NrgEdge Editor

Sharing content and articles for users
Last Updated: August 3, 2018
1 view
Business Trends
image

Market Watch

Headline crude prices for the week beginning 30 July 2018 – Brent: US$75/b; WTI: US$70/b

  • Supply concerns continue to weigh on global crude oil prices, but there is immediate relief on the horizon as production within OPEC rose by 70,000 b/d in July according to a Reuters survey – a high for 2018.
  • The WTI discount to Brent tightened as news filters out that the Syncrude facility outage in Canada may not be solved as quickly as hoped, which will translate to reduced oil flows in the Cushing, OK hub.
  • American numbers appear particularly tight, with US inventories near three-year lows last week and crude stocks at Cushing dropping to 23.7 million barrels, the lowest level since November 2014.
  • While supply continues to be a concern for 2018, the long-term supply outlook by analysts at Rystad Energy reveal that global discovered resources increased by 30% in 1H18, led by discoveries in Guyana, while oil majors are on pace to approve US$37 billion in upstream projects for the year.
  • Nevertheless, there is still the risk of disruption, with Total workers in the North Sea going on a 12-hour strike on July 30, while Saudi Arabia halted oil shipments in the Bab el-Mandeb Strait in the Red Sea as two of its tankers were attacked by Houthi militants from Yemen.
  • Wider concerns continue to hover too, as the US vacillates over its trade position, moving from negotiations to thaw relations with China over trade to threatening to up its tariffs from 10% to 25% on US$200 billion worth of Chinese imports currently under consideration by the administration.
  • US drillers, however, reversed three weeks of decline as three new oil rigs were started, offsetting a loss of one gas rig for a net gain of two.
  • Crude price outlook: Immediate supply concerns are ebbing as increased supply comes from OPEC+ countries, including Saudi Arabia, Russia and Iraq, but threat of disruptions and impending Iranian sanctions will keep prices in the US$72-75 range for Brent and the US$67-69 range for WTI.

Headlines of the week

Upstream

  • ExxonMobil has increased its estimate of recoverable resources from the Stabroek block offshore Guyana to more than 4 billion barrels of oil equivalent, up from 3.2 Bboe, while project costs are also expected to rise by a quarter given that the project might require up to 5 FPSOs.
  • The Kaombo offshore project, the largest in Angola, has started production, with Total’s Kaombo Norte FPSO unit brought onstream with a 115,000 b/d capacity, while the second FPSO Kaombo Sui is due next year.
  • BP has emerged as the winner of BHP Billiton’s onshore American assets, purchasing the latter’s interests in the Eagle Ford, Haynesville, Permian and Fayetteville oil and gas assets for US$10.8 billion.
  • Iran has become the second-largest supplier of oil to Indian state refiners in Q218, attracted by steep discounts as it stocks up before the sanctions kick in.
  • Total’s attempt to develop two oil blocks in South Sudan since 2013 has now been called off by the government, paving the way for other bidders to come in for the B1 and B2 blocks.
  • Mexican President-elect Andres Manuel Lopez Obrador has pledged to increase the country’s crude output from the current 1.9 mmb/d to 2.5 mmb/d, as well as revamp its existing six refineries and build a new one in Dos Bocas.
  • Russia is preparing the most sweeping shakeup of its oil tax system since 1999, which will allow producers to export crude and oil products duty free while raising wellhead costs in an attempt to revitalise the Russian economy.

Downstream

  • Not content with aiming for a B30 biodiesel mandate by 2019, Indonesia is now planning to implement its B20 across all gasoil sectors – including mining, marine, rail and non-subsidised diesel – as well as trialling a unique B100 palm oil-based ‘green diesel’ which could hit the market by 2022.
  • With PDVSA increasingly seen as unreliable, the Isla refinery in Curacao is speaking to at least 15 companies to temporarily operate the 335,000 bd Caribbean refinery, hoping to have one in place by September.
  • Algeria’s Sonatrach is reportedly looking to start up a trading joint venture, speaking with oil majors as it looks to purchase its first overseas refinery.
  • ExxonMobil has officially started production at its new ethane cracker in Baytown, Texas, part of its comprehensive ‘Growing the Gulf’ initiative.

