Wednesday, August 01, 2018 07:55 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.
- U.S. energy expenditures fell for the fifth year in a row in 2016, falling by 9 percent to about $1 trillion.
- Total expenditures on energy were the lowest since 2003.
- At 5.6 percent, it was the lowest percent of GDP spent on energy, adjusted for inflation, since at least 1970.
- Transocean (NYSE: RIG) rose nearly 4 percent on Monday after reporting a smaller-than-expected loss in the second quarter. It was the first full quarter of operations for all five of its newest ultra-deepwater drillships and four semisubmersibles it recently acquired.
- Range Resources (NYSE: RRC) jumped more than 3 percent after-hours after reporting its second quarter earnings more than tripled from a year earlier. Second quarter production jumped 13 percent to 2.2 million cubic feet per day.
- TransCanada’s (NYSE: TRP) Keystone XL project earned a mostly positive review from the U.S. State Department, which determined the project’s route would have no significant environmental impacts. The project still faces some hurdles in Nebraska.
Tuesday July 31, 2018
Oil prices rose on Monday, in part because of a weaker dollar. But
prices then fell significantly on Tuesday. “The market’s attempting to stabilize,”
Gene McGillian, vice president of research at Tradition Energy, told the Wall Street Journal. “Right
now we’re seeing a balance between the ideas that the increase in production
from Saudi Arabia and Russia is going to offset the loss in Venezuela and
Iran.” As July draws to a close, oil is set for its largest monthly loss in
over a year.
Iran warns oil prices will rise without sanctions waiver. Iranian officials said on Tuesday that oil prices would rise if the U.S. did not grant waivers to countries purchasing Iranian oil. Iran said that it would be wrong to assume that Saudi Arabia could cover for the supply shortfall. “It seems President Trump has been taken hostage by Saudi Arabia and a few producers when they claimed they can replace 2.5 million barrels per day of Iranian exports, encouraging him to take action against Iran,” Hossein Kazempour Ardebili, Iran’s OPEC governor, told Reuters. Meanwhile, Trump said that he would meet Iranian leadership without preconditions, if they wanted. “I would certainly meet with Iran if they wanted to meet,” Trump said. “I do believe that they will probably end up wanting to meet. I'm ready to meet whenever they want to.”
BP profits jump. BP (NYSE: BP) saw its profits rise in the second quarter by fourfold, and unlike some of its rivals, it avoided punishment from Wall Street. The strong results were welcomed, and BP’s CEO Bob Dudley used that good will to make a case for stepping up investment for growth. BP announced a $10.5 billion acquisition of BHP’s shale assets in recent days. “We’ve turned around and retooled the company over seven years,” Dudley said in a Bloomberg television interview. “It shows more confidence than we’ve had in a long time.” BP also hiked its dividend last week for the first time since 2014.
Permian pipelines beginning to bottleneck. Permian pipelines are starting to max out, according to data from Kayrros. That means that price differentials are set to widen through mid-2019 as production continues to edge up. The earliest relief will come from the BridgeTex pipeline expansion, which will come online in early 2019, but it will only add 40,000 bpd. The bottleneck is expected to force a slowdown in production growth, and Morgan Stanley estimates that the Permian might only be able to add 360,000 bpd next year, down from the Wall Street consensus of about 650,000 bpd.
Trump plans to water down fuel efficiency standards. The Trump administration is expected to unveil a deregulatory effort aimed at fuel efficiency standards in cars and light duty trucks. The effort will freeze Obama era regulations after 2020, requiring automakers to average a fleet wide corporate average fuel economy (CAFE) at about 37 miles per gallon, instead of allowing those standards to steadily rise to above 50 mpg through 2025. The proposal could lead to increased fuel demand by about 500,000 bpd through 2029. The crucial and controversial component would be the federal government’s attempt to strip California of its authority to set its own standards. It is almost certainly headed for a protracted legal fight.
Why did Saudi Arabia cease oil shipments through Bab el-Mandeb? Reuters looks into the question of whether Saudi Arabia had political motives when it halted oil shipments through the Strait of Bab el-Mandeb last week. Because other exporters did not suspend shipments, Saudi Arabia’s move is curious. Saudi officials could be trying to draw western powers into the war with Yemen by sounding the alarm on the threat to oil shipments, or it could be putting pressure on Europe to take a harder line on Iran.
India cut imports from Iran. Indian refiners reduced their oil purchases from Iran in June by 12 percent compared to May. India imported 664,000 bpd from Iran in June. For the full second quarter, India imported 715,000 bpd from Iran, which was up 45 percent from the first quarter. “We maintain our estimate of a disruption to Iran’s crude exports of almost 700 kb/d, but India will be the biggest swing factor,” Barclays wrote in a note. India is the second largest buyer of Iranian oil after China.
Solar panel glut offsetting U.S. tariffs. A glut of solar panels has led to a steep decline in module
prices, which is offsetting the higher cost of imported panels in the U.S.
because of the Trump administration’s 30 percent tariffs. “If you are building
a large power plant your pricing has certainly come back at least halfway to
what it was pre-tariff if not all the way,” Tom Werner, the CEO of SunPower Corp (NASDAQ: SPWR),
said in a Reuters interview. “It’s muting
the impact of tariffs.”
Pioneer to sell West Panhandle assets for $200 million. Pioneer Natural Resources (NYSE: PDX) agreed to sell all of its oil assets in the West Panhandle field in Texas for $201 million to an undisclosed buyer.
Previous Oilprice Intelligence Reports
1. Profits For Oil Majors Soar But Wall Street Wants More – OIR 270718
2. Oil Prices Head Upwards As Iran Hits Back – OIR 240718
3. Is This the End of the Oil Rally? – OIR 170718
4. Libyan Supply Keeps Oil Prices Down -OIR 130718
5. Bullish Sentiment Soars As Oil Outages Mount – OIR 100718