De groeicijfers in Europa stellen teleur, ziet BNR-macro-econoom Kees de Kort. Tegenvallende cijfers in Duitsland, Nederland, Italië. 'Opgeteld is de groei in de eurozone 0,2 procent op kwartaalbasis. Dat viel me behoorlijk tegen. De richting van de beweging is omlaag en heel wat lager dan vorig jaar rond deze tijd.'
Oil prices rose on Friday morning as markets hope OPEC and partners will take action to reverse bearish sentiment.
Friday, November 16, 2018
Oil prices posted some gains on Thursday and in early trading on Friday, rising on the hope that OPEC+ might agree to a production cut in early December.
IEA: OPEC achieved objective. The IEA said in its latest Oil Market Report that the OPEC+ coalition had largely succeeded in heading off the tightening oil market. Major oil producers within OPEC+ may not be that pleased with the price decline, but the IEA welcomed the surge in supply. “Rising stocks should be welcomed as a form of insurance, rather than a threat,” the agency said Wednesday.
Saudi Arabia angered by Trump waivers. Reuters reports that Saudi officials were reportedly caught off guard by the degree to which the Trump administration offered waivers on Iran sanctions. The waivers to eight countries will largely allow Iran to continue exporting oil and it effectively caps the potential outages from Iran in the short run. Those waivers are widely cited as one of the most important drivers in the recent oil price meltdown, something that Riyadh is not happy about. Saudi Arabia ramped up supply on the understanding that Iran’s exports would be going offline. Saudi sources told Reuters that the Saudi government feels betrayed by the Trump administration and that they are more determined than ever to engineer a production cut in order to put a floor beneath prices. Riyadh already announced that it would cut exports by 500,000 bpd in December.
Russia hesitates on production cuts. A senior Russian official told Reuters that Russia was not keen on reducing output, despite reports that OPEC+ is considering such an option. “I think (oil) production should not be lowered. Yes, we have done this in the past but this was not the right systematic approach,” a senior Russian government source said. Russian President Vladimir Putin was more careful and non-committal in recent comments, saying only that Russia will continue to cooperate with OPEC.
Citi: Oil plunge the fault of the Trump administration. The Trump administration deserves a lot of blame for the recent plunge in oil prices, according to Citibank. The waivers on Iran sanctions, U.S. shale growth, Trump’s tweets about OPEC, and the trade war with China have all contributed to a declining oil price. “The oversupply in the market is a made-in-America phenomenon,” Citi’s Ed Morse told Bloomberg. “It’s the unexpected consequences of American policy and the unintended impact of technological changes that made this historically unprecedented arena for production growth blossom.”
U.S. shale finally profitable. The U.S. shale industry suffered from years of red ink but is now becoming profitable – at least some companies are. A Reuters survey of 32 shale companies found that a third of them are cash flow positive, up from just 3 out of 32 a year earlier. However, the 32 companies still posted a collective cash flow deficit of $945 million in the third quarter, although that was sharply lower than the $4.92 billion deficit a year earlier.
Brain drain at Pemex? Bloomberg raises the possibility that Mexico’s Pemex sees a brain drain under the new administration. Lower salaries and political interference could be on the table, which could lead to an exodus of some of Pemex’s technical staff.
Oil price collapse could hit junk bonds. Shale companies dependent on junk bonds for funding could be in trouble with the collapse of oil prices. The value of junk bonds fell to the lowest level in the last two years this week.
Oil and gas output up with fewer wells. U.S. oil and gas production surged last year, and remarkably, the gains were achieved with fewer wells. In 2017, the total number of producing wells fell to 991,000 across the country, down from a peak of 1,039,000 wells in 2014. Advances in drilling technology have helped the industry produce more with fewer and fewer wells.
Big Oil starting to dominate shale. The largest oil companies are accelerating their drilling plans in U.S. shale basins, according to the Wall Street Journal, beginning to take on a greater role relative to the small and medium-sized E&Ps that have long been the main source of activity. Over the past year, for instance, ExxonMobil (NYSE: XOM) doubled its rig count, becoming the most active shale driller in the entire United States. “Scale is so important in shale,” Uday Turaga, chief executive of ADI Analytics, told the WSJ. “You can drive down costs from suppliers, secure pipeline access more quickly and get better contracts.”
