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Last Updated: May 10, 2019
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Headline crude prices for the week beginning 6 May 2019 – Brent: US$70/b; WTI: US$61/b

  • With trouble brewing for the US on the Iranian crude and Chinese trade front, worries over the state of the global economy has seen crude oil benchmarks fall back from recent highs
  • With President Donald Trump ratcheting up the trade rhetoric against China and an impending imposition of tariffs, a comprehensive trade deal between the two global economic supermajors appears to be very far from being achieved; this has sent a ripple throughout the global financial and commodity markets
  • These trade tensions have subdued crude oil prices globally, with impending weakness expected as the impact of the tariff imposition affects global trade
  • Iran and the USA have also traded threats, with Iran saying that the non-extension of the crude export waivers might lead it to close the vital Straits of Hormuz; in response, the US has dispatch an aircraft carrier strike groups and bomber force to the Middle East, with could spill into military escalation
  • Tensions within OPEC are also bubbling up; there are signs that global supply is not as tight as feared, but Iran is warning that OPEC is danger of collapse, accusing other producers in the cartel of undermining it, setting the stage for a confrontational atmosphere at the upcoming OPEC meeting in Vienna
  • Internal strife in Venezuela is also boiling over, impacting crude production there, and major oil buyers have been asking producers like Saudi Arabia, the UAE and Russia to increase production, muting the effect of the supply deal
  • In the US, drilling activity has remained muted, as sentiment has shifted from aggressive expansion to caution; after a huge 21 rig drop the previous week, the total active US rig count saw the net loss of one rig, with two oil rig gains offset by the dropping of three gas rigs
  • Jitters over the escalation of the US-China trade war will keep in lid on crude oil prices over the week. Along with abating supply worries, global crude prices should be trading in a narrow range, with Brent at US$70-71/b and WTI at US$61-62/b


Headlines of the week

Upstream

  • Warren Buffet has waded into the Chevron and Occidental Petroleum war to acquire Anadarko Petroleum, announcing plans to inject US$10 billion into Occidental that is conditional on its takeover of Anadarko
  • Occidental Petroleum has also agreed to a sale of Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total for US$8.8 billion, which itself is contingent on Occidental’s successful acquisition of Anadarko
  • ExxonMobil and Hess have taken FID on the Liza Phase 2 project in Guyana, planning to use an FPSO with a capacity for 220,000 b/d in the Stabroek Block
  • Ukraine has completed its second upstream licensing round through online bidding, with six of the seven blocks on offer snapped up by state oil firm UGV; a third licensing round covering 9 blocks across 3 regions is scheduled for June

Midstream & Downstream

  • Petrobras is planning to sell up to 8 refineries in Brazil – including the new Abreu e Lima unit – as part of a corporate  refocus on its upstream business; as part of the plan, Petrobras is also looking to sell its fuel retail network in Uruguay and its stake in fuel distributor BR Distribuidora
  • ExxonMobil will be proceeding with its US$2 billion expansion of its Baytown petrochemicals plant in Texas, with expected start-up in 2022
  • Ahead of the ambitious new 175 kb/d Hengyi refinery starting up in Brunei, Chinese operators Hengyi Industries has been purchasing Zafiro crude from Equatorial Guinea to begin trial runs
  • Russian billionaire Mikhail Gutseriyev is taking control over the 120 kb/d Afipsky refinery in southern Russia, aiming to bring the site back to profitability by combining it with Forteinvest’s 280 kb/d refining system
  • IndianOil will be shutting down its Bongaigaon and Guwahati refineries in India’s northeast to upgrade them for Euro VI fuels production
  • Curacao’s Isla refinery has been exempted from US sanctions on Venezuela, which should allow PDVSA or a new operator to continue activities
  • Chevron has completed its acquisition of the 110 kb/d Pasadena Refining System refinery from Petrobras, gaining its second US Gulf Coast refinery

Natural Gas/LNG

  • Despite Cyclone Kenneth devastating the area in Mozambique where the Rovuma LNG plant is being developed, ExxonMobil announced that it still expects to sanction the US$30 billion project on schedule by late 2019
  • Venture Global LNG has received US Federal approval for its 20 mtpa Plaquemines LNG facility in Louisiana, with operations planned for 2023
  • Abu Dhabi is looking to raise up to US$5 billion by selling stakes in its domestic gas pipeline network to international players
  • Thailand’s PTTEP is reportedly looking at the Cash-Maple gas field offshore Western Australia after encouraging recent finds at the Orchid field
  • US independent player Kosmos Energy is looking to develop two new LNG facilities in the eastern Atlantic to tap into identified deepwater gas resources located offshore Mauritania and Senegal
  • The Summit LNG FSRU in Bangladesh has begun commercial operation, doubling the LNG import capacity of the country at a time when Bangladesh’s gas reserves and output is dwindling

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EIA expects U.S. crude oil production to remain relatively flat through 2021

In the U.S. Energy Information Administration’s (EIA) November Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will remain near its current level through the end of 2021.

