Oil prices have traded relatively flat on Tuesday morning, despite bullish news continuing to mount.
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- U.S. natural gas production soared to a new all-time high in 2018, rising by a massive 10 billion cubic feet per day (Bcf/d), an 11 percent increase from the year before.
- The increase was the largest ever recorded in a single year.
- Natural gas exports jumped to 9.9 Bcf/d, up 14 percent from the year before. That figure includes both pipeline and LNG exports. LNG exports rose by 53 percent to 3 Bcf/d.
• Royal Dutch Shell (NYSE: RDS.A) says that it will decide by 2025 whether or not to move forward with an expansion of its LNG Canada project. The first phase of the $31 billion LNG export terminal was given a greenlight last year.
• Imperial Oil (TSE: IMO) decided to slow development at its Aspen in situ oil sands project “given market uncertainty stemming from Alberta government intervention and other industry competitiveness challenges.”
• Eni (NYSE: E) unveiled a four-year stock buyback program with an initial 400 million euro repurchase this year, plus a 3.6 percent increase in its dividend to 0.86 euros per share in 2019.
Tuesday March 19, 2019
Oil prices held onto gains at the start of the week, keeping WTI and Brent at four-month highs. OPEC’s assurances that cuts will remain in place for the next few months – including potentially over-compliance – firmed up prices.
OPEC delays decision on cuts. When OPEC announced the production cuts last December, it said that it would review the next steps at a meeting in April. Now, it appears that the group will push off a decision until the June meeting, at which point there will be more clarity on the Iran sanctions waivers and the impact of the production declines in Venezuela.
U.S. says oil market can deal with no Iranian oil. American officials said that the global oil market can withstand the removal of all Iranian oil exports this year, according to Bloomberg. No decisions have been made on waivers yet.
Refiners are trimming plans for maintenance. Refining margins have been poor for gasoline, but strong for distillates. That trend will continue ahead of the IMO regulations in 2020 that will reduce sulfur content in marine fuels, raising demand for distillates. Bloomberg reports that refiners are likely going to reduce planned maintenance periods, or front-load them in the first half of 2019, in anticipation of a strong period leading up to the implementation of the IMO rules. Related: “Perfect Storm” Drives Oil Prices Higher
Trump-Xi meeting delayed until June. A potential meeting between Trump and Xi Jingping that could put an end to the trade war has been pushed off until June, back from a proposed meeting later this month or for April.
Fires hit two refineries. ExxonMobil’s (NYSE: XOM) Baytown refinery caught fire over the weekend. The facility’s gasoline hydrofiner, which removes sulfur from fuel, caught fire and was billowing smoke. Separately, Phillips 66’s (NYSE: PSX) shut a crude unit on Friday near Los Angeles after it caught fire. The incidents could put pressure on gasoline stocks and prices. The Phillips 66 unit could have a bigger impact since California does not have interconnections with the rest of the country’s refining system. The impact on petrochemical production is so far unclear.
Keystone XL loses another court battle. A U.S. court had previously ordered TransCanada (NYSE: TRP) to halt construction on the Keystone XL pipeline while an environmental review played out. TransCanada appealed the decision but last week lost that appeal in a subsequent court ruling.
Environmental assessment could delay major oil export terminal. The Carlyle Group is hoping to build a $1 billion crude oil export terminal in Corpus Christi, Texas, which would vastly expand the U.S.’ capacity to export oil. As of now, there is only one deepwater port in the U.S. capable of loading onto supertankers. The Carlyle Group’s project, however, could face a lengthier delay after the U.S. Army Corps of Engineers recommended a full environmental impact statement before it can proceed, a process that could take 18 months. Trafigura is racing to build a rival project that would be subjected to less regulatory scrutiny because it would not require dredging.
Equinor (NYSE: EQNR) is exploring the sale of its Eagle Ford Shale assets. The company originally paid $1.3 billion for the joint venture in the Eagle Ford with Talisman Energy Inc., which was later purchased by Repsol. Equinor is reportedly looking for more natural gas deals as it exits the Eagle Ford. Notably, the company has avoided the Permian because acreage has become “too expensive.”
Carrizo explores deal with SM Energy. Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is exploring a merger with SM Energy (NYSE: SM), although no decisions have been made. Carrizo’s shares increased 4.9 percent on the news, while SM Energy’s shares jumped by 2.5 percent. The talks come as U.S. shale drillers are under pressure to demonstrate profitability at a time when the oil majors are scaling up operations in the Permian and other shale basins.
Libya’s oil production rises on Sharara restart. The restart of Libya’s largest oil field, the Sharara, has helped boost the country’s output. “Three weeks ago, production was around 900,000 barrels a day. Now we’re in the range of 1.2 million barrels a day,” Chairman of Libya’s National Oil Corp. Mustafa Sanalla told Bloomberg Television.
Related: Trade Tensions Are Keeping A Lid On Oil Prices
Alberta to lift production limits. Alberta will raise the limit on production by 25,000 bpd in May, followed by another 25,000-bpd increase in June.
Pemex to triple drilling rate. Pemex plans to triple the number of wells that it drills this year in an effort to stop its long-term slide in output. The company will drill 506 new wells across 20 oil fields, the company’s CEO said, which should yield 300,000 bpd in new output by 2022.
Battery startups introduce non-lithium batteries. The future of electric vehicles was thought to hinge on lithium, but newer battery designs promise to offer more efficient batteries.
Shipping industry bets on LNG tankers. The global fleet of LNG tankers could grow by a third in the next few years as the gas trade continues to boom. Each vessel costs about $175 million to build.
Colorado State Senate passes energy overhaul bill. Colorado’s State Senate passed a major piece of legislation that grants more local authority in the regulation of oil and gas drilling in the state. The bill also reforms the primary mission of state regulators to one of environmental protection, rather than promoting the growth of oil and gas development. The industry has opposed the measure, warning that it could impede production. The bill passed the Senate and now goes to the House, where odds of derailing it are even slimmer.
By Tom Kool for Oilprice.com
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