September 14, 2019 /07:05AM / By Tom Kool of
Oilprice.com / Header Image Credit: Oilprice.com
Financial markets have
received a boost from a perceived improvement in the trade war between China
and the U.S., halting the most recent oil price slump.
Friday, September 13th, 2019
overtures boost markets. A series of back-and-forth good
will gestures between Washington and Beijing has boosted market sentiment. On
Thursday, Chinese firms bought 10
shipments of U.S. soybeans in another effort to build confidence ahead of
October trade talks. Politico reports that
the Trump team is trying to find an "escape hatch" to get out of the trade war
that the President started. With pain clearly deepening for both sides, there
is a growing eagerness to head off trade escalation. Still, a breakthrough in
negotiations is a big ask.
Oil tight now, surplus in 2020. The IEA said this week
that the market will see inventory drawdowns of 0.8 mb/d in the second half of
2019, but that a surplus would return in 2020. The "call on OPEC" is set to
decline by 1.4 mb/d next year, presenting a serious challenge to the
oil minister wants to rebuild OPEC ties. After several
years in which the Saudi-Russian relationship seemed to take a higher priority
over cohesion within OPEC, the new Saudi oil minister wants to rebuild trust
within the group. "The new minister likes decisions to be unanimous instead of
being presented as just Saudi-Russian agreements," a source told Reuters. "He wants us to be a united front." In an early sign of success, several OPEC
members vowed to boost compliance with the cuts.
issued new bonds to pay old ones. Pemex issued $7.5
billion in new longer-dated bonds, easing the near-term path on bond payments
for the world's most indebted oil company. The move may also reduce the risk of
a credit downgrade. In addition, the Mexican government is injecting another
$5 billion into the company.
to give up control of Baker Hughes. GE (NYSE: GE) has decided to
give up majority control of Baker Hughes (NYSE: BHGE) by
winding down their stake in the company. The move is expected to raise nearly
$3 billion for GE and take its stake below 40 percent. GE acquired a 62.5
percent stake in Baker Hughes in 2017.
to halt Groningen gas by 2022. The Dutch government said it
would halt production of the massive Groningen field - Europe's largest onshore
gas field - by 2022, eight years earlier than planned. The increasing frequency
and severity of earthquakes in the Netherlands, with an especially large one
earlier last year, has accelerated the shutdown plans.
court upholds fracking ban. Colombia's high court upheld a
temporary ban on fracking, a decision denounced by the oil industry but
celebrated by environmentalists. According to Argus Media and
Ecopetrol data, Colombia's Middle Magdalena Valley basin holds between 4 and 7
billion barrels of oil equivalent.
natural gas production hits new record. U.S. natural gas
production rose to 91 Bcf/d in August, an all-time
monthly high. The increase came despite low prices.
fracking" cuts costs, threatens services companies. As Reuters reports,
a growing number of U.S. shale companies are turning to "electric fracking," which uses natural gas to power fracking operations rather than costly diesel.
E-frac, as the technology is called, could reduce the cost of a $6 million-$8
million shale well by $350,000. But while they save money for producers, they
threaten the business model of oilfield services companies like Halliburton
(NYSE: HAL), which have tens of billions of dollars tied up in
older technologies. Halliburton said it would be too costly to make the
increases North Sea production. Equinor (NYSE:
EQNR) started up production from the Mariner field in
mid-August, and is aiming to begin production from the Johan Sverdrup field in
October. Together, the fields could add almost
a half million barrels per day of production by 2020.
Drilling in ANWR would have little impact. The Interior
Department said that
drilling in the Artic National Wildlife Refuge (ANWR) would have a negligible
environmental impact, paving the way for a lease offering later this year.
Meanwhile, the U.S. House of Representatives passed a
bill reversing the law that allowed drilling in ANWR, although it is set to go
nowhere with the Republican-controlled Senate.
to move forward on stripping California of fuel economy authority. The
Trump administration has decided to move forward on an attempt to strip
California of its unique authority to set stricter fuel economy rules,
according to Bloomberg.
Mesa files for bankruptcy. Alta Mesa (NASDAQ: AMR) became
the latest shale driller to file for bankruptcy, while an SEC investigation
into potential fraud continues. As the Houston Chronicle notes,
the shale company, led by a former Anadarko Petroleum chief executive, was
valued at as much as $3 billion in early 2018, but has collapsed to just $30
million with its share price trading at less than 8 cents per share.
partially shuts Houston Ship Channel. Activists with
Greenpeace partially shut the Houston Ship Channel on Thursday, repelling down a bridge to
block shipping traffic in an effort to put a spotlight on the climate crisis
ahead of the Democratic debate, which was held in Houston on the same
step up efforts to track and report carbon. Major banks
see risks to fossil fuel assets from climate change, and are increasing their
efforts to track and report their involvement in carbon emissions, according
to Bloomberg Businessweek. Roughly 45 global financial institutions have signed up for
voluntary commitments to lower their emissions profiles in their lending.
admin urges biofuels groups to accept compromise. In a
closed-door meeting on Thursday, the White House urged U.S. biofuels companies
to accept a 5 percent increase in blending requirements for 2020, according to
Reuters. Biofuels groups want assurances that the move is not a one-off. The
Trump administration has struggled to please both oil refiners and the biofuels
industry, a conflict that escalated after an August decision to give 31
blending waivers to refiners.
Markit report predicts low natural gas prices for years. According
to IHS Markit, U.S. natural gas prices could average below $2/MMBtu next year,
the lowest price in real terms since the 1970s. Demand is rising, but not by
enough to absorb oversupply. "It is simply too much too fast," Sam Andrus,
executive director of IHS Markit, said in a statement. "Drillers are now able
to increase supply faster than domestic or global markets can consume it.
Before market forces can correct the imbalance, here comes a fresh surge of
supply from somewhere else."
to sell some oil projects to comply with Paris agreement. BP's (NYSE:
BP) CEO Bob Dudley said that
the company would sell some oil projects in order to align its business with
the Paris Climate Agreement. One idea would be to exit the most
carbon-intensive projects, although BP declined to specify those. The
consideration is a sign that oil majors are coming under pressure to make
strategic decisions to plan for a low-carbon future.
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