Oil Markets: Deja Vu As The Trade War Talks Flatter To Deceive


Saturday, November 09, 2019   /07:15AM  / By Tom Kool of Oilprice.com / Header Image Credit: Oilprice.com


Trade war optimism sent oil prices up at the start of the week but, with traders now growing skeptical of any progress in the talks between China and the U.S., oil prices are entering a familiar cycle.

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Friday, November 8th, 2019

Oil prices fell back on Friday as traders awaited more solid evidence that the U.S.-China trade deal will be completed. News reports this week suggested that both sides would lower tariffs as part of the "phase one" agreement. But the deal has been delayed until December. "The U.S.-China trade talks are heading in the right direction" but "there are still several obstacles that will need to be overcome," Stephen Brennock, an analyst at PVM Oil Associates Ltd., told Bloomberg.

Equinor agrees to sell Eagle Ford business. Equinor (NYSE: EQNR) has agreed to sell its 63 percent interest and operatorship in its onshore Eagle Ford shale business to Repsol (OTCQX: REPYF) for $325 million.

Brazil oil auction fails badly. International oil firms stayed away from a highly-anticipated offshore oil auction in Brazil, an unexpectedly poor result for the country. "Total disaster is the best way to describe this morning's round," Ross Lubetkin, CEO at Welligence Energy Analytics, a consultancy, told Bloomberg. The only blocks awarded went to state-owned Petrobras and Chinese state-owned CNODC. Four blocks received no bids at all. "All majors are focused on capital discipline and value versus volume. They will not bid at any cost for pre-salt assets," Marcelo de Assis, head of Latin America upstream at Wood Mackenzie, told Reuters. Brazilian officials suggested that they need to reform laws that currently puts Petrobras at the forefront of development in the pre-salt. A second auction on Thursday only saw one bid. Brazil's economy minister said the results left him "terrified."

Canadian oil prices fall on Keystone outage. TC Energy's (NYSE: TRP) Keystone pipeline leaked more than 9,000 barrels of oil in North Dakota last week, and U.S. federal regulators said the company needed to send a portion of the damaged pipeline to an independent lab for testing before it could be restarted. Western Canada Select prices fell, widening to a discount in excess of $22 per barrel, up from around $16 per barrel before the spill. TC Energy said the pipeline could partially restart next week, pending regulatory approval.

Saudi Aramco inks Asia deals. Saudi Arabia signed agreements with buyers in China, hoping to increase shipments to the east, which will make up from dwindling exports to the U.S.

OPEC not pushing for cuts. The largest oil producers from within OPEC+ are not pressing for deeper cuts. Sources told Bloomberg that the most likely outcome at the upcoming meeting in Vienna would be an extension of the current cuts. "It will prove very difficult to formally agree new, deeper cuts," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, told Bloomberg. "A rollover of current cuts for the rest of 2020, with an emphasis on compliance by all members, is the path of least resistance."

U.S. shale titans say drilling frenzy is over. Several high-profile U.S. shale executives made predictions on their recent earnings calls that the U.S. oil boom is coming to an end. The Permian basin is "going to slow down significantly over the next several years," Pioneer Natural Resources (NYSE: PXD) CEO Scott Sheffield said. Mark Papa, CEO of Centennial Resource Development (NASDAQ: CDEV), added that the slowdown is largely due to "the shift to Tier 2 and 3 drilling locations in all shale plays and increasing parent-child issues in the Permian." Meanwhile, Chesapeake Energy (NYSE: CHK) warned that it might not continue as a "going concern."

EOG Resources beats estimates. Bucking the trend from out-of-favor drillers, EOG Resources (NYSE: EOG) saw its share price jump after it beat earnings estimates. The company reported higher-than-expected production while spending less than anticipated.

Total to leave American lobby group. Total SA (NYSE: TOT) said that it would not renew its membership in the powerful American Fuel & Petrochemical Manufacturers association because the lobby group's position on climate change does not align with the French oil company. Total said it had different views on the Paris Climate agreement, carbon pricing and renewable energy. That follows a similar decision from Royal Dutch Shell (NYSE: RDS.A) earlier this year to leave AFPM.

India smog hits crisis levels. India declared a public health emergency as air pollution in New Delhi hit acute levels. People stayed indoors, factories and schools closed and flights were grounded. The smog is a drag on India's economy, the FT reports. Fuel demand growth is at a six-year low, and may only expand by 170,000 bpd this year. 

NY Fed: Climate change can't be ignored. "The U.S. economy has experienced more than $500 billion in direct losses over the last five years due to climate and weather-related events," Federal Reserve Bank of New York Executive Vice President Kevin Stiroh said at a risk forum on Thursday at the bank.

"Supervisors should take a risk management perspective, not a social engineering one. It is beyond our mandate to advocate or provide incentives for a particular transition path."

GM to sell shuttered plant to electric truck maker. GM (NYSE: GM) confirmed plans to sell its shuttered Lordestown facility in Ohio to an electric truck manufacturer.

Saudi Arabia bullies rich on IPO. Saudi Arabia is bullying wealthy Saudi citizens into buying stock in Saudi Aramco. 

China could cut EV subsidies again. China is considering further cuts to EV subsidies, which would deal another blow to the sector.


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