Muted gasoline demand. The rise in oil prices this year, along with the weakening of emerging market currencies, has depressed demand in much of the world. Gasoline futures opened up a discount relative to Brent crude this week, a relationship that usually trades in the other direction. Bloomberg notes that the discount suggests weak global demand for gasoline.
Natural gas prices spike, fall back. Natural gas prices saw heightened volatility this week as cold weather swept across the country. Henry Hub prices spiked to $4.80/MMBtu on Wednesday, before falling back to $4/MMBtu on Thursday. Prices were up again in early trading on Friday. The U.S. is entering the winter drawdown season with inventories at a 13-year low, which should ensure ongoing volatility this winter. Still, analysts expect the high prices to be temporary as record-breaking upstream production should replenish inventories in 2019.
Germany and Japan see weak GDP. More signs of a global economic slowdown came from Germany and Japan, which revealed a contraction in GDP in the third quarter. Economic weakness is starting to impact oil demand forecasts.
Drilling services picking up. The oil industry is expected to drill and complete 72,000 wells around the world in 2019, up 3 percent from this year, according to Rystad Energy. Well completion activity hit a low point in 2016, but has grown 30 percent since then. Rystad expects drilling and completion activity to grow by 4 percent per year through 2021.
Thanks for reading and we’ll see you next week.
Tom Kool Editor, Oilprice.com
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What's in Oil & Energy Premium this week:
Oil Market Breakdown:
• Fool The Saudis Twice? Don’t Bet On It
• Global Intelligence Report - 16th November 2018
• Will Canada Cap Its Oil Production?
• China’s Transport Revolution
• Halting The Oil Price Collapse
Global Intelligence Report - 16th November 2018
Sanctions, Oil Deals: The Russian Perspective
- High-level figure close to the Russian presidential administration - Senior official in the Russian Ministry of Finance - Moscow-based Russian economist - UK-based geopolitical analyst for Fortune 500 companies - Oil trader for a major European corporate entity - Moscow-based investigative journalist - Moscow-based energy analyst
According to a source close to the Russian Presidential Administration, Russia is pursuing an aggressive response to U.S. sanctions over Crimea, Donbas and the poisoning of the ex-GRU Colonel Sergei Skripal and his daughter in the UK. Moscow is looking to use its dominance within the energy sector to apply pressure on the U.S. oil sector.
Despite the current sanctions, Russia’s economy remains fairly stable. This stability has meant that the threat of tougher sanctions targeting Russia’s sovereign debt with maturity over two weeks and restricting dollar transactions of Russia’s largest banks did not raise significant concerns.
A senior official within the Ministry of Finance noted that “it is no surprise that the U.S. will seek tougher sanctions but we have been implementing an economic strategy that can take the strain”.
Most importantly, in anticipation of tougher sanctions by the U.S., Russia has been looking to the East. Russia’s growing isolation from the West due to the continuous sanctions has intensified its relationship with global players, with financial and political alliances being forged with China, Turkey and several Gulf states.
At the same time, Russia has responded by applying its own pressure on Western oil companies and oil traders by requesting the use of euros instead of dollars for payments and by introducing penalty clauses in the negotiation of its 2019 oil sales contracts in order to protect itself against the sanctions.
Part of the penalty clause incorporates measures if they fail to pay for supplies in the event of new U.S. sanctions being enforced that could disrupt oil sales. Negotiations between the large oil producers in Russia, such as Rosneft and Gazprom Neft, with oil traders, such as Gunvor, Trafigura and Vitol, have intensified in recent weeks.
According to an energy analyst “none of the oil traders and oil companies want to take responsibility for the impact any upcoming U.S. sanctions could have on their trade, so they don’t see why they should be penalized. They consider this a political issue that has nothing to do with their business.”
However, as an energy-focused journalist based in Moscow noted “It is naïve to think that Russia is not going to use its influence in energy policy to counter-measure the impact of further U.S. sanctions. Russia is very much aware that it has the upper hand when it comes to oil; and if U.S. oil companies and traders are not willing to compromise, Russia will be more than happy to turn its back on them and engage fully with Chinese and Gulf companies.”
According to an oil trader for a European corporate entity “it is important to distinguish the position of U.S. oil companies and European ones. Entities like Total and ENI are more interested in successfully concluding their negotiations with Russia because they are aware of their dependency on Russian oil. So they are more likely to take a less aggressive stance than their U.S. counterparts”.
