April 26, 2019 06:35 PM / By Tom Kool Editor, Oilprice.com
Oil prices finally fell on Friday as
markets brace themselves for more OPEC supply following Trump’s decision not to
extend the Iran sanctions waivers.
April 26, 2019
Oil prices fell sharply in early trading on Friday as the market reassessed the
impact of U.S. sanctions on Iran. Analysts argue that Iran
may succeed in mitigating the impact, maintaining some degree of exports. Also,
expectations of OPEC swinging into action are also on the rise. Oil prices fell
nearly 2 percent on Friday.
Spare capacity in spotlight after Iran sanctions.
While Saudi Arabia and the UAE have apparently indicated a willingness to
offset Iranian disruptions, it would come at the expense of spare capacity.
OPEC has about 3 mb/d of spare capacity, but Iran could lose nearly 1 mb/d if
the U.S. succeeds. An outage elsewhere leaves little margin for error. “If you
assume Iran exports don’t go to zero, and China continues to take some Iranian
barrels, then yes the Gulf states should be able to replace them,” Olivier
Jakob, managing director at consultants Petromatrix GmbH, said in a Bloomberg interview. “But you
still come back to the fact that the spare capacity is gone.”
Poland and Germany suspend oil imports from Russia over quality
concerns. Citing quality concerns, Germany and Poland
temporarily suspended imports of oil from Russia. The suspension could have
knock on legal effects, as buyers in Western Europe could open up lawsuits
against Russian suppliers, Reuters reports.
Trump admin sides with Haftar. Bloomberg reports that
President Trump indicated his support for the Libyan National Army’s (LNA)
assault on Tripoli in a phone call with strongman Khalifa Haftar last week,
reversing official U.S. policy of supporting the internationally-recognized
government in Tripoli. Trump was apparently convinced to back Haftar after
speaking with Egyptian President Abdel Fattah El-Sisi and Abu Dhabi Crown
Prince Mohammed bin Zayed Al Nahyan, both of whom stressed Haftar’s importance
in securing Libya’s oil fields.
China pulling back from Iran. Asian companies are
beginning to pull back from Iran, fearing retaliation from U.S. sanctions,
according to the Wall Street Journal. Iran had hoped that international companies, especially companies from
China, would provide an economic lifeline after the U.S. withdrew from the
nuclear deal. But many deals between Iran and China “are now dead in the
water,” an adviser to a Chinese oil company in Iran told the WSJ. China may try
to continue to import oil from Iran, defying U.S. sanctions, but Chinese
companies are curtailing their exposure.
Musk: Tesla might need to raise cash. After two
quarters of profits, Tesla (NASDAQ: TSLA) fell back
into unprofitable territory in the first quarter. The EV manufacturer reported
one of its worst losses in its history on Wednesday, and its available cash fell by more
than 40 percent to $2.2 billion. Elon Musk suggested that the company may need
to raise cash. Tesla reiterated its forecast of delivering 400,000 vehicles
this year, and it hopes to return to profits in the third quarter.
Ford to invest $500 million in Tesla rival. Ford (NYSE:
F) said it would invest $500
million in Rivian, an EV startup viewed as a Tesla rival. Rivian plans on
manufacturing an electric pickup truck and SUV by the end of 2020. Amazon
(NASDAQ: AMZN) invested $700 million in Rivian in February.
Anadarko subject of bidding war. Occidental
Petroleum (NYSE: OXY) lodged a rival bid for Anadarko
Petroleum (NYSE: APC), hoping to edge out Chevron’s
(NYSE: CVX). But Chevron may up the ante to ensure it wins out.
Occidental is offering $76 per share to Anadarko shareholders, a deal that
would be valued at about $57 billion. That tops Chevron’s offer of $65 per
share, or $50 billion. Anadarko seems to prefer Chevron despite Occidental’s
stronger offer, and analysts believe that
Chevron will prevail.
Shell announces major discovery in Gulf of Mexico. Royal Dutch
Shell (NYSE: RDS.A) announced a major
deepwater discovery in the Gulf of Mexico on Wednesday. The so-called Blacktip
prospect is the company’s second significant discovery in the Perdido Corridor.
Oil majors expected to post disappointing results. Lower
oil prices, weak LNG prices, and lower refinery margins could put a dent in the
profits of the oil majors when they report first quarter earnings, according to
Reuters. “We’re not looking for a great first quarter for the group,” Blake
Fernandez, senior research analyst with Piper Jaffray & Co’s Simmons
Energy, told Reuters. Total SA
(NYSE: TOT) reported adjusted
net income of $2.76 billion, down 4.3 percent from a year ago, but still viewed
as a strong result with rising cash flow and higher oil and gas production. ExxonMobil
(NYSE: XOM) said its profits in the first quarter were 50 percent lower than
a year earlier.
Trump to delay offshore oil expansion until after election. The
Trump administration will delay its
proposal to open up much of the U.S. coastline to offshore exploration until
after the 2020 presidential election. Drilling is widely opposed along the East
and West Coasts, including in Republican-controlled states. Most notably, the
Republican Governor Ron DeSantis in the battleground state of Florida has
indicated that Trump’s reelection could be put into jeopardy if he pushes forward
on opening Florida’s waters for drilling.
Chevron struggling to restore operations in Venezuela.
(NYSE: CVX) is struggling to return its Petropiar oil upgrader,
its largest joint venture in Venezuela, back to normal operations following the
widespread blackout on chronic electricity outages in the country. Production
at the facility fell by half from February to March, according to Bloomberg.
Venezuela’s oil production plunged to just 732,000 bpd in March, with more
losses expected. “We estimate a loss of 400,000 barrels due to the economic and
electricity crisis,” Reinaldo Quintero, president of the Venezuelan Oil Chamber,
Trump considers lifting Jones Act. Bloomberg reports that
President Trump is considering waiving Jones Act rules that require ships
traveling between American ports must be U.S.-flagged ships. Waivers would
allow Puerto Rico and the U.S. Northeast to import LNG from foreign-flagged
ships. Because there are no Jones Act-compliant ships capable of moving LNG,
Puerto Rico and New England have had to import LNG from abroad at a higher cost
rather than from other parts of the U.S.
Hits 2019 High On Iran Sanctions – OIR 230419
2. Can Saudi Arabia
Still Sway The Oil Market?
3. The Firm Floor
Under Oil Prices - OIR 190419
4. Oil Bulls
Undaunted By OPEC Fears - OIR 160419
5. Average Prices
of PMS, AGO, HHK and Cooking Gas – March 2019
6. Oil Climbs For
Sixth Straight Week - OIR 120419
7. GACN Issues Gas
Purchase Order to Axxela and NGMC Joint Mini LNG Project
8. Smart Money Is
Piling Into Oil
9. Brent Breaks $70
On Libya Violence - OIR 090419
10. Oil Hits $70 On
Libya Unrest, Crisis In Venezuela – OIR 050419
11. Sahara Group
Canvasses Intra-Africa Solution for Petroleum Sector Challenges
12. Axxela Now 100
Percent Owned by Helios
13. 5.32bn Litres of
PMS Imported Into Nigeria in Q4 2018 - NBS
14. Oil Hits 2019
High On Shale Slowdown - OIR 020419
15. Oil Breaks $60
As Bullish News Mounts - OIR 290319
16. Sahara Group
Advocates Adoption of Uniform Petroleum Products Standards in Africa