Dear Member ,
Greetings from London.
In today’s newsletter, 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.
But before we get onto the
data please do take a moment to look at our premium service. If you find the weekly free letters of value then you
will get huge benefit from a premium membership. There is no risk to you as
the first 30 days are without charge so you can see if the service is right
for you at our expense. To find out more please click here.
Chart of the Week
For
more detailed numbers and oil market analysis start a free trial to Oilprice
Premium - Click here
• So much attention is paid to shale basins such as the
Bakken or Permian, but the lesser-known Utica Basin has seen production grow steadily over the past several
years.
• The Utica is mainly a source of natural gas production,
with more lucrative spots producing natural gas liquids. Monthly production
has increased from 0.1 billion cubic feet per day (Bcf/d) in December 2012 to
more than 3.5 Bcf/d in June 2016.
• The Utica only produces about 76,000 barrels of oil,
however. Natural gas production has leveled off as well.
Market Movers
• The Brazilian state-owned Petrobras could spend $6 billion on new oil platforms, and could solicit
offers beginning next year. The company announced a five-year spending plant
last week, lowering spending by 25 percent to $74 billion for 2017-2021.
• Noble
Energy (NYSE: NBL) says it has secured a deal with Jordan’s state-owned electric utility to export
natural gas from the giant Leviathan gas field in the Mediterranean. The
agreement could see Israel export 300 mcf/d of gas over 15 years to Jordan.
• TransCanada
(NYSE: TRP) announced its intention to purchase Columbia Pipeline Partners
(NYSE: CPPL), a deal worth roughly $848 million. The acquisition will give
TransCanada stakes in three regulated natural gas pipelines in the U.S., plus
an array of processing assets.
Tuesday September 27,
2016
All eyes are on Algeria this week where the International Energy Forum is
being held. But instead of the conference itself, the global oil markets are
anxiously awaiting the developments of an informal meeting to be held on the
sidelines of the Forum between OPEC and non-OPEC officials. At the time of
this writing, no deal had been announced, although there are some unconfirmed reports that Iran and Saudi Arabia are considering some sort of
limit on production. The proposal would call for Saudi Arabia cutting output
by several hundred thousand barrels per day if Iran froze production at 3.7
million barrels per day. Oil prices surged on Monday on hopes of a deal,
jumping more than 2 percent. However, in early trading on Tuesday, WTI and
Brent were back down by more than 2 percent as expectations of an agreement
began to fade. The result may not be known until Wednesday, but comments from Iran’s oil minister, saying that the talks were
simply “consultative,” seemed to dash hopes of any specific agreement. For
now, it appears that if anything is agreed to, it would only be the outlines
of a deal, which would make the official Nov. 30 summit in Vienna much more
important for finalizing the specifics.
Saudi Arabia appears
more desperate than Iran. For years, Iran wanted higher
oil prices while Saudi Arabia was satisfied letting other producers sweat.
But after two years of low oil prices, Saudi Arabia is under serious fiscal
pressure, an unfamiliar predicament in Riyadh. Saudi Arabia just announced that it would cut its ministers’ salaries by 20 percent
and slash benefits for government employees as the country pursues deeper
belt tightening. Meanwhile, Iran is seeing a resurgence in its economy after
the lifting of international sanctions and the return of supply. Saudi Arabia
has a massive budget hole equivalent to 13.5 percent of GDP, while Iran’s deficit
will only reach 2.5 percent of GDP. In other words, Saudi Arabia seems to be
more desperate than Iran for higher oil prices.
IEA reiterates bearish
forecast. On the sidelines of the energy conference in
Algiers, IEA’s executive director Fatih Birol said that the global surplus in crude oil will persist until
late 2017. Unless there is “major intervention,” Birol said, referring to
OPEC production cuts, "We don’t see the oil market re-balancing until
late 2017.” He sounded especially bearish on the demand side of the equation,
“demand is weak, weaker than many of us thought…about 0.8 million barrels per
day…less than 1 million barrels per day.” He went on to add that “supply is
coming strongly, especially from Middle East countries. And the stocks are
huge. As a result of that, we have lower oil prices with huge implications
for the next few years.”
