Wednesday, January 23,
2019 06.38AM / By Tom Kool of Oilprice.com
“Despite greater oil price volatility in recent months, our research shows that the sector appears confident in its ability to better cope with market instability and long-term lower oil and gas prices. For the most part, industry leaders now appear to be positive that growth can be achieved after several difficult years.” - Liv Hovem,
Today, we will take a quick look at some of the critical figures and data
in the energy markets this week.
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.
Market Movers
Tuesday January 22, 2019
Oil prices started Tuesday down on gloomy economic news, with mounting fears
that economic growth will slow in 2019.
IMF
warns economy “weakening.” The
International Monetary Fund warned on Monday that economic growth could slow
this year. “While global growth in 2018 remained close to post-crisis highs,
the global expansion is weakening and at a rate that is somewhat faster than
expected,” the Fund said. The IMF lowered its global
growth estimate to 3.5 percent this year, down 0.2 percent from its October
estimate. The Fund said that the downward revision is modest, but that downside
risks are rising. “While financial markets in advanced economies appeared to be
decoupled from trade tensions for much of 2018, the two have become intertwined
more recently, tightening financial conditions and escalating the risks to
global growth.”
Oil prices pause on weak China data. After hitting
a two-month high in recent days, oil prices have taken a breather on renewed
concerns of an economic slowdown generally, and in China more specifically. On
Monday, China reported its 2018 GDP growth rate
at 6.6 percent, the weakest in nearly three decades.
Permian
crude prices soar to highest since March. Oil
price discounts in Midland have
narrowed sharply, converging towards WTI in Houston. The discount is now at its
smallest since March 2018. Discounts once traded nearly $20 per barrel below
WTI in Midland, but the discount has now fallen to roughly $2.25. Some
midstream capacity has been added in recent months, while production growth hit
a rough patch this month because of cold weather.
Schlumberger:
Shale growth slowing. Schlumberger (NYSE: SLB) saw its
share price jump over the last few trading days after reporting upbeat guidance
for 2019. However, the oilfield services giant also said that its fourth
quarter revenue fell by 12 percent quarter-on-quarter, the result of slowing
drilling activity in the U.S. shale patch. “We could be facing a more moderate
growth in U.S. shale production in coming years,” Schlumberger’s CEO Paal
Kibsgaard told investors on an earnings call.
Rig count plunges. On Friday, Baker Hughes
reported a massive decline in the U.S. rig count, with oil rigs falling by 21
and natural gas-focused rigs falling by four. The huge drop off is the clearest
sign yet that the oil price downturn that began in October is starting to wear
down the shale industry. Oil prices firmed up on the news.
Energy industry expects to increase spending. The
majority of top energy executives see an uptick in spending this year,
according to a survey by DNV GL. The survey of 791 top energy
professionals finds that 70 percent of respondents planned to either maintain
or increase capex this year, compared to just 39 percent in 2017. “Despite
greater oil price volatility in recent months, our research shows that the
sector appears confident in its ability to better cope with market instability
and long-term lower oil and gas prices,” said Liv Hovem, who heads DNV’s oil
and gas division, according to Reuters. “For the most part, industry leaders
now appear to be positive that growth can be achieved after several difficult
years.”
Mexico pipeline explosion death toll rises. The
death toll from the oil pipeline explosion in Mexico has jumped to 91 and could yet exceed
100. The incident has raised questions about why it took Pemex so long to shut
off the pipeline after thieves ruptured it.
Government shutdown delays Atlantic exploration. A
federal court judge ruled on Friday that the U.S.
Department of Interior cannot process seismic testing permits for offshore oil
exploration in the Atlantic Ocean while the government is shutdown.
Colombian pipeline hit by bomb attack. Ecopetrol
SA, Colombia’s state-owned oil company, said on Sunday that its
Transandino pipeline was hit by a bomb attack, causing a spill near the border
with Ecuador. The 85,000-bpd pipeline was not operating at the time.
More signs of gasoline glut. European shipments of
gasoline are having trouble finding a home, Bloomberg reports. The surge in U.S. shale
production, a light oil that yields relatively high amounts of gasoline, has
left the market well-supplied. “Shale oil production is going through a dream
phase and the U.S. is going to make more gasoline,” said Olivier Jakob,
managing director at Petromatrix GmbH.
South Sudan sees oil output increase 34 percent.
South Sudan has increased its oil production by
34 percent after the Unity fields reopened, according to S&P Global Platts,
pushing output up to 175,000 bpd.
LNG derivatives take off. The volume of
derivatives based on LNG only represented about 2 percent of global LNG
production at the start of 2017, according to Bloomberg. But by the end of
2018, derivatives trade ballooned to 23 percent of LNG supply. Volumes are
still a fraction of those for Brent crude, for example, but the rising
liquidity in trading is evidence that the market is maturing.
China funding coal projects worldwide. China is
cutting the use of coal, but it is promoting coal abroad in order to develop
markets for its product. Reuters reports that China has helped
finance about a quarter of coal projects worldwide even as it seeks to curtail
coal use at home due to environmental concerns. The top countries include
Bangladesh, Vietnam, South Africa and Pakistan.
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