Thursday, January 11,
2018 08.47AM / Tom Kool, Editor, Oilprice.com
Tuesday, we took a quick look at some of the critical figures and data in the
energy markets this week.
We then looked 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.
for Energy Investors: The World
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- The U.S. has seen the installation of around 700 megawatts of utility-scale battery storage capacity over the last several years.
- The total is only 0.06% of U.S. utility-scale generating
capacity. But the storage market is starting to gain steam.
- As of now, there is another 69 MW of capacity planned for
(NYSE: OKE) announced plans to spend $1.4
billion on a new pipeline from the Rocky Mountain region. The 900-mile Elk
Creek Pipeline would carry 240,000 bpd of unfractionated NGLs from Montana to
Kansas, and is expected to be completed by the end of 2019. - Credit Suisse says it’s time to buy oilfield
services stocks. “The oilfield services sector - after suffering the sharpest
decline in history followed by the sharpest recovery - is back to what appears
to be at least a three-plus year run of somewhat normal growth,” Credit Suisse
analyst James Wicklund wrote.
- Nymex futures for natural gas fell back after the cold
snap. Spot prices in New York and New England have spiked to stratospheric
levels, but the problem is pipeline capacity not a shortage of natural gas.
Nymex gas is still trading below $3/MMbtu.
Tuesday, January 9, 2018
Oil has held onto the strong gains from last week, despite some choppy trading.
As of early trading on Tuesday, Brent was sitting at roughly $68 per barrel and
WTI at $62. Brent is not far from the key psychological threshold of $70, a
level that hasn’t been hit since 2014 during the beginning of the market downturn.
Iran worries about oil prices
moving too high.
Iran’s oil minister said that OPEC does not want oil to rise
any more than it already has so as not to spark a shale drilling boom. “Members
of the Organization of the Petroleum Exporting Countries are not keen on
increased Brent crude prices above $60 a barrel because of shale oil,"
Bijan Namdar Zanganeh said in comments on the
ministry’s news agency Shana. Oil tanker profits plunge.
Earnings for supertankers that move oil around the world fell by more than half
in 2017, in large part because of the OPEC cuts. Fewer shipments came at a time
when the shipping industry brought new capacity online, crushing their day
rates. “These cuts reduced the number of cargoes from the Middle East to Asia
significantly at a time when a large amount of newly-built vessels are being
delivered,” Olivier Jakob, managing director at Petromatrix GmbH, told Bloomberg. Earnings per day fell
to $17,794 on average in 2017, the lowest figure since 2009. The poor
conditions for the oil tanker industry are set to continue this year, with
capacity expected to expand by another 4 percent at a time when OPEC will
continue to hold back supply. FERC rejects proposal to
subsidize coal and nuclear. FERC, the powerful energy regulator in the U.S., rejected a proposal from the
Department of Energy to prop up aging coal and nuclear power plants. The logic
behind the proposal was to reward power plants that provide “resilience” to the
grid. That is, the proposed rule change would have led to a premium for plants
that held a 90-day supply of fuel on site – a definition only met by coal and
nuclear plants. FERC rejected the proposal, and instead asked grid operators to
come up with ideas to improve resilience. The rejection is a blow to the coal
and nuclear industry, as well as the Trump administration, which supported the
proposal. Iranian oil tanker burns for a
third day. An
Iranian oil tanker collided with a Chinese freight ship in the East China Sea,
and the fire on the tanker raged for a third day. Poor weather hindered rescue
efforts on Tuesday. The tanker has been leaking condensate, an ultra-light
crude oil that is volatile, raising fears that the tanker would explode. “We
can’t grasp the level of oil contamination at this moment. The cargo is still
on fire, so it is hard to figure out if oil is being spilled,” Park Sung-dong,
an official from South Korea’s Ministry of Oceans and Fisheries, told Reuters. Gasoline shortages in
Nigeria. Nigeria has suffered through several weeks of
fuel shortages. Despite producing nearly 1.8 million barrels of oil per day,
the poor state of Nigeria’s refining sector means that the country has to
import most of its refined fuel. On top of that, regulated fuel prices mean
that refiners struggle to turn a profit. Hedge funds continued to step
up bullish bets.
Major investors increased their net length on WTI
and Brent futures at the start of the year, breaking new records in the extent
of their bullishness. The positioning is a testament to the optimism
surrounding the trajectory of oil prices, but it also continues to heighten the
risk of a correction to the downside. Venezuelan oil production
sinks again. Venezuela’s oil output fell by another 100,000 bpd in
December, dipping to just 1.7 mb/d, the lowest level since 2002, according to
S&P Global Platts. The drop off is steeper than prior monthly losses, and
raise fears of an accelerated decline in 2018. S&P Platts says that
Venezuela "has been suffering from a spiraling economic, political and
humanitarian crisis, with state oil company PDVSA short of funds, personnel and
equipment, and suffering under U.S. sanctions that restrict its
financing." Oilfield services companies
plan IPO. Some
oilfield services companies are planning public offerings this year after
putting plans on ice in 2017. Expectations of higher oil prices and higher
spending from drillers makes 2018 more opportune for going public. Reuters reports that Liberty
Oilfield Services, a fracking services company, recently filed to raise $160
million by selling 10.7 million shares. If that offering goes well, more IPOs
will likely follow. Shell plans focus on shale. Royal Dutch Shell (NYSE: RDS.A) will
increasingly rely on shale production going forward, according to an FT interview with the oil major’s
CEO. Ben van Beurden told the FT that Shell will invest in chemicals,
electricity and biofuels in the years ahead, a variety of sectors that will act
as a hedge against a tightening regulatory regime on carbon emissions. As for
oil, Shell will focus on shale development in the U.S., Canada and Argentina.
Shell has been late to the shale game, but van Beurden says its declining cost
of production combined with the rebound in oil prices means that “you will see
a tremendous amount of growth” in cash flow.
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