Natural Gas/LNG

  • The US Energy Department has implemented faster approval of small-scale LNG and natural gas exports with an upper limit of 51.75 bcf/y of natural gas, targeting markets in the Caribbean, Central and South America.
  • Venice Energy, set up by former BHP Billiton executives, has joined two other proposed LNG import projects in East Australia, looking to fill a growing supply gap through an FSRU project in Port Adelaide by 2020.
  • Egypt is proving to be a hotbed of discoveries in 2018, with SDX Energy reporting a new gas discovery at the onshore SD-3X well in South Disouq.

Corporate

  • Russian petchems giant Sibur is preparing for an IPO that could potentially value the company at US$2-3 billion across bourses in Moscow and London.
  • Rosneft and ExxonMobil are heading for a legal clash, as the Russian behemoth is claiming US$1.41 billion in ‘unjust enrichment’ in Sakhalin-1.

oil and gas oil and gas news news weekly update market watch market trends latest oil and gas trends
3
0 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

Renewables became the second-most prevalent U.S. electricity source in 2020

In 2020, renewable energy sources (including wind, hydroelectric, solar, biomass, and geothermal energy) generated a record 834 billion kilowatthours (kWh) of electricity, or about 21% of all the electricity generated in the United States. Only natural gas (1,617 billion kWh) produced more electricity than renewables in the United States in 2020. Renewables surpassed both nuclear (790 billion kWh) and coal (774 billion kWh) for the first time on record. This outcome in 2020 was due mostly to significantly less coal use in U.S. electricity generation and steadily increased use of wind and solar.

In 2020, U.S. electricity generation from coal in all sectors declined 20% from 2019, while renewables, including small-scale solar, increased 9%. Wind, currently the most prevalent source of renewable electricity in the United States, grew 14% in 2020 from 2019. Utility-scale solar generation (from projects greater than 1 megawatt) increased 26%, and small-scale solar, such as grid-connected rooftop solar panels, increased 19%.

Coal-fired electricity generation in the United States peaked at 2,016 billion kWh in 2007 and much of that capacity has been replaced by or converted to natural gas-fired generation since then. Coal was the largest source of electricity in the United States until 2016, and 2020 was the first year that more electricity was generated by renewables and by nuclear power than by coal (according to our data series that dates back to 1949). Nuclear electric power declined 2% from 2019 to 2020 because several nuclear power plants retired and other nuclear plants experienced slightly more maintenance-related outages.

We expect coal-fired electricity generation to increase in the United States during 2021 as natural gas prices continue to rise and as coal becomes more economically competitive. Based on forecasts in our Short-Term Energy Outlook (STEO), we expect coal-fired electricity generation in all sectors in 2021 to increase 18% from 2020 levels before falling 2% in 2022. We expect U.S. renewable generation across all sectors to increase 7% in 2021 and 10% in 2022. As a result, we forecast coal will be the second-most prevalent electricity source in 2021, and renewables will be the second-most prevalent source in 2022. We expect nuclear electric power to decline 2% in 2021 and 3% in 2022 as operators retire several generators.

monthly U.S electricity generation from all sectors, selected sources

Source: U.S. Energy Information Administration, Monthly Energy Review and Short-Term Energy Outlook (STEO)
Note: This graph shows electricity net generation in all sectors (electric power, industrial, commercial, and residential) and includes both utility-scale and small-scale (customer-sited, less than 1 megawatt) solar.

July, 29 2021
PRODUCTION DATA ANALYSIS AND NODAL ANALYSIS

Kindly join this webinar on production data and nodal analysis on the 4yh of August 2021 via the link below

https://www.linkedin.com/events/productiondataanalysis-nodalana6810976295401467904/

July, 28 2021
Abu Dhabi Lifts The Tide For OPEC+

The tizzy that OPEC+ threw the world into in early July has been settled, with a confirmed pathway forward to restore production for the rest of 2021 and an extension of the deal further into 2022. The lone holdout from the early July meetings – the UAE – appears to have been satisfied with the concessions offered, paving the way for the crude oil producer group to begin increasing its crude oil production in monthly increments from August onwards. However, this deal comes at another difficult time; where the market had been fretting about a shortage of oil a month ago due to resurgent demand, a new blast of Covid-19 infections driven by the delta variant threatens to upend the equation once again. And so Brent crude futures settled below US$70/b for the first time since late May even as the argument at OPEC+ appeared to be settled.

How the argument settled? Well, on the surface, Riyadh and Moscow capitulated to Abu Dhabi’s demands that its baseline quota be adjusted in order to extend the deal. But since that demand would result in all other members asking for a similar adjustment, Saudi Arabia and Russia worked in a rise for all, and in the process, awarded themselves the largest increases.

