NrgEdge Editor

Sharing content and articles for users
Last Updated: October 29, 2018
1 view
Business Trends
image

Market Watch

Headline crude prices for the week beginning 26 October 2018 – Brent: US$79/b; WTI: US$69/b

  • Crude prices retreated from their highs to below psychological thresholds, as the threat of Saudi Arabia retaliation to criticism of its role in the assassination of Jamal Khashoggi by using its oil wealth abated
  • As Saudi Arabia sounds more contrite after evidence emerged that the murder of Khashoggi was state-sanctioned, the Saudi Energy Minister said the Kingdom has no intention of triggering a repeat of the 1973 oil crisis
  • While most executives and firms have shied away attending an investment conference in Riyadh dubbed ‘Davos in the Desert’ due to the scandal, Total boss Patrick Pouyanne will be attending, underscoring the continual dependence of the oil world on the Kingdom
  • However, international tensions over the Khashoggi scandal still remain, with President Donald Trump now acknowledging that Saudi Arabia is ‘tainted’ and other Western powers threatening sanctions, with Germany stopping all defence and arm sales to Saudi Arabia
  • Over the same period, American shale oil production was expected by the EIA to grow to 7.71 mmb/d, up 100,000 b/d m-o-m, with the Permian Basin contributing to half of the expected net gains
  • The Saudi Energy Minister’s pronouncement – if true – removes the risk of Saudi Aramco pulling back on crude supply just before sanctions on Iran kick in next week, although jitters over the eventual impact of the sanctions will keep crude prices above US$70/b
  • After weeks of caution, American drillers continued a streak of active rig gains, adding 4 new oil rigs and 1 new gas rig last week, bringing the total number of operational rigs to 1,067 – the highest since March 2015
  • Crude price outlook: With the threat of a Saudi embargo retreating and the market now beginning to fret about demand destruction, it looks like crude prices will continue their downward trend towards US$75-77/b for Brent and US$65-67/b for WTI

 

Headlines of the week

Upstream

  • BP has started up its Thunder Horse Northwest expansion in the Gulf of Mexico ahead of schedule and under budget, which will boost output at the Thunder Horse field by 30,000 b/d to 200,000 b/d
  • Equinor has started up its Oseberg Vestflanken 2 field in the North Sea, using the first unmanned platform on the Norwegian Continental Shelf to oversee an operation for the recovery of some 110 million barrels of oil
  • Eni has won the rights for the offshore Block A5-A in Mozambique, bolstering its position in the African nation that include some giant gas discoveries
  • Shell continues the trend of supermajors exiting Denmark, selling its upstream assets in Danish territory to Norwegian Energy Company (Noreco) for US$1.9 billion, which includes some 67,000 b/d of production in 2017

Downstream

  • Turkmenistan’s Turkemgaz has started up its new US$3.4 billion NGLs-based petrochemicals plant in Kiyanly, converting LPG and condensate from Petronas’s Block 1 to some 450 ktpa of olefins
  • The expansion of ThaiOil’s Sriracha refinery has begun, with engineering and construction beginning soon which will increase capacity from 275 to 400 kb/d
  • A month after signing a crude oil supply deal with Zhejiang Rongsheng, Saudi Aramco is going a step further to invest in the Chinese textile giant’s planned 400 kb/d integrated petrochemical refinery, its third such investment in China
  • After years of squabbling with its founding family, Japanese refinery Idemitsu Kosan has finally finalized a deal to buy out fellow refiner Showa Shell Sekiyu for US$5.6 billion, consolidating the Japanese refining industry further

Natural Gas/LNG

  • Production at Inpex’s Ichthys LNG project is progressing, having sold its second condensate cargo to Trafigura a week after selling its first
  • Aker BP has purchased Equinor’s 77.8% stake in the Norwegian North Sea King Lear gas/condensate discovery for US$250 million
  • More activity from Equinor, as it sells its 42.38% interest in the Tommeliten Unit and 30% stake in PL 044, gas/condensate fields that are both in the Norwegian Continental Shel, to Poland’s PGNiG for US$220 million
  • After purchasing American LNG on the spot market earlier this year, Polish Oil and Gas (PGNiG) has signed a long-term 20-year LNG contract with Venture Global, who will begin delivering 2 mtpa of LNG from the Calcasiue Pass and Plaquemines LNG plant in Louisiana when they are completed in 2022
  • Shell and Equinor have reaffirmed their commitment to the proposed US$30 billion LNG export plant in Tanzania, overcoming concerns that the government’s new mining legislation allows it to renegotiate contracts
  • NextDecade is advancing with its planned 27 mtpa Rio Grande LNG project in the US Gulf Coast after the FERC issued a draft environment impact statement
  • Cuadrilla has begun hydraulic fracking at the Preston New Road shale gas site in the UK, overcoming opposition to tap into some 200 tcf of gas in place
  • Argentina may be closing its floating LNG import facility regasification ship, as development of Vaca Muerte shale turns it into a natural gas exporter

Corporate

  • Mubadala Investment has shelved a planned IPO offering up 25% in Spanish oil refiner Cepsa over the recent turmoil in global stock markets, but the Abu Dhabi state-linked firm said it may revive the IPO in the future

oil oil and gas news oil and gas industry LNG oil and gas companies news weekly update market watch market trends latest oil and gas trends
3
1 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