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Last Updated: November 22, 2017
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Market Watch

Headline crude prices for the week beginning 20 November 2018 – Brent: US$62/b; WTI: US$56/b

  • Mixed signals out of OPEC. Saudi Arabia says ‘too early to make assessment’ on extending oil output cuts, while Iran says majority of OPEC members support extending supply freeze
  • Decision on extending cuts beyond March 30, 2018 expected at OPEC Vienna meeting next week on November 30. Pact with NOPEC group (Russia and 9 other Non-OPEC countries) likely to continue
  • OPEC admits market ‘will not be balanced’ by March 2018 and expects supply deficit to increase next year on stronger-than-expected demand
  • Active US rig count up by 8, all gas-producing sites in Texas and Louisiana
  • Part of TransCanada’s Keystone pipeline shut after leak in South Dakota, but no impact on Nebraska’s approval of Keystone XL pipeline route
  • US EIA data points to growth in domestic crude and gasoline inventories, while US oil output hit a record 9.65 mmb/d last week
  • International Energy Agency expects the US to account for more than 80% of world crude supply growth through 2027
  • Norway’s US$1 trillion sovereign well fund proposes US$35 billion sell-off in oil and gas stocks, including ExxonMobil and Shell, rattling long-term confidence in the oil sector
  • Dollar gains against the Euro, as Angela Merkel’s talks to form the next German government fail, hitting commodities
  • Singapore onshore oil product stocks continue to swell, with light distillates up by 8.6% to 11.6 million barrels, placing pressure on Asian gasoline and naphtha prices
  • China raised retail gasoline prices on 18 November, the 10th increase in 2017 and second in November. Retail prices of gasoline up by CNY265 (US$40) per ton, diesel up by CNY250 (US$38) per ton
  • Crude price outlook: Crude prices likely to trend downwards over the week to US$60/b (Brent) and US$54/b (WTI) on rising American output and fretting over OPEC deal. Prices to stay rangebound until November 30 when clarity is expected on OPEC’s position. 


Headlines of the week

Upstream

  • After regaining the Bai Hasan and Avana oilfields from Kurdish regional government, Iraq plans to increase output in Kirkuk to 1 mmb/d, as negotiations with Turkey on the Kirkuk-Ceyhan pipeline continue
  • Murphy Oil strikes oil at the CM-1X well in its Block 15-1/05 in the Nam Con Son basin, the firm’s second oil discovery after CT-1X this year
  • Following lifting of US sanctions last month, Sudan has begun dialogue with Lukoil and several US/Canadian companies to develop its onshore oil industry, as well as natural gas projects in the Red Sea
  • Eni has signed a new PSC for offshore Block 52 in Oman, holding a 85% stake, in partnership with Oman Oil Company Exploration and Production

Downstream

  • Oman Oil Company has begun preliminary financial negotiations to back its planned 230 kb/d Duqm refinery, a joint venture with KPI
  • Saudi Arabia announced initial plans to build a refinery in Egypt, after serving as Egypt’s main oil product supplier since 2016
  • Petrobras is opening early discussions with China’s CNPC over the latter’s participation in reviving the stalled 165kb/d COMPERJ refinery and petrochemical project in Rio de Janeiro

Natural Gas/LNG

  • Anadarko’s Mozambique LNG project is approved by the government, as it signs a 20-year contract with Thailand’s PTT to supply 2.6 mtpa of LNG
  • Ahead planned March 2018 start of Ichthys, Japan’s Inpex awarded 100% exploration permit for Block WA-532-P in Western Australia, near Ichthys
  • Russia and Saudi Arabia have opened up talks on Saudi Aramco potentially collaborating in Novatek’s Arctic LNG 2 project, after PetroChina parent CNPC and China Development Bank bought in
  • Sinopec and China’s sovereign wealth fund sign up for 20 mtpa Alaska LNG export terminal project, par of a second wave of US LNG projects
  • China’s POLY-GCL Petroleum Group signs US$4 billion MoU with Djibouti for a natural gas project, comprising pipeline, liquefaction plant and export terminal in Damerjog. Gas to be transported from Ethiopia (12 bcm capacity), with LNG target capacity at an initial 3 mtpa in 2020
  • Egypt optimistic that it can halt all LNG imports by end-2018 and begin gas exports in 2019 as Zohr field begins producing at initial 350 mcf/d; Rosneft acquired almost 30% of the Eni-led Zohr in October, and announced plans to invest over US$2 billion through 2021 and possibly increase its stake to 35%
  • Premier UK is seeking to sell of a 25% stake in Indonesia’s Tuna gas field from its 65% stake to fund development. Output is expected to start in 2022, with Premier Oil having reached a deal to sell Tuna gas to Vietnam via a cross-border pipeline connection to Nam Con Son system

Corporate

  • Australia’s Santos Energy is now part of a bidding war, after a A$9.5 billion takeover from Harbour Energy was rejected, triggering further bids and an improved all-cash A$11 billion offer from Harbour
  • A law firm survey reveals that offshore service companies dominated North American energy industry bankruptcies in 2017, with 44 firms filing for bankruptcy owing US$24.8 billion

BP became the first major European energy firm to start a share buyback programme since 2014, a sign that years of austerity have paid off

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November, 15 2018
Your Weekly Update: 12 - 16 November 2018

