Wednesday,
December 12, 2018 08:57 AM / Oilprice Intelligence Report
Today, 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.
- U.S. LNG export capacity is expected to more than double by the end of 2019, rising to 8.9 Bcf/d, up from 3.6 billion cubic feet per day (Bcf/d) currently.
- That will be enough to make the U.S. the third largest LNG
exporter after Australia and Qatar.
- The U.S. only began exporting LNG in early 2016.
Market Movers
- ConocoPhillips (NYSE: COP) said that its shale output will
grow by 25 percent next year even with the prospect of oil prices much lower
than 2018 levels. Conoco says its Eagle Ford, Permian and Bakken assets can
make a return even with oil at $50 per barrel.
- BP (NYSE: BP) agrees to consider a climate
resolution at its 2019 annual general meeting, pushed by activists investors.
The resolution would call on BP to set and publish targets in line with the Paris
Climate agreement.
- HESS (NYSE: HES) announced a $2.9 billion spending
program for 2019, forecasting a 12 percent increase in production. Hess also
said that 2019 will be the peak spending year for the Liza 1 development in
Guyana, which is on track to come online in 2020.
Tuesday December 11, 2018
Oil prices bounced on Tuesday after losing ground on Monday as news of
unexpected outages in Libya helped buoy sentiment.
Saudi Arabia to cut oil exports by 1 mb/d in January. Saudi
Arabia will lower oil exports by 1 mb/d beginning in January. Sources told Reuters exports will drop to 7.3
mb/d, down from 8.3 mb/d in November.
Libya
declares force majeure. Libya’s National Oil Corp. declared
force majeure on crude loadings at its Sharara field because of the presence of
a militia, according to S&P Global Platts. “The
shutdown of Sharara will result in a daily site production loss of 315,000 b/d,
with an additional loss of 73,000 b/d at El Feel due to its dependence on
Sharara for electricity supply,” NOC said in a statement.
Markets rocked by trade war fears. Despite the
hyped Trump-Xi truce, the trade war may only be on hold. U.S. Trade
Representative Robert Lighthizer said on Sunday that tariffs would
rise on March 1 if a significant deal cannot be reached. Meanwhile, the
political turmoil in the UK following the cancelled parliamentary vote on the
Brexit package also fed uncertainty. Financial markets started the week in the
red.
Russia
to only cut by 50,000-60,000 bpd. Russia and other non-OPEC
producers agreed to cut a combined 400,000 bpd at the OPEC+ meeting, but the
reality is beginning to sink in. The cuts may only be phased in over time.
Russia may only cut output by 50,000 to 60,000 bpd in January, according to
Russian energy minister Alexander Novak. That could mean that actual reductions
from the entire group may trail the headline figure of 1.2 mb/d in cuts.
OPEC+ deal may not impact U.S. shale significantly. The
U.S. shale industry is likely rejoicing after the successful OPEC+ meeting,
which should tighten the market and push up prices. But some analysts believe
the deal won’t significantly alter the shale supply picture. “I just think
there's a lot of uncertainty and this is a pretty small cut,” Amy Myers Jaffe,
director of the Council on Foreign Relations' energy security and climate
program, told S&P Global Platts. The
duration of the deal is an open question, as is compliance. The outlook for the
global economy could loom much larger for shale operators. “I don't think OPEC
has the will to make the kind of cuts we'd need to make if we saw a real
recession,” Myers Jaffe said.
Analysts
say OPEC+ deal should balance market. Most major investment
banks were in agreement that the OPEC+ deal should eliminate the supply surplus
in the first half of 2019. Yet, oil prices have not jumped as much as many
expected. “The current price weakness is all the more surprising given that
just short of 400,000 barrels per day of Libyan oil are currently missing
because production has been interrupted at Libya’s largest oil field,”
Commerzbank said in a note. Nevertheless, the cuts should do the trick. “We
believe that the cuts, if strictly implemented, will rebalance the oil market
next year.”
