Wednesday, August 07, 2019 /08:20AM / By Tom Kool of Oilprice.com / Header Image Credit: Business World
Today’s newsletter, 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.
Chart of the Week
For five consecutive days in July, U.S.
natural gas consumption exceeded the previous record high –
43.1 Bcf last set on July 16, 2018.
- A heat wave in the U.S. pushed up
demand, but the structural backdrop has been climbing for some time – more
gas-fired power plants are in operation, having pushed out coal.
- Nevertheless, natural gas prices
continue to plumb new multi-year lows, with Nymex front-month prices down below
$2.10/MMBtu on Monday.
- Petrobras (NYSE: PBR) is initiating a process to sell its
exploration and production assets in Espirito Santo state. It hopes to sell four refineries this year.
- Lonestar Resources
(NASDAQ: LONE) saw its share price jump nearly 24
percent after reporting better-than-expected results for the second quarter.
- Continental Resources
(NYSE: CLR) saw its revenues rise by $50 million in
the second quarter, and posted earnings of GAAP EPS of
Tuesday August 6, 2019
Oil prices fell again on Monday, with Brent down in particular, dipping
below $60 per barrel. The catalyst this time was the firm response by China to
proposed U.S. tariffs. China let its currency depreciate to 7 yuan to the
dollar, which immediately sparked further retaliation from Washington. The
Treasury Department labeled China a currency manipulator,
taking the standoff to another level. Perhaps the silver-lining is that the
pressure is now on the Federal Reserve to cut interest rates again – a
long-sought objective by President Trump. But, the markets are not taking any
comfort in this dynamic.
On Tuesday, markets started on a positive note
after China apparently softened its tone, with the central bank setting a
stronger target for the yuan than expected, an indication that China is not yet
ready to use its currency as a weapon.
WTI Midland rises on pipeline capacity additions. WTI
traded in Midland rose to its strongest level
since June after Plains All American Pipeline LP (NYSE: PAA) set rates
for its 670,000-bpd Cactus II pipeline on Friday, raising expectations that it
would begin service soon. Cactus II is one of three pipelines expected to come
online this year connecting the Permian to the Gulf Coast.
U.S. announces embargo on Venezuela. The Trump
administration announced a total economic embargo against Venezuela,
dramatically escalating the confrontation. The order freezes all government
assets and prohibits any transactions with the Venezuelan government. It’s the first embargo of its kind
against a government in the Western Hemisphere in three decades.
Trump’s trade war is double-whammy against oil industry. Higher
tariffs on China is dragging down oil, raising expectations of a cut in global
growth. But the industry is also paying more for steel because of the tariffs. Plains All
American (NYSE: PAA) said that it would charge
oil producers 5 cents per barrel because of the tariffs.
Iran seizes oil tanker. Iran seized another oil tanker
on Sunday, this time an Iraqi ship that Iran says was smuggling fuel to Arab
1 in 7 new natural gas plants at low capacity.
According to S&P Global Platts, 1 in
7 new natural gas combined-cycle power plants are running at shockingly low
levels. More than 33,000 MW of capacity had capacity factors below 40 percent
in 2018. Some plants are even shutting down in California because of surging
solar power and depressed electricity prices.
Millennials shunning work in oil and gas. Young
people are increasingly steering clear
of the oil and gas industry, owing to a combination of factors, including fears
about job insecurity and the climate crisis. As a result, the industry could
find itself short on talent as aging workers head into retirement.
Eurozone slows down. More data from the Eurozone
points to a slowing economy. IHS Markit’s Euro Zone Composite Final Purchasing
Managers’ Index (PMI), a broad gauge of economic health, dropped to 51.5 in
July from June’s 52.2.
BNP Paribas: Oil needs to fall to $9-$10 to compete long-term. A
blockbuster new report from BNP Paribas finds that the oil industry faces
existential decline from the combination of renewable energy and electric
vehicles. The study finds that the energy return on capital invested is 6x-7x
times better for solar and wind plus EVs than it is for gasoline. As a result,
if gasoline is going to compete with EVs, crude oil would need to fall to
$9-$10 in the long run.
China helping Iran move oil. A subsidiary of
China’s CNPC has used a fleet of tankers to help Iran move oil to China,
according to the FT. Keeping Iranian oil
exports alive presents a big downside risk to oil
prices. “While we retain our $60 a barrel Brent forecast for next year, we
admit that a Chinese decision to reinitiate Iran crude purchases could send oil
prices into a tailspin,” Bank of America Merrill Lynch said in a note.
Chevron and Exxon scale up in Permian as others cut back.
(NYSE: XOM) and Chevron (NYSE: CVX) both reported large increases in
oil production from the Permian in the second quarter, and are among the
largest and most active drillers in the basin, despite arriving late.
Meanwhile, small and medium-sized E&Ps are facing pressure to cut
Williams Cos. considering buying Noble Energy’s midstream unit. Williams
Companies (NYSE: WMB) is working with investment firm
Global Infrastructure Partners to buy midstream assets from Noble Energy
Battery powered ships in development. Four
Japanese companies are working together on the
world’s first zero-emissions tanker, set to be rolled out in 2021.
Bipartisan legislation to keep nuclear fleet alive.
A bipartisan bill is gaining support in the U.S.
Senate that would support existing nuclear reactors.
Climate change becomes issue for credit ratings agencies. Scrutiny
on financial exposure and vulnerability to climate change is becoming a
critical issue for credit quality. “More and more, issuers and investors want
to know how they are exposed to climate events,” Michael Mulvagh, head of
communications in the Americas, Europe, Africa and the Middle East for Moody's
Corporation, told InsideClimate News.
Petrobras production rises. Petrobras
(NYSE: PBR) said its production rose to
2.76 mb/d in July, up from 2.633 mb/d in the second quarter. In late July,
production jumped to 3 mb/d.
5.61bn Litres of
PMS Imported into Nigeria in Q2 2019 - NBS
Lauds Investment Opportunities in Angola’s Downstream Sector
Rebound After A Difficult Day - OIR 020819
Oil Markets On
Edge Ahead Of Big Week - OIR 300719
Struggle For Direction- OIR 260719
Ignore The Tanker War- OIR 230719
Oil Capped By
Shaky Demand Outlook - OIR 190719
Oil Falls Back
As Iran Risk Factor Fades - OIR 160719
of PMS, AGO, HHK and Cooking Gas – June 2019
WTI Tops $60 On
Gulf Of Mexico Shut-Ins - OIR 120719
Tension Boosts Oil Prices - OIR 090719