August 31, 2019 /02:57AM / By Tom Kool of Oilprice.com /
Header Image Credit: Oilprice.com
Oil prices looked to be on course for
their largest weekly gain since July, but demand fears driven by Hurricane
Dorian hitting Florida sent prices crashing on Friday morning.
Friday, August 30th, 2019
Oil prices looked set for their biggest weekly gain since July, but demand
fears caused by Hurricane Dorian hitting Florida sent prices crashing on Friday
morning. Oil prices were pushed up this week by cautious language from the U.S.
and China, falling oil inventories, and also by a major Hurricane heading for
the U.S. southeast. Despite an apparent cooling in the trade war,
already-announced tariffs are set to jump on Sunday. "Upside momentum should
not be taken for granted. Recession fears are casting a shadow on sentiment and
oil prices should keep dancing to the tune of the U.S.-China trade saga," Stephen Brennock of oil broker PVM told Reuters.
Category 4 hurricane barrels towards Florida and the Gulf. Hurricane
Dorian, which could yet strengthen to a powerful Category 4, is heading for
Florida. "There's a storm premium in the WTI price," Phil Flynn, an analyst at
Price Futures Group in Chicago, told Reuters. "The track of the storm is kind of dangerous for Gulf of Mexico
production." The storm could impact fuel supplies in Florida at the retail
level. Florida is not an oil producer. The storm is expected to turn up the
Atlantic Coast, so Gulf of Mexico production probably won't be impacted. There
could be a significant demand impact though.
bankruptcies increase. There have been 26 bankruptcies in
the U.S. shale industry this year, nearly as much as the 28 bankruptcies in all
of 2018. The default rate of 5.7 percent is at its highest level since 2017,
according to the Wall Street Journal. Investors have lost faith in shale
E&Ps, and bankruptcies are on the rise. But this may pale in comparison to
the debt wave that comes due over the next few years. Roughly $9 billion in
debt is set to mature over the remainder of 2019 - but a massive $137 billion
matures between 2020 and 2022.
stakes out softer tone on tariffs. Tariffs are still set to
jump starting in September, but both President Trump and China have dialed down
the rhetoric in recent days. China said that it would not immediately respond to last week's announced tariff increase from
eyes split IPO. Saudi Aramco may pursue a public offering
in two stages, one on the Saudi stock exchange later this year, followed by an
international offering in 2020 or 2021, according to the Wall Street Journal. The WSJ says that Aramco is considering
Tokyo, spurning London and Hong Kong because of political uncertainty.
sells WTL to South Korea. Saudi Aramco Trading Company, an
arm of the Saudi oil giant, sold its first-ever cargo of U.S. West Texas Light
oil to a refinery in South Korea, according to Reuters. The move is a sign that Aramco is expanding its relationship with the
U.S. and boosting trade volumes.
to end Groningen gas quicker than expected. The Dutch
government will stop production at the enormous Groningen natural gas field
sooner than previously planned. "I expect the Groningen field to no longer be
necessary very soon," Dutch Economy Minister Eric Wiebes said on Tuesday. "Things are moving very fast, a lot faster than anyone
would have predicted some time ago." The government has curtailed output due to
the rising frequency of earthquakes.
Mexico to open up energy sector again. In an about-face, Mexican President Andres
Manuel Lopez Obrador is expected to turn back to the private sector to revive
oil production. AMLO had halted new oil auctions and laid out billions of
dollars of new investment into state-owned Pemex. But in the face of budgetary
pressure and deteriorating credit ratings at Pemex, AMLO could reopen offshore
development to the private sector, according to the FT.
cyber-attack thwarts Iranian tanker attacks. A secret U.S.
cyber-attack in June against Iran damaged a critical database Iran's
paramilitary arm needed to plot attacks against oil tankers, according to the New York Times.
open to talks with U.S. A new report from the New York Times says that the Iranian government sees talks with the U.S. as
inevitable. The NYT says that Iran could pursue a dual-track strategy of
escalation with the U.S. in order to gain leverage, while exploring the
possibility of future talks. Notably, the report says that Iran would be open
to a comprehensive deal, covering both nuclear issues and some other issues that
the Trump administration has cited, such as Iran's ballistic missile program.
In exchange, Iran would demand lasting economic relief.
Alaska sale raises questions about future of Arctic. BP (NYSE: BP) agreed
to sell its Alaska assets to privately-held Hilcorp Energy
for $5.6 billion as the oil giant focuses on U.S. shale. The exit raises
questions about the future viability of Alaska's oil and gas sector, which has
been in decline. "Alaska's never been shy on supply ... but is it
economically viable?" Kara Moriarty, president and CEO of the Alaska Oil
and Gas Association said in an interview with S&P Global Platts. Platts says that breakeven prices for
Alaska's onshore oil stand at about $55 per barrel, with higher offshore
breakevens at about $65 per barrel. In contrast, U.S. shale has a breakeven
closer to $45 per barrel.
to ban single-use plastics. India is set to impose a
nationwide ban on plastic bags, cups and straws beginning on October 2,
according to Reuters. "The ban will be comprehensive and will cover manufacturing, usage and
import of such items," one official said.
Global: Argentina in "default." Argentina has decided to
extend the maturities on outstanding debt, rather than seeking a haircut, but
S&P Global said that it still constitutes a selective default. "Following the continued inability to
place short-term paper with private-sector market participants, the Argentine
government unilaterally extended the maturity of all short-term paper on Aug.
28," the ratings agency said in a statement. "This constitutes default under our criteria." The Vaca
Muerta could be hit hard by the financial turmoil in Argentina. Fixed oil
prices are cutting into profits, while currency volatility could deter
draw pushes up oil. A more conciliatory tone from the U.S.
and China, along with a massive crude inventory drawdown report from the EIA
helped push up oil prices this week.
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