Trump water rule could pave way for new pipelines.
The EPA is unveiling a proposed roll back of federal water protections this
week, a move that could make it much easier to build new oil and
gas pipelines. An estimated 60 to 90 percent of
U.S. waterways could lose federal protection.
Morgan
Stanley cuts oil pricing forecast. Morgan
Stanley expects Brent to reach $67.50 per barrel in the second quarter of 2019,
a downward revision by $10 from its prior forecast. The investment bank said
that non-OPEC supply growth could still overwhelm demand, which should keep a
lid on prices. The OPEC+ deal helps erase some of the surplus, but also removes
some risk from non-OPEC suppliers.
Citi:
Oil flat in 2019. Citibank forecasts Brent to average just
$60 per barrel in 2019, or essentially flat from today’s level. That forecast
is notable given the sizable cuts from OPEC+. Citi says the cuts could actually
sow the seeds of another selloff. “OPEC+ did the work of drawing down
inventories that otherwise would have to be done through a painful period for
shale producers,” Citi said in a research note. “[T]he more OPEC+ tries to
support prices by withholding oil from the market, the more they give the US
shale sector an out from rationing supply growth themselves.”
Global
investors say lack of climate action risks financial crash. Global
investors managing a combined $32 trillion in assets warned negotiators at the UN
climate summit that the lack of action on climate change could provoke a
financial crisis much deeper than the 2008 meltdown. For instance, investment
firm Schroders said that the global economy could see losses of $23 trillion in
the long run without rapid action. On the contrary, a rapid clean energy
transition could result in enormous benefits. “The low-carbon economy presents
numerous opportunities and investors who ignore the changing world do so at
their own peril,” said Thomas DiNapoli of the $207 billion New York State
Common Retirement Fund.
Atlantic Coast pipeline delayed. A major natural
gas pipeline intended to carry Marcellus shale gas to the U.S. South just hit
another setback. A federal court ordered the project to halt
construction, suspending federal permits because of potential impacts on
wildlife.
Iran
says oil exports improving. Iranian president Hassan Rouhani
said that oil exports from the country have improved since November. “The goal
of the Americans was to block our oil exports. I want to say frankly to our
people that our oil exports after (Nov. 4) have improved by degrees,” Rouhani said. “So the Americans have been
unsuccessful with regard to the oil issue.” Much of it is likely bluster, but
there are reports that Japan and South Korea, at least, intend to buy more oil
from Iran after obtaining waivers from the U.S. Treasury Department.
Previous Oilprice
Intelligence Reports
1.
OPEC
Surprises Markets With Last Minute Deal - OIR 081218
2.
Oil Makes Gains
Ahead Of OPEC Summit - OIR 041218
3.
Can Saudi Arabia
Counter The Oil Price Crash? - OIR 281118
4.
OPEC Drowning
Under Oil Supply Glut - OIR 231118
5.
Oil Companies
Lose $1 Trillion As Prices Crash - OIR 201118
6.
Oil Rebounds On
Hopes Of OPEC and Action – OIR 171118
Related News
1.
Oil Prices Slide
as OPEC is Seen Cutting Output Less Than Expected
2.
The Saudi
Dilemma: To Cut or Not To Cut
3.
Africa Oil and
Gas State of Play
4.
Are Oil Prices Heading
For The Rocks?
5.
4.37bn Litres of
PMS Imported into Nigeria in Q3 2018 - NBS
6.
Average Prices
of PMS, AGO, HHK and Cooking Gas – October 2018
7.
Can We Expect A
Major Rebound In Oil Prices?
8.
Is Oil Price At
Its Point of Inflection?
9.
NNPC, NCDMB,
Oando, Seplat And Many More Push The Nigerian Agenda At The 25th Africa Oil
Week
10. Outlook for
Africa’s Oil and Gas Industry Improves – PwC Report