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Last Updated: June 27, 2016
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  1. Global crude oil prices fell over Thursday and Friday, spilling into this week, as the UK’s Brexit decision to leave the European Union rocked financial and commodity markets worldwide; with the UK now dealing with more uncertainty over how or even if to proceed with the divorce, expect a bumpy road ahead.

  2. Saudi Arabia’s oil minister, Khalid Al-Falih, declared that ‘the oil glut is over’, with most interpreting the statement as the end to the kingdom’s attempt to wipe up US shale producers by raising production to keep prices low. Some 81 North American oil companies have gone bankrupt since the start of 2015, but Saudi Arabia has also taken a monetary hit. If this statement is followed by a scaling back of oil production, expect the oil markets to cheer and begin to beat a path to US$60/b.

  3. India has big ambitions for its eastern state of Assam, planning to raise oil and gas production there to 9.4 million metric tons of oil equivalent. All that oil will have to go somewhere, and India’s roadmap is to create a 5,000 km mega petroleum pipeline grid that would not only serve its north-eastern states, but also Bhutan, Bangladesh, Nepal, Myanmar and possibly even South-East Asia.

  4. Indonesia’s Pertamina is preparing to spend up to US$100 billion by 2030 to reach its target of 943 kb/d output target. Much of the focus is domestic – eyeing blocks of a production capacity of 35 kb/d and above held by private companies – but foreign investment is also being considered, particularly in Iran.

  5. The Kurdistan Regional Government, a semi-autonomous area of Iraq, is in talks with Iran on a pipeline deal that would transport Kurdish crude (and natural gas) across the border from Sulaimaniya and Kirkuk fields. Reports suggest that the volumes being look at are about 250 kb/d.

  6. The end of the April/May maintenance season in China has led to a boost in Chinese crude runs in June, with healthy refining margins also playing a factor. Sinopec, PetroChina and CNPC are all planning run rates of 80%, up from 75% in May, even as domestic petroleum demand appears to be slowing down.

  7. More Iranian deals ahead, this time in Central Asia. Iran and Kazakhstan are in talks to develop a joint oil refinery in Kazakhstan, using Kazakh crude. Offtake is earmarked to head to Iran, as the country attempts to balance its new-found popularity as a crude exporter with its own fuel hungry population.

  8. A fire broke out at the Petron oil refinery in Port Dickson, temporarily disrupting operations. Put out within hours, Petron is investigating the cause of the fire and has assured customers that there would be no supply disruptions.

  9. Growing demand for condensate in Asia, which yields the naphtha for petrochemicals production, is a boon for new condensate projects in Australia as Qatar and Iran both aim to scale back condensate exports in favour of domestic splitters. Australia’s Inchtys comes online next year, with 100 kb/d of output, with Gorgon and Angel already operational.

  10. Oil and gas exploration is one of the sectors earmarked to be opened to private investment in China, as part of the country’s bid to halt a worrying slide in investment growth. China will also attempt to encourage private investors by improving and providing more transparency in financing and market access, along with creating a more dynamic competitive environment.

  11. China’s CITIC and Japan’s Itochu are joining together to invest in oil and gas prices, aiming to capitalise on rising oil prices. The Chinese oilfield operator will collaborate with Itochu on identifying, acquiring and investing in E&P assets and projects worldwide.

  12. TransCanada is officially suing the United States government over the controversial Keystone XL oil pipeline, first supported in the US then cancelled by Barack Obama’s administration over environmental concerns. Keystone XL was to carry crude from Canada’s tar sands oil fields across to continental US to refineries in the Gulf of Mexico, with TransCanada seeking US$15 billion in compensation.

  13. While no new attacks in Nigeria occurred last week, with the country’s military ramping up operations, the Niger Delta Avengers have issued their over-arching demand – a referendum on Nigeria’s unity, aiming to break up the federation into as many as five separate countries; the separatist movement has been gaining in Nigeria, over complaints that the Niger Delta and south do not receive enough share of oil wealth.

  14. The US oil rig count dropped by 6 last week to 331, as worries over volatile oil prices snapped a three-week rise in the rig count. Gas rigs rose by 4, bringing the total operational rig count to 421.

  15. Plans to launch Nigeria’s first private oil refinery have been unveiled by Aliko Dangote, Africa’s richest man. The planned refinery has an optimistic start date of 2019, with capacity of 650kb/d and costing US$12 billion. It should help ease Nigeria’s chronic fuel shortages and expand the market in West Africa, with the idea of being the Africa equivalent of India’s Jamnagar refinery a long-term goal.

  16. Industrial action in France and high existing inventories have trimmed refinery appetite in Europe, with crude cargoes finding few buyers there; peak refinery utilisation comes in summer, but refiners are preferring to draw down stockpiles instead of importing fresh cargoes.

  17. International gas prices bucked the Brexit trend as the UK National Balancing Point prices rose in the wake of the referendum; being denominated in sterling, the sharp fall in the pound will have made natural gas cheaper for foreign buyers. The UK natural gas price is used as the reference mark for many gas traders, including in Asia. 

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September, 21 2019
Your Weekly Update: 16 - 20 September 2019

Market Watch  

Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices


Headlines of the week

Upstream

  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery

Midstream/Downstream

  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal
September, 20 2019
Financial Review: Second-Quarter 2019
Key findings
  • Brent crude oil daily average prices were 9% lower in second-quarter 2019 than in second-quarter 2018 and averaged $68 per barrel
  • The 117 companies in this study increased their combined liquids production 4.6% in second-quarter 2019 from second-quarter 2018, and their natural gas production increased 5.0% during the same period
  • Nearly half of the companies were free cash flow positive—that is, they generated more cash from operations than their capital expenditures
  • Dividends plus share repurchases were nearly one-third of cash from operations, slightly lower than the six-year high set in first-quarter 2019

Distributions to shareholders via dividends and share repurchases amounted to nearly 33% of cash from operations


See entire second-quarter review

September, 20 2019