Libya: From Palermo to Paris
As we have noted repeatedly, elections have no chance of taking place in Libya next month, a fact that has now been officially confirmed.
What’s going on right now in Libya is largely a colonial game. Thus we see first one ‘peace’ conference in Paris, followed by one in Palermo, Italy, which ended on Tuesday. The Palermo conference was an attempt by Italy to upstage France as the main power broker in Libya. The Paris summit was about propping up General Haftar. Haftar showed up at the Palermo summit, but made it clear that he wasn’t there officially.
At the Paris summit in May, Libya’s factions agreed to hold elections by 10 December. That’s not going to happen, as made clear at Palermo this week. There is no date on elections, but factions agreed to hold a UN conference on organizing elections in Spring 2019.
And the issue of migrants—however unrelated it may seem—is going to end up being a key to who ends up with control over Libya’s oil wealth (meaning, control over the government).
Italy and France have the same agenda here, but the position of chief power broker is key. France is propping up Haftar in an attempt to make him as legitimate as the failing Government of National Unity (GNA). By supporting Haftar, they are supporting Saudi Arabia and the UAE, as this is not only a colonial power battle—it’s also a battle between Saudi Arabia/UAE and Qatar, plus their allies, with Qatar representing the Muslim Brotherhood in this case. The GNA wasn’t going to recognize Haftar, so France boosted him in Paris.
Europe, in general, is gunning for Libya to create ‘camps’ for migrants. The GNA has refused, which is another reason for France’s support of Haftar. For Italy, the migrant issue is a critical one, so this will play in Haftar’s favor as well.
That Haftar only showed up to the Palermo summit and refused to sit down with world leaders should not be taken as a significant snub. He is prone to theatrics, in general, and this is more of a publicity stunt than anything else.
But Italy’s description of the summit as a success is a wild misrepresentation, even if Rome needs the Palermo summit to trump its precursor in Paris.
In the meantime, oil production remains steady in the status-quo standoff, with the NOC saying that exports of crude, natural gas and condensates rose almost 6 percent in September, compared to August.
Global Oil & Gas Playbook
Crude oil has entered a bear market and this time it happened so fast banks are only just now beginning to revise their price projections downwards. It was just a couple of weeks ago that OPEC oil ministers assured the world there will be enough oil for everyone despite U.S. sanctions against Iran that snapped back on November 5. Now, they are discussing production cuts on growing worries about oversupply.
Two reports that came out this week contributed to the bearish sentiment saw oil prices fall by more than 20% inside a month. One was from the International Energy Agency and the other was from OPEC, and both had little by way of good news for exporters of crude oil, predicting a slowdown in demand growth accompanied by further surging U.S. production that will lead a non-OPEC increase of more than 2 million barrels daily this year and next.
Meanwhile, U.S. inventories are also rising, which is normal for this time of year—especially with higher production—but with the market so jumpy, normal does not mean much to price movers. So, instead of going to $100 a barrel as many analysts expected days before the Iran sanctions came into effect, Brent crude and WTI have both shed a quarter of their value as of mid-October. And this slide will likely continue, despite OPEC’s talk about production cuts, as indications of an oversupply play together with economic growth expectations.
The Saudis are angry, and the general consensus is that Trump tricked them into creating an oversupply situation that would lower energy costs for American consumers.
Deals, Mergers & Acquisitions
• Anadarko has decided to sell $4 billion worth of its midstream assets, which is almost all of them, including pipelines and storage facilities. The buyer is Western Gas Partners, a midstream master limited partnership. The sale is seen to wrap up by the end of March next year. It will involve $2 billion in a cash payment with the rest to be paid in shares of Western Gas Partners.
• Exxon, Chevron, ConocoPhillips, and Shell are among potential suitors for Permian-focused independent Endeavor Energy Resources. Exxon and Chevron have already submitted their bids for the private company, which has the rights to 329,000 net acres in the Permian, and could be worth up to $15 billion. The company’s holdings are a potentially very tasty morsel, with just 2% of the acreage tapped so far.
• Norway’s Equinor has bought a 9.7% interest in a solar power company, Scatec Solar, after earlier buying a 0.3% stake in the firm. The price tag for the bigger stake was $82.55 million and, according to the company it will help it expand its exposure to the fast-growing solar industry as the state oil and gas company continues with its complete makeover that also involved a change of name to distance itself from its main business.
