April 02, 2019 09:55 PM / By Tom Kool Editor, Oilprice.com
Today, we will take a quick look at some of the
critical figures and data in the energy markets this week. We 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.
- The EIA projects that U.S. tight oil
production, having taken over from conventional crude as the major source of
output for the country, will hit 10 million barrels of daily oil production by
- In 2018, tight oil
production reached 6.5 mb/d.
- Three shale plays in
the Permian – the Spraberry, Bone Spring, and Wolfcamp – account for 41 percent
of total U.S. tight oil production.
- Morgan Stanley says that
Chevron (NYSE: CVX) is a much more compelling investment than ExxonMobil (NYSE:
XOM). While both are posting big profits, “the cash flow profile should diverge
for these two companies” going forward, the investment bank said. Chevron is
keeping spending in check while Exxon is ramping up spending.
- TransCanada’s (NYSE:
TRP) Keystone XL pipeline received a boost from a new executive order by
President Trump approving the project. The order is intended to work around
legal challenges to the pipeline, although uncertainty remains.
- Vanguard Natural
Resources (OTCQX: VNRR) filed for Chapter 11 bankruptcy protection, its second
bankruptcy in two years. Vanguard is an oil and gas driller with assets in
Wyoming, Colorado and the Permian Basin among other places.
Tuesday April 2, 2019
Oil rises to 2019 high. Crude
oil hit fresh 2019 highs this week, pushed up by tightening supplies globally,
a slowdown in U.S. output, and fewer concerns about the global economy. WTI
bounced above $62 per barrel in early trading on Tuesday with Brent closing in
on the $70-per-barrel mark.
shale slowdown. The
EIA reported that U.S. oil production fell in January by 90,000 bpd, offering
more evidence that suggests the shale industry slammed on the brakes at the end
of last year when oil prices collapsed.
House approves oil reform. Colorado’s
House approved the new legislation
that will overhaul regulation of the oil and gas industry in the state. The
bill grants much more authority to local governments to regulate drilling
operations, while also beefing up environmental oversight. The measure was
already approved by the Senate. The oil and gas industry has sounded the alarm
about the bill, warning that it could disrupt development, while local
communities and environmental groups praised the move.
natural gas goes negative. The
natural gas prices in Western Texas fell into negative territory last week, plunging to
a record low of -$2.50/MMBtu (yes, negative $2.50/MMBtu). There has been a
shortage of takeaway capacity in the region, leading to a glut of gas. But
equipment failures and maintenance have added to the midstream problems.
glut leads to crashing prices. The
wave of new LNG export capacity that is hitting the market this year is leading
to a meltdown in prices. “The gas market obviously is undergoing a winter
hangover” Francisco Blanch, head of global commodities and derivatives research
at Bank of America Corp. in New York, told Bloomberg. “We are getting a
glut across the board and we don’t see that changing all that much.” Spot
prices for LNG in Asia – the JKM marker – fell as low as $4.375/MMBtu at the
end of March.
Aramco produces oil at $2.80 per barrel. Data
from a new prospectus for Saudi Aramco’s upcoming dollar-denominated bond reveals that the Saudi oil
company can produce oil at a cost as low as $2.80 per barrel. Aramco’s profits
of $111 billion last year makes it the world’s most profitable company, even as
its obligations to prop up the state are enormous.
Ghawar field produces less than expected. The
iconic and legendary oil field, Ghawar, produces less oil than expected.
Details of the field have been a tightly-guarded state secret, but the Aramco
bond prospectus published on Monday revealed some clues. Ghawar is able to produce 3.8 mb/d, well below
the 5 mb/d that had been widely thought.
block Trump’s Artic and Atlantic plans. A
U.S. judge blocked the Trump administration’s campaign to open up parts of the
offshore Arctic and Atlantic Oceans for drilling. The court said that Obama-era
protections must be overturned by an act of Congress.
issues new executive order on Keystone XL. President
Trump signed an executive order approving the Keystone XL pipeline, a move that
would supersede his original approval issued in 2017, which has been bogged
down in courts. The latest order is an attempt to push the project forward, but
it too will likely be the subject of litigation.
quits lobby group over climate. Royal
Dutch Shell (NYSE: RDS.A) withdrew from an influential
Washington lobby group due to differences over climate policy. Shell quit the
American Fuel and Petrochemical Manufacturers because of the group’s opposition
to the Paris climate agreement, carbon pricing, fuel mandates and methane
reductions. Shell’s top brass has been vocal about trying to reduce carbon
emissions and pivot towards cleaner energy. Still, Shell maintained membership
in separate lobby groups that oppose climate action.
LNG deal linked to Brent. NextDecade
Corp. (NASDAQ: NEXT) inked a long-term contract
for LNG deliveries to Royal Dutch Shell (NYSE: RDS.A) with prices
linked to Brent crude. The cargoes will come from an export facility in
Brownsville, Texas, and will have destination flexibility.
Well drilled in Arctic
National Wildlife Refuge in 1986 was “worthless.” The
New York Times reported on the tightly held
secret results of a single well drilled in the Artic National Wildlife Refuge
(ANWR) in the 1980s. Those results have been kept secret, which has fueled
speculation about their contents. It is the only well ever drilled in ANWR and
it has become newly relevant with the opening of the refuge under the Trump
administration. The NYT reports that the well was likely “worthless.” However,
new technologies would likely push oil companies to a separate part of the
refuge, so it does not mark an end to the story.
Exxon weighs sale of Nigerian
assets for $3 billion. ExxonMobil (NYSE: XOM)
is considering a sale of its oil and
gas assets in Nigeria, which could fetch as much as $3 billion. Exxon is
increasingly focused on Guyana, the Permian and its downstream business.
pressuring Exxon on climate risks. Shareholder
groups have filed resolutions with ExxonMobil (NYSE: XOM),
calling on the company to disclose short-, medium- and long-term risks to
climate change. Exxon wants the SEC to throw out the resolutions, which could
be voted on at their annual shareholder meeting. A decision is expected
flooding adds to gasoline prices. Crude
oil recently hit a 2019 high, but floods in the Midwest have
pushed up gasoline prices because of the disruption to ethanol output. The
national average in the U.S. is now $2.71 per gallon, or up 28 cents from a
month ago and 50 cents since January.
1. Oil Breaks $60
As Bullish News Mounts - OIR 290319
2. Sahara Group
Advocates Adoption of Uniform Petroleum Products Standards in Africa
3. The World's
Largest Oil Company And Petrochemical Company Merge
4. Oil Prices Dive
On Economic Fears - OIR 220319
5. Nigeria Produced
55.85m Tonnes of Solid Minerals in 2018 - NBS
6. Oil Price Rally
Hits Resistance – OIR 190319
7. Oil Prices Surge
To Multi-Month Highs - OIR 150319
8. P and ID’s Risk
To Nigeria - Hedge Fund Purchase Underscores Fiscal, Monetary Risk
9. Average Prices
of PMS, AGO, HHK and Cooking Gas – February 2019
10. Oil Prices Inch
Higher On Venezuelan Crude Crisis – OIR 120319
11. Oil Prices Sink
On Negative Economic Data – OIR 090319