• 9 hours U.S. Oil Production To Increase in November As Rig Count Falls
  • 11 hours Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 13 hours Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 15 hours EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 17 hours Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 17 hours Aramco Says No Plans To Shelve IPO
  • 3 days Trump Passes Iran Nuclear Deal Back to Congress
  • 3 days Texas Shutters More Coal-Fired Plants
  • 4 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 4 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 4 days Chevron Quits Australian Deepwater Oil Exploration
  • 4 days Europe Braces For End Of Iran Nuclear Deal
  • 4 days Renewable Energy Startup Powering Native American Protest Camp
  • 4 days Husky Energy Set To Restart Pipeline
  • 4 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 5 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 5 days India Needs Help To Boost Oil Production
  • 5 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 5 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 5 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 5 days District Judge Rules Dakota Access Can Continue Operating
  • 5 days Surprise Oil Inventory Build Shocks Markets
  • 6 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 6 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 6 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 6 days Oil M&A Deals Set To Rise
  • 6 days South Sudan Tightens Oil Industry Security
  • 6 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 6 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
  • 7 days Record U.S. Crude Exports Squeeze North Sea Oil
  • 7 days Iraq Aims To Reopen Kirkuk-Turkey Oil Pipeline Bypassing Kurdistan
  • 7 days Supply Crunch To Lead To Oil Price Spike By 2020s, Expert Says
  • 7 days Saudi Arabia Ups November Oil Exports To 7-Million Bpd
  • 7 days Niger Delta State Looks To Break Free From Oil
  • 7 days Brazilian Conglomerate To Expand Into Renewables
  • 7 days Kurdish Independence Could Spark Civil War
  • 7 days Chevron, Total Waiting In The Wings As Shell Mulls Majnoon Exit
  • 7 days The Capital Of Coal Is Looking For Other Options
Alt Text

What’s Stopping An Oil Price Rally?

Oil prices rallied in Q3…

Alt Text

5 Players To Watch In The FinTech Revolution

Artificial Intelligence and Blockchain tech…

Alt Text

3 Stocks To Play Today’s Hottest Market

Big automakers have jumped on…

Oil Moves Higher On Expectations Of Tighter Market

Oil Refinery

Oil prices gained on Monday and Tuesday as both traders and analysts see crude markets tightening as a result of OPEC output cuts.

Chart of the Week

(Click to enlarge)

• The collapse of oil prices in 2014 provided a windfall for the airline industry, with industry-wide profits rising to $25.6 billion in 2015, up from $7.5 billion in 2014.

• Fuel costs fell by $16.5 billion over that timeframe.

• The profits and fuel savings have allowed airlines to upgrade their fleets, procuring new aircraft in the past few years.

Market Movers

Statoil’s (NYSE: STO) Troll field will be added to calculations for the Brent crude benchmark. The Brent benchmark is priced based on physical oil from the Brent field, plus three other fields – Forties, Oseberg and Ekofisk. However, with those fields depleting, S&P Global Platts said it will include the Troll field in the mix.

Gastar Exploration (NYSEMKT: GST) saw its share price shoot up more than 10 percent after it secured $425 million in new financing. Gastar is a small shale player in the STACK play in Oklahoma.

Enbridge (NYSE: ENB) announced in its quarterly results that it was spending $1.7 billion to take a 50 percent stake in an offshore wind farm in the North Sea with nearly 500 MW of capacity.

Tuesday February 21, 2017

Oil prices moved up on Tuesday on hopes that the market is tightening. OPEC says its cuts are working and hedge funds are still bullish on crude, but pitfalls remain.

