February 19, 2019 06:41PM / By Tom Kool, News Editor,
Today, we will take a quick
look at some of the critical figures and data in the energy markets this week
and 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.
Chart of the Week
- Bank of America Merrill Lynch says that Brent will likely
trade between $50 and $70 per barrel over the next five years.
- The bank says that prices will be “anchored” around $60,
and that rising U.S. shale supply and OPEC’s willingness to back out production
will keep volatility in check.
However, the bank also said that a global economic slowdown
would throw this forecast out of the window. Some worrying economic data in
China presents one of the largest downside risks to the oil market.
- Occidental Petroleum (NYSE: OXY)
was downgraded two notches by Barclays, from Overweight to Underweight,
with a $70 price target. Barclays says the company’s deficit, its aggressive
growth target, and its valuation all supported the downgrade.
- Eni (NYSE: E) saw its shares jump
on Friday after it reported $1.65 billion in fourth quarter profits, beating
- U.S. Silica (NYSE: SLCA) reported
a fourth quarter loss of $256 million, down from a $72 million profit a year
earlier. Frac sand sales were “negatively impacted by the well reported
industry headwinds related to budget exhaustion and lack of takeaway capacity,
as well as further pricing pressure from a combination of low demand and
additional local sand capacity coming on line in the Permian,” CEO Bryan Shinn
said in a statement.
Tuesday February 19, 2019
OPEC+ cuts, supply disruptions and an easing of trade tensions between the U.S.
and China has boosted crude oil to a three-month high.
Oil nearing a breakout? Some analysts see higher
prices ahead, as the OPEC+ cuts create a tighter backdrop. Any unexpected
outage could send prices much higher, while a breakthrough in the trade war
could remove one of the largest downside risks. “Brent and WTI are both now
seriously testing a major resistance zone, around $65 and $55, respectively,
the break of which could be the catalyst for another rally,” Craig Erlam,
senior market analyst at brokerage OANDA, wrote in a morning market briefing.
Saudi Arabia cutting deep. Saudi Arabia is going
above and beyond in its production cuts, but it’s unclear how long Riyadh will
be willing to shoulder the burden alone. “Saudi Arabia’s production cuts by
more than the required level also serve to offset the lack of compliance shown
by countries like Iraq. It is doubtful whether Saudi Arabia will be willing to
do so long-term, however. After all, the Saudis are losing market shares to US
shale oil producers,” Commerzbank wrote in a note.
Texas to install world’s biggest battery. A
495-megawatt energy storage system combined with a solar farm is set to be
installed in Texas. Ironically, the project is intended to support oil
operations in the Permian, according to Bloomberg. The energy storage system
will be the world’s largest.
VW expands electric offerings. VW (OTCMKTS:
VWAPY) announced plans to expand its electric vehicle offerings in the
coming years, aiming to add models for the Chinese market. VW is planning on
spending 9 billion euros on 20 EV models by 2025.
BP: renewable energy and natural gas dominate growth.
According to BP’s (NYSE: BP) latest energy outlook, renewable
energy and natural gas will together claim 85 percent of the world’s energy supply growth through
2040. The new analysis “brings into sharp focus just how fast the world’s
energy systems are changing, and how the dual challenge of more energy with
fewer emissions is framing the future,” BP CEO Bob Dudley said.
Mexico to spend $5.2 billion on Pemex. Mexican
President Andres Manuel Lopez Obrador announced a $5.2 billion rescue package for state-owned Pemex.
“We’ve taken the decision to support Pemex with everything,” AMLO said last
week. “We’re going to launch an initial plan, but if they require more, there
will be more support.” The package means that Pemex won’t turn to the bond
markets this year. Critics view the state support not only as insufficient to
put Pemex on a sustainable path – Pemex is the world’s most indebted oil
company – but it will also act as a drag on the Mexican budget.
War on plastic could cut into oil demand. The
petrochemical sector is expected to be one of the few sectors that will see
large crude oil demand growth over the coming decades. Much of that is the
result of turning oil and natural gas liquids into plastics. However, policies
targeting plastic use are proliferating. Recycling and bans on single-use
plastic could cut the assumed oil demand growth in petrochemicals as much as 20
percent through 2040, the FT reports, and “bring projected peak oil demand forward by a
India signs oil deal with U.S. Indian
Oil Corp., India’s top refiner, signed a deal to buy U.S. oil through March 2020. The company
will be the first state refiner in India to sign a contract with a U.S. company
(the seller was not named).
Guyana’s oil boom and lessons from Venezuela. Guyana
is set to become a petrostate with production expected to reach 750,000 bpd by
2025. WoodMac offered some advice, with lessons learned from the collapse of neighboring
Venezuela. A sovereign wealth fund has been useful for other petrostates to
smooth out the impacts of booms and busts. Also, other sectors of the economy
need to be developed, and investments in infrastructure and education are
Citgo removes top executives. Citgo, the
U.S.-based subsidiary of PDVSA, removed three top executives close to Venezuelan President Nicolas
Maduro. That could pave the way to allowing the recognition of a new board of
directors, shifting power of the company into the hands of the
European refiners hurt by tight sour crude market.
U.S. sanctions on Venezuela are accelerating the losses of heavy sour crude,
tightening up sour crude supplies. That has hurt some U.S. Gulf Coast refiners,
but also European refiners who now have to pay more for supply. “Looking ahead
to April and May it will also be interesting, given that the Venezuelan is
gone, and Iran waivers will [likely not be extended],” a crude trader told S&P Global Platts. “Overall, heavier crudes do very well - heavy North Sea
grades, Urals, also we heard heavy sweet from WAF [West Africa] are seeing good
deals because the sour market is tight,” he added.
Oil discovery in China could set off shale bonanza.
A well test by PetroChina in the western province of Xinjiang shows high
potential for commercialization. An estimate by Morgan Stanley says that the shale region could reach
100,000 to 200,000 bpd by 2025.
1. OPEC Cuts Oil
Production, U.S.-China Trade Deal Looks Positive - OIR 150219
2. Axxela Achieves
Initial Issuer Rating of BBB (NG); Outlook Stable
3. Average Prices
of PMS, AGO, HHK and Cooking Gas – January 2019
4. European Majors
Set To Weather Oil Price Volatility - Fitch
5. Oil Market
Tightens On OPEC Cuts– OIR 120219
6. What Is Keeping
Oil Prices Subdued? – OIR 080219
7. Bank Of America:
Oil Demand Growth To Hit Zero Within A Decade
8. Oil Rally Halts
On Economic Concerns – OIR 050219
9. Crude Oil
Trading Terms You Need to Know
10. Oil Rises 18% In
Best January On Record
11. The Nigerian
Upstream Oil and Gas Report - Wind In The Sails
12. Oversold Lithium
Could Be About To Rally
13. Oil Prices
Bounce On Venezuela Turmoil And Saudi Cuts
14. 2nd Nigeria
International Petroleum Summit Focuses on Efficiency and Innovation