Friday, November 30, 2018 10:38 PM / Oilprice Intelligence Report
Oil prices fell in trading on Friday morning, with a falling rig count
unable to halt bearish sentiment.
Friday, November 30, 2018
Oil prices dipped in early trading, but the next few days will be volatile.
First, any news from the G20 summit on the Trump-Xi meeting regarding the trade
war could have ramifications for the global economy and oil demand heading into
2019. But much of next week will be characterized by whatever jawboning or
rumors come out of upcoming OPEC meeting. For now, oil is downbeat but awaiting
U.S. Senate vote hamstrings Saudi Arabia. Saudi
Arabia is aiming to cut oil production in order to boost prices, but the recent
vote by the U.S. Senate to end the war in Yemen, even if it doesn’t become law,
heightens the pressure on Riyadh to assuage American concerns. That gives
President Trump more leverage as he demands lower oil prices from Saudi
officials. Riyadh faces a choice between accepting painfully low oil prices or
defying Washington by cutting production. Reports suggest they are going to try
to thread the needle, opting for modest cuts that at least put a floor beneath
crude prices. “President Trump has effectively put a ceiling on oil prices --
arguably this ceiling is about $70 a barrel Brent, maximum $75,” Thibaut
Remoundos, founder of Commodities Trading Corporation Ltd., told Bloomberg. “It will be interesting to see if Saudi-Russia can keep the floor in
Saudi Arabia struggling to convince others to cut.
Many members of the OPEC+ coalition want Saudi Arabia to do all of the heavy
lifting when it comes to production cuts. After all, they argue, Saudi Arabia
was the one that added 1 million barrels per day of fresh supply since May. The
Saudis “made this mess. They need to clean it up,” a Middle Eastern oil
official told the Wall Street Journal. On Wednesday, Saudi oil minister Khalid
al-Falih indicated that Saudi Arabia would not cut alone.
Trump administration to advance seismic drilling in Atlantic. The
Trump administration is taking an early but critical step that could pave the
way to oil exploration in the Atlantic Ocean. According to Bloomberg, the National Marine Fisheries Service could allow seismic surveying by
five companies in the Atlantic, a precursor to exploration. Seismic testing is
essential to exploration, but is highly controversial because of its effect on
marine animals such as whales and dolphins.
Russia shows signs of support for OPEC+ cuts.
Russia indicated that it could support an OPEC+ production cut next week in Vienna.
Russia’s deputy foreign minister said that Russia wants more predictability and
“smooth price dynamics.” However, Russia, and its oil firms, are not scared of
lower prices. “Russian crude producers will feel comfortable in the $50 to $60
per barrel band,” said Dmitry Marinchenko, oil and gas director at Fitch Ratings.
Canadian oil discounts leading to layoffs. Oil
prices for Western Canada Select (WCS) are trading below $15 per barrel,
inflicting pain on the entire sector. Oilfield services companies in Alberta
are issuing layoffs as activity slows down. Investment broker Peters & Co. said in a
note that drilling activity has fallen by 10 per cent in recent weeks and could
“weaken further over the course of December, a function of budget exhaustion
and the curtailment of capital spending.”
Permian natural gas prices fall below zero. Natural
gas prices at the Waha hub in the Permian fell into negative territory this
week amid a worsening glut. A lack of pipelines to ferry away natural gas has
some producers essentially paying other companies to take the product.
Shale industry could cut spending. The U.S. shale
industry could cut budgets for the first time since the last downturn years
ago. Shale companies are formulating their 2019 budgets right now, and the
latest crash in prices could force a more cautious approach. “Something has to
give,” Andy McConn, an analyst at Wood Mackenzie, told Bloomberg. “We expected some minor increases in budgets going into next year but
now we see risk to the downside, with budgets flat or down year on year.”
China buying oil while it’s cheap. Bloomberg
reports that China may be stepping up its purchases of oil as prices hit one-year lows,
although data is spotty.
EPA to send ethanol blending requirements. The
Trump administration’s EPA is set to announce ethanol blending requirements for
2019, which will include an increase in advanced biofuels by 15 percent while
conventional corn ethanol levels will be kept flat. The implication is that the
EPA has decided not boost the corn ethanol requirement to compensate for the
rush of waivers it granted to oil refiners over the past two years, which
ethanol producers have blamed for sinking the market for ethanol credits.
