woensdag 19 september 2018

OilPrice Intelligence Report: Oil Markets Unfazed By $200 Billion Trade War Escalation

Dear Member ,

Greetings from London.

In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week.

We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.

-    OPEC members earned a combined $567 billion in oil export revenue in 2017, up 29 percent from a year earlier.

-    The increase was due to both higher oil prices and higher export levels.

-    The EIA projects that OPEC’s oil export revenue will climb to $736 billion this year, a 30 percent increase over 2017.

Market Movers

-    Enbridge (NYSE: ENB) announced deals to buy out its subsidiaries – Enbridge Energy Partners (NYSE: EEP), Enbridge Energy Management (NYSE: EEQ) and Enbridge Income Fund Holdings (OTC: EBGUF) for a combined $8.2 billion. The moves will simplify its corporate structure.

-    Dominion Energy’s (NYSE: D) Atlantic Coast pipeline obtained reissued permits to allow construction to go ahead. The natural gas pipeline was sidelined by FERC weeks ago, but will now move forward.

-    Duke Energy (NYSE: DUK) says it has restored power to 1.2 million customers in the wake of Hurricane Florence. Around 300,000 people were without power as of Monday. Meanwhile, two of Duke’s coal ash landfills spilled during the storm.

Tuesday September 18, 2018

Oil prices rose on news that Saudi Arabia is comfortable with Brent above $80 per barrel, offsetting the concerns that have been building over the U.S.-China trade war.

Saudi Arabia comfortable with $80 oil. Bloomberg reported that Saudi Arabia is not afraid of oil heading north of $80 per barrel, a bullish sign that suggests that Riyadh might not ramp up production to offset declines from Iran. “It casts doubts on whether Saudi Arabia will increase output to compensate for the loss of Iranian crude once sanctions come into effect,”
said Carsten Fritsch, an analyst at Commerzbank. Meanwhile, U.S. Secretary of Energy Rick Perry dismissed concerns about a supply crunch, arguing that Saudi Arabia, Russia and the U.S. could add enough supply to the market to compensate for Iran. “I don’t foresee spikes,” Perry said.

Iran has lost 900,000 bpd in oil exports since April. U.S. sanctions on Iran are set to go into effect in November, but countries have already been slashing purchases. Iran has lost an estimated 900,000 bpd of crude oil exports since April, with shipments
down to 1.6 million barrels per day this month. “Iranian oil exports are coming down pretty hard,” Roger Diwan, a veteran oil analyst at consultant IHS Markit Ltd., told Bloomberg.

Trump steps up trade war with $200 billion in tariffs. The Trump administration moved forward on a highly-anticipated plan to escalate the trade war with China,
announcing $200 billion in tariffs on Chinese goods. The tariffs will start at 10 percent and go into effect on September 24, but will rise to 25 percent by January 1. He also suggested that an additional $267 billion in tariffs are in the works. The effects of a trade war have lingered as a downside threat to the U.S. and global economy, but unlike earlier rounds of tariffs, this tranche will affect consumer goods. Moreover, China is expected to retaliate, with the potential for tariffs on U.S. oil and gas exports. That could put a dent in crude oil exports while also threatening the economics of future LNG export terminals.

Hedge funds bullish on oil. Hedge funds and other money managers have
remained bullish on Brent futures, but cut their net length on WTI last week, likely because of fears about the impact of Hurricane Florence.

European Commission opens antitrust investigation into BMW, Daimler AG, Volkswagen AG. The European Commission’s antitrust body
opened an investigation into top German automakers over a possible collusion scheme to limit the development of emissions controlling technology. The investigation comes after the VW diesel emissions cheating scandal.

Solar plus batteries becoming cheaper than natural gas. According to Bloomberg New Energy Finance, new solar projects that come equipped with batteries are becoming cheaper to build per megawatt-hour than natural gas in parts of the U.S. southwest. For example, solar-plus-battery projects cost $36 per megawatt-hour in the southwest for plants going into service in 2021, while combined-cycle gas projects cost $47/MWh. But this could just be the beginning. “This won’t be contained to the Southwest,” BNEF analyst Hugh Bromley
said. “This is spreading and will continue to spread.

Spanish oil company Cepsa to launch IPO. Spanish oil and gas company Cepsa announced plans to launch an IPO later this year, selling around 25 percent of the company’s shares. Cepsa is owned by Abu Dhabi state investor Mubadala. The IPO could be the
largest public offering for an oil company in more than a decade.

Cheniere Energy inks 15-year LNG deal with Vitol Group. Cheniere Energy (NYSE: LNG)
signed a 15-year agreement to sell LNG to Vitol Group, an agreement that suggests the long-term LNG contract is not dead yet.

China to lend $5 billion to Venezuela. China agreed to lend $5 billion to Venezuela, to be paid back with oil. Bonds of PDVSA rose on the news. China has lent around $70 billion to Venezuela over the past decade, but had seemed to cut off the increasingly indebted and cash-strapped nation. The latest loan will loosen the noose just a bit. “This will give the government some breathing room,” Asdrubal Oliveros, director of Ecoanalitica, told

Shell announces plan to control methane. Royal Dutch Shell (NYSE: RDS.A)
announced plans to limit methane emissions from its oil and gas operations to 0.2 percent by 2025.

Two ethanol plants to shut down. Green Plains Inc. (NASDAQ: GPRE)
said it was shutting down two ethanol plants in Iowa and cutting production at another in Minnesota because of poor profit margins. The announcement comes after the Trump administration’s trade war with China has cut off access to the Chinese market for ethanol. The result has been an ethanol supply glut in the U.S., which has pushed down prices.

We invite you to read several of the most recent articles we have published which may be of interest to you:

Is The Shale Slowdown Overblown?
Colorado’s Oil Industry Braces For A Devastating Blow
Why WTI Could Crash In The Coming Weeks
The Age Of Electrification Has Arrived

You can also follow the most talked about topics of the week and have your say on the new Oilprice.com community:

Blackouts in Australia
100% Renewables will Fuel the Growth of Poverty and Homelessness
Big Oil Costs Can't Go Much Lower

That’s all from your midweek intelligence report, we hope you enjoyed it and we´ll be back on Friday, with your latest energy market update, industry intelligence and special report.

Best regards,

Tom Kool
News Editor, Oilprice.com

P.S. –  In his final column for the Oil and Energy Insider, Dan Dicker provides a road map for energy investors for the next two years – providing his insight into where oil prices are going and which sectors will provide the best investment opportunities. Read Dan’s road map by signing up for your free trial of the 
Oil & Energy Insider