Thursday, January 04, 2018 8:25 AM / Tom Kool, Editor,
today’s update, 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.
Note for Energy Investors:
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Electronics Engineers, the MIT Technology Review, prestigious national
laboratories, and a slew of other experts are buzzing about this new element
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Chart of the Week
- 2017 was a year of record-breaking U.S crude oil exports.
In 2016, the U.S. averaged crude exports of 520,000
bpd, but that figured more than doubled to 1.1 million barrels per day (mb/d)
by February 2017, only to hit higher levels as the year wore on.
- Canada remained the top buyer of U.S. crude, as proximity
and pipeline interconnections made it an obvious destination.
- But other buyers of American crude emerged in 2017,
including the Netherlands, Curacao and China.
(NYSE: BP) and Royal
Dutch Shell (NYSE: RDS.A) have suggested that the U.S tax
overhaul would be positive in the future, but would lead to one-time charges in
the fourth quarter of 2017.
• The Forties pipeline is now fully operational. "All
restrictions on the flow of oil and gas from platforms feeding into the
pipeline system have been lifted and virtually all platforms are now on
line," operator Ineos said in a statement on December
• Rising oil prices would benefit shale companies that have
relatively less hedging, exposing them to a more positive market. Cowen analysts singled out Anadarko Petroleum (NYSE:APC),
EOG Resources (NYSE:EOG)
and Continental Resources
(NYSE:CLR) as potential winners.
January 2, 2018
Oil prices started out the year with some bullish sentiment related to
geopolitical flashpoints, while the market fundamentals looked less favorable
with the restoration of some key pipelines.
Iran unrest pushes up oil
prices. Oil prices remained at more than two-year highs as
protests swept across multiple cities in Iran. Crowds of protestors, mainly
young people, criticized the government for poor economic conditions. The
demonstrations pushed crude prices up a bit, and both WTI and Brent opened
above $60 per barrel for the first time in years. "Growing unrest in Iran
set the table for a bullish start to 2018," the Schork Report said in a note to clients on
Tension over North Korea. The
saga over North Korea’s nuclear program continues to take new twists and turns.
The latest disturbance comes after news that Russian oil tankers helped send
oil to North Korea, which would be a violation of UN sanctions. The U.S. has
also accused China of violating UN sanctions by shipping crude oil to the
isolated North Korea regime.
Forties pipeline back
online; Libya too. The return of the Forties pipeline to
operation and the restoration of output from North Sea oilfields removed one of
the recent bullish catalysts from the oil price equation. Libya’s pipeline
outage also came to an end after the damaged pipeline was repaired. So far, the bearish
news of resumed oil flows in the North Sea and Libya has been outweighed by the
protests in Iran. Venezuela to launch
oil-backed cryptocurrency. The Venezuelan government has said that within days it will
launch a new cryptocurrency backed by its 5.3 billion barrels of oil reserves.
"Camp one of the Ayacucho block will form the initial backing of this
cryptocurrency," Jorge Rodriguez, Venezuela’s communications minister told
reporters, referring to a section of the country’s southern Orinoco Belt.
"It contains 5.342 billion certified barrels of oil. We're talking about
backing of $267 billion.” Few analysts think that Caracas can successfully
stage a new cryptocurrency or that it would help the beleaguered government in
any real way. Midstream sector to invest
billions in Permian pipelines. Surging oil and gas production
from the Permian basin is leading to a flurry of investments in infrastructure
able to move all of that product to market. Recently, Phillips 66 (NYSE: PSX) and
Enbridge Inc. (NYSE: ENB) announced
in a joint venture that they will build the Gray Oak Pipeline, which will have
a capacity of 385,000 bpd. More projects are likely in the offing. “There will
be billions spent, between natural gas, crude and natural gas liquids,” Aaron
Blomquist, managing director, investment banking with Tudor, Pickering, Holt
& Co., told the Midland Reporter-Telegram. “Each
project will be about $1 billion, so it will be tens of billions. The Kinder
Morgan natural gas pipeline (from West Texas to Corpus Christi) alone will cost
$1.7 billion” Drilling costs to rise in
2018. 90 percent of oil producers surveyed by Barclays say that
they expect the cost of drilling and producing oil will rise this year. Nearly two-thirds
expect the cost of oilfield services to rise by as much as 10 percent. And
roughly half of the respondents expect cost inflation to eat away 75 percent of
the efficiency gains that the industry has achieved in recent years. A growing
number of companies also think that the efficiency gains are at least 25 to 50
percent structural, rather than cyclical. And finally, more than half of the
respondents said that they expect to spend within their cash flow this year. Saudi Arabia boosts
gasoline prices. As part of the Kingdom’s wide-reaching
economic reforms, the Saudi government has hiked gasoline prices at the start
of the year, raising them from 0.75 riyals to
1.37 riyals per liter for Octane 91. Bioplastics to take a bite
out of oil demand. Bloomberg reports that the use of
bioplastics derived from plant-based sources like sugar cane, corn and wood
will rise by 50 percent over the next five years. The increase of plant-based
plastics could dent the prospects of some heady projections for the growth of
oil demand from the petrochemical sector. “Biochemicals and bioplastics could
erode a portion of oil demand, much like recycling can erode overall virgin
plastics demand,” said Pieterjan Van Uytvanck, a
senior consultant at Wood Mackenzie. “It will become a larger portion of the
supply.” Russian gas production hits
record high in 2017. Russian natural gas production rose by 7.9 percent last year to
a record high, edging out the previous high set in 2011. Russia also has more
projects in the works, which could allow it to continue to boost output and
rival the U.S. for the top spot. New and planned LNG export terminals provide
more outlets for Russian gas, while shipments via pipeline to Europe are also
on the rise. +$60 oil needed for new
round of rig count additions. A survey from the Dallas Fed
finds that oil executives believe that WTI will need to stay above $60 per barrel
if the rig count is to continue to climb. The survey finds that the industry
believes oil will need to trade between $61 and $65 per barrel if the rig
additions are to rise significantly from current levels. North Dakota oil production
up, aided by pipeline. The WSJ notes that the beginning of
operations at the Dakota Access pipeline has lowered the cost of shipping crude
from the Bakken to the Gulf Coast, while also adding capacity. The early
results are positive – North Dakota crude oil production hit a new peak in
October at 1.185 mb/d, and output is up 135,000 bpd since the start of the
– While oil markets have remained largely flat
since the extension of the OPEC production cut deal, there remains a
significant downside risk to markets that most analysts appear to be ignoring.
Links from Oil Price
Shale Can’t Offset Record-Low Oil DiscoveriesRussia’s Grip On European Gas Markets Is TighteningForties Pipeline To Return To Normal Rates Around New YearThe Biggest Oil Story Of 2017UK Smashes 13 Clean Energy Records In 2017Higher Oil Prices Slow China’s Crude StockpilingOil Price Volatility Crashes To Three-Year LowSaudi Arabia’s New Foreign Policy Is Not Without RiskOil-Rich Venezuela Is Out Of GasolineGOP Tax Bill Is A Boon For Oil And GasU.S. Rig Count Falls Slightly As Canada’s Rig Count TanksSouth Korea Seizes Hong Kong Oil TankerVenezuela To Launch Oil-Backed Petro Cryptocurrency Within Days