Saturday, 15 June 2019 / 07:42AM / By Tom Kool, Editor, Oilprice.com / Header Image Credit: Oilprice.com
Oil markets appear to have more or less shaken off the oil tanker
attacks, with most analysts returning to focus on fundamentals and the most
recent rig count.
Friday, June
14th, 2019
Oil prices spiked in early trading on Thursday by more than 4 percent on news
from the Gulf of Oman of a tanker attack, but benchmark prices gave up some of
those gains as the day wore on. In early trading on Friday, crude oil was
mostly flat, as traders seemed to return to focus on fundamentals. A falling
rig count then caused prices to climb.
Tensions skyrocket on
tanker attacks. Two oil tankers were attacked on Thursday in the Gulf
of Oman, and the U.S. government says Iran is to blame. Iran denies the
charges, saying that the U.S. is waging a war of disinformation. U.S. Central
Command released a video that apparently showed an Iranian patrol boat removing
an unexploded mine from one of the tankers. But some experts say it is not enough evidence to jump to
conclusions. Still, with tensions on the rise, the possibility of an all-out
military conflict is higher than at any point in recent memory. At the same
time, officials in both Tehran and Washington said that they want to avoid war.
Oil prices have mostly shrugged off the news, as fears of an economic recession
and cratering demand are offsetting what would normally be a major upside risk
to prices.
Tanker insurance costs
to rise. The risks to shipping in the Persian Gulf could
lead to ballooning costs for insurance for oil tankers. “Owners that currently
have their vessels in the area are checking and trying to find out more about
security, crewing, insurance and legal aspects,” a London-based broker told the FT.
IEA and OPEC cut demand
forecasts. In its latest Oil Market Report, the IEA lowered its demand forecast by
0.1 mb/d compared to last month’s report. For its part, OPEC revealed that it lowered its production to just
29.876 mb/d in May, down 236,000 bpd from a month earlier and down to a five-year
low. The cartel also slightly cut its demand growth forecast to 1.14 mb/d this
year, a downward revision of 0.07 mb/d.
Recession fears
dominate. Oil traders have become panicked over fears of sinking
oil demand. Prices plunged by 4 percent on Wednesday. Several investment banks
have slashed their demand forecasts. Barclays says demand may only grow by 1
mb/d this year.
U.S. gas flaring spiked
by 48 percent in 2018. The rate of gas flaring in the U.S. rose by 48 percent last year,
according to the Global Gas Flaring Reduction Partnership, managed by the World
Bank. The world flared 145 billion cubic meters of gas in 2018, equivalent to
the entire gas consumption of Central and South America.
China hikes steel
tariffs. China raised its tariffs on U.S. and
European steel imports.
Exxon and Sabic start
construction on $10 billion petrochem plant. ExxonMobil (NYSE: XOM) and
Sabic said that they would begin
construction on a $10 billion petrochemical plant in Corpus Christi. “Building
the world's largest steam cracker, with state-of-the-art technology, on the
doorstep of rapidly growing Permian production gives this project significant
scale and feedstock advantages,” said Darren W. Woods, CEO of ExxonMobil.
Oil titans head to the
Vatican. Pope Francis told oil executives on Friday
that a “radical energy transition” to clean energy is needed. The Pope met with
the CEOs from BP (NYSE: BP)
and Eni (NYSE: E).
Saudi Aramco earned
$111.1 billion in 2018. Saudi Aramco revealed earnings of $111.1
billion last year, up from $75.9 billion in 2017.
West Virginia court
rulings affect shale industry. A series of rulings from the West
Virginia Supreme Court could affect the shale industry. In one ruling, the
court said that drilling from one property beneath an adjacent property is
trespassing. The decision was a win for property owners and a setback for shale
drillers. However, the industry prevailed on a separate lawsuit that shot down
claims that dust, traffic and noise from gas operations were creating a
nuisance.
Musk eyes 400-mile EV.
Tesla’s (NASDAQ: TSLA)
Elon Musk said that “it won’t be long
before we have a 400-mile range car.” Tesla continues to struggle with
production issues and a high cash burn rate.
Canada to ban plastic
bags and straws. Canada plans on banning some single-use
plastics such as bags and straws by 2021.
UK to be net zero by 2050.
In a first for a G7 nation, the UK said it would adopt laws to zero
out carbon emissions by 2050. Notably, the effort has support across the
political spectrum.
U.S.-China LNG
relationship hinges on trade deal. If the U.S. and China
can hash out a trade deal, it would lead to a wave of LNG exports from the U.S.
to China. With a deal, the U.S. could account for 21 percent of China’s
gas imports by 2025, according to Morgan Stanley. If the standoff continues,
the U.S. would only capture 5 percent of the market.
Norway’s sovereign
wealth fund eliminates ConocoPhillips. After a review,
Norway’s sovereign wealth fund needs to cut out ConocoPhillips (NYSE: COP)
and Hess (NYSE: HES)
from its holdings. The fund aims to divest from oil exploration companies,
although it still maintains holdings in integrated oil majors. “It makes sense
that the Norwegian Oil Fund divests from oil majors like ConocoPhillips, which
have become increasingly speculative with a weak future outlook,” Kathy Hipple,
a financial analyst at the Institute for Energy Economics and Financial
Analysis, said, according to Reuters.
Interest fades for SCOOP
and STACK. Inconsistent production results and
higher-than-expected costs has led to waning interest from shale drillers in
Oklahoma’s SCOOP and STACK plays, according to Reuters. Some companies are
trimming spending and pivoting to other regions.
Green groups step up
litigation on public lands. According to Reuters, environmental groups
have increased litigation against parcels offered by the U.S. federal
government to the oil and gas industry. The strategy is an attempt to slow
offerings and development.
Shell to spend $2.4
billion in Mexico. Mexico’s oil regulator approved Royal Dutch Shell’s (NYSE: RDS.A) offshore
exploration plans. Taken together, Shell could invest as much as $2.4 billion.
Thanks for reading and we’ll see you next week.
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