A record 12.9 million barrels per day (b/d) of crude oil was produced in the United States in November 2019 and was at 12.7 million b/d in March 2020, when the President declared a national emergency concerning the COVID-19 outbreak. Crude oil production then fell to 10.0 million b/d in May 2020, the lowest level since January 2018.

By August, the latest monthly data available in EIA’s series, production of crude oil had risen to 10.6 million b/d in the United States, and the U.S. benchmark price of West Texas Intermediate (WTI) crude oil had increased from a monthly average of $17 per barrel (b) in April to $42/b in August. EIA forecasts that the WTI price will average $43/b in the first half of 2021, up from our forecast of $40/b during the second half of 2020.

The U.S. crude oil production forecast reflects EIA’s expectations that annual global petroleum demand will not recover to pre-pandemic levels (101.5 million b/d in 2019) through at least 2021. EIA forecasts that global consumption of petroleum will average 92.9 million b/d in 2020 and 98.8 million b/d in 2021.

The gradual recovery in global demand for petroleum contributes to EIA’s forecast of higher crude oil prices in 2021. EIA expects that the Brent crude oil price will increase from its 2020 average of $41/b to $47/b in 2021.

EIA’s crude oil price forecast depends on many factors, especially changes in global production of crude oil. As of early November, members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) were considering plans to keep production at current levels, which could result in higher crude oil prices. OPEC+ had previously planned to ease production cuts in January 2021.

Other factors could result in lower-than-forecast prices, especially a slower recovery in global petroleum demand. As COVID-19 cases continue to increase, some parts of the United States are adding restrictions such as curfews and limitations on gatherings and some European countries are re-instituting lockdown measures.

EIA recently published a more detailed discussion of U.S. crude oil production in This Week in Petroleum.

November, 19 2020
OPEC members' net oil export revenue in 2020 expected to drop to lowest level since 2002

The U.S. Energy Information Administration (EIA) forecasts that members of the Organization of the Petroleum Exporting Countries (OPEC) will earn about $323 billion in net oil export revenues in 2020. If realized, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues.

Crude oil prices have fallen as a result of lower global demand for petroleum products because of responses to COVID-19. Export volumes have also decreased under OPEC agreements limiting crude oil output that were made in response to low crude oil prices and record-high production disruptions in Libya, Iran, and to a lesser extent, Venezuela.

OPEC earned an estimated $595 billion in net oil export revenues in 2019, less than half of the estimated record high of $1.2 trillion, which was earned in 2012. Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programs, and support public services. EIA expects a decline in net oil export revenue for OPEC in 2020 because of continued voluntary curtailments and low crude oil prices.

The benchmark Brent crude oil spot price fell from an annual average of $71 per barrel (b) in 2018 to $64/b in 2019. EIA expects Brent to average $41/b in 2020, based on forecasts in EIA’s October 2020 Short-Term Energy Outlook (STEO). OPEC petroleum production averaged 36.6 million barrels per day (b/d) in 2018 and fell to 34.5 million b/d in 2019; EIA expects OPEC production to decline a further 3.9 million b/d to average 30.7 million b/d in 2020.

EIA based its OPEC revenues estimate on forecast petroleum liquids production—including crude oil, condensate, and natural gas plant liquids—and forecast values of OPEC petroleum consumption and crude oil prices.

EIA recently published a more detailed discussion of OPEC revenue in This Week in Petroleum.

November, 16 2020
The United States consumed a record amount of renewable energy in 2019

In 2019, consumption of renewable energy in the United States grew for the fourth year in a row, reaching a record 11.5 quadrillion British thermal units (Btu), or 11% of total U.S. energy consumption. The U.S. Energy Information Administration’s (EIA) new U.S. renewable energy consumption by source and sector chart published in the Monthly Energy Review shows how much renewable energy by source is consumed in each sector.

In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

Wood and waste energy, including wood, wood pellets, and biomass waste from landfills, accounted for about 24% of U.S. renewable energy use in 2019. Industrial, commercial, and electric power facilities use wood and waste as fuel to generate electricity, to produce heat, and to manufacture goods. About 2% of U.S. households used wood as their primary source of heat in 2019.

Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

Biofuels, including fuel ethanol, biodiesel, and other renewable fuels, accounted for about 20% of U.S. renewable energy consumption in 2019. Biofuels usually are blended with petroleum-based motor gasoline and diesel and are consumed as liquid fuels in automobiles. Industrial consumption of biofuels accounts for about 36% of U.S. biofuel energy consumption.

Solar energy, consumed to generate electricity or directly as heat, accounted for about 9% of U.S. renewable energy consumption in 2019 and had the largest percentage growth among renewable sources in 2019. Solar photovoltaic (PV) cells, including rooftop panels, and solar thermal power plants use sunlight to generate electricity. Some residential and commercial buildings heat with solar heating systems.

October, 20 2020