After five weeks of being whiplashed by financial market fears, crude reconnected with its own fundamentals over March 12-16, only to become locked in a narrow price band, with WTI anchored at $60/barrel and Brent at $65. Predictions of ballooning non-OPEC oil supplies were counter-balanced by reiterations of confidence in strong global oil demand growth this year, depriving the market of any incentive to either go long or short.
The limbo could prove to be short-lived. As the week came to a close, Iran and the fate of its nuclear deal had moved to the top of news headlines. The sudden departure of Rex Tillerson, a moderate on Iran, and his replacement as US secretary of state by the more hawkish CIA director Mike Pompeo, could precipitate a clash between the two countries over the 2015 multilateral nuclear deal. The fate of the Iran nuclear deal is now a cliffhanger and likely to inject a fear premium in crude over the coming weeks.
Meanwhile, anxiety over the possible outbreak of trade wars, especially between the US and China, as well as the US and its partners in the precarious North American Free Trade Agreement — Canada and Mexico — could continue to rattle the financial markets. The fears come on top of lingering uncertainty over the course of US inflation rates and monetary policy. The Federal Reserve is widely expected to raise interest rates by a quarter of a percentage point at its next meeting March 20-21.
Myriad concerns rippling through the financial markets since the start of February ultimately converge to hang a question-mark over the presumed strong and synchronous global economic growth this year. They have rattled equity markets across the world and are likely to continue buffeting crude as well. A deceleration in the global economic growth would not bode well for the health of oil demand.
The oil market’s focus this week was primarily on OECD inventory data and outlook for global oil supply and demand balances. The closely-watched monthly oil market reports from OPEC and the International Energy Agency released on Wednesday and Thursday respectively were remarkably similar in tone and almost evenly split between the bullish and bearish elements on the horizon. The weekly US stocks data also pulled market sentiment in opposite directions, showing a major build in crude inventories and a plunge in gasoline and distillate stocks for the week ended March 9.
The OPEC and IEA reports lent further credence to expectations of a shale renaissance in 2018, given their projections of US crude production vaulting by 1 million b/d or more this year, way higher than the growth recorded in 2017. The market is once again paying attention to the weekly US rig count data after mostly ignoring it through the latter half of last year, once the shale growth trajectory had become clear. The rig numbers are not a good proxy for US crude production rates, but a useful input for market participants continuously trying to assess or validate their assessment of shale’s growth.
Unfortunately, the rig count is also not telling a coherent story yet. Baker Hughes reported a drop of four in the number of oil rigs operating in the US in the week ended March 9 to a total of 796, reversing six successive weeks of increases, and leaving the market guessing on what the trend might be.
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Malaysia has the fourth largest oil and gas reserve in Southeast Asia and produces a whopping 30,000 megawatts of energy per year. The country continues to be hopeful about the prospects of its oil & gas industry and expects it to contribute meaningfully towards the growth of its economy. But then again, what does it mean for the employees who are working in the industry or plan to enter it? Is it a profitable industry in terms of salary growth and expectations? Let’s figure out what the industry holds for its employees and job seekers of oil and gas jobs in Malaysia.
What does the number say?
The best way to analyze the oil and gas job sector is to look at the recent studies and research conducted, which can give a substantial view into the future of the industry. As per the statistics department, Malaysia saw 8.1% growth in the salary in 2017 amounting to RM 2880 as compared to 2016, in which the average salary recorded was RM 2657. Additionally, the chief statistician of the department, Datuk Seri Dr Mohd Uzir Mahidin, said that an increase in the mean monthly salary and also the wages are in sync with the country’s economic performance. Even the exports indicated to grow by 20.3% which amounts to RM935.5bil. He made these observations based on the results of Salaries and Wages Survey 2017 of oil and gas professionals and entry-level oil and gas job seekers.
What the number means for prospects of oil and gas salary in Malaysia
If the above data is viewed on a sectoral basis, then the mining and quarrying sector indicated the highest monthly salaries as well as wages, which amounted to a mean of RM5,709 and a median of RM3,700.
Datuk Seri Dr Mohd Uzir Mahidin, further added that capital-intensive industries like the oil and gas, which is a major part of mining and quarrying sector, employs professionals, who are highly skilled and hence a bigger paycheck and higher mean and median salary.
