July 03, 2019 /09:50AM / By Tom Kool of Oilprice.com / Header Image Credit: Olirice
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.
- Refining processing has climbed steadily over the years,
adding nearly 3.7 mb/d of capacity over the past decade.
- Between 2009 and 2018, U.S. oil imports fell by 1.3 mb/d,
exports increased by 2 mb/d, leading to a decrease in net imports by about 3
- ExxonMobil (NYSE: XOM) warned that weaker chemical margins will slash
second quarter profits by $100 million to $300 million, quarter-on-quarter. But
better refining margins would have a positive impact by $300 to $400 million.
- Callon Petroleum (NYSE: CPE) briefly saw its shares jump by 3 percent
after Barclays upgraded the stock from equal weight to overweight. Barclays
downgraded SM Energy (NYSE: SM) to underweight from equal weight, on concerns
that small- to mid-cap E&P companies continue to underperform.
- Weatherford International (NYSE: WFT) officially filed for Chapter 11
bankruptcy protection on Monday.
Tuesday July 2, 2019
Oil prices surged over the weekend on news that the U.S. and China would restart trade negotiations, suspending an escalation in tariffs, at least for now.
OPEC+ also agreed to extend the production cuts, going a long way to head off
another surplus. However, oil markets were unimpressed on Tuesday and fell back
in early trading over demand fears.
OPEC+ extends for 9 months. As expected, OPEC+ agreed to extend the production cuts, this time for nine months,
pushing the 1.2 mb/d deal to the end of the first quarter of 2020. At the same
time, some restless OPEC members balked at what has largely become a
decision-making process between only Saudi Arabia and Russia. The extension was
largely assumed by traders, so there was little impact on oil prices.
OPEC+ framework revised for indefinite cooperation.
OPEC+ also agreed on a charter that would allow them to continue to cooperate
beyond the nine-month deal. OPEC Secretary-General said the cooperation with
the select non-OPEC countries could last for “eternity.” Also, Saudi Arabia
said it would measure its success against an inventory target, using the
2010-2014 average rather than the trailing five-year average. That is a more
ambitious objective, and will ultimately mean they seek to drain global
inventories to a lower level.
Saudis see U.S. shale growth slowing down. The
extension highlights the perpetual battle that OPEC+ finds itself in against
U.S. shale growth. Cuts have only granted more space for shale, but top OPEC
officials are confident in the strategy. “I have no doubt in my mind that U.S.
shale will peak, plateau and then decline like every other basin in history,”
Saudi oil minister Khalid Al-Falih told reporters at OPEC’s Vienna headquarters. “Until it does I think it’s
prudent for those of us who have a lot at stake, and also for us who want to
protect the global economy and provide visibility going forward, to keep
adjusting to it.”
Saudi Aramco to restart IPO plans. According to Bloomberg, Saudi Aramco is beginning to restart preparations for an
IPO, after shelving those ambitions months ago. Aramco had preliminary talks
with banks, but work may pick up later this year, Bloomberg said.
Russia pipeline contamination keeps output in check.
Russia’s oil production has stayed below its production limit as part of the
OPEC+ deal, largely because of the lingering effects of the Druzhba pipeline
contamination crisis. In June, Russia averaged 11.155 mb/d, according to Bloomberg, or about 35,000 bpd below its agreed upon limit.
U.S. production grows, but more slowly. The U.S.
produced 12.16 mb/d in April, up 246,000 bpd from a month earlier, according to
Iran says EU help not enough. Iran said that the
EU’s effort to setup a financial vehicle to continue business with Iran is
insufficient if it does not allow for oil sales. “Without oil deal, it’s very
clear, Instex will not work,” Oil Minister Bijan Namdar Zanganeh said in a Bloomberg Television interview in Vienna on Tuesday.
Libya faces water crisis. The civil war in Libya
threatens clean water supply to millions of people, according to Reuters. The UN has warned all sides in the fighting not to use
water as a weapon of war. Libya’s main water authority warned of a “sudden,
unexpected, uncontrollable and un-prepared for” shutdown of the water system if
infrastructure is not repaired.
Oilfield services battered. The prices that
oilfield service companies charge for their gear has fallen to the lowest level
since 2016 amid a glut of supply. As companies fight for market share, their
fortunes have tumbled. Schlumberger (NYSE: SLB) and Halliburton
(NYSE: HAL) have each seen their stocks lose 65 percent since
oil prices started falling in 2014. Both stocks are down by nearly half from a
year ago. It’s a model that “definitely needs to be changed,” Luke Lemoine, an
analyst at Capital One in New Orleans, told Bloomberg. “It’s just been capital destruction for 20 years.”
Two killed at Shell platform. Two workers were killed on Sunday during a training exercise at Royal Dutch
Shell’s (NYSE: RDS.A) Auger platform in the Gulf of Mexico. A
federal investigation is underway.
Existing fossil fuel infrastructure incompatible with climate target.
A new study estimates that the carbon emissions from existing
infrastructure alone would result in the world blowing past the 1.5-degree C
target. That comes even before factoring in plans for new power plants,
pipelines, oil wells, and the like. The upshot is that some existing
infrastructure would need to be shuttered if the world is to meet climate
U.S. proposes $4 billion tariffs on European goods. The
U.S. government is considering $4 billion of tariffs on European goods in retaliation to a standoff
between government subsidies relating to Boeing and Airbus SE. The news helped
drag down equity markets.
12 states just raised gasoline taxes. On July 1,
higher gasoline taxes went into effect in 12 U.S. states. Illinois saw the largest increase at 19
cents per gallon.
Enbridge’s Line 5 in trouble. Michigan’s attorney
general is suing to halt the flow of oil through Enbridge’s
(NYSE: ENB) Line 5 pipeline, an aging system that state
officials argue puts water at risk.
1. The Oil Crisis
Saudi Arabia Can't Solve
2. Oil Markets
Await Two Vital Decisions– OIR 280619
3. Middle East
Tensions Move Oil Prices Higher – OIR 250619
4. War Worries Send
Oil Prices Soaring – OIR 210619
5. Fitch Ratings Updates
Oil Price and Lowers Gas Price Assumptions
6. Are Oil Markets
At A Turning Point? – OIR 180619
7. Average Prices
of PMS, AGO, HHK and Cooking Gas – May 2019
8. The Tanker
Attacks: A Storm In A Teacup – Oil Markets Refocus On Fundamentals
9. Saudi Arabia
Successfully Calms Oil Markets – OIR 110619
10. An OPEC plus
Extension Is All But Certain – OIR 070619
11. DPR Revokes Six
Oil Licences To Recover Legacy Debts
12. Oil Is On The
Brink Of A Bear Market– OIR 040619
13. Is Trump
Reversing Course On Iran?
14. Oil Tanks On
Fears Of U.S., Mexico Trade War – OIR 310519
15. OPEC plus Has
Capacity to Offset Iran Crude Supply Cuts