January 30, 2019 11:25 AM / By Tom Kool Editor,
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.
- Gasoline margins have plunged in recent months as the glut of
supply continues to worsen.
- Refiners are churning out diesel because of the relatively
higher margins, but that is exacerbating the glut of gasoline.
- The turmoil in the products market is a reflection of the
surge in supply of light crude oil from U.S. shale at a time when medium and
heavier blends from the Middle East are being curtailed by the OPEC+
- Hi-Crush Partners (NYSE: HCLP) entered a long-term supply agreement with CNX
Resources (NYSE: CNX) for Northern White frac sand, for CNX’s
operations in the Marcellus and Utica shales.
- Eni (NYSE: E) and OMV (OTCPK:
OMVJF) agreed to pay a combined $5.8 billion for 20 percent and 15
percent stakes, respectively, in Abu Dhabi National Oil Company’s refining
- U.S. Oil Fund (NYSEARCA: USO) saw
its assets drop to the lowest level in a year. Last week, investors
withdrew roughly $108 million from the ETF.
Tuesday January 29, 2019
After a selloff on Monday, oil prices steadied at the start of trading on
Oil drops on rig count and China concerns. Renewed
concerns over Chinese growth weighed on crude prices on Monday, with WTI and
Brent falling more than three percent. It was the largest single-day decline in
a month. Meanwhile, the U.S. oil rig count jumped by 10 last week, a sign that
the U.S. shale industry could be adding rigs back into operations. “We’re
seeing oil prices really start to break down here,” Phillip Streible, senior
market strategist at RJO Futures in Chicago, told Reuters on Monday. “One of the factors that played in is the
rising rig count that we saw on Friday.”
Vice President Pence coordinated with Venezuelan opposition.
The Wall Street Journal reported that U.S. Vice President Mike Pence was in communication
with Juan Guaidó prior to Guaidó’s declaring that he was the rightful
president. The report suggests that the U.S. effort at regime change in
Venezuela has been underway for some time and is tightly coordinated. The
Venezuelan military is sticking with President Nicolas Maduro for now, but the
WSJ report suggests the U.S. government is determined to topple him.
U.S. announces oil sanctions on Venezuela. The
U.S. has taken the long-anticipated move of sanctioning PDVSA, hoping to cripple the country and oust Maduro. The
sanctions prohibit most American businesses from engaging in transactions with
PDVSA. The measures put roughly 500,000 bpd of Venezuelan oil exports at risk.
PDVSA, in theory, can reroute its shipments to Asia, but it will have to sell
barrels at a much steeper discount. Citgo, the U.S.-based subsidiary of PDVSA,
would be allowed to continue to operate, but its revenues will be diverted into
a special account, presumably to be controlled by the fledgling government of
Juan Guaidó. In the interim, the U.S. is trying to pry Venezuela’s oil revenues
out of the hands of Maduro and steer them towards Guaidó.
Saudi Arabia pledges deeper cuts in February.
Saudi oil minister Khalid al-Falih said that Saudi Arabia would lower its oil
production in February to just 10.1 million barrels per day, down from 10.2
mb/d this month. The reduction would also be lower than Riyadh’s commitments as
part of the OPEC+ deal – its limit is set at 10.33 mb/d. “Saudi Arabia will be
well below the voluntary cap that we agreed to” and will produce below its
ceiling “for the full six months” of the deal, al-Falih told Bloomberg.
Natural gas drillers cut spending. EQT (NYSE:
EQT), Antero Resources (NYSE: AR) and Gulfport Energy
(NASDAQ: GPOR) have cut their spending plans for 2019 amid a decline in natural gas prices and pressure
from investors on returns. The U.S. shale gas revolution, more than a decade
old, has failed to produce the juicy profits that have long been expected. Now,
investors are clamoring for a shift in focus away from production growth, with
a priority on shareholder returns. U.S. shale gas companies have badly trailed
the S&P 500. EQT announced a spending cut of $700 million relative to 2018.
U.S. unveils criminal charges against Huawei executives. The
U.S. government escalated its conflict with China on Monday, announcing criminal
charges against Chinese telecom firm Huawei and its CFO, Meng Wanzhou. The U.S.
charges that the firm has been trying to steal trade secrets for years while
also violating Iran sanctions. The timing is not great since the U.S. and China
are in the midst of trade talks ahead of a self-imposed March 1 deadline.
Permian shale drillers flaring more than they report. According
to the Houston Chronicle, Permian shale drillers are flaring nearly twice as much
natural gas as they are reporting to state regulators. In 2017, the industry
reported flaring of 55 billion cubic feet of natural gas. But a separate
analysis by the Environmental Defense Fund found that the industry flared about
104 billion cubic feet.
DOE to invest in recycling critical minerals. The
rise of electric vehicles is breaking economic dependence on fossil fuels but
could also open up a new dependence on critical minerals – cobalt, nickel,
lithium, etc. – from a small number of places such as the Democratic Republic
of Congo. The U.S. Department of Energy said it would invest more federal money into recycling programs to lessen U.S.
dependence on these sources.
Chevron to purchase Texas refinery. Chevron
(NYSE: CVX) has agreed to purchase a Texas oil refinery with a checkered past
from Petrobras. The 112,000-bpd refinery in Pasadena, TX, would give Chevron an
outlet for its surging Texas shale production.
Exxon to double the size of Texas refinery. ExxonMobil
(NYSE: XOM) gave the go-ahead to double the capacity of its Beaumont, TX refinery. The refinery
already has the capacity of 365,000 bpd, so the expansion would launch the
facility into the top spot as the country’s largest refinery.
Total to expand exploration. Total SA
(NYSE: TOT) said that it would launch its largest exploration campaign in years in 2019,
an effort intended to focus on lower-risk resources in emerging and mature
basins. The oil company said it was moving away from high-risk, high-reward
1. 2nd Nigeria
International Petroleum Summit Focuses on Efficiency and Innovation
2. Oil Prices
Unmoved By Venezuela Turmoil
3. Saudi Arabia:
We'll Pump The World's Very Last Barrel Of Oil
4. What’s Driving
Oil Prices Down? – OIR 220119
5. Huge Backlog
Could Trigger New Wave Of Shale Oil
6. Oil Rises On
Trade Deal Hopes
7. Avoidable Oil
and Gas Revenue Losses: Breaking the Election Cycle
8. Key Development
Considerations - Modular Refinery Development
9. Average Prices
of PMS, AGO, HHK and Cooking Gas – December 2018