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Oil Falls Despite Major Outage In Libya

Despite an escalation in Libya's oil war, crude prices fell on Tuesday morning as a deadly virus in China sparked fears of an economic slowdown. 

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- The EIA forecasts Brent oil prices averaging $65 per barrel in 2020 and $68 per barrel in 2021, and WTI averaging $59 and $62 per barrel over the same timeframe.

- The agency says prices could remain elevated in early 2020 because of geopolitical risk, but the premium will fade as the year wears on.

- The EIA sees Brent dropping to $62 per barrel by May.

Market Movers

- Magellan Midstream Partners (NYSE: MMP) has agreed to sell three marine terminals to Buckeye Partners (NYSE: BPL) for $250 million.

- Halliburton (NYSE: HAL) beat earnings estimates by $40 million, and its share price was up by 2 percent in early trading.

- Total SA (NYSE: TOT) signed an agreement with Qatar and Japan’s Marubeni to build a $467 million solar project.

Tuesday, January 14, 2020

Oil prices pared gains in early trading on Tuesday, as a new virus in China raised fears of an economic slowdown. Even substantial oil supply disruptions in Libya couldn’t keep prices up.

Libya outage pushes oil up. Libya’s oil operations were disrupted at the El Feel and Sharara fields as well as the Zawiya export terminal. Other ports also declared force majeure, including Brega, Ras Lanuf, Hariga, Zueitina and Sidra. Together, the outages may total as much as 800,000 bpd. Libya’s civil war has raged since last April, but the oil outages open up a dangerous new phase.

Chevron waiver in Venezuela extended. The U.S. government extended a waiver for Chevron (NYSE: CVX) for another three months, allowing the company to continue to operate in Venezuela despite sweeping American sanctions on the country. Venezuela’s oil production has stabilized at lower levels – at a little over 700,000 bpd – despite the ongoing sanctions.

Related: 800,000 Bpd Offline After Haftar Affiliates Halt Exports

Natural gas drops below $2. Nymex natural gas prices have plunged below $2/MMBtu, a level not seen in years. Prices continued to decline in early trading on Tuesday. Shale gas stocks were deep in the red as a result. For instance, Range Resources (NYSE: RRC) was off by more than 7 percent on Tuesday, Antero Resources (NYSE: AR) was down by more than 5 percent. The gas-focused drillers in the Marcellus shale are under particular pressure because they don’t have crude oil to offset the losses. The gas plunge is also squeezing coal-fired power plants.

BP pulls out of Kurdistan. BP (NYSE: BP) is withdrawing from Iraqi Kurdistan after its $100 million contract expired at the end of 2019. The move is a blow to Iraq’s oil sector goals and comes as the country has been rattled by unrest.

IEA: Oil industry at risk of energy transition. The oil industry is not investing enough in clean energy, and companies are at risk as the world moves on from fossil fuels, the IEA warned in a new report. But large oil and gas companies could play a constructive role in accelerating the deployment of clean energy, the agency said.

Oil major dividends unsustainable. A new IEEFA report finds that the shareholder payouts from the five largest oil majors are unsustainable. The payouts to shareholders exceeded free cash flow by $207 billion over the past decade. The majors took on debt and sold assets to bridge the gap, raising questions about the sustainability of such a strategy.

China to phase out single-use plastics. China is rolling out a ban on plastic bags in all majors cities by the end of 2020 and banned in cities and towns by 2022. “The timely implementation of such an initiative stands to have a sizeable impact on our petchem demand growth outlook, with China accounting on average for around 50% of global growth in our current base case over the next decade,” JBC Energy wrote in a note. “Moreover, this follows a raft of similar bans announced elsewhere in the world – with the EU and Canada two particularly prominent examples – and highlights the growing risk to the petchem demand outlook as a whole.”

Hedge funds sell oil on economic concerns. Renewed concerns about the global economy have led to a selloff in oil futures by hedge funds and other money managers.

Related: Has Natural Gas Hit Rock Bottom?

Radioactive risk from oil and gas waste. A new investigation from Rolling Stone finds that handling fracking waste carries risk of radioactive contamination.

U.S. offshore wind revolution. By 2030, the U.S. could have 20 GW of offshore wind online, with investment exceeding $15 billion by the mid-2020s, according to Rystad Energy. That means that spending on offshore wind could exceed that of offshore oil and gas in the next few years. “Assuming continued support from the regulators, many more projects will be sanctioned in the coming years and we expect to see yearly investments in the sector exceed $15 billion by the middle of the decade,” says Tim Bjerkelund, Head of Consulting New York at Rystad Energy. “That would certainly signal an energy revolution and offshore suppliers should take note.”

Saudi growth forecast cut by IMF. The IMF lowered its forecast for Saudi Arabia’s GDP due to the OPEC+ cuts, cutting it to 1.9 percent this year from 2.2 percent. Meanwhile, there have been conflicting reports about when the OPEC+ coalition would meet next. As of now, the cuts expire at the end of March.

By Tom Kool for Oilprice.com 

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