May 24, 2019 08:20 PM / By Tom Kool Editor, Oilprice.com
It has been a dismal week
for oil prices despite a slight recovery on Friday morning, but there may be a
silver lining to the most recent price crash.
Friday, May 24th, 2019
Oil rebounded on Friday but it was not enough to erase the roughly 7 percent
meltdown seen on Thursday. The trade war is
starting to become a top concern to global equity and commodity markets. As of
mid-day, WTI was trading above $58 per barrel and Brent moved above $67,
somewhat mitigating what has otherwise been a dismal week. On the upside, the
plunge in prices and the renewed bearishness undercuts the rationale for OPEC+
to increase production. “It is reasonable to doubt whether Saudi Arabia will be
willing to step up its output given the latest decline in prices,” analysts at
Commerzbank said. “We therefore expect to see higher oil prices again in the
Chinese demand takes a hit. Demand for fuels
in China is showing weakness, with teapot refineries seeing inventories
building up. Gasoline inventories in Shandong province have surged to their
highest level since 2011, according to Bloomberg.
The refiners are losing $8 on every barrel they produce. “It’s all because of
very sluggish downstream demand, especially on the gasoline side,” Gao Jian, an
oil analyst at Zhao Jin Futures, told Bloomberg. Refiners are starting to cut
U.S. threatens sanctions on Venezuelan jet fuel. In
a bid to tighten the screws further, the U.S. told several
European trading houses to stop selling Venezuela jet fuel or else they will
China signals rare earths cut off to U.S. Chinese
President Xi Jingping took a trip to a rare earths plant during a domestic tour
this week, which analysts took as a signal that the government is considering
using its rare earths export as a weapon in its trade war with the United
States. China accounted for about 71 percent of mined rare earth elements last
year, and an even higher ratio of processed rare earths, according to Reuters.
The U.S. relies on China for 80 percent of its imports. However, any cut off
would be detrimental to China as well.
U.S. manufacturing activity weak. U.S. manufacturing
growth fell to
its lowest reading in nearly a decade, a sign that the trade war may be
impacting the economy. IHS Markit said its Purchasing Managers Index (PMI)
declined to 50.6 in May, the lowest level since September 2009. Anything below
50 is an outright contraction. Separately, in a speech this
week, U.S. Federal Reserve Chair Jerome Powell warned about rising corporate
Total looks to sell stake in Kashagan. Total SA
(NYSE: TOT) is hoping to sell part
of its stake in the Kashagan oil field, the massive field in Kazakhstan. Total
has a 16.8 percent stake and is looking to raise $4 billion by selling a third
of its position. Kashagan was the world’s most expensive oil project.
Energy eyes Anadarko’s offshore assets. Talos Energy
(NYSE: TALO) is interested in
buying some of Anadarko Petroleum’s (NYSE: APC) deepwater
assets in the Gulf of Mexico.
Shell starts up Appomattox platform. Royal Dutch
Shell (NYSE: RDS.A) started up
its Appomattox platform in the Gulf of Mexico ahead of schedule. The project is
the only major platform expected to come online in the Gulf this year. It is
expected to produce 175,000 bpd.
Russian oil contamination not over. Russia
tried to quickly resolve the oil contamination problem through its Druzhba
pipeline but hit a setback this week. French oil company Total SA
(NYSE: TOT) saw its Leuna refinery damaged, and reportssuggest
it may have been linked to receiving contaminated oil. The largest-ever outage
to hit Russia may continue.
Oil volatility set to jump. Despite the series
of supply outages and the prospect of an escalating trade war, oil price
volatility had been rather subdued this year. That is, until this week. A new
report predicts that
the oil market is in for a “bumpy ride” in the second half of the year.
BP to look at frontier exploration. After
several years of pursuing more cautious tie-back projects offshore, BP (NYSE:
BP) said that
it was considering more ambitious frontier exploration. It’s a sign that the
oil majors are willing to take on greater risk once again, after several years
of stepping back.
Pipeline protestors push back. Texas became
the latest state to pass draconian punishments for protestors interrupting oil and gas pipeline
construction, measures intended to prevent a repeat of the Dakota Access
protests. However, the laws are now facing litigation.
