In what is turning out to be a very impressive earnings season, nearly all the oil majors are beating expectations and rewarding shareholders with higher dividends and share buybacks, much to the chagrin of the White House.
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Friday, October 28th, 2022
Strong corporate earnings have breathed new life into the oil markets, with most oil majors sticking to their set policy of increasing dividends and ramping up share buybacks. This might not sit well with the White House ahead of the midterm elections as the flurry of optimism has supported oil prices well, with ICE Brent within touching distance of the $100 per barrel psychological barrier. The difficulties that sprang up earlier this week – widespread dumping of Chinese assets amidst Xi Jinping’s re-election, the ECB’s sullen interest rate increase, and many others – appear to have been forgotten, for now.
IEA Casts a Long Shadow on Fossil Fuels. In its 2022 edition of the World Energy Outlook, the International Energy Agency (IEA) indicated that global demand for every fossil fuel will peak around 2030, which is especially surprising for natural gas, previously seen as the bridge fuel towards a greener future.
World Bank Projects Energy Price Decline. The World Bank announced it expects global energy prices to drop 11% in 2023 after a massive surge this year, putting Brent prices at $92 per barrel and expecting decreases in both natural gas and coal prices next year amidst weaker growth.
US Rail Strike Odds Increase Again. After the second rail workers’ trade union rejected the national tentative agreement reached in mid-September, the likelihood of seeing a railway strike in the US in December is rising again, potentially putting some 30% of US cargo shipments in jeopardy.
US Diesel Tops the Shortage Agenda. With US distillate inventories at the lowest level for this time of the year since the EIA started collecting weekly data in 1982, at 106 million barrels, diesel prices will have a massive upside in the winter months unless rates of diesel consumption decline.
UN: We Might Not be Able to Halt Global Warming. Ahead of the COP27 next month, the UN said it sees no “credible pathway” to limit the rise in global temperatures to 1.5° C above pre-industrial levels and that with the current course it is set to rise by 2.8° C.
High LNG Prices Bring Dual-Fuel Tankers Back. Confronted with exorbitantly high natural gas prices, with LNG JKM hitting $70/mmBtu this year, shipping companies have substantially increased their interest in dual-fuel tankers that can run on LNG or diesel as a means of hedging their bunkering costs.
TotalEnergies Doubles Down on Lebanese Offshore. After Russia’s Novatek relinquished its 20% stake in Lebanon’s offshore block 09, French oil major TotalEnergies (NYSE:TTE) has been handed temporary majority control of the project, potentially also farming in Qatar Energy at a later stage.
Germans Don’t Appreciate Chinese Stake in Key Port. The German government allowed China’s state-run shipowner and operator Cosco to buy a 24.9% stake in a Hamburg port terminal, triggering widespread government dissent as the move is seen to strengthen Beijing’s sway over Germany.
US Government Wants to Mine its Own Uranium. With US nuclear firms still depending on Russian and Kazakh uranium, the Biden Administration is building up its own uranium strategy with a view to mining more domestically – the IRA already allocated $700 million for producing high-assay low enriched uranium.
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The Guyanese Gift that Keeps on Giving. US oil major ExxonMobil (NYSE:XOM) recorded two further discoveries in Guyana’s Stabroek block with its Sailfin-1 and Yarrow-1 wildcats, which despite both encountering moderate net oil pays (23 m) will be tied to larger projects.
Namibia Considers Joining OPEC. Following news of at least two major discoveries in offshore Namibia, with TotalEnergies’ (NYSE:TTE) Venus and Shell’s (LON:SHEL) Graff both potentially being multi-billion-barrel finds, Namibia could consider joining OPEC in the years to come.
Venezuela Opens the Gate for JV Partners to Leave. Venezuela is allowing partners of its state oil company PDVSA to leave joint ventures if they forgo payment for past debts and unpaid dividends – by now the only majors that remain in the country are Chevron (NYSE:CVX), ENI (BIT:ENI), and Repsol (BME:REP).
President Biden Singles Out Shell. US President Joe Biden singled out UK-based energy major Shell (LON:SHEL) for funneling profits to shareholders instead of lowering gasoline prices, a reaction to the oil firm’s 15% dividend increase and continued share buyback program.
France’s Nuclear Generation Gets Hope for 2023. The government of France will require state-owned utility EDF (EPA:EDF), soon to be fully nationalized, to sell less of its nuclear power at mandated below-market prices (100 TWh instead of this year’s 120 TWh), sparking some hope this might improve the company’s balance sheet.
By Michael Kern for Oilprice.com
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