November 16, 2019 /07:32AM / By Tom Kool of Oilprice.com
/ Header Image Credit: Oilprice.com
Both OPEC and the IEA released key
reports this week, both of which pointed to some major worries for the oil
cartel, yet oil markets seem not to have noticed.
Friday, November 15th, 2019
It was a big week for oil market data and projections this week, with both OPEC
and the IEA releasing some key reports for the industry. Despite this influx of
new data, oil is set to close out the week little changed from a week earlier.
It was a relatively quiet week in terms of volatility, with the U.S.-China
trade war maintaining its firm grip over oil markets.
OPEC faces "major challenge" in 2020. Weak demand and
rising non-OPEC supply presents a "major challenge" to OPEC next year,
according to a new report from the IEA. The agency said that non-OPEC supply
could grow by 2.3 mb/d in 2020, higher than the 1.8 mb/d this year. As a
result, demand for OPEC's oil will decline by around 1 mb/d. "The hefty supply
cushion that is likely to build up during the first half of next year will
offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next
month," it added.
Investment bank ends lending to fossil fuels. The
European Investment Bank announced on Thursday plans to end financing for
fossil fuel projects around the world, a decision that will take effect in
2021. In the interim, only projects currently in the works will go forward.
Instead, the EIB said it would unlock 1 trillion euros ($1.1 trillion) for
climate change action. "We will stop financing fossil fuels and we will launch
the most ambitious climate investment strategy of any public financial
institution anywhere," said EIB President Werner Hoyer. The EIB
is the world's largest multilateral lender.
AG joins lawsuit to shut down Line 5. Minnesota's
Attorney General, Keith Ellison, has joined a lawsuit in Michigan to shut
down Enbridge's (NYSE: ENB) Line 5 pipeline.
oil to peak in 2020. Offshore oil production could hit
a peak in 2020 before entering decline.
After supply additions next year, a dearth of new projects go forward, according
to a report from Sanford Bernstein. For investors, the opportunity is huge
because there is a scenario in which industry spending falls but oil prices
rise. The recent failed auction in Brazil lends some weight to the theory that
the industry might stay away from future offshore spending.
signs point to OPEC+ extension, not deeper cut. OPEC+
is likely to extend its production cuts through the end of 2020 at the upcoming
meeting in Vienna, rather than deepening the cuts. "There is always a risk that
if we cut deeper and prices rise, those [U.S.] companies could change their
plans to hike production," a Gulf OPEC delegate told the Wall Street Journal. "OPEC would ensure that won't happen."
Icahn wants Occidental to sell assets. Famed activist
investor Carl Icahn is pressuring Occidental Petroleum (NYSE:
OXY) to sell some of its assets after the $38 billion
takeover of Anadarko Petroleum.
Oil plunges on poor outlook in Guyana. Tullow
Oil (LON: TLW) saw its share price nosedive by 27 percent this week after it
said it is reassessing the commercial viability of its oil discoveries in
Guyana. The oil has a high sulfur content, the company said. "We expect
investors to worry about the projects' value," Al Stanton, an analyst at at RBC
Europe Ltd., said in a note. Hess (NYSE: HES), which also has
a lot on the line in Guyana, fell by nearly 5 percent after Tullow's
Oil demand to peak in 2030s, but not emissions. The
IEA released its highly-anticipated annual World Energy Outlook this week,
complete with forecasts to 2040. The agency said that oil demand will likely
plateau in the 2030s, but emissions are still on track to rise through 2040.
The IEA also saw U.S. shale growing strongly through 2030, nearly doubling in
output, despite the current slowdown.
Resources looks at Haynesville. Comstock
Resources (NYSE: CRK) is in talks to purchase Chesapeake
Energy's (NYSE: CHK) Haynesville shale assets in a deal
that could be worth as much as $1 billion.
miners hit by EV downturn. The lithium industry has
hit its first major downturn as global lithium supply has surpassed demand by
around 5 percent, according to Reuters. That is also the result of slowing EV
sales in China as the government pares back subsidies.
Iran resumes uranium enrichment. The IAEA said in a
report this week that Iran has resumed uranium enrichment at its underground
Fordow plant. In the first signs of a crack, some European diplomats raised the prospect of a return of
sanctions on Iran.
Petroleum reduces bid for Carrizo. Callon
Petroleum (NYSE: CPE) sharply cut its offer for Carrizo Oil
& Gas (NASDAQ: CRZO), reducing its bid to $723 million from
$1.2 billion in July.
to cut 1 billion in personnel. Daimler plans to cut
1.4 billion euros in personnel costs and warned that the push for EVs will cut
into profits. "The industry is in transformation," chief executive Ola
Kallenius told investors in London. "We have to do this." Tighter European standards on the transportation sector take effect in 2020.
for U.S. shale diverge. Forecasts for U.S. shale
growth have diverged widely, with several investment banks
drastically cutting supply growth forecasts while the main agencies - the IEA,
EIA and OPEC - still maintain growth projections of 1 mb/d or more. A lot
hinges on who is closer to the mark.
under investigation by SEC. Oilfield services company ProPetro
(NYSE: PUMP) confirmed that it is under investigation by
the SEC for irregular financial disclosures.
IPO threatens OPEC. The Saudi Aramco IPO threatens OPEC because the company may be under
greater pressure to go its own way in an effort to satisfy shareholders, which
could make Saudi Arabia less amendable to the concerns of OPEC members.
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