• 35 mins Thanksgiving Gas Prices At 3-Year High
  • 5 hours Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 7 hours South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 10 hours Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 10 hours Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 11 hours Iraq Steps In To Offset Falling Venezuela Oil Production
  • 13 hours ConocoPhillips Sets Price Ceiling For New Projects
  • 3 days Shell Oil Trading Head Steps Down After 29 Years
  • 3 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 3 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 3 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 3 days Venezuela Officially In Default
  • 3 days Iran Prepares To Export LNG To Boost Trade Relations
  • 4 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 4 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 4 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 4 days Rosneft Announces Completion Of World’s Longest Well
  • 4 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 4 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 5 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 5 days Santos Admits It Rejected $7.2B Takeover Bid
  • 5 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 5 days Africa’s Richest Woman Fired From Sonangol
  • 5 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 5 days Russian Hackers Target British Energy Industry
  • 5 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 5 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 5 days Lower Oil Prices Benefit European Refiners
  • 6 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 6 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 6 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 6 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 6 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 6 days OPEC To Recruit New Members To Fight Market Imbalance
  • 7 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 7 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 7 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 7 days GE Considers Selling Baker Hughes Assets
  • 7 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 7 days Saudi Aramco To Invest $300 Billion In Upstream Projects

Breaking News:

Thanksgiving Gas Prices At 3-Year High

Alt Text

The Undisputed Leader Of Tomorrow’s Oil & Gas Markets

According to the Executive Director…

Alt Text

Energy Majors Hit Hard By Climate Regulations

Siemens and General Electric have…

Alt Text

EU Aims To Reform World’s Biggest Carbon Market

The European Union is divided…

Iran’s Eagerness To Export Sees Oil Tanking Again

Iran’s Eagerness To Export Sees Oil Tanking Again

First wel'll take a quick look at some of the critical figures and data in the energy markets this week. Oil broke below $30 per barrel late last week as Iran returned to the international economy and prepared to export more oil.

(Click to enlarge)

(Click to enlarge)

Related: Oman Offers to Slash Oil Production If OPEC Follows Suit

Chart of the Week


• Oil-related tax receipts have plunged along with the price of crude.
• Alaska has been hardest hit because its severance taxes are based on oil companies’ net income rather than production. As profits have disappeared, so have tax payments. The state received “practically no revenue from this tax” for 2015, according to the EIA. This explains the push by Alaska’s governor to introduce the first income tax in decades, plus a cut in dividends to residents from the state’s oil fund.
• Texas saw its revenues shrink by about 50 percent in 2015. But unlike Alaska, where severance taxes make up nearly three-quarters of state revenue, the more diversified Texas only gets about 11 percent of its budget revenue from severance taxes.
• Revenues in North Dakota fell by more than 60 percent in 2015 compared to a year earlier. Production has largely held up in North Dakota, despite the sharp fall in rig counts. Still, the state’s budget is suffering from the downturn.

Market Movers

Suncor Energy (NYSE: SU) put aside its failed hostile takeover of Canadian oil Sands (NYSE: COS), and the two companies came to an agreement on a ‘friendly’ takeover. The deal was reached after Suncor agreed to raise its purchase price to CAD$4.24 billion (USD$2.92 billion). The deal will allow Suncor to obtain a major stake in the Syncrude project in Canada’s oil sands.
• Fourth quarter earnings reports are just around the corner, and Oppenheimer’s Fadel Gheit warns investors that the results could be ugly. Oppenheimer expects Q4 earnings for the majors to be more than 50 percent lower than the year before, and 30 percent lower than the 3rd quarter of 2015.
Seadrill (NYSE: SDRL) has $4.5 billion in debt due in the next two years and is struggling with the collapse of the offshore rig market. JP Morgan says that “major evasive action will be required to avoid covenant breaches in 2016 and 2017.” Seadrill has younger and more technologically advanced rigs in its fleet, but many have not been booked by clients for drilling.

Tuesday January 19th 

The big news from the past week is the removal of international economic sanctions on Iran following the implementation of the July 2015 nuclear agreement. Iran’s oil ministry immediately ordered the ramp up of 500,000 barrels per day in production. It is unclear how quickly this will happen, although Iran says it can achieve the target almost immediately.

