Tuesday, October 16, 2018 /06:59PM / 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. nuclear plant outages were relatively low throughout the summer, but spiked last
month. Nuclear plants tend to go offline for maintenance, often during spring
and winter months and often to coincide with the refueling cycle, but the 14.5
GW that went offline in September was larger and earlier than usual.
- The temporary shutdown of a plant related to Hurricane
Florence magnified the disruptions.
- The outages put more pressure on natural gas to pick up the
slack, and with natural gas inventories already at their lowest levels since
2005 heading into winter, the nuclear outages helped tighten the gas market and
push up prices.
Transfer Partners (NYSE: ETP) said its West Texas Gulf pipeline will resume operations this weekend after
the pipeline spilled water with non-toxic green dye and residual fuel oil in
Abilene, TX. The pipeline runs from Colorado City, TX to Longview, TX.
-Electrobras, the state-owned Brazilian utility, could be
privatized under Jair Bolsonaro, should he win Brazil’s upcoming second round
presidential election. Bolsonaro’s top economic advisor favors
selling off the company.
Petroleum (NYSE: OXY) saw its shares plunge
on Monday after reports that Qatar Petroleum would take
over management and operation of the Idd El-Shargi North Dome offshore oil
field after the production sharing agreement expires next year.
October 16, 2018
Ongoing production gains in the U.S. are putting some downward pressure on oil
prices. The EIA said that it expects large gains from the shale patch next
month (more below). “Shale oil production continues unabated in the United
Carsten Fritsch, commodities analyst at Commerzbank. “Rising U.S. oil
production is one key reason why the global oil market is likely to be amply
supplied next year.”
Saudi threatens oil
weapon against U.S., but both sides eager to tamp down tension.
Saudi Arabia shocked the oil world by seeming to threaten to engineer a price
spike if the U.S. took action against Riyadh over the apparent murder of Saudi
journalist Jamal Khashoggi. However, President Trump does not appear interested
in taking action over the incident, taking Saudi assurances at face value. Sec.
of State Mike Pompeo traveled to Riyadh to meet with the Saudi king, and all
signs suggest that both sides are eager to put the issue behind them.
Iran says “bullying”
won’t bring oil prices down. Iran’s oil minister Bijan
Zanganeh said that the U.S. won’t bring global oil prices down by “bullying”
other nations. “The oil market is suffering from short supply and this cannot
be resolved by words. Trump thinks he can bring the oil prices down by
bullying,” Zanganeh said. He added that the rise of oil prices was a “self-inflicted pain”
caused by U.S. sanctions and that the U.S. “has done most of the things it
could do, and there is not much left to do against Iran.”
Iran exports falling in
October. In the first two weeks of October, Iran’s oil
1.3 million barrels per day (mb/d), down sharply from the
1.6 mb/d it averaged in October, and down from the recent peak of 2.5 mb/d in April.
Sanctions on Iran take effect on November 4, and most analysts see exports
falling further over the next few weeks.
Signs of Permian
overheating. Bloomberg reported
on the signs that the Permian basin is overheating,
including high costs for frac sand, six-figure salaries for truck drivers, and
clogged roads from truck traffic make West Texas one of the deadliest places to
drive in the country. Output is still growing, but pipeline bottlenecks have
cut the monthly growth rate down by three-quarters. Schlumberger (NYSE: SLB)
has warned producers that drilling wells too closely together has led to lower
productivity, raising the prospect that drilling efficiencies are bumping up
against their limits.
U.S. to add 98,000 bpd
in November. The latest Drilling Productivity Report
from the EIA shows strong gains expected for next month.
The EIA predicts the U.S. will add 98,000 bpd in November compared to a month
earlier. Unsurprisingly, the Permian leads the way with 53,000 bpd in growth,
followed by the Eagle Ford (+15,000 bpd), the Bakken (+13,000 bpd) and smaller
contributions from the Anadarko, Appalachia and Niobrara.
DOE’s coal bailout put
on ice. The U.S. Department of Energy has gone to great
lengths to bail out aging coal and nuclear power plants, digging up obscure
statutes related to national security to justify subsidizing them. But the DOE
proposal has apparently “run aground” at the White House, according to Politico
. The White House does not think the proposal is on solid
legal ground, and perhaps more importantly, intervening in electricity markets
to prop up coal has angered the oil and gas industry, as well as
environmentalists, consumer advocacy groups and free market proponents. For
now, the initiative appears dead.
