Wednesday, June 26, 2019 /08:59AM / By Tom Kool of Oilprice.com / Header Image Credit: Oilprice.com
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
- At the start of the year, there were 29 states plus the
District of Columbia that had some version of a renewable portfolio standard
(RPS). Four states have since updated their standards – New Mexico, Washington,
Nevada and Maryland, plus DC.
- States with RPS account for 63 percent of electricity sales
in the U.S.
data overlooks the massive bill about to become law in New York, which will aim
for 100 percent clean energy and net-zero emissions by 2050. A growing number
of states are scaling up their ambition in the face of an intransigent federal
Energy Transfer Partners (NYSE: ETP)
has proposed to double the volume of its Dakota Access Pipeline from
500,000 to 1 million barrels per day. DAPL was one of the most hotly protested
pipelines in recent memory, but ETP says that demand for pipelines from the
Bakken is strong.
- Oasis Petroleum (NYSE: OAS) saw
its share price plunge by 5.5 percent on Monday after Morgan Stanley downgraded its shares to Equal Weight from Overweight.
Occidental Petroleum (NYSE: OXY)
fell nearly 1.5 percent on Monday after Morgan Stanley downgraded its shares, citing “outsized risk” to the stock if oil
prices move lower.
Tuesday June 25, 2019
Oil prices were steady in early trading on Tuesday, before WTI rose to break
the $58 mark. It seems U.S.-Iran tensions are slowly overpowering continued
U.S.-China trade war concerns.
Trump says U.S. not dependent on Hormuz. In a tweet on Monday, President Trump said that the U.S. was no
longer dependent on oil coming through the Strait of Hormuz, and he suggested
that other countries should pay for security in the region. “China gets 91% of
its Oil from the Straight, Japan 62%, & many other countries likewise,”
Trump wrote. “So why are we protecting the shipping lanes for other countries
(many years) for zero compensation. All of these countries should be protecting
their own ships on what has always been....a dangerous journey. We don't even
need to be there in that the US has just become (by far) the largest producer
of Energy anywhere in the world!” The U.S. has made navigation through the
Strait a national security concern since the 1970s.
U.S. imposes more sanctions on Iran. Following the
aborted military strike from last week, the U.S. imposed a new round of sanctions on Iran, targeting top level officials, including Ayatollah
Ali Khamenei. Iran’s crude oil and condensate exports averaged 1 mb/d in April
and 800,000 bpd in May, according to S&P Global Platts. In response, Iran’s foreign ministry said the sanctions on top officials means the “permanent closure of the path
of diplomacy.” Trump’s aim for a new nuclear deal “has thus become a distant
dream,” Commerzbank said in a note. “It appears that the doors have been closed
– at least for the time being – to any diplomatic solution to the crisis.”
Chevron Phillips Chemical to build Qatari petrochemical complex. Qatar
Petroleum chose Chevron Phillips Chemical, a joint venture between Chevron
(NYSE: CVX) and Phillips 66 (NYSE: PSX), to build
the largest ethylene production plant in the Middle East. The plant will turn
Qatar’s abundant natural gas liquids into the building blocks for plastic.
According to Bloomberg, at a $65-per-barrel Brent price, oil producers can earn
$15 per barrel by refining it and an additional $30 by converting it into
Tainted Russian oil still can’t find buyers. Even
as Russia has declared the oil contamination crisis over, roughly $500 million
of tainted oil cannot find willing buyers, even at a steep discount of $10 to
$15 per barrel. “I’m not willing to risk our equipment just for cheap crude,”
an oil trader with a North Asian refinery told Reuters.
Pioneer reins in ambitions. Pioneer
Natural Resources (NYSE: PXD) is discarding its aggressive
growth model, forgoing plans to pursue 1 mb/d of production, and instead is
focusing on profitability, according to the Wall Street Journal. The strategy shift is hard to overstate, as it signals
the growth-at-all-costs business model for shale drilling is reaching its
limits. Questionable economics are catching up to the industry. Pioneer has slashed its workforce and is
slowing down on drilling. The big question is if others in the industry will
follow Pioneer’s lead.
Shipping insurance spikes to $500,000 in Persian Gulf. The
cost of insuring oil shipments through the Persian Gulf, so-called war risk
premiums, has surged to $500,000, according to Bloomberg. That’s roughly a ten-fold increase from earlier this
year. “This will get passed on to the customers,” said Sandy Fielden, an
analyst at Morningstar Inc. “Refiners are paying more for crude and they will
pass on the cost to customers if they can. If refiners choose not pass that
along, their margins would get squeezed.”
Gasoline prices could rise after refinery explosion.
Multiple explosions rocked one of the largest refineries on the East Coast.
Philadelphia Energy Solutions’ refinery in South Philadelphia suffered serious damage, which could hamper gasoline production at the 335,000-bpd
Occidental looking for buyer of some pipeline assets. Occidental
Petroleum (NYSE: OXY) is hoping to sell a stake in Western Midstream Partners LP (NYSE: WES),
which it is inheriting after buying Anadarko Petroleum.
Morgan Stanley: upstream capex to climb. The
global oil industry should still see growth in upstream spending over the next
few years, despite the recent pullback in prices, Morgan Stanley wrote in a
note. The investment bank said that Brent needs to trade at $60 per barrel or
higher. Morgan Stanley said that global upstream spending, although still a
fraction of pre-2014 levels, should grow by roughly 6 percent CAGR through
Shale return on investment peaked in 2017. “The
return on investment from oil and gas wells in the most popular shale hotspot
in the Permian Delaware basin peaked in 2017,” according to a new study by Rystad Energy. The consultancy looks at returns based
on vintage, and found that 2017 was the best year for shale, mainly due to
lower costs and higher oil prices.
1. War Worries Send
Oil Prices Soaring – OIR 210619
2. Fitch Ratings
Updates Oil Price and Lowers Gas Price Assumptions
3. Are Oil Markets
At A Turning Point? – OIR 180619
4. Average Prices
of PMS, AGO, HHK and Cooking Gas – May 2019
5. The Tanker
Attacks: A Storm In A Teacup – Oil Markets Refocus On Fundamentals
6. Saudi Arabia
Successfully Calms Oil Markets – OIR 110619
7. An OPEC plus
Extension Is All But Certain – OIR 070619
8. DPR Revokes Six
Oil Licences To Recover Legacy Debts
9. Oil Is On The
Brink Of A Bear Market– OIR 040619
10. Is Trump
Reversing Course On Iran?
11. Oil Tanks On
Fears Of U.S., Mexico Trade War – OIR 310519