China SPR a
“wildcard.” S&P Global says that the oil markets are facing a “wildcard” with the
potential slowdown of China’s oil imports as the country’s strategic
petroleum reserve system is filling up. OPEC could act to boost prices by
limiting output, but China could respond to the higher prices by cutting
imports, leaving the oil market no better off. Even if OPEC does nothing to
restrain oil exports, China may soon ratchet down imports because it no
longer needs to fill its SPR, at least with the same urgency as the past two
years. This presents a downside risk to the oil markets.
Goldman Sachs lowers
oil price forecast. Citing a larger supply surplus than
previously expected, Goldman Sachs lowered its fourth quarter oil price forecast from $50 to $43
per barrel.
Russia ramps up
unconventional drilling. Reuters reports that Russia’s Rosneft and Gazprom Neft are ratcheting up
their efforts to increase oil and gas production from unconventional sources.
By 2020, Russia hopes to source 11 percent of its output from unconventional
sources, up from 7 percent in 2016. The potential is enormous – government
officials estimate Russia has 88 billion barrels of unconventional oil
reserves, or about two-thirds of its total reserves. With much of Russia’s
current output coming from large but aging oilfields, there is increasing
pressure to expand into shale and other hard-to-reach oil reserves. The U.S.
and its western allies slapped sanctions on Russia back in 2014, focusing on
blocking the spread of shale drilling technology. But Russia is moving
forward anyway, or at least trying to.
Niger Delta Avengers
strike again. The fragile and short-lived ceasefire
between the Niger Delta Avengers and the Nigerian government seemed to come
to an end this weekend. The Avengers announced on their website that they struck the Bonny crude export
line on September 23. The militant group said that the “so-called dialogue
and negotiation process on the side of President Muhammadu Buhari and his
government” has been an “over dramatization.” The Avengers still favor
negotiation, but said there has been “no progress and no breakthrough.”
Nigerian government officials recently said that they brought back several
hundred thousand barrels per day of lost output to the market, with plans to
ramp up production with repaired infrastructure. A renewed bout of violence
threatens that objective.
Venezuela sweetens
pot on debt swap proposal. Venezuela’s PDVSA is hoping to
push off debt payments that soon fall due, but after the state-owned oil
company approached creditors with a proposal to spread out $7 billion worth
of near-term payments for payments over the course of several years,
investors balked. PDVSA increased its offer for payments made on bonds due in
2020 in exchange for payments maturing in 2017. Wall Street analysts,
according to Reuters, say the new offer could earn a better reception from
investors. If PDVSA succeeds in bringing investors on board, it could help
prevent a default.
Rice Energy to
purchase Vantage for $2.7 billion. Rice Energy (NYSE:
RICE) announced its decision to purchase the private company Vantage for
$2.7 billion, making Rice one of the largest shale gas drillers in the
Marcellus in Pennsylvania and Ohio.
We invite you to read several of the most recent articles we have published
which may be of interest to you:
Inside OPEC: What Does Each Member
Want?
OPEC’s Meeting: The Real Show Is On
The Sidelines
Oil And Gas Bankruptcies Set To
Double This Year
Where To Find Value In Today’s
Energy Markets
Tax Troubles Threaten Russia’s
Arctic Megaproject
The Presidential Debate: Clashing On
Energy
Oil Rises, Skepticism Too, As OPEC
Meets To Talk Output Deal
Only An OPEC Miracle Can Save
Venezuela
Why Oil Prices Will Rise More And
Sooner Than Most Believe
What If The Oil Rebound Never
Happens?
A Freeze Won’t Do – OPEC Needs To
Cut Production
Clean Energy Gets A Boost With
California Regulations
Energy Is At The Center Of Falling Productivity
Growth
That’s all from your midweek intelligence
report, we hope you enjoyed it and we´ll be back on Friday, with your latest
energy market update, industry intelligence and special report.
Best regards,
Evan Kelly
News Editor, Oilprice.com
P.S. – Uncertainty in the E&P patch has raised questions about the
valuation of certain shale companies. In his never ending quest for value in
the oil patch, veteran Trader Dan Dicker is looking into downstream players.
Dan mentions gasoline exports as a growth opportunity for big refiners. Find
out which companies have caught Dan’s eye by claiming your risk-free 30 day
trial to Oil and Energy Insider
|