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Last Updated: August 29, 2019
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Market Watch 

Headline crude prices for the week beginning 26 August 2019 – Brent: US$59/b; WTI: US$54/b

  • Having traded mixed for most of last week as the trade tit-for-tat table tennis match between the US and China continued, crude prices started on a higher note this week as President Trump signals a move to restart trade talks
  • Of course, this has happened before, so Trump’s comments at the G7 Summit in Biarritz might not amount to anything but were still taken by the market to be a positive step
  • This comes as China placed tariffs on US crude oil for the first time since the trade war began, embroiling a key growing export market for American producers in the turmoil
  • Chinese tariffs on US crude oil were imposed up until last year when they were removed, but the re-imposition of a 5% tariff could choke off a burgeoning business and further damage global oil demand
  • The news comes as the American Petroleum Institute (API) stated that it believes the escalating US-China trade dispute ‘hurts’ American energy leadership, directly impacting jobs within the sector
  • US crude stockpiles fell more than expected, which managed to prop up prices somewhat, capping off a stronger summer for fuel demand, particularly gasoline, and refineries ran at near full capacity
  • On the supply side, reports suggest that almost half of all active rigs in Venezuela will shut down by end October 2019 if the Trump administration does not extend a 90-day waiver on sanctions for American producers
  • After a gain last week broke a streak of losses, the US active rig count fell once again by a significant 19 sites, led by the loss of 7 rigs in the Permian; the total active rig count is now at its lowest in almost 18 months at 916 sites
  • Rangebound trading is the best the crude market can hope for now; the ebb and flow between the US and China on trade issues shows no end – depending on who you talk to – and crude prices will remain firmly in the US$58-60/b range for Brent and the US$54-56/b range for WTI


Headlines of the week

Upstream

  • Equinor and YPF have signed a joint exploration agreement for the CAN 100 offshore block in the North Argentinian Basin, with Equinor taking a 50% share
  • Husky Energy will resume production at the North Amethyst and South White Rose drill centres after operations were halted following the November 2018 oil spill off Canada’s Newfoundland and Labrador province
  • Equinor has struck oil at the Sputnik exploration well in Norway’s Barents Sea, with recoverable assets estimated at an initial 20-65 million barrels
  • Alberta will be extending its province output cuts to the end of 2020 to allow more time for the current oversupply to be eased by delayed pipeline projects
  • After being restarted just earlier this month, the Hibernia platform in Canada’s Newfoundland and Labrador has been halted once again after another incident
  • South Sudan has made a new crude discovery in the northern Adar oilfields, with ambitious plans to start production by the end of 2019
  • Pembina Pipeline Corp will be purchasing Kinder Morgan’s Canadian unit for US$3.3 billion, aiming to capitalise on Western Canadian oil sands
  • Lundin Petroleum AB has made a new oil discovery in Norway, with oil struck at Well 16/5-8s in the Goddo prospect under the PL81 license

Midstream/Downstream

  • Petrobras has received three binding offers for its LPG unit Liquigas Distribuidora, with the sale expected to be concluded by November
  • Petronas will be restarting the shut CDU at the Pengerang Refining and Petrochemical (PrefChem) Complex, after the plant was shut down in April following a fire that damaged the AR desulfurisation unit
  • The fire-damaged Philadelphia Energy Solutions refinery may have found a buyer in SG Preston, a biofuels producer that intends to convert the 350 kb/d complex into a renewable diesel production complex
  • Saudi Aramco’s US refining arm Motiva Enterprises has acquired full ownership of the Flint Hills Resource Port Arthur petrochemicals plant
  • Despite stating earlier that it would not be able to meet the new IMO rules of sulfur levels, Indonesia has now said that it will be able to meet the 2020 deadline for Indonesian-flagged vessels operating internationally and locally
  • Nigeria’s NNPC has awarded a tranche of crude-for-product swap deals to firms such as Vitol, Trafigura, and BP in an attempt to alleviate a domestic fuels deficit stemming from underperformance of NNPC’s refineries

Natural Gas/LNG

  • After a bombshell attempt by the government of Papua New Guinea to renegotiate the Papua LNG gas deal, Total is now looking to finalise terms by the end of August, sticking with the original deal signed in April
  • Natural gas production at the giant Zohr field in Egypt has now reached 2.7 bcf/d, up from a production level of 2 bcf/d in September 2018
  • Commercial LNG production has begun at the Cameron LNG Train 1 in Louisiana, with two additional trains planned for a total capacity of 12 mtpa
  • Total has re-confirmed its commitment to develop the US$23 billion Mozambique LNG project after it takes over Anadarko’s African assets following the acquisition of the latter by Occidental Petroleum
  • First liquids output has been produced at the Freeport LNG Train 1 project in Texas, with Trains 2 and 3 on course for completion by Q1 2020

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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