July 26, 2019 /07:54PM / By Tom Kool of Oilprice.com / Header Image Credit: Oilprice.com
Oil prices have ended the week where they
started, with demand fears and inventory draws countering one another and
geopolitical shocks failing to move the needle.
July 26, 2019
Oil seems to be stuck in a range at the moment, with strong inventory draws
being offset by ongoing
fears about weak demand. Fundamentals are playing an increasingly large role in
oil markets, with geopolitical shocks failing to move the needle when it comes
to oil prices.
Oilfield services warn of more financial pain. The
CEO of Helmerich & Payne (NYSE: HP), a large U.S.-based
oilfield services company, said that the sector will see more financial pain as
the pace of drilling slows down. “The full effect of the industry’s emphasis on
disciplined capital spending continues to reverberate through the oil field
services sector,” CEO John Lindsay said in a
statement. “We are reluctant to predict another bottom and see further
softening during our fourth fiscal quarter as our guidance would indicate.” The
statement comes a few days after both Halliburton (NYSE: HAL) and
Schlumberger (NYSE: SLB) echoed similar concerns about the contraction in U.S.
Shale may need to spend more. In order to keep
production from flattening out or even falling, some shale companies may need
to increase spending, according to Wood Mackenzie. However, the problem is that
Wall Street has lashed energy stocks over the past year, and punished companies
that are heavy spenders.
“Steeper decline rates ... in the Permian basin will likely result in operators
needing to drill more wells than originally planned, if they're committed to
hitting previously established long-term targets,” said Robert Clarke,
WoodMac's Lower 48 research director, according to the Houston Chronicle. “This will be especially challenging in the near-term because raising
capital budgets today is effectively off-limits.”
China imports from Iran continue. China imported
about 209,000 bpd of oil from Iran in June, according to Bloomberg, despite
U.S. sanctions. Imports are down from just under 500,000 bpd in the first five
months of the year, but the levels are still significant.
Profits at Total, Equinor dip in second quarter.
Earnings for Total SA (NYSE: TOT) fell to $2.76
billion in the second quarter, down from $3.72 billion a year earlier. The
company said lower natural gas prices were in part to blame, but production was
also up 9 percent. Equinor (NYSE: EQNR), on the
other hand, saw its production fall in the
second quarter, with earnings also hit by lower gas prices.
Automakers cut deal with California on fuel economy. Four
major automakers – Ford (NYSE: F), BMW (FRA:
BMW), Volkswagen AG (VOWG_p.DE) and Honda Motor
Co Ltd (7267.T) – secretly negotiated a deal with
California on stricter fuel economy standards in an attempt to provide some
clarity going forward. The deal is also aimed at forcing the Trump
administration to back down from gutting national fuel economy standards, which
could leave regulatory standards in the auto market bifurcated. The non-binding
agreement with California would be much stricter than what the Trump
administration is proposing, but slightly weaker than the Obama-era regulations
on the books.
Chevron awards Schlumberger with 20-year contract. Chevron
(NYSE: CVX) awarded Schlumberger
(NYSE: SLB) a 20-year contract for services and equipment at
its offshore project in the Gulf of Mexico. In recent days, Schlumberger had
voiced confidence in the oil market outside of U.S. shale, with growth picking
up offshore and around the world.
Canadian rail shipments steadily on the rise. Oil-by-rail
shipments from Canada
continue to increase, with volumes rising to 285,131 bpd in May, up from
232,294 bpd in April. With pipeline projects either on ice or in perpetual
legal morass, oil-by-rail shipments have been viewed as an increasingly
important mode of transport for Alberta’s oil.
Tesla bleeds cash, but car deliveries rise. Tesla
(NASDAQ: TSLA) saw its stock price nosedive by more than 13
percent this week, after the EV company reported a $408
million loss for the second quarter, which followed a $702 million loss in the
first quarter. The results were worse than Wall Street expected. On a positive
note, Tesla said that it delivered 95,200 cars in the second quarter, a 50
percent increase from the first quarter.
Valero sees profits fall by 32 percent. Valero
(NYSE: VLO) saw its profits plunge by 32
percent in the second quarter, which the company blamed on the rising cost of
heavy crude. The mandatory production cuts in Alberta rescued oil producers
there, but the higher prices are more costly for refiners.
California Governor tours Chevron spill, talks fossil fuel transition.
California Governor Gavin Newsom visited the site of a major oil spill by Chevron
(NYSE: CVX) – one of the largest spills in the state’s history
– and he promised to step up regulation of the industry and even wants to begin
planning to phase down oil production. “I want to focus not just on demand but
supply, and that, I think, is a new approach in this state with this new
administration,” the governor told The LA Times.
Native Americans sue Enbridge over Line 5. A
Native American tribe in Wisconsin is suing Enbridge
(NYSE: ENB) over its aging Line 5 pipeline, demanding the
shutdown of the line. The same pipeline is facing legal troubles in Michigan.
Line 5 has also become ensnared in presidential politics, with at least two
major Democratic candidates calling for its closure ahead of the next round of
debates to be held in Detroit next week.
Global solar installations to hit record this year.
New solar PV installations are expected to rise to a record
high 114.5 GW this year, according to Wood Mackenzie, a 17.5 percent jump from
2018. WoodMac says the industry is growing on the back of improving markets in
Europe, the U.S., India and Vietnam.
Moody’s to buy climate data firm. In a sign of the
times, Moody’s has purchased a
controlling stake in Four Twenty Seven, a firm that measures physical risks of
climate change. The move is a sign that top credit rating agencies are growing
more concerned about the quality of credit for a number of governments and
industries exposed to climate change.
PDVSA to halt output at upgrader. Venezuela’s oil
production is set to take another hit as PDVSA
plans to indefinitely halt output at a heavy oil upgrader. Meanwhile, the Trump
administration is set to decide the fate of the waiver that Chevron
(NYSE: CVX) has that allows it to continue operating in
Venezuela. At the time of this writing, the decision had not been made, but the
waiver expires on Saturday.
Bipartisan bill emerges in industrial emissions. A
bipartisan group of senators is supporting legislation that would cut emissions in the industrial sector. The bill would
create a program within the Department of Energy dedicated to developing
technologies to cut emissions from industrial processes, such as cement, steel
and petrochemical production. Notably, in addition to support from both
parties, the legislation also has support from top industry, labor and
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