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Oil prices hit $50 a barrel on Thursday for the first time in seven months, then bounced below that level and settled lower on the day as investors worried robust price gains could encourage more output and add to the global glut.

Wildfires in Canada’s oil sands, unrest in the Nigerian and Libyan energy sectors, and a near economic meltdown in OPEC member Venezuela have knocked out nearly 4 million barrels per day in immediate production, sparking a buying frenzy in crude futures.

Brent and U.S. crude’s West Texas Intermediate (WTI) futures have risen nearly 90 percent from 12-year lows hit this winter. They have recouped about half of what they lost since mid-2014 when both traded at above $100 a barrel.

A climb above $50 per barrel could spur producers, particularly U.S. shale drillers, to revive scrapped operations, which could bloat supplies and trigger a new selloff, analysts said.

“We are viewing current risk/reward ratios as unfavorable toward new longs at current levels,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates, who cites a potential drop of Brent to $47.50.

Brent LCOc1 surged as high as $50.51, its highest since early November, then retreated and settled down 15 cents at $49.59 a barrel.

WTI CLc1 fell 8 cents to settle at $49.48, after reaching $50.21, its highest since early October.

U.S. crude for the balance of 2016 CLBALst remained above $50 while the calendar strip for 2017 CLYstc1 was above $51.

“I am maintaining my oil view at neutral with a short term bias to the upside,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The global surplus still exists and there is still a possibility that oil prices could retrace further.”

But he conceded that crude was trading “more and more in sync with the forward looking or perception view with the overall bearish fundamentals mostly priced into the market as production issues offset any short term negativity”.

Adding to outage concerns, a source at Chevron Corp (CVX.N) said the producer’s activities in Nigeria had been “grounded” by a militant attack, worsening a situation that had already restricted hundreds of thousands of barrels from reaching the market.

Investors will watch next month’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) for signs of an output hike.

“The bigger risk is that following the meeting, (the) Saudis will increase production to meet rising summer domestic demand, to preserve market share in its oil wars with Iran and Iraq,” David Hufton, head of PVM Oil brokers, said. Source.

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Your Weekly Update: 11 - 15 March 2019

Market Watch

Headline crude prices for the week beginning 11 March 2019 – Brent: US$66/b; WTI: US$56/b

  • Global crude oil prices continue to remain rangebound despite bearish factors emerging
  • News that Libya was restarting its 300,000 b/d Sharara field could weaken the ability of OPEC to control supply, while a report from the US EIA hints that the market was moving into a glut
  • The EIA report showed that commercial crude inventories in the US rose by 7.1 million barrels, far higher than the 1.6 million barrel increase predicted, with a 873,000 barrel increase at Cushing and a 12% y-o-y drop in crude imports
  • By the end of 2019, with American output surging and Saudi Arabia curtailing production, the US could export more oil and liquids than the world’s largest exporter
  • Meanwhile in OPEC, PDVSA has received some aid from Russia with Rosneft agreeing to send heavy naphtha to Venezuela – a product necessary to thin heavy Venezuela crude to move by pipeline to the coast that have been affected by the American sanctions
  • On the demand side, Morgan Stanley has predicted that China’s oil consumption will peak in 2025, some 5-8 years earlier than most expectations, driven by a shift in cars towards electric vehicles and high-speed rail
  • The US active rig count fell for a third consecutive week, following a 9 rig fall with an 11 rig drop last week, with nine oil sites and two gas sites scrapped
  • Despite the bearish factors, it looks like crude has found a new comfortable range with Brent at US$65-67/b and WTI at US$56-58/b for the week


Headlines of the week

Upstream

  • Despite security concerns, Libya has restarted its largest oil field, with output at 300,000 b/d Sharara expected to reach 80,000 b/d initially, throwing a new spanner in the OPEC goal of controlling supply
  • A one-year delay to Enbridge’s Line 3 conduit in Canada due to regulatory issues has thrown new troubles onto Alberta’s beleaguered crude industry
  • ExxonMobil is planning a major acceleration of its Permian assets, aiming to produce more than 1 mmboe/d by 2024, an increase of nearly 80%
  • China has announced plans to form a national oil and pipeline company, part of a natural energy industry overhaul that will give the new firm control over at least 112,000 km of oil, gas and fuel pipelines currently held by other state firms
  • Equinor, with Petoro, ConocoPhillips and Repsol, have announced a new oil discovery in the North Sea, with the Telesto well on the Visund A platform potentially yielding 12-28 million barrels of recoverable oil
  • Aker Energy has reported a new oil discovery at the Pecan South-1A well offshore Ghana, with the Pecan field expected to hold 450-550 mboe of oil
  • Production declines at Kazakhstan’s three main oil fields will see the country slash crude exports by 2% to 71 million tons this year, with cuts mostly to China

Midstream & Downstream

  • Canadian Natural Resources is looking to ease pressure on the Alberta crude complex by bringing its 80 kb/d North West Redwater refinery online this year
  • Work has begun on the upgrade and expansion of Egypt’s Middle East Oil Refinery near Alexandria, with the project expected to boost capacity to 160 kb/d and quality to Euro V through the installation of a new CDU and VDU
  • Bahrain’s BAPCO has announced plans to expand its Sitra oil refinery by early 2023, growing capacity from 267 kb/d to 360 kb/d

