December 14, 2019 /07:00AM / By Tom Kool of Oilprice.com
/ Header Image Credit: Oilprice.com
The announcement of a "phase one" trade
deal between the U.S. and China saw WTI break $60 for the first time in months,
with bullish sentiment taking hold despite some bearish fundamentals
Friday, December 13th, 2019
Oil jumped on Friday after the UK election and the announcement of a "Phase
One" trade deal between the U.S. and China. Both issues offered some certainty
to investors. In early trading on Friday, WTI was at about $60 per barrel, a
three-month high. "Risk appetite among financial investors is now likely to
remain high thanks to the deal between the U.S. and China," said Eugen
Weinberg, head of commodities research at Commerzbank AG in Frankfurt. But, "the oil market risks facing a massive oversupply and a pronounced inventory
build, at least in the first half of the year."
Oil glut still coming. The IEA said that despite the OPEC+
deal, the oil market will still see a supply surplus of 0.7 mb/d in the first quarter.
trade deal reached. The U.S. and China reached a partial
trade deal, consisting of the U.S. cutting tariffs on Chinese goods and
delaying a separate tranche of tariffs scheduled to go into effect next week.
In exchange, China would make verbal commitments to buy agricultural goods. The
deal would mark a significant climb-down by President Trump, but from the
market's perspective, any truce is positive news. Oil rose on Thursday and in early trading on Friday.
Aramco shares surge. Aramco's shares surged in the first
days of trading, which Riyadh took as a vindication of its strategy. The
valuation, as a result, briefly hit the Kingdom's $2-trillion price target. "It's a great day for Saudi Arabia and the leadership of Saudi Arabia and for
the people of Saudi Arabia. It's a D-Day for Aramco, it's a day of reckoning
and vindication," Energy Minister Prince Abdulaziz bin Salman told Reuters in Madrid. However, the FT Editorial Board noted the extensive political
interference makes the IPO a "pyrrhic victory."
moves on from $11 billion write down, greenlights offshore project.
(NYSE: CVX) announced that it would take an $11 billion impairment
charge in the fourth quarter largely due to its shale gas business in
Appalachia. The shale industry has struggled to prove it can consistently post
positive cash flow, and gas-focused assets are under particular stress.
Analysts say Chevron's write down are indicative of a broader industry problem.
Meanwhile, Chevron moved on from the bad news and gave the final investment
decision on a $5.7 billion Anchor project in the Gulf of Mexico.
ethanol plants shut down in a year. About 13 ethanol plants
in the U.S. Midwest have shut down since November 2018, according to Reuters, victims of the trade war and EPA policies
favoring oil refineries.
investors predict energy stock rebound. A handful of major
investors are piling into the energy sector, betting that battered shares could
finally turn a corner. Is energy about to go into bullish mode?
energy outperforms U.S. energy. Canadian energy companies
have seen their shares outpace their American competitors. "The Canadian
industry has been starved of capital for four years now," Rafi Tahmazian,
senior portfolio manager at Canoe Financial, said in an interview on BNN Bloomberg Thursday. He said Canada's
industry is "on the edge of extreme profitability."
unveils 2050 climate target. The European Union unveiled
its 2050 net-zero emissions target this week, a proposal that calls for 100
billion euros invested in the transition. One of the sticking points was
Poland's vast fleet of coal-fired power plants.
solar industry grows 45% in third quarter. The U.S. solar
market installed 2.6 GW of new solar PV in the third quarter, a 45% increase
from a year earlier, and up 25% quarter-on-quarter. The residential sector saw
700 MW of installations, a new record. For the full year, WoodMac expects the
sector to grow by 23 percent over 2018.
methane leaks. The New York Times produced a stunning piece of visual journalism,
documenting the extensive leaks of methane in the Permian basin.
Army to fund rare earths plant. The U.S. Army has plans to finance the construction of rare earths processing
facilities, as the supply of those elements is viewed as a national security
U.S. to dominate oil and gas growth. The U.S. is expected
to account for the vast majority of oil and gas production
growth over the next five years.
policy could force $1.6 trillion in stock repricing. Climate
policy could result in trillions of dollars' worth of assets suffering a
repricing. One report put the figure at $1.6 trillion, while another put it at $2.3 trillion.
and Exxon to export oil from Guyana in 2020. ExxonMobil
(NYSE: XOM) and Hess Corp. (NYSE: HES) are
scheduled to export the first-ever shipments from Guyana as soon as
SA to buy Marathon's Libya assets. Total SA
(NYSE: TOT) is buying Marathon
Oil's (NYSE: MRO) assets in Libya for $450 million.
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