The net result of this won’t be that apparent in the short- and mid-term. The original proposal at the early July meetings, backed by OPEC+’s technical committee was to raise crude production collectively by 400,000 b/d per month from August through December. The resulting 2 mmb/d increase in crude oil, it was predicted, would still lag behind expected gains in consumption, but would be sufficient to keep prices steady around the US$70/b range, especially when factoring in production increases from non-OPEC+ countries. The longer term view was that the supply deal needed to be extended from its initial expiration in April 2022, since global recovery was still ‘fragile’ and the bloc needed to exercise some control over supply to prevent ‘wild market fluctuations’. All members agreed to this, but the UAE had a caveat – that the extension must be accompanied by a review of its ‘unfair’ baseline quota.

The fix to this issue that was engineered by OPEC+’s twin giants Saudi Arabia and Russia was to raise quotas for all members from May 2022 through to the new expiration date for the supply deal in September 2022. So the UAE will see its baseline quota, the number by which its output compliance is calculated, rise by 330,000 b/d to 3.5 mmb/d. That’s a 10% increase, which will assuage Abu Dhabi’s itchiness to put the expensive crude output infrastructure it has invested billions in since 2016 to good use. But while the UAE’s hike was greater than some others, Saudi Arabia and Russia took the opportunity to award themselves (at least in terms of absolute numbers) by raising their own quotas by 500,000 b/d to 11.5 mmb/d each.

On the surface, that seems academic. Saudi Arabia has only pumped that much oil on a handful of occasions, while Russia’s true capacity is pegged at some 10.4 mmb/d. But the additional generous headroom offered by these larger numbers means that Riyadh and Moscow will have more leeway to react to market fluctuations in 2022, which at this point remains murky. Because while there is consensus that more crude oil will be needed in 2022, there is no consensus on what that number should be. The US EIA is predicting that OPEC+ should be pumping an additional 4 million barrels collectively from June 2021 levels in order to meet demand in the first half of 2022. However, OPEC itself is looking at a figure of some 3 mmb/d, forecasting a period of relative weakness that could possibly require a brief tightening of quotas if the new delta-driven Covid surge erupts into another series of crippling lockdowns. The IEA forecast is aligned with OPEC’s, with an even more cautious bent.

But at some point with the supply pathway from August to December set in stone, although OPEC+ has been careful to say that it may continue to make adjustments to this as the market develops, the issues of headline quota numbers fades away, while compliance rises to prominence. Because the success of the OPEC+ deal was not just based on its huge scale, but also the willingness of its 23 members to comply to their quotas. And that compliance, which has been the source of major frustrations in the past, has been surprisingly high throughout the pandemic. Even in May 2021, the average OPEC+ compliance was 85%. Only a handful of countries – Malaysia, Bahrain, Mexico and Equatorial Guinea – were estimated to have exceeded their quotas, and even then not by much. But compliance is easier to achieve in an environment where demand is weak. You can’t pump what you can’t sell after all. But as crude balances rapidly shift from glut to gluttony, the imperative to maintain compliance dissipates.

For now, OPEC+ has managed to placate the market with its ability to corral its members together to set some certainty for the immediate future of crude. Brent crude prices have now been restored above US$70/b, with WTI also climbing. The spat between Saudi Arabia and the UAE may have surprised and shocked market observers, but there is still unity in the club. However, that unity is set to be tested. By the end of 2021, the focus of the OPEC+ supply deal will have shifted from theoretical quotas to actual compliance. Abu Dhabi has managed to lift the tide for all OPEC+ members, offering them more room to manoeuvre in a recovering market, but discipline will not be uniform. And that’s when the fireworks will really begin.

End of Article 

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free.

Market Outlook:

  • Crude price trading range: Brent – US$72-74/b, WTI – US$70-72/b
  • Worries about new Covid-19 infections worldwide dragging down demand just as OPEC+ announced that it would be raising production by 400,000 b/d a month from August onward triggered a slide in Brent and WTI crude prices below US$70/b
  • However, that slide was short lived as near-term demand indications showed the consumption remained relatively resilient, which lifted crude prices back to their previous range in the low US$70/b level, although the longer-term effects of the Covid-19 delta variants are still unknown at this moment
  • Clarity over supply and demand will continue to be lacking given the fragility of the situation, which suggests that crude prices will remain broadly rangebound for now

No alt text provided for this image

Click here to view upcoming Energy Industry training courses

July, 26 2021