Tenders, Auctions & Contracts
• UAE’s Adnoc has awarded Italy’s Eni a 25% stake in the Ghasha natural gas concession, which spans several offshore fields. The fields contain so-called sour gas that needs more processing than other gas to reduce its sulfur content and make it suitable for consumption. The project is part of Abu Dhabi’s drive to become self-sufficient in gas and will also involve another partner, yet to be picked, with Adnoc retaining 60% and operatorship in the 40-year concession.
• Gazprom Neft is keen on taking part in the next oil and gas licensing round in Abu Dhabi as part of expanding its cooperation with local major Mubadala. Earlier this year, Mubadala’s oil and gas division sealed a deal for the acquisition of 44% in a joint venture operating in Russia, Gazpromneft-Vostok. Now, its partner in the venture is looking to enter production projects in the emirate.
Discovery & Development
• Shell and Anadarko have locked horns in Mozambique over the supply of locally sourced natural gas for Shell’s planned 38,000 bpd gas-to-liquid plant. Anadarko, together with Italy’s Eni, develops a huge discovery off the shore of the African country that contains an estimated 150 trillion cu ft of natural gas. Plans are to liquefy the gas at a two-train LNG facility on the coast and sell it abroad. Anadarko has told Shell it would only be willing to start supplying gas to its fuels plant once the second liquefaction train starts operating at the LNG project, which will only take place in 2031. For Anadarko, it’s a question of the commercial viability for Shell’s project, which it doubts the project has.
• Petrobras has begun production from a second floating production, storage, and offloading unit at the Buzios field, which was discovered eight years ago in the prolific Santos Basin that has attracted the attention of Big Oil with its reserves, especially those in the pre-salt zone. The unit has the capacity to process a maximum of 150,000 barrels of crude daily and compress a maximum of six million cu m of natural gas.
• The UK’s offshore drilling regulator has given the go-ahead to drilling plans at the Wick prospect in the North Sea that could hold as much as 250 million barrels of oil in resources. Drilling is slated to begin next month with an appraisal well to confirm the resource estimate. The Wick prospect is operated by Corallian Energy. The prospect lies close to the biggest onshore gas field in Europe, Wytch Farm.
• Cenovus and Canadian natural Resources are calling for production cuts among Alberta oil producers in an attempt to reverse a steep discount of Canadian crude to WTI that has seen profit margins shrink considerably. The discount itself is a consequence of pipeline bottlenecks that have seen local producers increase the amount of oil they transport to refiners by rail, a costlier alternative to pipelines that has also eaten into bottom lines.
Automobilisten moesten zich dit najaar opmaken voor recordprijzen aan de pomp, zeiden experts nog geen anderhalve maand geleden. Maar totaal onverwacht keldert de olieprijs juist. ,,Trump heeft de Saoedi's een loer gedraaid.’’
Dit bewijst hoe onvoorspelbaar de oliemarkten zijn
Paul van Selms, brandstofexpert UnitedConsumers
Rara, hoe kan dat? Alle seinen stonden eind september op rood. De pompprijzen waren al een jaar stijgende en lagen slechts enkele centen onder het record uit 2012. De adviesprijs voor benzine bedroeg ruim 1,78 euro, de dieselprijs ruim 1,50 euro. Een vat Brentolie deed ruim 85 dollar, dubbel zoveel als een jaar eerder.
En de benzineprijzen leken richting 1,90 en misschien wel 2 euro te gaan, want president Trump had het atoomakkoord met Iran opgezegd en nieuwe sancties tegen Teheran aangekondigd. Ruim twee miljoen vaten olie per dag zijn daardoor sinds deze maand weggevallen.
De winter komt er bovendien aan, een periode waar de vraag naar energie stijgt, en olieland Venezuela ligt op zijn gat.
Spoel ruim anderhalve maand vooruit en het tegendeel gebeurde: de prijs van een vat Brent olie is ruim 20 dollar gekelderd, een kwart van het totaal. Dat is de sterkste daling sinds 2015. Gevolg is blije gezichten aan de pomp: de adviesprijs voor euro 95 daalde naar 1,676 euro, diesel doet 1,465.
Hoe dat mogelijk is? Een belangrijke reden is dat de VS, Rusland en Saoedi-Arabië hun olieproductie hebben opgevoerd om de weggevallen Iraanse olie te compenseren. Vervolgens zwakte de regering Trump de sancties tegen Iran af door acht landen toestemming te geven tóch Iraanse olie te blijven kopen. De ingegane sancties ten spijt.
