Wednesday, June 12, 2019 /08:49 AM / By Tom Kool of Oilprice.com / Header Image Credit:Oilprice
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.
Chart of the Week
- In 2018, U.S. coal production fell to 756 million short tonnes, the second-lowest total since 1978 and
down from a peak of 1,172 million short tonnes in 2008.
- Production and consumption have fallen in tandem.
Consumption dropped to just 687 million short tonnes last year, a four-decade
- The vast majority of coal consumed is used for electricity
generation. The ongoing shuttering of coal-fired power plants likely ensures
steady declines for both production and consumption of coal for years to come.
- Cabot Oil & Gas
(NYSE: COG) plunged by 5 percent on Monday, dropping to a four-month low.
Other natural gas producers also fell sharply. Natural gas prices have fallen
to three-year lows as a result of rising supply.
- Devon Energy (NYSE: DVN) announced a voluntary methane reduction target, aiming to lower
emissions by 12.5 percent from current levels to a methane-intensity rate of
0.28 percent by 2025.
- Legacy Reserves (NASDAQ: LGCY), a
Permian shale driller, filed for Chapter 11 bankruptcy protection.
Tuesday June 11, 2019
Oil prices rebounded a bit on Tuesday on Saudi
assurances that OPEC+ would not let the oil market slide any further. “Prices
are finding support from the prospect of OPEC oil production remaining
restricted beyond mid-year,” Commerzbank said in a note.
Russia uncommitted to OPEC+ cuts. Saudi oil
minister Khalid al-Falih traveled to Moscow to meet his counterpart, and the
two apparently discussed the possibility that crude oil would crash below $40 per barrel without a deal in Vienna. While
Russia has been cagey about committing to an extension, market analysts say the
odds of a rollover in the cuts is likely.
U.S. considers sanctions on EU-Iran trade. The
Trump administration is considering another round of sanctions that would target the European
Union’s financial vehicle that was intended to keep trade alive with Iran. The
U.S. sanctions would hit the financial entity Iran established to do business
with the EU. Europe’s effort has largely been inadequate, but any U.S. move
would damage its relationship with its European allies.
Iran won’t leave OPEC. Iran has no intention of
leaving OPEC despite the fact that the group has been turned “into a political
forum,” treating Iran like an enemy, Iranian oil minister Bijan Zanganeh said. Iran has been outraged at the seeming cooperation between Saudi Arabia
and the U.S. to block Iranian oil exports.
Airlines prepare for higher fuel costs after IMO rules. When
the new regulations on marine fuels take effect at the start of next year, jet
fuel could become more expensive. The heightened demand for low-sulfur fuels
and distillates will cut into supplies needed by the aviation industry.
Shell ships first LNG cargo from Prelude. Royal Dutch
Shell (NYSE: RDS.A) shipped its first cargo from its Prelude
FLNG (floating LNG) facility off the coast of Western Australia, one of the
most expensive and highly-anticipated LNG export terminals in the world. “The
first [LNG] cargo was more than eight years after FID and nearly two years
after the facility arrived in Australia. How fast Prelude delivers its second
and third cargo, and ramps up to plateau output, will be a key indicator of
success,” Wood Mackenzie senior analyst Daniel Toleman said.
Wall Street cutting off financing for shale. The
red ink accumulated by U.S. shale companies is making it difficult for them to access capital markets as investors are growing tired of the poor returns. New
bond and equity issuances have ground to a halt, forcing more asset sales. If
low oil prices persist, bankruptcies could begin to pile up.
Wind industry booming, but tariffs pose threat. The
wind industry is growing quickly and hiring a lot of workers, but tariffs could
slow development, according to CNBC.
Trump admin considering more sanctions on Venezuela. The
Trump administration is considering secondary sanctions that would close off avenues
for Venezuela to export its oil. However, analysts say that more sanctions
would have little effect since Venezuela is exporting to countries that would
not comply. “Russia is not going to stop trading oil with Venezuela as a result
of official secondary sanctions, especially since Russia itself is being
sanctioned by the US,” Lisa Viscidi, director of energy, climate change and
extractive industries at Inter-American Dialogue told S&P Global Platts.
