August 02, 2019 /06:46PM / By Tom Kool of Oilprice.com / Header
Image Credit: Oilprice
An escalation of the trade war sent oil prices plunging on Thursday, and
China is threatening to retaliate if the new tariffs come into play.
August 2nd, 2019
Oil prices fell by 7
percent on Thursday, the worst single-day performance in over four years.
President Trump’s surprise announcement that he would put a 10 percent tariff
on $300 billion worth of Chinese imports caused a widespread selloff in
equities and oil prices. China said that it would retaliate if the tariffs go
into effect. Trump left open the possibility that the U.S. could hold off, but
only if China offered concessions.
Oil rebounds. With a selloff as steep as the one
seen on Thursday, it was unsurprising that traders bought on the dip. Oil was
up 3 percent in early trading on Friday.
Natural gas down. While oil received all of the attention, natural gas has also
fallen sharply. Nymex prices for September delivery fell to $2.10/MMBtu on
Friday, another multi-year low. Meanwhile, in Europe, natural gas and LNG hit 10-year lows in June and
while they rose on Thursday, the outlook is bearish. There is some concern that
storage could fill up by the end of summer in parts of Europe. “I think it will
be a rough August in general,” a gas trader told Reuters.
Energy stocks meltdown. With oil down 7 percent,
nobody in the energy sector was spared. Many companies saw their share prices
fall 7 or 8 percent, some fared better but others posted even deeper loses. Energy
Select Sector SPDR Fund (or XLE) fell more than 2
Concho misses earnings. Concho
Resources (NYSE: CXO) reported a surprise 25 percent decline in
quarterly profit on Wednesday, mostly due to lower oil and gas prices. Concho said its Permian
wells were spaced too close together, and the company said it would slow the
pace of development. Concho’s share price fell by 22 percent on Thursday.
Iran exports plunge, perhaps down to 100,000 bpd. Iran’s
oil exports plunged to just
100,000 bpd in July, although there is a dispute over the accuracy of that
data. If true, volumes are down sharply from the 400,000 bpd in June.
Meanwhile, the Iranian government approved a plan to
lop off a few zeros from its currency and rename it amid bad inflation.
Libyan production falls below 1 mb/d. Libya’s oil
production fell to just 950,000 bpd after the Sharara field went offline for
the second time in as many weeks. The outage is a sign of deteriorating security as the 4-month civil war drags on.
OPEC production falls to 8-year low. OPEC
production fell to just
29.42 mb/d in July, down 280,000 bpd from June. Voluntary cuts from Saudi
Arabia and steep losses from Iran contributed to the lower figure.
Trump considers quarantine of Venezuela. When asked if he was
considering a blockade or quarantine of some kind of Venezuela, President Trump
said: “Yes, I am.” He did not offer any further details.
Enbridge pipeline explodes. Enbridge
(NYSE: ENB) had one of its natural gas pipelines explode in
Kentucky, which killed 1 and injured six others. The incident puts a spotlight
on Enbridge’s safety record as it seeks to build controversial replacement
pipelines for Line 3 and Line 5.
ExxonMobil Baytown fire injures 37. An explosion
and fire at ExxonMobil’s (NYSE: XOM) Baytown petrochemical complex
injured 37 people and sent a plume of black smoke over the Houston area. The
fire hit Exxon’s olefins plant. Harris County filed a lawsuit
against Exxon over the pollution from the fire.
reports $3.1 billion in quarterly profit. ExxonMobil
(NYSE: XOM) reported a $3.1
billion profit for the second quarter, down 21 percent from a year earlier.
Upstream liquids production up 8 percent. Permian production was up 90 percent
from the same period last year. Capex was also up to $8 billion, a 22 percent
increase from a year earlier.
Chevron earnings up 27 percent. Chevron
(NYSE: CVX) reported
stronger-than-expected earnings on Friday, pushed higher by production
increases. Chevron’s profit jumped by 27 percent, although that was magnified
by a one-off $740 million termination fee from Occidental Petroleum (NYSE:
OXY) after the Anadarko takeover.
Occidental earnings off 25 percent. Occidental
Petroleum (NYSE: OXY) reported a $635 million profit in the
second quarter, which was down 25 percent from a year earlier. However,
investors are more focused on the $38
billion acquisition of Anadarko Petroleum, which should close this month.
Meanwhile, Oxy announced a joint venture with Colombia’s Ecopetrol to develop
100,000 net acres in the Permian. Ecopetrol will pay $750 million up front and
will carry another $750 million in capital. Oxy will maintain a 51 percent
stake in the joint venture.
Shell disappoints on earnings, cites low LNG and natural gas prices. Royal Dutch
Shell (NYSE: RDS.A) reported disappointing earnings for the
second quarter on Thursday, with earnings down 26 percent. Shell was hit on all
fronts, and sounded downbeat about the trajectory of the economy. “We’ve seen
some very severe macroeconomic headwinds -- probably most pronounced in our
downstream business where we saw some weaker refining margins -- but especially
a much weaker trading environment for petrochemicals,” Chief Executive Officer
Ben Van Beurden said in a
Bloomberg TV interview on Thursday. “In our upstream, we’ve seen headwinds
particularly in North American gas.” With Shell more heavily invested in gas
and LNG than its fellow oil majors, the downturn in global gas markets hit
BlackRock lost $90 billion in fossil fuel investments.
A new report found that BlackRock (NYSE: BLK), the world’s largest investor,
lost around $90 billion over the past decade through investments in fossil fuel
North Dakota challenges Washington rail law. Washington
State has a law set to take
effect in January 2020 that would prevent refineries from unloading oil from
trains with a psi above 9, which could exclude oil from the Bakken. The law is
intended to reduce the risk of oil-by-rail accidents that result in explosions.
North Dakota fears the law could impact as much as 200,000 bpd of production,
and the state is seeking help from the Trump administration, asking regulators
to overrule Washington’s law.
LNG prices hit 3-year low. Asian spot prices for
LNG fell to a 3-year low this week,
with spot prices for September delivery down to just $4.10/MMBtu.
1. Oil Markets On
Edge Ahead Of Big Week - OIR 300719
2. Oil Markets
Struggle For Direction- OIR 260719
3. Oil Markets
Ignore The Tanker War- OIR 230719
4. Oil Capped By
Shaky Demand Outlook - OIR 190719
5. Oil Falls Back
As Iran Risk Factor Fades - OIR 160719
6. Average Prices
of PMS, AGO, HHK and Cooking Gas – June 2019
7. WTI Tops $60 On
Gulf Of Mexico Shut-Ins - OIR 120719
8. Middle East
Tension Boosts Oil Prices - OIR 090719
9. Why Oil Prices
Are Refusing To Rally - OIR 050719
Reconstitutes Gas Flaring Steering Committee
11. Of Trade Wars
and Oil Thieves: As Nigeria's Key Industry Legislation Gathers Momentum
12. OPEC Extends
Voluntary Production Adjustments For An Additional Period Of Nine Months