
wells (DUCs). The so-called “fracklog” had steadily climbed for the better part
of two years, but now, with investor scrutiny putting pressure on shale
companies, the fracklog is declining. “They have already sunk their cash into
the drilling portion,” Elisabeth Murphy, an analyst at ESAI Energy LLC, told Bloomberg. “Now it’s just a
matter of completing rather than drilling new wells.”
Gulf
of Mexico production begins to restart. Roughly 1.3 mb/d of
oil production in the Gulf of Mexico, or 69 percent, was still offline as of
Monday. Also, 1.7 Bcf/d of natural gas, or 61 percent, was not operating. But
companies were beginning the process of restarting on
Sunday.
Fossil
fuels less efficient than previously thought. The energy
return on investment (EROI) of oil and gas may be lower than was previously
thought. The general consensus has been that the EROI for oil, gas and coal was
25:1, but a new study found that when including refining, the EROI drops to
just 6:1. Because of its high energy content, fossil fuels are often considered
to be superior to renewable energy, but the lower EROI puts them on level
footing. “The transition from fossil fuels to renewables actually might not be
as bad as people thought,” said Paul Brockway, a
co-author of the study.
Refining
margins shrink on weak economy. Weak distillate prices have cut into refining
margins, due to slower demand and an economic deceleration. Up until only
recently, the pending 2020 IMO regulations on maritime fuels were predicted to
drive up distillate prices and cause major disruptions to refiners and to
product markets.
Libya’s
oil revenue plunges. Libya’s oil revenue fell 11.2 percent in the
first half of the year. Production has not been severely affected thus far
despite several months of civil war.
Chevron
ordered to stop oil spill. Chevron (NYSE: CVX) has
spilled as much as 800,000
gallons of crude oil and water in Kern County canyon in southern California
since it began in May, and state regulators ordered the company to put a halt
to the spill.
Secret
recording of Russian-Italian deal. BuzzFeed News reported on a secret
meeting between Russian and Italian officials, which unmasked the details of a
scheme that would see Russian money funneled into the far-right Lega Party in
Italy. According to BuzzFeed, a Russian oil company would sell fuel at a
discount to Eni (NYSE: E), with the difference – roughly $65
million – secretly diverted into the coffers of the Lega Party.
California
puts the brakes on fracking. After news surfaced that
California had approved twice as many fracking permits in the first six months
of this year compared to 2018, California Governor Gavin Newsom fired the top oil
regulator. The reshuffling could slow the pace of permitting for drilling in
the state and may present a serious headwind for the industry.
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