Iran has oil tankers loaded with 50 million barrels of crude ready to depart, although the FT reported that satellite imagery showed that none had departed as of January 18. Still, Iran’s assertive approach to returning to the oil market is straining relations between Iran and Saudi Arabia further, if that is possible. Related: Is This The Riskiest Oil Stock In The World?

OPEC members warned Iran would sink oil prices further. “Anyone who will introduce more supply in current situation will make it worse,” UAE energy minister Suhail bin Mohamed said. Iranian officials responded that prices will remain low until a “logical consensus to manage the oil market” emerges, a dig at Saudi Arabia’s current strategy.

Iran has every incentive to sell more oil, just like any other producer who is trying to make up for falling revenue by shipping more volume. But Iran also appears aware of the dangers.

“Iran is not interested in entering the market in a disorderly manner, which is self-defeating. However, it is also not interested to sacrifice further, to benefit those who gained from its absence,” a former Iranian oil official told the FT. “It is a delicate balance.” Oil prices sank below $29 per barrel on Monday following the news.

The IEA and OPEC each released their monthly oil market reports this week. Not much changed from OPEC’s perspective, as the cartel expects the markets to continue to rebalance later this year. The IEA took a more somber tone. The Paris-based energy agency said that oil demand slowed dramatically in the fourth quarter due to weak economic conditions in China, Brazil, Russia and other commodity exporters. Also, crude oil inventories could add another 285 million barrels to storage this year before drawing down, which will come on top of the notional 1 billion barrels in storage increases in 2015. IEA warned of the implications of rising storage: “While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply.”

Nexen Energy’s Long Lake oil facility in Alberta suffered an unexplained explosion on January 15, killing one and injuring another. The incident forced the shutdown of 50,000 barrels of synthetic oil production. Nexen is a subsidiary of China’s state-owned Cnooc. When asked when production would resume, Nexen officials demurred. “I couldn’t even speculate today on how long that would be,” Ron Bailey, Nexen’s senior vice president of Canadian Operations, told reporters. “The priority right now is to shut down safely, suspend operations and understand what went on.” The Long Lake facility also had to curtail production back in July 2015 when a pipeline ruptured.

Separately, China's Cnooc said that it would cut oil and gas production this year due to low prices. The company is targeting 470 to 485 million barrels of oil equivalent (boe), down from 495 million boe last year. China’s National Development and Reform Commission admitted that Chinese oil producers have breakeven costs that are higher than $40 per barrel. Related: IEA Doesn’t See Oil Markets Balancing Out In 2016

Meanwhile, Canada’s dollar continues to sink amid the ongoing slump in crude prices. With the loonie at a 12-year low, a growing chorus of people in Canada are warning at the central bank against cutting interest rates, even though the markets are increasingly seeing such an outcome as likely. Canada’s economy is floundering, and thus a rate cut makes sense. But that could further push down the Canadian dollar, which while helping boost exports, could also be too much too fast. It is a tricky balance for both the Canadian government and the central bank as they try to stimulate the economy. The central bank is expected to announce its plans on Wednesday.

The Bank of America Merill Lynch High Yield Energy Bond Index, an index chalk full of high-yield energy bonds, closed last Thursday with a yield of 17.43 percent, a record high since the fund started back in 1996. That yield is higher than the 17.05 percent it posted in December 2008 when the financial markets were melting down. Sub-$30 oil is pushing the bonds of smaller energy companies deep into dangerous territory.

Brazilian President Dilma Rousseff declined to rule out a bailout for the floundering Petrobras, which is partially state-owned. Petrobras is the most indebted oil company in the world, with debt loads exceeding more than $125 billion. With such high levels of debt, the company cannot invest what it needs to help grow production. Last week the company lowered its 2020 production target to reflect lower spending.

As such, it is resorting to asset sales, but even that likely won’t be a solution since the depressed marketplace is crushing asset valuations. That has raised questions over the company’s viability. President Rousseff remains open to assistance if necessary. "We won’t rule out that it could be necessary to evaluate," Rousseff said in Brasilia on January 15. "It’s not just the Brazilian government that won’t rule it out; no government would rule it out." Following the comments, Petrobras’ CFO tamped down bailout speculation, saying the company was not looking for government help.

By Evan Kelly of 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