September 27, 2019 /08:48PM / By Tom Kool of
Oilprice.com / Header Image Credit: Oilprice.com
Crude oil prices fell
on news that Saudi Arabia has declared a partial cease-fire in Yemen, a move
that could significantly ease tensions across the region.
Oil is set to close out the week with the largest weekly loss in months. Crude
fell on news that Saudi Arabia has declared a partial cease-fire in Yemen, raising hopes that several years of
war could come to an end. It would also dial down tension with Iran.
Arabia insists on Abqaiq timeline, but analysts remain skeptical.
Saudi Aramco has promised to restore production at the Abqaiq and Khurais
facilities by Monday, but oil traders are not so sure. "I would like to see
real evidence that they are going to resume [production] in the coming weeks," a Middle East oil company official, told S&P Global Platts. Middle East-based petroleum engineer Einstein Millan
Arcia added: "I seriously doubt Saudi Aramco's capability to recommission such
facilities [by September 30] considering the depth of the damage and all the
associated testing protocol needed prior to restart."
accelerates IPO preparations. After some reports suggested that
Saudi officials were considering delaying the IPO of Aramco, it now appears that
the government is pressing forward and even accelerating the effort. The offering could come as soon as
exports plunge. Despite assurances that there would be little
interruption in exports, a report from Petro-Logistics, reported on by Reuters, estimates that Saudi oil exports averaged 5.875 mb/d
in the 10 days after the Abqaiq attack, down 1.494 mb/d from prior.
on capital falling for oil majors. Low oil prices and a
slow but unfolding energy transition is cutting into the returns for the oil
industry. ExxonMobil's (NYSE: XOM) return on invested
capital (ROIC) was 25 percent in 2011, but was less than 10 percent last year,
according to the Wall Street Journal. Meanwhile, the ROIC for Vestas Wind Systems (CPH: VWS) was
negative 5 percent in 2011, but averaged 22 percent over the last five years.
and China make goodwill gestures. The atmosphere between the U.S. and China is thawing just a bit
after a series of back-and-forth goodwill gestures. On Thursday, China said
that it was willing to buy more U.S. products after Washington waived tariffs
on some Chinese products. Talks are scheduled to restart in early October.
Resources restructures $750 million in debt. Halcon
Resources (OTCMKTS: HKRSQ) shed $750 million from its
balance sheet in a debt restructuring. That could allow the company to exit
bankruptcy in the coming weeks, the company's second time in bankruptcy. Halcon
blamed unforeseen operational issues, according to the Wall Street Journal, including poor well performance and falling oil
may cut oil demand forecast on souring economy. The head of the
IEA said that the agency may slash its oil demand growth forecast once again if
the global economy continues to deteriorate. "It will depend on the global
economy. If the global economy weakens, for which there are already some signs
we may lower oil demand expectations," Fatih Birol told Reuters. "But at the same time, we shouldn't forget low oil
prices also (put) upward pressure on the demand."
groups fear impeachment inquiry could delay agreement. Biofuels
groups are concerned that the impeachment inquiry into President Trump could
delay a pending deal on biofuels policy. The battle between ethanol and oil refineries
has been fierce and ongoing, but Trump was poised to hash out an agreement that
could boost biofuels demand in 2020. "It seems his interest has waned," one
industry source told Reuters. Another source said that he would not be surprised
if the deal was put on hold indefinitely.
push to breakup Marathon. Two large shareholders in Marathon
Petroleum (NYSE: MPC) are calling for the removal of the company's CEO and the breakup of the company into
three parts. The push comes from Elliott Management Corp. and former board
members of Andeavor, a refiner that was acquired by Marathon last year. "This
experience, combined with Marathon's stagnation and destruction of value,
causes us great concern with your decision to ignore our perspectives and
insights," the group of shareholders wrote in a letter to the company.
costs soar on sanctions. Oil tanker costs are rising sharply after the U.S. put sanctions on Chinese
companies accused of handling Iranian oil.
stock up on delivery figures. Tesla (NASDAQ:
TSLA) saw its stock price jump by more than 6 percent on
Thursday after Elon Musk said that the company would deliver more than 100,000
Model 3 vehicles this quarter, a new high.
oil exports could hit 4 mb/d. U.S. oil exports could top 4 mb/d for the first time by the end of the year thanks to new Permian
pipeline capacity and the outage in Saudi Arabia. The "market call on the U.S.
will increase because the U.S. is effectively the marginal supplier," Sandy
Fielden, oil research director at Morningstar, told Platts.
to hike dividend. Total SA (NYSE: TOT) said
that it would accelerate its dividend growth â€œin the coming yearsâ€ as it
looks to return more cash to shareholders. The group will increase its "dividend by 5 to 6 percent per year instead of the 3 percent per year as
previously announced," Total said.
disruptions could push California gasoline over $4. An outage
at a Valero (NYSE: VLO) refinery and a failed restart
at a Chevron (NYSE: CVX) refinery could
temporarily push California gasoline prices over $4 per gallon.
production falls. Venezuela's Orinoco Belt saw production fall to 246,000 bpd on Tuesday, down from 370,000 bpd from earlier in the
month, according to Platts. Lack of tankers and depleted storage has forced
glut now, shortage later. Because of long lead times for LNG
projects, there is often imbalance between supply and demand. A wave of
projects came online this year, pushing prices down to decade-lows. But by
2021, very few new projects will hit the market, a legacy of the shortfall in
investment from several years ago during the market downturn. That could lead
to market tightness in the early- to mid-2020s. "The supply outlook is very much a
feast-to-famine situation," Nicholas Browne, Asia gas and LNG director at Wood
Mackenzie, told the WSJ.
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