AMLO tells oil companies
to show results. Incoming Mexican President Andres Manuel
Lopez Obrador has reiterated his support for existing oil contracts with
foreign companies, but pressed them to hurry up and show results, according to Reuters
. “We know we have to exceed expectations and we’re trying
to make sure we do that,” Talos
Energy (NYSE: TALO) CEO Tim Duncan, one of the executives who
attended a September meeting with AMLO, told Reuters.
Nigeria shut key oil
pipeline. Nigerian National Petroleum Corp. shut down a key
oil pipeline network, the NNPC System 2E, due to an explosion triggered by oil
thieves. The outage has interrupted operations at the 210,000-bpd Port Harcourt
refineries, according to S&P Global Platts
Oil companies pursue
augmented reality technologies. The Houston Chronicle
reports on how the oil industry is using new technologies,
such as augmented reality, in order to cut costs. Maintenance and management
decisions can be made remotely, speeding up decision-making and defraying
expenses. It’s somewhat of a merger between Silicon Valley and Big Oil. “We
have some experts that travel a half-million miles a year,” Ed Moore, Chevron’s
enterprise architecture and strategy manager, told the Houston Chronicle.
“There’s a lot of opportunity to make savings.”
U.S. oil exports to
China fall to zero. Chinese companies are cutting back in
the midst of the U.S.-China trade war, scrambling the flow of oil around the
world. In August, China’s purchases of oil from the U.S. fell to zero
, after China had been the largest buyer of American crude
in the first half of the year. U.S. producers are still finding buyers, but are
having to look elsewhere. Meanwhile, Russia and Saudi Arabia are replacing the
U.S. as the main suppliers to China.
Venezuela has $949
million bond payment due. Venezuela has a $949 million bond
payment due on October 27, and analysts believe it will meet the payment
schedule since the bond is backed by a majority stake in Citgo Holdings.
Instead of letting creditors lay claim to Citgo, Venezuela will likely pull out
all stops in order to meet the payment, analysts believe
. Venezuela is already late on some $7 billion in bond
payments and is dangerously low on funds.
Oil sands companies
scrambling amid $50-per-barrel discount. Canadian oil
companies are hedging production, booking oil-by-rail shipments and otherwise scrambling
to find storage as Western Canada Select (WCS) suffers
from a price discount as large as $50 per barrel below WTI. The pipelines out
of Alberta are full and those without pricing protection are getting slammed.
Markets Take A Bearish Turn – OIR 121018
2. Oil Prices Rise On Iran, Hurricane
Outages – OIR 091018
3. The Oil Price Rally Is Under Threat – OIR 051018
Why Brent Broke $85 – OIR 021018
5. The $100 Oil Debate – OIR 280918
6. Brent Oil Hits Its Highest Level Since
2014 – OIR 250918
7. Is Oil On Its Way To $80? – OIR 210918
8. Oil Markets Unfazed By $200 Billion
Trade War Escalation – OIR
9. A Crucial
Period For Oil Markets– OIR 150918
10. Why Oil
Prices Are Heading Higher – OIR 120918
The End Of
The Oil Price Rally – OIR 080918
Behind The Oil Price Rally? -OIR 050918
13. Why Oil
Prices Are Trending Upwards -OIR 310818
14. Oil Holds
Gains Despite Downward Pressure -OIR 290818
The Illogical World of Nigeria’s Oil And Gas Industry
Average Prices of PMS, AGO, HHK and Cooking Gas –
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
Oil Price Rally Boosts Electric Car
$100 Oil Is A Distinct Possibility
Oil Prices Slip After Trump Slams OPEC On Twitter
10. Join The 2018 Oil Price Prediction Challenge
11. ICE Begins West African Crude Oil Swaps
Prices of PMS, AGO, HHK and Cooking Gas – August 2018
Downside For Oil Is Limited
Signs MOU with Chinese Consortia on Biofuels Production
Analyst Offers Insight Into Why President Buhari Will Not Sign The PIGB
Mulls Setting up Bunkering Company
Explains Why Presidential Assent Was Withheld For Petroleum Industry Governance