Wednesday, November 14, 2018 08:49 AM / Oilprice Intelligence
Report
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.
- The IEA says that the petrochemical industry will drive
crude oil demand forward over the next 20 years.
- The developing world is set to experience more than 5 mb/d
of demand increase from passenger vehicles, but that is mostly offset by demand
destruction in rich countries.
- That leaves heavy trucks and petrochemicals as the main
sources of demand growth
- As a result, the IEA does not see overall peak oil demand
until 2040.
Market
Movers
- Cenovus Energy (NYSE: CVE) is
pushing for mandatory production curbs in
Alberta as the lack of pipeline capacity has led to painful discounts for
Western Canada Select. Cenovus argues that the province already has the
authority to require companies to reduce output.
- YPF revealed that its oil and gas
production might fall as much as 3 to 4 percent
year-on-year, more than previously expected. Low natural gas demand forced the
company to close gas wells as it stepped up its search for oil.
- Imperial Oil (NYSE: IMO) saw its share price
jump after Barclays upgraded its shares to Overweight
from Equal Weight, arguing that the company had reached an “important
inflection point” with improving momentum.
Tuesday November 13, 2018
Oil fell yet again on Tuesday, with the string of losses starting to mount. WTI
fell below $60 and Brent fell below $70, hitting fresh one-year lows in the
morning. Saudi Arabia is trying hard to stop the price declines, but it is
going to need to convince OPEC+ to do more at the upcoming meeting in three
weeks’ time.
OPEC slashes oil demand forecast. OPEC cut its oil demand forecast for
2019, the fourth consecutive month that it has done so. The cartel now only
sees demand rising by 1.29 mb/d in 2019, down another 70,000 bpd from last
month’s forecast. At the same time, non-OPEC supply is expected to grow by a
massive 2.23 mb/d next year, an upward revision of 120,000 bpd. “Although the
oil market has reached a balance now, the forecasts for 2019 for non-OPEC
supply growth indicate higher volumes outpacing the expansion in world oil
demand, leading to widening excess supply in the market,” OPEC said.
OPEC supply rises despite Iran. Total OPEC
production jumped in October, as Saudi Arabia and the UAE more than offset the
declines from Iran. Iran saw production fall by 156,000 bpd, and Venezuela
suffered another 40,000-bpd monthly decline. But Saudi Arabia added 127,000 bpd
and the UAE added 142,000 bpd. Combined the entire group’s production edged up
by 127,000 bpd. As the market expected supplies to tighten due to Iran
sanctions, the increase has helped push down crude oil prices.
Saudi cuts output as bear market forms. OPEC is
scrambling to stop the slide in oil prices. Saudi Arabia announced that it
would cut exports by 500,000 bpd in December, and it is working with OPEC+ to
engineer a collective cut of about 1 mb/d, which could be on the table at the
upcoming meeting in Vienna in early December. The cuts are needed as the market
is suddenly awash in fresh supplies. “The market now increasingly looks
concerned about the prospect of too much supply,” Norbert Ruecker, head of
macro and commodity research at Swiss bank Julius Baer, told Reuters.
Big Oil’s reserves fall to lowest level in a decade. Last
year, the five largest oil majors saw their “proven reserves life” fall to the
lowest level in a decade. The majors slashed costs after the oil market
downturn in 2014, and that has translated into several years in which they have
produced more oil than they have discovered, leading to a significant decline
in life of their reserves. The flip side of that is that investors no longer
prioritize growth above all. Companies that have continued to pursue growth,
such as ExxonMobil (NYSE: XOM), have seen their share prices
lag their peers, the Wall Street Journal writes.
IEA: Oil demand to peak in 2040. The IEA said in
its World Energy Outlook, out on Tuesday, that oil demand will continue to grow
by about 1 mb/d per year through 2025, after which demand growth slows to 0.25
mb/d before peaking in 2040. The IEA sees EVs slashing demand by about 3.3 mb/d
by 2040. Still, demand grows on the back of petrochemicals, aviation and heavy
trucking.
