Bullish Sentiment Keeps Oil Above $60 - OIR 241219


Tuesday, December 24,  2019 /06:12 PM/ By Tom Kool of Oilprice.com / Header Image Credit: India Today


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.

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Chart Of The Week

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  • The U.S. consumed 101.3 quadrillion BTUs in 2018, up 4 percent from a year before and a new all-time record high.

  • Fossil fuel consumption jumped by 4 percent as well, accounting for 80 percent of the total primary energy use. Natural gas consumption spiked 10 percent, while coal consumption fell sharply.

  • Renewables rose by 3 percent (wind was up 8 percent and solar was up 22 percent).

Market Movers

  • Sempra Energy (NYSE: SRE) began production at Train 2 of its Cameron LNG project in Louisiana. Sempra owns 50.2 percent, while smaller stakes held by Total SA (NYSE: TOT) and Mitsui (OTCPK: MITSY).

  • Royal Dutch Shell (NYSE: RDS.A) made a "significant" gas and condensate discovery in the Browse Basin off the North West Coast of Western Australia.

  • Denbury Resources (NYSE: DNR) agreed to sell half of its interest in four southeast Texas oil fields to Israel's Navitas Petroleum for $50 million. 

Tuesday, December 24, 2019

Oil prices were relatively lifeless at the start of the week, holding onto recent gains, but not moving much in either direction. 

Banks see oil prices sliding. A Wall Street Journal survey of 13 major investment banks finds that analysts see oil prices falling next year as the OPEC+ deal fails to rally prices. The average Brent forecast is $61.23 per barrel in the first quarter of 2020, barely up from last month's forecast despite the deeper production cuts. In the short run, investors are bullish – net-bullish wagers on oil futures rose to their highest level in seven months last week. 

Permian wells getting gassier. Permian shale wells are producing a higher gas-to-oil ratio than expected, another blow to shale drillers' profits. "Activity levels are no longer what they were," said Artem Abramov, head of shale research at Rystad Energy. "The oil ratio is no longer sufficient to offset gas in older wells, so we're seeing some increase in basin-wide" gas-to-oil ratios. The focus on the Delaware sub-basin is also contributing, as that area is gassier. 

Saudi Arabia and Kuwait near restart of Neutral Zone. Saudi Arabia and Kuwait are on the brink of a deal to restart production at the Neutral Zone oil fields that lie on the border of the two countries, potentially ending a five-year dispute. The fields can produce 500,000 bpd but were shut down in 2014. The restart would still be subject to the OPEC+ deal, meaning any increase would likely need to be offset elsewhere. 

Equinor and Rosneft reach deal on Arctic JV. Russia's Rosneft and Equinor (NYSE: EQNR) agreed to jointly develop the Severo-Komsomolskoye oilfield in the Arctic. 

Exxon starts production in Guyana. ExxonMobil (NYSE: XOM) and Hess Corp. (NYSE: HES) started production at the Liza field in offshore Guyana, a highly-anticipated project that will ramp up to 120,000 bpd in the coming months. On Monday, Exxon said it made another discovery at its Mako-1 well southeast of the Liza field. 

Total SA to pay $100 million for Suriname deal. Total SA (NYSE: TOT) said that it would pay a bonus of $100 million as part of a previously announced deal with Apache (NYSE: APA) to develop an offshore project in Suriname. The project adds to the excitement around the Guyana-Suriname basin. 

Bank lending to Permian slows. Lending to oil companies in the Permian is slowing, as banks seek to reduce their exposure. Some banks are growing more concerned that the reduced value of shale assets could fail to cover for missed debt payments. 

U.S. adds Nord Stream 2 sanctions, but too little, too late. President Trump signed a new law that puts sanctions on any companies working on the Nord Stream 2 pipeline, and a Swiss company working on the project suspended construction. However, the sanctions probably won't stop the project altogether, as it is very close to completion. 

Iraq to cut by 110,000 bpd. The pressure on Iraq from OPEC+ members to comply with the deal is bearing fruit – Iraq's output is expected to be 110,000-bpd lower this month. But Iraq would still be about 200,000 bpd over its agreed upon limit. "It seems a stretch to imagine that they will voluntarily reduce production by the amount that is required," Daniel Gerber, chief executive officer of Petro-Logistics, told Bloomberg.
Judge rejects TC Energy bid to dismiss KXL lawsuit. A U.S. federal judge rejected TC Energy's (NYSE: TRP) and the Trump administration's request to dismiss a lawsuit aimed at the Keystone XL pipeline. The judge said that indigenous and environmental groups have credible claims that should proceed to a merit hearing. 

Kinder Morgan ships first LNG from Elba Island. Kinder Morgan (NYSE: KMI) has shipped its first LNG cargo from Elba Island in Savannah, Georgia. 

100% renewables would cost $73 trillion, pay itself off in 7 years. A new Stanford University study finds that phasing out fossil fuels would cost the world $73 trillion, but would be offset by $11 trillion in annual savings. Over seven years, the savings would offset the costs. "There's really no downside to making this transition," the study's author, Marc Jacobson, told Bloomberg. "Most people are afraid it will be too expensive. Hopefully this will allay some of those fears."

China's coal consumption to rise, but imports down. China's leaning more on coal as it grows concerned about oil and gas import dependence, but it is also ramping up domestic production, meaning that coal imports could fall by 8 percent in 2020. "New supply will create a coal glut," said Michelle Leung, an analyst with Bloomberg Intelligence. China's coal consumption has rebounded back to record high levels after declining in recent years. 

Energy equity issuance dries up. The amount of stock sold in the energy sector plunged by 70 percent this year, falling to just $1.3 billion, and debt issuance was flat. Investors have spurned the shale industry. "It seems to be fairly unloved as a sector," said Andy Brogan, Global Oil & Gas Sector Leader for Ernst & Young LLP.

U.S. official: China's infrastructure spending rickety. The CEO of the U.S. International Development Finance Corporation told the FT that China's $1.3 trillion global infrastructure spending spree is "100 per cent" like a house of cards because of "debt overload, poor infrastructure, bribes [and] lack of transparency."

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