Wednesday, October 31, 2018 09:59 AM / Oilprice Intelligence Report
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.
- The EIA forecasts that total global liquids inventories
will rise by an average of 200,000 bpd in 2018, followed by a slightly larger
surplus in 2019 at 280,000 bpd.
- However, the estimate is a rough one, with so many factors
at play. Iran sanctions are set to take effect in a week, and the EIA assumes
the loss of 1 mb/d of Iranian production relative to the April 2018 peak at 3.8
- Furthermore, it is unclear how OPEC will react to the
- Meanwhile, the EIA assumes U.S. production will grow by 1
mb/d next year.
- YPF plans to spend $4 billion to $5 billion per year
through 2022 in an effort to increase oil and gas production, with a target of
5 to 7 percent production growth per year.
- Petrobras and a consortium including BP (NYSE:
BP) and CNPC began drilling on its first well in the Peroba
subsalt area in offshore Brazil. The block could hold as much as 5.3 billion
barrels of oil.
- Cabot Oil & Gas (NYSE: COG)
saw its share price jump when it reported higher realized natural gas prices
and gains from asset sales. Cabot’s stock rose nearly 6 percent despite missing
October 30, 2018
Oil started out the week seeing some volatility and choppy trading, awaiting
more signs of a clear direction.
India, China and Turkey still buying Iranian oil. With
just days to go before U.S. sanctions on Iran go into effect, it appears that
India, China and Turkey are still resisting demands from Washington to
eliminate purchases. Reuters reports that there is tension
within the Trump administration over how hard to press these countries, with
one camp, led by national security adviser John Bolton, pushing for zero
tolerance, and others more in favor of offering some waivers. Several top
importers are still set to buy some Iranian oil in November. “We have told this
to the United States, as well as during Brian Hook’s visit,” a source from the Indian
government told Reuters, referring to the U.S.’ special envoy. “We cannot end
oil imports from Iran at a time when alternatives are costly.” Concerns over global economy weigh on crude.
oil posted steep losses over the past two weeks, the result of growing concerns
about the health of the global economy. Other commodities, including copper,
have also seen volatility. “It is often said that when stock markets sneeze,
commodities catch a cold. This adage was on full display last week as a global
rout on equity gauges dragged the energy complex lower,” PVM Oil Associates
strategist Stephen Brennock said to Reuters
Market in wait-and-see mode. With Iran sanctions
set to take effect in a few days, the market is awaiting further clarity. Saudi
Arabia and Russia have vowed to cover any supply shortfall, but Iran’s oil
exports likely won’t go to zero. “I expect investors will take a wait-and-see
stance this week before the return of sanctions on Iran and U.S. midterm
elections,” Makiko Tsugata, a senior analyst at Mizuho Securities Co., told Bloomberg
. Even though Iran is
set to lose a significant portion of its exports, “if both Saudi Arabia and
Russia boost output and U.S. production continues to rise, we could have a
Russia ill-prepared for IMO rules. Rules from the
International Maritime Organization (IMO) set to take effect in 2020, which
will lower the allowed concentration of sulfur in marine fuels, pose an
enormous threat to Russia. Russia is the world’s largest exporter of sulfurous
residual fuel oil and it is ill-prepared to comply with the regulations.
“Russia’s oil segment appears to end up among the biggest losers financially,”
IHS Markit Ltd.’s senior research analyst Alexander Scherbakov said, according
. There’s “no chance for
them to be 100 percent prepared.”
Hedge funds continue to cut bullish bets. Hedge
funds and other money managers continued
to liquidate their
bullish positions on crude oil futures, a sign that investors are increasingly
pessimistic about the trajectory for oil prices. The ratio of long to short
positions fell to 6:1, down from 12:1 at the end of September, according to
Fossil fuel subsidies on the rise again. Global
subsidies on fossil fuels rose
in 2017 for the first time
in years, according to the IEA. After declining by half between 2012 and 2016,
subsidies began to creep up again last year as oil prices rose. The IEA says
that the value of total subsidies around the world increased by 12 percent in
2017 to more than $300 billion.
Moody’s: High levels of debt a “drag” on oilfield services.
U.S. oilfield services and drilling companies’ high debt levels “are
unsustainable over the long term without a substantial improvement in cash
flow,” according to a new report
from Moody’s Investors
Service. “US oilfield services and drilling companies' high debt levels will
continue to constrain their credit quality in 2019 and beyond,” said Sreedhar
Kona, a Moody's Senior Analyst. “The largest firms are significantly better
positioned to regain their credit strength next year than the smaller ones,
though the threat of balance sheet restructuring will persist, particularly for
the latter.” An increase in North American drilling activity will help
land-focused OFS firms, Moody’s said, such as Schlumberger (NYSE: SLB),
(NYSE: HAL) and Baker Hughes (NYSE: BHGE).
Gasoline tax in California up for a vote. California
passed a 12-cent-per-gallon tax on gasoline last year to help fund transit
priorities, but the issue is going to be put before the state’s voters next
week. A referendum, if passed, would repeal the tax. The latest polling
has a plurality of
voters in favor of keeping the tax.
Uber proposes fee in London to fund EV effort.
Uber has proposed
a 15-pence-per-mile fee
on trips in London to help raise money for drivers to switch to electric
vehicles. The fee is expected to raise $260 million by 2025, and the revenue
will go to incentives for drivers to switch to EVs.
State considers carbon tax. Washington State is hoping to become the first
in the U.S. to
pass a carbon tax. Voters will decide on the measure next week on election day.
The oil and gas industry has poured millions of dollars into the state to
defeat the proposal.
PDVSA makes bond payment. Venezuela’s PDVSA made a
$949 million bond payment on principal and interest due on a 2020 bond, the
only one of its debt issuance not in default, according to Argus Media
. The payment saves
PDVSA from seeing its U.S.-based subsidiary Citgo put at risk from investor
1. Oil Markets Gripped By Supply
Glut Fears – OIR 271018
Oil Prices Crash As Iran Fears Fade – OIR 231018
Where Have The Oil Bulls Gone? – OIR 191018
Oil Prices Under Pressure As U.S. Shale Supply Soars
– OIR 161018
Oil Markets Take A Bearish Turn – OIR 121018
Oil Prices Rise On Iran, Hurricane Outages – OIR 091018
The Oil Price Rally Is Under Threat –
Why Brent Broke $85 – OIR 021018
The $100 Oil Debate – OIR 280918
Brent Oil Hits Its Highest Level Since 2014 – OIR 250918
Is Oil On Its Way To $80? – OIR 210918
12. Oil Markets Unfazed By $200 Billion Trade War
Escalation – OIR 190918
The World Bank, Red Flags And the Looting of
Nigeria’s Oil Revenues - The Seven Energy Web
U.S. Shale Has A Glaring Problem
The Illogical World of Nigeria’s Oil And Gas Industry
Average Prices of PMS, AGO, HHK and Cooking Gas – September
Nigeria’s Fuel Subsidies Bill Set To Soar On Rising Oil
What Oil At $100 A Barrel Would Mean For The Global
Oil Prices: The Saudi Chess Game
Move Aside Lithium – Vanadium Is The New Super-Metal
Oil Price Rally Boosts Electric Car Sales
$100 Oil Is A Distinct Possibility
11. Oil Prices Slip After Trump Slams OPEC On Twitter