California to replace gas plants with batteries. California’s
PG&E
(NYSE: PCG) plans on replacing three natural
gas-fired power plants with battery-storage systems. The California Public
Utility Commission approved the utility’s plan, which came after the commission
ordered the company to look for replacements to the gas plants. Tesla
(NASDAQ: TSLA) has one contract with PG&E for an energy
storage system.
Chevron and Exxon consider bid for Endeavor Energy Resources.
Chevron
(NYSE: CVX) and ExxonMobil (NYSE: XOM) are among
several companies that are considering first-round bids for Endeavor
Energy Resources LP, a private company that could be valued as
high as $15 billion. It could rank in the top 10 largest deals
in history for a private energy company. “We think Endeavor’s asset base is
likely to be attractive given the positioning in the core of the basin and the
overall acreage continuity,” Biraj Borkhataria, an analyst at RBC Capital
Markets, said in a note to clients. “However, given the size of the transaction
buyers would likely be limited to large independents or majors.”
New Bakken pipeline proposed. Phillips 66
(NYSE: PSX) and Bridger Pipeline have announced an open season to gauge
interest in a new pipeline that would carry Bakken oil to Corpus Christi,
Texas. The proposed Liberty Pipeline would carry 350,000 bpd from North Dakota
to Wyoming, tying into other infrastructure there. North Dakota might see
pipeline capacity maxed out as production continues to rise – output stood at
1.29 mb/d in August, and the region has pipeline and refining capacity to
handle 1.37 mb/d. Justin Kringstad, director of the North Dakota Pipeline
Authority, says that North Dakota’s oil production could increase to 2 million
to 2.3 million barrels per day, but that would require more takeaway
capacity.
Digitalization could save oil industry $75 billion annually. The
upstream oil and gas industry could save $75 billion per year through
digitalization, according to a new report from Wood Mackenzie. Using
data, machine learning algorithms, artificial intelligence, robots and an array
of other technologies, the industry could cut costs, extend the life of mature
fields, and ultimately recover more oil and gas reserves.
Volkswagen to sell EV for less than $23,000.
Volkswagen said it would sell EVs for less
than 20,000 euros, and the ramp up in production of EVs could mark a dramatic
shift for the automaker, which as of now, is the continent’s largest
manufacturer of gasoline and diesel vehicles.
Previous Oilprice
Intelligence Reports
1. What’s
Behind The Oil Price Crash? – OIR 091118
2. Oil
Prices Tumble On Iran Uncertainty – OIR 061118
3. Soaring
U.S. Oil Production Forces Prices Down – OIR 021118
4. Oil Markets Uncertain
As Iran Sanctions Loom – OIR 301018
5. Oil Markets Gripped By Supply
Glut Fears – OIR 271018
6.
Oil Prices Crash As Iran Fears Fade – OIR 231018
7.
Where Have The Oil Bulls Gone? – OIR 191018
8.
Oil Prices Under Pressure As U.S. Shale Supply Soars
– OIR 161018
9.
Oil Markets Take A Bearish Turn – OIR 121018
10.
Oil Prices Rise On Iran, Hurricane Outages – OIR 091018
11.
The Oil Price Rally Is Under Threat –
OIR 051018
12.
Why Brent Broke $85 – OIR 021018
13.
The $100 Oil Debate – OIR 280918
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2. Outlook
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3. Ibe
Kachikwu, Adewale Tinubu And Others Represent Nigeria At The 25th Africa Oil
Week
4. Oil Price Rises
in 2019 to be Modest as U.S. Production Constraints Ease - World Bank
5. What’s Behind
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6. Dangote Refinery to
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7.
The World Bank, Red Flags And
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U.S. Shale Has A Glaring
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9.
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10. Average Prices of PMS, AGO, HHK and Cooking Gas –
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11.
Nigeria’s Fuel Subsidies Bill Set To Soar On Rising
Oil Price
12. What Oil At $100 A Barrel Would Mean For The Global
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13. Oil Prices: The Saudi Chess Game