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.
- Devon Energy's (NYSE:DVN) transition
from a gas-weighted asset portfolio towards a rather one-sided focus on US
onshore oil seems to be paying off as the US firm's Q4 earnings, to be
published this evening, are expected to surpass expectations.
- Extraction Oil & Gas (NASDAQ:XOG)
has dropped almost 9% on the news that it would lay off 20% of its Colorado
workforce as weaker prices and regulatory requirements continue to plague its
DJ Basin operations.
- Glencore (LSE:GLEN.L) shares took
a plunge Tuesday when the world's largest commodity trader announced its first
annual net loss in 5 years (at $404 million), on the back of underperforming
coal and metal assets.
Tuesday, February 18, 2020
A robust five-day rally in oil prices was cut short by another wave of
uncertainty as it became clear that any OPEC+ deal will take substantially more
deliberation than originally thought and the much-hoped-for V-shaped recovery
in Chinese oil demand is unlikely to come about as quickly as previously
projected "Activity is slowly picking up, and while oil demand for storage has
remained robust, the demand for products remains low", Ole Sloth Hansen of Saxo
Bank A/S told Bloomberg, adding that "the
market will have to live with a W-shaped recovery rather than a V-shaped
Zone To Reach Full Capacity Before 2020 End. Kuwait's oil
minister stated that production from the heretofore shut-down Divided Zone,
hastily restarted on February 16, will be ramped up to 550kbpd peak production "before the end of the year". Early indications suggest Kuwait and Saudi Arabia
will aim to maximize medium sour Khafji output to 325kbpd, in a move that has
already sparked rumors that the
impact of the September 14 attack might be more severe than officially
acknowledged by Riyadh.
State Refiners Cut Runs. Argus reported that the February
average refinery runs in China will be 3.9mbpd lower than in January (at
9mbpd), hitting the lowest level since January 2014. Sinopec will bear the
brunt of refinery cuts, lowering utilization rates to some 60-70 percent across
the country to the effect of decreasing February runs by 1.4mbpd
month-on-month, whilst Petrochina will cut 0.77mbpd from January levels.
Finds Oil Offshore Mexico. The Italian major ENI (NYSE:E)
announced that its Saasken-1 well, drilled in 340 meters of water to a total
depth of 3830 meters, has discovered 80 meters of net oil pay, pointing to a
reserve base of 200-300 MMbbls. With six further operated blocks in Mexico's
Sureste Basin, ENI is emerging as the leading offshore non-Mexican oil firm
with output potential of some 200kbpd by mid-2020s.
Oil's Cold Streak Doesn't Seem to End. In contrast to ENI,
UK-based Tullow Oil (LSE:TLW.L) has experienced another painful
setback when the Marina-1 exploration well, drilled to a total depth of 3 022
metres in 362 metres of water in deepwater offshore Peru turned out to be dry.
With its stock having declined 64% last year, the Peru drilling fiasco has sent
its shares a further 8% down.
Production Drops Even Lower. Libya's national oil company reported
that as of Monday its oil production stood at 135.7 thousand barrels per day,
roughly one-tenth of what it was before Field Marshal Haftar's army launched a blockade of
Libya's ports. Total losses from the blockade already reached $1.6 billion,
according to NOC.
Signs MSGBC Basin Drill Deal. British Petroleum (NYSE:BP)
has awarded a 4-well contract for the Valaris DS-7 drillship to drill offshore
Senegal and Mauretania, with another 2020 exploration well stipulated for
Gambia. Buoyed by 2019's largest gas discovery, the 1.3bboe Orca gas find from
late 2019, BP now wants to create three separate LNG hubs offshore Mauritania
with a total production capacity of 10mtpa.
Threatens Russia With Crude Withdrawal. Still unable to find
common ground with Russia on some 24mtpa of pipeline crude supplies,
Belarussian President Alexander Lukashenko has threatened to "begin withdrawing
transit crude from the Druzhba pipeline if Russia fails to supply oil in
sufficient quantities". Thus far, no Russian major has delivered any crude this
year to Belarus as Russia wants to wean itself off subsidizing prices to FSU
Bounces Back From All-Time High. Arguably the world's most
expensive crude, the Australian Pyrenees has bounced back from an all-time high
premium of $30.5 per barrel to Dated Brent, with BHP (ASX:
BHP.AX) selling an April 10-15 loading cargo for a premium of
$21 per barrel. The drop in value reflects the decrease of VSLFO prices on the
Asian market - Pyrenees (19Â° API, 0.2% Sulphur) is highly suitable to blend
into IMO 2020-compliant marine fuels.
River Coal Facing a Dire Future. A mere ten years ago Powder
River Basin-produced coal accounted for half of the United States' electricity
generation, now it dropped to half of that. Faced with ever-shrinking demand,
2019 production volumes have dropped 9% year-on-year to 266.8 million tons and
this year will most probably see another decline of some 30 million tons,
predicts University of Wyoming economist Rod Godby.
Pledges 5 Billion in "Green" Commitments. The Russian national
oil company Rosneft (MCX:ROSN.ME) has vowed to invest 5 billion in "green" causes over the next five years. Shying away from investing in
renewables or setting a carbon-neutral path forward, the Russian firm will
primarily focus on cutting greenhouse gas emissions (by 8 million tons by 2022)
and reutilizing associated petroleum gas.
Reports First Coronavirus Case. The Anglo-Dutch major has
confirmed that one of its contractors at the 500kbpd Pulau Bukom Refinery, the
largest wholly-owned by Shell (NYSE:RDS.A), contracted
coronavirus. The company's trading department has been on alert, too, as one of
the operations staff was reported to be at risk of contraction, luckily this
seems to have been a false alarm.
Delays Mooted LNG Projects. Reuters has reported that Qatar has
postponed its North Field Expansion Project by 3-9 months, just several months
after it announced its willingness to launch it together with Western majors
like ExxonMobil (NYSE:XOM) or Shell
(NYSE:RDS). The root cause of the delay lies in coronavirus
depressing Asian demand, further aggravating the ongoing LNG supply glut which
has already sent US LNG prices into record lows.
Mothballs Nascent Shale Industry. Israel's Energy and
Environment Protection Ministry has stated it will not issue any new licences
for shale oil exploration and production, for fear of unjustifiedly high "environmental and ecological footprint risks". The Ministry said it will not
renew the Mishor Rotem license (which belongs to Israel
Chemicals, NYSE:ICL) beyond May 2021 and has initiated
proceedings to reexamine the other two licenses that have been issued.