Hedge funds take record bullish position to new heights. Hedge funds and money managers have been on a buying spree since OPEC announced its deal in late November. Bullish bets on crude oil futures have climbed at a rapid pace in the past few months, setting new records nearly every week. Now, hedge funds and other money managers have surpassed 1 billion barrels of bullish bets, a new record high. As we have noted many times, the record buildup leaves the market exposed to a backsliding in prices if the mood of traders turns sour. Related: Oil Leaps Higher As OPEC Pushes For 100% Compliance

$30 oil possible if OPEC doesn’t extend deal. The OPEC deal called for cuts of 1.2 mb/d over the course of six months. If the deal is not extended until at least the end of the year, oil prices could fall back into the $30s, according to ABN Amro Bank NV. The “downside risk has become much bigger than previously,” Hans van Cleef, ABN Amro’s senior energy economist, told Bloomberg.

Saudi Aramco prefers western stock exchange. The Wall Street Journal reported that Saudi Arabia is leaning towards a western stock exchange when it lists its state-owned oil company. The plan is a partial IPO of about 5 percent of the company, which could allow the kingdom to take in more than $100 billion. Saudi officials looked at exchanges around the world but decided against one in Asia. Now officials are looking at New York, London and Toronto, with New York as the leading candidate. The IPO could be the largest ever. However, because the company is state-owned, it will be difficult to disentangle its finances from the Saudi government. Roughly 90 percent of Aramco’s profits go into government coffers and the royal family certainly takes its share as well. Only about 10 percent of the profits are reinvested in the company. The complexity of this situation is likely to push the IPO off until late 2018 at the earliest, or more likely 2019, the WSJ says.

ExxonMobil set to write off oil sands. ExxonMobil (NYSE: XOM) is days away from writing off 3.6 billion barrels of Canadian oil sands assets. Exxon has been notorious for refusing to take write downs, a practice that attracted the attention of the SEC and the NY attorney general. But now the oil major is acknowledging that the oil sands are no longer profitable to produce and the company could issue a disclosure next week. But Exxon will likely emphasize the fact that the oil sands could be profitable again if oil prices rise. Longer-term, however, the chances are rising that oil sands will be left in the ground because of stricter environmental rules. “For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” Jim Krane, an energy fellow at Rice University’s Baker Institute, told the WSJ. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” On top of that, suddenly the market is talking about “peak demand,” the notion that the world will see consumption top off in the near- to medium-term, which could keep oil prices low enough that oil sands, and many other assets, are no longer profitable.

Shell says no glut in LNG market. The largest LNG exporter in the world is not concerned about the state of oversupply in the global market. Royal Dutch Shell (NYSE: RDS.A) made a massive bet on LNG when it spent more than $50 billion to acquire BG Group. But because a wave of LNG export terminals have come online, particularly in Australia, prices have crashed. But Shell is sanguine. “There’s been a perception and quite a few headlines of the LNG market being oversupplied,” Maarten Wetselaar, Shell’s head of integrated gas, said this week. “In 2016 you didn’t find any proof of that.”

Related: Can Canada’s ‘Gas City' Replicate Qatar’s Success?

Saudi cuts make Russia largest oil producer. Russia produced 10.49 million barrels of oil per day in December, and Saudi Arabia produced just under that amount at 10.46 mb/d as it started to throttle back on output. That makes Russia the largest oil producer in the world right now. In January, Saudi Arabia took production below 10 mb/d in order to meet its obligations under the OPEC deal.

Trump administration to assault environmental rules. With his EPA chief in place, the Trump administration is gearing up for an attack on federal environmental regulations. One of the top priorities will be the EPA’s limits on greenhouse gas emissions, a core part of the Obama administration’s climate campaign. However, the regulations cannot be undone by a simple executive order, they must be taken apart by an official rule, which takes time to formulate. Still, the EPA is set to signal a coming wave of deregulation in an effort to prioritize fossil fuel production. It is important to note that scrapping climate regulations is not a clear win for natural gas producers, who were set to benefit from the displacement of coal. In fact, President Obama’s climate campaign hinged quite a bit on natural gas as the largest source of electricity in the U.S. How this shakes out is unclear at the moment, but gas and renewables are still expected to win in the marketplace.

By Evan Kelly for Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News