Saturday, June 22, 2019 /08:32AM / By Tom Kool of Oilprice.com / Header Image Credit: Oilprice
The shooting down of a U.S. drone over
Iran has led to the most serious escalation of the U.S.-Iran conflict yet, with
oil prices soaring by more than 5 percent on Thursday.
June 21st, 2019
Oil prices spiked by roughly 5 percent on
Thursday as the U.S. considered a military strike against Iran. Late Thursday,
the U.S. military appeared poised to carry out such a strike, but the operation
was called off at the last minute. Reuters reported that Trump
may have relayed a message to Iran through Omani intermediaries that he wanted
to open negotiations. Trump tweeted early Friday morning that he called off the
strike because it would not be proportional to the shooting down of an unmanned
drone. “I am in no hurry, our Military is rebuilt, new, and ready to go, by far
the best in the world. Sanctions are biting & more added last night. Iran
can NEVER have Nuclear Weapons, not against the USA, and not against the
WORLD!,” Trump tweeted.
Region on high alert. Iranian sources told Reuters that the
Supreme Leader was opposed to negotiations, but that they would relay the
message to him. They also said that any attack would have regional and
international consequences. “There is no doubt that a severe disruption to the
transit of oil through this vulnerable route would be extremely serious,” said
consultancy FGE Energy in a note. Oil prices were set for their largest weekly
gain since February, rising more than 5
percent. “Though the action was halted at the last minute, the situation is
unlikely to calm down anytime soon, especially given Iran’s announcement that
it will breach the limit on its stockpile of enriched uranium, which was set by
the nuclear agreement in 2015, already next week,” Commerzbank wrote in a
Exxon’s $53 billion investment in Iraq hits snag. ExxonMobil
(NYSE: XOM) may wait on its $53 billion investment in Iraq that
was announced a few weeks ago, as it has been held up by contract negotiations
with Baghdad, as well as the security situation in southern Iraq, according to Reuters. Exxon
wants to recoup development costs, something the Iraqi government says will
encroach on state ownership.
OPEC to keep production flat in July. Gulf oil
producers will keep output within the limits of the production cut agreement in
July, despite the deal slated for expiration at the end of this month,
according to Reuters. The plans
suggest that the cuts are likely to be extended. “All the talk now is about an
extension of the same cuts, or a rollover, until the end of the year,” one OPEC
source told Reuters.
Oil industry wants Trump not to put tariffs on drilling material. U.S.
tariffs on China could affect a key material used in oil and gas drilling. The
industry is lobbying the Trump
administration not to put tariffs on barite, which is used in drilling mud.
Roughly 40 percent of the 2.3 million tons used annually comes from China.
Chevron-Phillips 66 JV to pay $15 billion for chemical company. Chevron
Phillips Chemical Company, a joint venture between Chevron
(NYSE: CVX) and Phillips 66 (NYSE: PSX), has offered to buy Nova
Chemicals Corp. for more than $15 billion. The company produces polystyrene and
resins used in wide range of industries.
New York passes historic climate bill. The state
of New York just passed one of the
most ambitious climate bills in the world. It aims to reach net-zero emissions
by 2050, a plan that encompasses zeroing out emissions from the transportation
sector, including phasing out gasoline cars. The European Union is considering
a similarly ambitious proposal.
Explosion and fire at Philly refinery. A major
explosion and fire ripped through a
refinery in South Philadelphia on Friday, owned by Philadelphia Energy
Solutions. “Any shortage ahead of the peak of the summer driving season does
not bode well for U.S. consumer pocketbooks,” Joe Brusuelas, Chief Economist at
RSM US LLP, said on Twitter.
“The video of the early morning explosion is horrific.” The refinery processes
335,000 bpd of oil, and is the main supplier of gasoline to the New York Harbor
market. At the time of this writing, the extent of the damage and the impact on
operations was unclear.
Anadarko greenlights $20 billion LNG project in Mozambique.
Petroleum (NYSE: APC) approved the
construction of a $20 billion LNG export project in Mozambique, the largest of
its kind in Africa.
Eni rejected oil cargo over Iran ties. Eni (NYSE:
E) reportedly rejected a
cargo of suspected Iranian crude, a shipment that was destined for a refinery
in Sicily. The shipment came from a Nigerian oil trading company, highlighting
the difficulty in tracking illicit shipments.
Federal Reserve softens tone. The U.S. Federal
Reserve laid out a more
dovish position this week on monetary policy, raising hopes of an interest rate
cut as soon as next month. The more accommodating position helped boost oil
Texas regulators may look at flaring. Natural gas
flaring has soared in Texas, but regulators are coming under pressure to take
action. The Texas Railroad Commission has done very little to stand in the way
of skyrocketing rates of flaring, but according to E&E news, it
recently challenged the wisdom of flaring in a request by an oil driller.
Putin says sanctions cost Russian $50 billion.
Russian President Vladimir Putin said that
international sanctions since 2014 have cost the Russian economy $50
Deepwater investment on the rise. Total global
upstream investment is expected to rise for
a third year in a row, although at a slow rate. Deepwater investment is rising
more quickly, with capex expected to hit $80 billion, up from just $20 billion
last year, according to Wood Mackenzie. In 2014, project breakevens were $79
per barrel, which has declined to just $50 per barrel today.
1. Fitch Ratings
Updates Oil Price and Lowers Gas Price Assumptions
2. Are Oil Markets
At A Turning Point? – OIR 180619
3. Average Prices
of PMS, AGO, HHK and Cooking Gas – May 2019
4. The Tanker
Attacks: A Storm In A Teacup – Oil Markets Refocus On Fundamentals
5. Saudi Arabia
Successfully Calms Oil Markets – OIR 110619
6. An OPEC plus
Extension Is All But Certain – OIR 070619
7. DPR Revokes Six
Oil Licences To Recover Legacy Debts
8. Oil Is On The
Brink Of A Bear Market– OIR 040619
9. Is Trump
Reversing Course On Iran?
10. Oil Tanks On
Fears Of U.S., Mexico Trade War – OIR 310519
11. OPEC plus Has
Capacity to Offset Iran Crude Supply Cuts
12. Déjà Vu: Oil
Prices Stuck Once Again – OIR 280519
13. The Silver
Lining Of An Oil Price Crash – OIR 240519
14. 4.87bn Litres of
PMS Imported in Q1 2019 - NBS
15. Oil Markets In
Limbo After OPEC plus Meeting – OIR 210519
16. Middle East
Tensions Put Oil Markets On Edge – OIR 170519