Refiners sue Trump over ethanol. The American Fuel
and Petrochemical Manufacturers group is suing the Trump administration over its decision to allow
year-round sales of E15, a higher concentration of ethanol.
Biofuels don’t lower gasoline prices. A new report
from the U.S. government found that the Renewable Fuel Standard, which requires
refiners to blend in biofuels to their fuel mixes, has not helped to lower gasoline prices. And in states far from ethanol
production, the standard has actually led to a slight increase in prices.
Oil exodus from Alberta leaves Calgary real estate ailing. Bloomberg
reported on the rising number of vacancies in Calgary’s real estate market due
to the exodus of international oil companies from Canada’s oil sands. Job cuts
from Canadian producers have also added to the woe. Since 2016, more than 20
percent of Calgary’s downtown office space has been available for rent, Bloomberg said, which is about five times the rate seen in Toronto
Keystone XL construction delayed. A federal court
ruled that construction on Keystone XL can move forward, but TC Energy
(NYSE: TRP), formerly TransCanada, missed the construction
window for the year. “There will be no mainline construction in 2019 in the
U.S.,” a TC Energy spokesperson told the Financial Post.
Hedge funds sell off oil on economic fears. Hedge
funds and other money managers continued to liquidate their long bets on crude oil futures, as fears of an
economic slowdown intensify. The retreat has helped exacerbate the pricing
Texas drillers injecting gas back into wells. As
the glut of natural gas in West Texas has grown worse, a number of E&Ps are
beginning to pump the gas back into their wells. The benefits are two-fold –
avoiding flaring while also boosting the recovery of oil. EOG
Resources (NYSE: EOG) has found that in some cases it can
increase oil production by 30 to 70 percent. Meanwhile, New Mexican regulators are beginning the process of writing new rules on methane
Shell to return $125 billion to shareholders. Royal Dutch
Shell (NYSE: RDS.A) said that it is on track to return $125 billion to shareholders between 2021 and 2025 via dividends and
share buybacks. Shell has also allocating a rising portion of its spending to
power generation, a strategy intended to plan for a low-carbon future.
Oil majors inundated with climate lawsuits. A
growing number of cities and states are filing lawsuits against the oil majors,
seeking damages related to climate change. For instance, the city of Baltimore
wants damages related to the ballooning cost of retrofitting storm drains. San
Francisco wants money to build a seawall. The FT reports that the litigation resembles the strategy against Big
Tobacco. “They are frightened at the prospect of liability at what they have
done, and they are scared of courts,” Rhode Island Senator Sheldon Whitehouse
1. An OPEC plus
Extension Is All But Certain – OIR 070619
2. DPR Revokes Six
Oil Licences To Recover Legacy Debts
3. Oil Is On The
Brink Of A Bear Market– OIR 040619
4. Is Trump
Reversing Course On Iran?
5. Oil Tanks On
Fears Of U.S., Mexico Trade War – OIR 310519
6. OPEC plus Has
Capacity to Offset Iran Crude Supply Cuts
7. Déjà Vu: Oil
Prices Stuck Once Again – OIR 280519
8. The Silver
Lining Of An Oil Price Crash – OIR 240519
9. 4.87bn Litres of
PMS Imported in Q1 2019 - NBS
10. Oil Markets In
Limbo After OPEC plus Meeting – OIR 210519
11. Middle East
Tensions Put Oil Markets On Edge – OIR 170519
12. 4 Geopolitical
Trends To Watch In 2019 - Oilprice.com
13. Sahara Energy,
Brooge Petroleum Partner To Build Up To 250,000bpd Refinery In Fujairah
14. Oil Jumps On
Middle East Tensions - OilPrice Intelligence Report