Iran’s nuclear chief warns that time is running out on nuclear deal. Iran’s
top nuclear official warned the European Union that it could exit the 2015
nuclear deal if it does not begin to see some of the benefits from European
efforts to rescue the accord. “If we cannot sell our oil and we don’t enjoy
financial transactions, then I don’t think keeping the deal will benefit us
anymore,” Ali Akbar Salehi, head of the Atomic Energy Organisation of Iran,
told Reuters. “I think the period of patience for our people is getting more limited
and limited. We are running out of the assumed timeline, which was in terms of
months.” Meanwhile, the U.S. State Department said that Iran’s oil exports would fall further “very soon.”
Refining margins sink to five-year lows. Flat U.S.
gasoline demand and high refinery output have combined to push refining margins
down to five-year lows, according to the EIA.
triples estimated reserves for oil field. Pemex
more than tripled the estimate reserve figure for its Ixachi field, saying the
field in Veracruz could now hold 1.3 billion barrels of oil equivalent in
proven, probable and possible (3P) reserves. “Without doubt this news will
allow Pemex to contribute with more production in the future and stabilize the
production platform,” outgoing Pemex CEO Carlos Trevino said.
LNG from Africa set to surge. New LNG capacity
from Mauritania and Senegal in West Africa, operated by Kosmos Energy (NYSE: KOS), is set to come online in
December. Other projects will come online in Cameroon, as well as Mozambique in
East Africa, in the coming years. Many projects are using floating LNG, cutting
costs and lead times relative to conventional onshore fixed facilities. “Africa
is the hot spot for floating LNG,’’ said Lucas Schmitt, a senior gas analyst at
consultants Wood Mackenzie Ltd., according to Bloomberg. “Confidence in
floating facilities is firming up.’’
Volkswagen plans EV plant in U.S. Volkswagen is
considering a plant in North America to manufacture electric vehicles. “We are
100 percent deep in the process of ‘We will need an electric car plant in North
America,’ and we’re holding those conversations now,” Scott Keogh, the newly
appointed CEO of Volkswagen Group of America, told journalists at the Los Angeles auto show. Earlier this month, VW said it would
spend $50 billion by 2023 to remake itself, with a focus on EVs.
Saudi Arabia Counter The Oil Price Crash? - OIR 281118
Drowning Under Oil Supply Glut - OIR 231118
Companies Lose $1 Trillion As Prices Crash - OIR 201118
Rebounds On Hopes Of OPEC and Action – OIR 171118
Prices Collapse To One-Year Lows – OIR 131118
Behind The Oil Price Crash? – OIR 091118
Prices Tumble On Iran Uncertainty – OIR 061118
U.S. Oil Production Forces Prices Down – OIR 021118
9. Oil Markets Uncertain
As Iran Sanctions Loom – OIR 301018
10. 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
1. Are Oil Prices
Heading For The Rocks?
2. 4.37bn Litres of
PMS Imported into Nigeria in Q3 2018 - NBS
Prices of PMS, AGO, HHK and Cooking Gas – October 2018
We Expect A Major Rebound In Oil Prices?
Oil Price At Its Point of Inflection?
NCDMB, Oando, Seplat And Many More Push The Nigerian Agenda At The 25th Africa
for Africa’s Oil and Gas Industry Improves – PwC Report
Kachikwu, Adewale Tinubu And Others Represent Nigeria At The 25th Africa Oil
9. Oil Price Rises
in 2019 to be Modest as U.S. Production Constraints Ease - World Bank
10. What’s Behind
The Continued Selloff In Oil?
11. Dangote Refinery to
Save Nigeria from Dirty Fuels With Euro V Specification
12. The World Bank, Red Flags And
the Looting of Nigeria’s Oil Revenues - The Seven Energy Web
13. U.S. Shale Has A Glaring
14. The Illogical World of Nigeria’s Oil And Gas Industry
Average Prices of PMS, AGO, HHK and Cooking Gas – September
16. Nigeria’s Fuel Subsidies Bill Set To Soar On Rising
What Oil At $100 A Barrel Would Mean For The Global
18. Oil Prices: The Saudi Chess Game