Market Watch

Headline crude prices for the week beginning 12 November 2018 – Brent: US$71/b; WTI: US$60/b

  • Crude prices continue their retreat from recent highs, as a bear market engulfed sentiment last week over fears of oversupply from frantic OPEC+ pumping offsetting the loss of Iranian crude volumes, which itself was mitigated by the US handing out waivers to eight key crude importers
  • After stating that OPEC was in a ‘pump as much as you can’ mode, the quick fall in prices has caused alarm across the cartel, with Saudi Arabia reversing gear to curb its exports by 500,000 b/d in December to shore up prices
  • With the OPEC meeting in Vienna imminent, it is possible that a new output cut agreement could be reached within OPEC+, to counter an oversupply situation stemming from declining demand, as well as surging US shale production – which will rise to a record 7.94 mmb/d across seven major shale basins in December, according to the EIA
  • However, beyond Saudi Arabia, there is not much appetite within the OPEC+ alliance to reduce output, with Iraq happy with its record production and Russia dismissing the oversupply situation as a ‘seasonal glitch’
  • Saudi Arabia’s plan to cut its oil production was criticised by US President Donald Trump, stung by losses in midterm elections that Trump chalks up to, in part, high fuel prices
  • News that Saudi Arabia was researching the topic of breaking up OPEC rattled the markets, but the Kingdom moved to quash rumours as Aramco raised the pricing for its medium and heavy crudes sold to Asia
  • Despite this, trends have turned bearish for crude prices over this week, propelled by large jumps in US crude output and worries over a global economic slowdown, particularly in China; Brent and WTI fell by over US$4/b on Tuesday alone, falling below the US$70/b and US$60/b levels again
  • After several weeks of caution, US drillers added 14 new rigs this week – up by 12 oil rigs and 2 gas rigs to 1,081 in total – with the most gains once again coming from the prolific Permian Basin
  • Crude price outlook: After the large drop on Tuesday, crude prices appear to have stabilised somewhat around the US$65-66/b level for Brent and the US$55-56/b level for WTI


Headlines of the week

Upstream

  • Another setback for TransCanada’s beleaguered Keystone XL pipeline, as a judge in Montana halted the project over two lawsuits filed asserting that its environmental impact assessment required further review
  • Phillips 66 and Bridger Pipeline are launching two new crude pipelines connecting Rockies and Bakken oil to the Texas Gulf Coast; the Liberty Pipeline will carry 350 kb/d from Bakken/Rockies to Corpus Christi, while the 400 kb/d Red Oak Pipeline connects Corpus Christi to Houston
  • Magellan Midstream Partners is looking to build a new pipeline connecting Cushing to Houston, with the 250 kb/d Voyager pipeline targeted at end-2020
  • The Kurdistan Regional Government in Iraq has increased capacity of its oil pipeline from Kirkuk to Ceyhan, Turkey, from 700,000 b/d to 1 mmb/d
  • After previously fleeing from Canadian oil sands, ExxonMobil is investing again, with its Imperial Oil unit earmarking some US$2 billion for the new Aspen project in northern Alberta
  • Senrica Energy continues its buying spree in the North Sea, acquiring Marubeni Oil & Gas’ 3.75% and 8.33% interest in the Bruce and Keith fields
  • ADNOC is implementing a comprehensive hydrocarbons strategy that will increase its crude output capacity to 4 mmb/d by 2020 and 5 mmb/d by 2030
  • Croatia has launched the country’s second onshore licensing round, offering seven blocks in the prolific Pannonian basin
  • Eni and Lukoil have signed a farm-out deal, transferring participating interests in three shallow-water offshore Mexican licenses, including Area 10, 12 and 14
  • Buoyed by recent gas successes, Israel has announced its second offshore licensing round, offering up 19 blocks in its southern waters
  • Senegal is overhauling its own code, with plans to raise royalties and have the state take a bigger stake in projects after a string of major discoveries
  • CNOOC is kickstarting a development drive aimed at eking out additional volumes from several marginal fields in Bohai Bay and the South China Sea

Downstream

  • Nigeria’s ambitious overhaul of its state-owned refineries has been pushed back to end-2019 over slow progress in NNPC’s attempt to seek joint financing
  • NNPC is looking to sign crude-for-product swap deals with Shell and ExxonMobil, after signing one with BP, to acquire crude for its refineries
  • France is pushing ahead with its attempt to introduce a new fuel tax, despite a series of major blockades and protests planned to oppose the measure

Natural Gas/LNG

  • Total and Sempra Energy have signed a new MoU on LNG cooperation, covering the Cameron LNG in Louisiana, USA and Energía Costa Azul in Baja California, Mexico, with Total potentially taking up to 9 mtpa of LNG for its global portfolio from both projects
  • Cuadrilla has had first shale gas flow at its exploration well in the UK’s Preston New Road site, sparking optimism for the commercialisation of Bowland Shale
  • Croatia has picked Golar Power to deliver an FSRU for a planned floating LNG terminal in the northern Adriatic Sea
  • Tellurian confirms that construction on its Driftwood LNG terminal Louisiana will begin in 2H2019, which operations planned to begin in 2023
  • Japan’s Toshiba Corp is exiting the US LNG business, selling off its assets to China’s ENN Ecological Holdings for over US$800 million
November, 15 2018