The observation made by the chief statistician gets further backing by an online job site’s employment index. Although, it shows a decrease of 11% in May 2018 for the hiring activities in comparison to the previous year. However, it pointed towards a steep growth in the Oil & Gas sector. The hiring activity went up by 14% year-on-year in May 2018.
What can be the salary expectations for energy professionals?
The above studies and research indicate a positive outlook for both upstream and downstream players of this sector. However, it is important to note that a lot of factors help to determine your salary potential, which includes: education, years of experience, expertise, work ethics, job location, skill set and so on.
As per payscale.com, a Petroleum Engineer can earn on an average RM 104,343 per year. Which means an average salary of RM 99,803 with an estimated average bonus of RM 22,500 and profit sharing of RM 5120. Your experience and education play a major role in determining your salary. Similarly, in oil and gas industry, the average salary of a mechanical engineer amounts to RM 72,000 whereas the average salary of Account is RM 82,248 and for Project Engineer is RM 57,000 while a sales manager has the potential of RM 120,000.
Since the industry prefers professionals with high-level skills in the respective areas, it is advisable to enhance your overall employability factors to enjoy higher compensation and perks. And also use oil and gas professional networks to your advantage in getting the desired contacts and opportunities.
Headline crude prices for the week beginning 13 August 2018 – Brent: US$72/b; WTI: US$67/b
Headlines of the week
Source: U.S. Energy Information Administration, Weekly Petroleum Status Report
For the week ending July 6, 2018, the four-week average of U.S. gross refinery inputs surpassed 18 million barrels per day (b/d) for the first time on record. U.S. refineries are running at record levels in response to robust domestic and international demand for motor gasoline and distillate fuel oil.
Before the most recent increases in refinery runs, the last time the four-week average of U.S. gross refinery inputs approached 18 million b/d was the week of August 25, 2017. Hurricane Harvey made landfall the following week, resulting in widespread refinery closures and shutdowns along the U.S. Gulf Coast.
Despite record-high inputs, refinery utilization as a percentage of capacity has not surpassed the record set in 1998. Rather than higher utilization, refinery runs have increased with increased refinery capacity. U.S. refinery capacity increased by 862,000 barrels per calendar day (b/cd) between January 1, 2011, and January 1, 2018.
The record-high U.S. input levels are driven in large part by refinery operations in the Gulf Coast and Midwest regions, the Petroleum Administration for Defense Districts (PADDs) with the most refinery capacity in the country. The Gulf Coast (PADD 3) has more than half of all U.S. refinery capacity and reached a new record input level the same week as the record-high overall U.S. capacity, with four-week average gross refinery inputs of 9.5 million b/d for the week ending July 6. The Midwest (PADD 2) has the second-highest refinery capacity, and the four-week average gross refinery inputs reached a record-high 4.1 million b/d for the week ending June 1.
U.S. refineries are responding currently to high demand for petroleum products, specifically motor gasoline and distillate. The four-week average of finished motor gasoline product supplied—EIA’s proxy measure of U.S. consumption—typically hits the highest level of the year in August. Weekly data for this summer to date suggest that this year’s peak in finished motor gasoline product supplied is likely to match that of 2016 and 2017, the two highest years on record, at 9.8 million b/d. The four-week average of finished motor gasoline product supplied for the week ending August 3, 2018, was at 9.7 million b/d.
U.S. distillate consumption, again measured as product supplied, is also relatively high, averaging 4.0 million b/d for the past four weeks, 64,000 b/d lower than the five-year average level for this time of year. In addition to relatively strong domestic distillate consumption, U.S. exports of distillate have continued to increase, reaching a four-week average of 1.2 million b/d as of August 3, 2018. For the week ending August 3, 2018, the four-week average of U.S. distillate product supplied plus exports reached 5.2 million b/d.
In its August Short-Term Energy Outlook (STEO), EIA forecasts that U.S. refinery runs will average 16.9 million b/d and 17.0 million b/d in 2018 and 2019, respectively. If achieved, both would be new record highs, surpassing the 2017 annual average of 16.6 million b/d.