Friday, November 02, 2018 08:15 PM / Oilprice Intelligence Report
Oil prices continued to slide on Friday afternoon, despite a small
decline in the U.S./Canadian rig count.
November 2, 2018
Iran sanctions are just days away but the market has come around to the idea
that Iranian oil exports won’t be going to zero, despite months of promises
from the Trump administration. New reports suggest waivers are in the offing.
“Oil prices look to remain under pressure, as fears of global oversupply have
returned with a vengeance,” Ashley Kelty, oil and gas research analyst at
Cantor Fitzgerald Europe, told Reuters.
U.S. to grant waivers to eight countries importing Iranian oil. The
U.S. has granted exemptions to eight importers of Iranian oil just days before
sanctions on Iran take effect. The countries will be allowed to continue to
import oil without fear of retribution from the U.S. as long as they continue
to make reductions in those purchases, according to Bloomberg. Four of the
countries include Iran’s top buyers – China, India, South Korea and Japan. The
other four were not identified in the Bloomberg report, but
the decision is expected to be announced on Monday.
U.S. oil production surges. The EIA said the U.S.
produced more than 11.3 mb/d in August, a massive jump of over 400,000 bpd from
a month earlier. The new record high also made the U.S. the largest oil
producer in the world. Record output, combined with higher production from OPEC,
has dealt sharp losses to crude oil prices amid mounting fears of oversupply.
Trump's admin sees “thaw” in relations with China. President
Trump spoke with Xi Jingping by phone on Thursday, and Trump tweeted that the
discussion went well. His economic adviser Larry Kudlow said that there was a
“thaw” in relations. The two leaders are expected to meet later this month at
the G20 summit in Argentina, and the conversation by phone this week raises the
odds of a breakthrough on trade. Crucially, Bloomberg reports that Trump
wants to reach a deal with Xi in Argentina, and he reportedly asked his cabinet
to draft terms. However, hours after the phone call, the U.S. Justice
Department unveiled charges against two Chinese companies for intellectual
property theft, illustrating the difficult task of resolving differences
between the two countries.
U.S. seeks to keep Middle East oil flowing. U.S.
diplomats have reportedly stepped in to try to resolve disputes in the Middle
East to increase oil flows. According to the Wall Street Journal, the U.S. is trying to broker a deal between Saudi Arabia and Kuwait
over the Neutral Zone oil fields, which have 500,000 bpd of capacity but have
been offline for years. The U.S. is also trying to help Iraq export more oil
through Kurdistan, which would add another 300,000 bpd or so to global
supplies. Washington is trying to ease these burdens at a time when it is
seeking to shut in Iranian production.
EOG posts $1.2 billion in profit. EOG
Resources (NYSE: EOG) posted an enormous
$1.2 billion in third quarter profit, up more than ten-fold from the $100
million profit a year earlier. The performance is a strong vote of confidence
in shale drilling, after years of red ink across the industry.
Continental Resources doubles resource estimate. Continental
Resources (NYSE: CLR) doubled its
estimated recoverable resources to 30-40 billion barrels, up from the previous
estimate of 20 billion barrels set in 2011. “With today's completion technology
we are recovering 15% and potentially 20% of the oil in place on a primary
basis,” Continental’s President Jack Stark said during today's earnings conference
call. “This is substantially higher than the recoveries that we thought
possible back in 2011.”
Tanker rates up on higher OPEC production. Tanker
rates are rising as OPEC
ships more oil, pushing day-rates up to $51,000, up nearly three-fold from the
$18,000 rates seen just a month ago.
Oil and gas sector needs consolidation. Top
industry executives said that the oil and gas industry needs to consolidate, in
order to reach scale, cut costs and streamline services. “There's a lot of
smaller high-quality companies across industry where synergy and value can be
captured” by combining, Chesapeake Energy’s (NYSE: CHK) CEO Doug Lawler said at
the Deloitte Oil & Gas Conference, according to S&P Global Platts. “This will be a part of [Chesapeake's] strategy going forward.” Other
top analysts and executives voiced similar sentiments, an indication that a new
wave of M&A activity could be coming.
Petrobras could divest $20 billion. New Brazilian
President Jair Bolsonaro has indicated he would not privatize Petrobras for
now, but the company might still divest itself of some $20 billion worth of
assets, according to a source for Reuters.
Economists: Brent to average $76 in 2019. A
Reuters survey of 46
economists find an averaged predicted Brent crude price of $76.88 per barrel in
2019. The respondents see Iran sanctions putting a floor beneath oil prices,
but weaker demand and a slower global economy putting a cap on prices.
OPEC production hits two-year high. OPEC
production rose in October
to its highest level in nearly two years. Higher output from Saudi Arabia,
Libya and the UAE pushed production up 390,000 bpd compared to September’s
levels. The figures gave the market confidence OPEC will be able to supply the
market as Iranian production goes offline.
Oil majors post huge earnings. The third quarter
earnings for the oil majors were the strongest in years, with a significant
jump in profits. Cost-cutting and higher oil prices led to a windfall for the
world’s largest oil companies. Most of them are sticking with a plan of capital
discipline, with an emphasis on boosting shareholder returns.
Venezuela’s refinery utilization plummets, leading to fuel shortages.
Venezuela’s refineries are operating at low levels as the nation runs short on
crude oil. Refineries have averaged a meager 17 percent utilization rate this
year, according to Bloomberg, down from
50 percent last year and 70 percent in 2016. Gas shortages have spread quickly
and there is no end in sight for the crisis.
1. Oil Markets Uncertain
As Iran Sanctions Loom – OIR 301018
2. Oil Markets Gripped By Supply
Glut Fears – OIR 271018
Oil Prices Crash As Iran Fears Fade – OIR 231018
Where Have The Oil Bulls Gone? – OIR 191018
Oil Prices Under Pressure As U.S. Shale Supply Soars
– OIR 161018
Oil Markets Take A Bearish Turn – OIR 121018
Oil Prices Rise On Iran, Hurricane Outages – OIR 091018
The Oil Price Rally Is Under Threat –
Why Brent Broke $85 – OIR 021018
The $100 Oil Debate – OIR 280918
1. Oil Price Rises in 2019
to be Modest as U.S. Production Constraints Ease - World Bank
2. What’s Behind The
Continued Selloff In Oil?
3. Dangote Refinery to
Save Nigeria from Dirty Fuels With Euro V Specification
The World Bank, Red Flags And
the Looting of Nigeria’s Oil Revenues - The Seven Energy Web
U.S. Shale Has A Glaring
The Illogical World of Nigeria’s Oil And Gas Industry
Average Prices of PMS, AGO, HHK and Cooking Gas –
Nigeria’s Fuel Subsidies Bill Set To Soar On Rising
What Oil At $100 A Barrel Would Mean For The Global
10. Oil Prices: The Saudi Chess Game