Natural Gas/LNG

  • India has started up its first LNG regasification facility on the east coast, with the Ennore terminal expected to service the major cities of Chennai and Madurai
  • Total has signed an agreement with Russia’s Novatek for the formal acquisition of a 10% stake in the Arctic LNG 2 project, bringing its total economic interest in the 19.8 mtpa project in the Yamal and Gydan peninsuals to 21.6%
  • Thailand’s PTTEP has announced a new offshore gas find in Australia’s portion of the Timor Sea, with the Orchid-1 well striking gas and expected to be incorporated into the Cash-Maple field with 3.5 tcf of resources
  • Crescent Petroleum and Dana Gas’s joint venture Pearl Petroleum Company is aiming to boost gas production at Khor Mor block in Iraq’s Kurdistan region by 63% with an additional 250 mmscf/d of output
  • Petronas’ 1.2 mtpa PFLNG Satu – the world’s first floating LNG vessel – has completed its stint at the Kanowit field and will now head to its second destination, the Kebabangan gas field offshore Sabah
  • Chevron is looking to revisit its Ubon wet gas project in Thailand after a period of hiatus as the supermajor recalibrated its development costs
  • Nigeria’s NLNG Train 7 LNG project is expected to reach FID in the third quarter of the year after multiple delays
  • ExxonMobil and BP have agreed to collaborate with the Alaska Gasline Development Corporation to advance the Alaska LNG project
  • Energean Oil and Gas has started its 2019 drilling programme in Israel, focusing on four wells, including one in Karish North near the Karish discovery
March, 15 2019
Latest issue of GEO ExPro magazine covers New Technologies and Training Geoscientists, with a geographical focus on Australasia and South East Asia

GEO ExPro Vol. 16, No. 1 was published on 4th March 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focuses on new technologies available to the oil and gas industry and how they can be adapted to improve hydrocarbon exploration workflows and understanding around the world. The latest issue of GEO ExPro magazine also covers current training methods for educating geoscientists, with articles highlighting the essential pre-drill ‘toolbox’ and how we can harness virtual reality to bring world class geological locations to the classroom.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

Download GEO ExPro Vol. 16, No. 1

March, 14 2019
Norway’s Retreat in Oil Investments – Politics or Economics?

In 2017, Norway’s Government Pension Fund Global – also known as the Oil Fund – proposed a complete divestment of oil and gas shares from its massive portfolio. Last week, the Norwegian government partially approved that request, allowing the Fund to exclude 134 upstream companies from the wealth fund. Players like Anadarko Petroleum, Chesapeake Energy, CNOOC, Premier Oil, Soco International and Tullow Oil will now no longer receive any investment from the Fund. That might seem like an inconsequential move, but it isn’t. With over US$1 trillion in assets – the Fund is the largest sovereign wealth fund in the world – it is a major market-shifting move.

Estimates suggest that the government directive will require the Oil Fund to sell some US$7.5 billion in stocks over an undefined period. Shares in the affected companies plunged after the announcement. The reaction is understandable. The Oil Fund holds over 1.3% of all global stocks and shares, including 2.3% of all European stocks. It holds stakes as large as of 2.4% of Royal Dutch Shell and 2.3% of BP, and has long been seen as a major investor and stabilising force in the energy sector.

It is this impression that the Fund is trying to change. Established in 1990 to invest surplus revenues of the booming Norwegian petroleum sector, prudent management has seen its value grow to some US$200,000 per Norwegian citizen today. Its value exceeds all other sovereign wealth funds, including those of China and Singapore. Energy shares – specifically oil and gas firms – have long been a major target for investment due to high returns and bumper dividends. But in 2017, the Fund recommended phasing out oil exploration from its ‘investment universe’. At the time, this was interpreted as yielding to pressure from environmental lobbies, but the Fund has made it clear that the move is for economic reasons.

Put simply, the Fund wants to move away from ‘putting all its eggs in one basket’. Income from Norway’s vast upstream industry – it is the largest producing country in Western Europe – funds the country’s welfare state and pays into the Fund. It has ethical standards – avoiding, for example, investment in tobacco firms – but has concluded that devoting a significant amount of its assets to oil and gas savings presents a double risk. During the good times, when crude prices are high and energy stocks booming, it is a boon. But during a downturn or a crash, it is a major risk. With typical Scandinavian restraint and prudence, the Fund has decided that it is best to minimise that risk by pouring its money into areas that run counter-cyclical to the energy industry.

However, the retreat is just partial. Exempt from the divestment will be oil and gas firms with significant renewable energy divisions – which include supermajors like Shell, BP and Total. This is touted as allowing the Fund to ride the crest of the renewable energy wave, but also manages to neatly fit into the image that Norway wants to project: balancing a major industry with being a responsible environmental steward. It’s the same reason why Equinor – in which the Fund holds a 67% stake – changed its name from Statoil, to project a broader spectrum of business away from oil into emerging energies like wind and solar. Because, as the Fund’s objective states, one day the oil will run out. But its value will carry on for future generations.

The Norway Oil Fund in a Nutshell

  • Valued at NOK8.866 trillion/US$1.024 trillion (February 2019)
  • Invested in 9,138 companies in over 73 countries
  • Holds 1.3% of all global stocks
  • Holds 2.3% of all European stocks
  • Holds 2.4% of Shell, 2.3% of BP
March, 13 2019