U.S. gearing up to sanction Nord Stream 2. Bipartisan
momentum is building for
sanctions on companies that help build the Nord Stream 2 pipeline. The U.S.
views the pipeline as a geostrategic threat, hooking Europe on Russian gas. But
it would also impact U.S. LNG exporters, adding an extra impetus to lawmakers
to try to halt the pipeline.
Norway’s oil output falls to a three-decade low. Norway’s
oil production fell to
1.38 mb/d in April, down from 1.531 mb/d a year ago.
Energy storage in U.S. to double. U.S. energy
storage capacity is expected to doublethis
year to 712 megawatts, up from 376 MW last year.
Pioneer slashes 25 percent of its workforce. Pioneer
Natural Resources (NYSE: PXD) announced that
it was laying off 25 percent of its workforce, a move that could save it $100
Saudi Arabia to buy U.S. LNG. Saudi
Aramco agreed to
buy LNG from Sempra Energy’s (NYSE: SRE) Port
Arthur LNG project. Aramco may also take a 25 percent stake in the project. The
deal is a dramatic role reversal, with the U.S. sending energy to Saudi Arabia,
rather than the other way around.
Texas ranch sells for $450 million. Bloomberg reports on
how a remote Texas ranch is set to be sold for $450 million, all because of the
land’s water resources. Permian drillers are desperate for water, and industry
spending on water is set to jump from $11 billion last year to $18 billion by
Middle East oil suffers discount from IMO rules. Looming
IMO rules on sulfur fuels could push Middle East oil to a heavy discount. Dubai crude could fall to an $8-per-barrel discount to Brent, deeper
than the current $4 discount, according to Citi. High-sulfur fuels will fall
out of favor when the shipping rules take effect at the start of 2020.
1. 4.87bn Litres of
PMS Imported in Q1 2019 - NBS
2. Oil Markets In
Limbo After OPEC plus Meeting – OIR 210519
East Tensions Put Oil Markets On Edge – OIR 170519
4. 4 Geopolitical
Trends To Watch In 2019 - Oilprice.com
5. Sahara Energy,
Brooge Petroleum Partner To Build Up To 250,000bpd Refinery In Fujairah
6. Oil Jumps On
Middle East Tensions - OilPrice Intelligence Report
7. Average Prices
of PMS, AGO, HHK and Cooking Gas – April 2019
8. Shell Docked As
Nigerian Oil Community Wins Court Judgment in The UK
9. Oil Supply
Shortages Countered By Trade War – OIR 100519
10. Saudi Exports
Send Oil Prices Falling – OIR 070519
11. NNRC, Order
Paper Initiative, Others, Concerned Over Delays in Oil and Gas Reforms
12. Has The Oil
Rally Reached Its Limit? - OIR 030519
13. Oil Rebounds On Saudi Reassurances - OIR 300419
14. Oil Prices Crash As OPEC Prepares To Boost Supply -
15. Oil Hits 2019 High On Iran Sanctions – OIR 230419
16. Can Saudi Arabia Still Sway The Oil Market?
17. The Firm Floor Under Oil Prices - OIR 190419
18. Oil Bulls Undaunted By OPEC Fears - OIR 160419
19. Average Prices of PMS, AGO, HHK and Cooking Gas –
20. Oil Climbs For Sixth Straight Week - OIR 120419
21. GACN Issues Gas Purchase Order to Axxela and NGMC
Joint Mini LNG Project
22. Smart Money Is Piling Into Oil
23. Brent Breaks $70 On Libya Violence - OIR 090419
24. Oil Hits $70 On Libya Unrest, Crisis In Venezuela –
25. Sahara Group Canvasses Intra-Africa Solution for
Petroleum Sector Challenges
26. Axxela Now 100 Percent Owned by Helios
27. 5.32bn Litres of PMS Imported Into Nigeria in Q4 2018
28. Oil Hits 2019 High On Shale Slowdown - OIR 020419
29. Oil Breaks $60 As Bullish News Mounts - OIR 290319
30. Sahara Group Advocates Adoption of Uniform Petroleum
Products Standards in Africa
31. The World's Largest Oil Company And Petrochemical