,,Je kunt gerust zeggen dat Trump de Saoedi's een loer heeft gedraaid”, zegt onafhankelijk energie-expert Jilles van den Beukel. ,,Eerst kondigt hij sancties aan en spoorde hij Saoedi-Arabië aan de productie sterk op te voeren. Vervolgens geeft hij waivers aan diverse landen af. Zo licht hij de Saoedi's beentje.”
Jilles van den Beukering, onafhankelijk energieanalist
Wat meespeelt is, zijn mindere economische vooruitzichten en de vrees voor een einde aan de huidige economische hoogtij. De verwachte vraag naar olie voor 2019 - met name door de derdewereldlanden - is al naar beneden bijgesteld.
Verder hebben hedgefondsen hun posities in olie deels afgebouwd. ,,Zij bouwden die eerder dit jaar tot records op, maar verkochten die recent,” aldus expert Van den Beukel die een kwart eeuw voor Shell werkte.
Als gevolg daarvan dalen de pompprijzen, ziet brandstofexpert Paul van Selms van UnitedConsumers. Eind september voorspelde hij nog prijzen die richting de 1,90 tot 2,00 euro zouden gaan. ,,Dit bewijst weer hoe onvoorspelbaar de energiemarkten zijn", stelt hij. ,,Inmiddels ligt de benzineprijs weer een cent of 12 onder de top van begin oktober.”
Dat de pompprijs voor het gevoel niet harder daalt, komt door de torenhoge accijnzen. ,,Kort door de bocht: in de adviesprijs van 1,67 zit ruim een euro accijnzen en belastingen,” rekent Van Selms voor. ,,De olieprijs zelf bedraagt 67 cent of eigenlijk enkele centen minder. Als daar 20 procent vanaf gaat, betaal je aan de pomp ruim een dubbeltje minder.”
Ondanks het kelderen kunnen automobilisten zich nog niet rijk rekenen. ,,Diverse experts denken dat de prijzen weer kunnen stijgen als de OPEC de productie volgende maand terugdraait.” Het oliekartel komt op 6 december bijeen.
Die kans is inderdaad reëel, erkent Van den Beukel. ,,De OPEC moet bijna wel optreden.” In praktijk is de OPEC Saoedi-Arabië en Rusland, stelt de expert. ,,Zij bepalen tegenwoordig vrijwel alles, de rest mag in feite tekenen bij het kruisje.” De twee landen zouden denken aan een forse vermindering van minstens een miljoen vaten per dag.
Na 2020: prijzen weer omhoog
Volgende maand kan alles er dus weer anders uitzien. Op langere termijn lijken de olieprijzen sowieso omhoog te gaan. In zijn recente World Energy Outlook spreekt het International Energie Agentschap (IEA) de verwachting uit dat de wereldvraag naar olie ondanks de verduurzamingstrend en het Klimaatverdrag van Parijs zal blijven toenemen. Na 2020 dreigen er weer tekorten, met structureel hogere prijzen tot gevolg.
Wat niet meehelpt is dat energiegiganten als Shell hun zoektocht naar nieuwe olievelden afgelopen jaren hebben teruggeschroefd. Van den Beukel: ,,Een tekort kan zo moeilijker worden opgevangen.”
Voorlopig kunnen automobilisten zich echter nog verheugen op lagere prijzen aan de pomp. En de vraag blijft of een productieverlaging van de OPEC op korte termijn veel uithaalt. Voorlopig draait de productie van Amerikaanse schalie-olie zeer goed. President Trump gooit bovendien olie op het vuur door te twitteren dat de prijzen nog steeds veel te hoog liggen.
Daarmee verraste de republikein de markten die dachten dat Trumps gefoeter over dure olie retoriek was, die hij na de Midterms-verkiezingen in de VS wel zou stoppen. De tekst loopt verder door onder de foto.
Kleine veranderingen, grote consequenties
Andere remmende factor is ten slotte de sterker wordende dollar. Dat heeft een neerwaarts effect heeft op de olieprijzen. Het zwarte goud wordt immers in dollars afgerekend en een sterkere dollar betekent een relatieve prijsstijging van olie.
Van Selms van UnitedConsumers is benieuwd naar de komende maanden. ,,Enkele relatief kleine wijzigingen hebben grote consequenties. Dat bewijst de afgelopen tijd maar weer.”
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