• 1 day PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 1 day Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 1 day Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
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Oil Prices Fall As Markets Question OPEC Cuts

Chespeake drilling rig

Oil markets are showing signs that optimism in crude prices might be reaching its limit as many speculative bets are reversing

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Chart of the Week

 

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• U.S. coal production plunged by 17 percent in 2016 from 2015 levels. Coal output is now at its lowest level since 1978.

• U.S. coal production has been falling for nearly a decade, but the decline has accelerated in the last few years.

• The main drivers are cheap natural gas, a few warm winters that led to gluts of gas and coal, but more importantly a mass shuttering of coal-fired power plants that have sapped demand. International coal markets have also been in the doldrums for years, putting downward pressure on prices and leaving few outlets for U.S. coal miners.

Market Movers

Noble Energy (NYSE: NBL) purchased 7,200 acres in the Delaware Basin, which is part of the vast Permian Basin in West Texas. Noble paid $300 million to an undisclosed seller.

NRG Energy (NYSE: NRG) and JX Nippon Oil & Gas Exploration Corporation (JX Nippon) launched the world’s largest carbon capture system at their Petra Nova facility in Texas. The CO2 from the coal plant will be captured and used to boost reservoir pressure for oil production.

Total SA (NYSE: TOT) announced that it will acquire a $900 million stake in Tullow Oil’s (OTCMKTS: TUWOY) in Ugandan oil fields.

Tuesday January 10, 2017

Oil prices declined sharply at the start of this week on fears of rising U.S. shale production and a reversal of speculative bets by hedge funds and other money managers, a sign that optimism in crude prices might be reaching its limits. WTI and Brent fell more than 2 percent on Monday and declined by another 1 percent during midday trading on Tuesday. Natural gas prices have also fallen sharply over the past week (although gas gained a bit on Tuesday) as warmer weather is set to arrive in much of the United States.

Oil jobs on the rise. With capex set to rise in 2017 for the first time in three years, payrolls in the oil industry will also expand. An estimated 440,131 jobs were eliminated around the world during the downturn, with more than three quarters coming from the oilfield services sector, including drilling contractors, equipment suppliers and service providers. After bottoming out in July, oil jobs started to rise in the U.S., and hiring will pick up momentum this year, according to industry consultant Graves & Co.

Oil discoveries could rise too. In 2016, the global oil industry discovered 3.7 billion barrels of new oil, the lowest figure dating back to the 1950s, according to Wood Mackenzie. However, there is a good chance that last year’s total will be the low point, with discoveries set to rise this year as spending on exploration increases.

Canadian pipeline jam. Enbridge (NYSE: EEP) is trying to market a new stream of oil to U.S. customers, but is having trouble finding willing buyers. Canada’s oil industry is suffering from a dearth of pipeline capacity, forcing Canadian oil to sell at a steep discount to WTI. Much of Canada’s oil is of the heavier variety, but Enbridge is trying to market a new stream dubbed Canadian Heavy Sweet (CHS), a mixture of heavy and light oil. The idea is to send more oil along an existing but under-utilized pipeline that runs to Wisconsin, USA, which has been used to ship light oil. The new CHS blend would allow more heavy oil to be exported, but U.S. refiners are thus far wary of the unknown oil blend. Related: The Next Big Innovation In Oil & Gas: Cloud Computing

Barclays: Time to jump into oilfield services. Investment bank Barclays says that the time is right for investors to turn back towards the oilfield services industry. The sector has been hit hard by the more than two-year downturn, but Barclay’s analysts’ see upstream spending on the rebound, rising by 7 percent this year. That opens up the possibility of strong growth, even from a sector that still has high valuations. “While we acknowledge the lofty valuations on a historical basis…we believe investors will continue to justify paying up for what could also prove to be a longer period of hyper earnings growth.” Barclay’s analysts added that OFS could benefit at the expense of the upstream sector. “With oilfield services having one of the most concentrated ownerships within the S&P (a good proxy for under ownership), we expect rotation into oilfield services and out of E&Ps, which outperformed by 1100bp in 2016 (by 2700bp from trough), particularly as economic rent shifts in favor of services.”

New York to shutter Indian Point nuclear reactor. Another reactor bites the dust. New York Governor Andrew Cuomo is set to announce a deal that will see the closure of the Indian Point nuclear reactor, located a few dozen miles from New York City. The governor has long opposed the reactor, due to its proximity to the city, but the plant’s owner, Entergy (NYSE: ETR) was hoping to obtain a 20-year license extension on the 40-year old plant. Instead, Entergy has agreed to shut the plant down by 2021. The closure is emblematic of a problem across the nuclear industry, which will struggle to keep aging reactors online. Gov. Cuomo has promised to replace the lost power – 2 GW of carbon-free electricity – with renewables, but natural gas could also help fill the void. Related: Lithium Prices Set To Jump As Tesla Doubles Global Battery Production

Argentina offers gas industry subsidized prices. Argentina reached a deal with labor unions and energy companies that could help attract investment to its vast Vaca Muerta shale basin. The deal will see the government offering the industry regulated prices for natural gas at $7.50 per million Btu (MMBtu), much higher than the prevailing market price. The subsidized price is “indispensable for attracting long-term investment,” the government said in a statement. Argentina is at the forefront of the shale revolution outside of North America, and majors like Chevron (NYSE: CVX), Shell (NYSE: RDS.A) and ExxonMobil (NYSE: XOM) already have a presence in the Vaca Muerta.

UK wind surpasses coal. Wind farms in the UK generated more electricity than coal in 2016, the first time that renewable energy accounted for a larger share of electric power than coal on an annual basis. The closure of three coal plants caused its market share to plunge to just 9.2 percent, down from 22.6 percent in 2015. Wind generated 11.6 percent of the UK’s electricity in 2016.

Exxon CEO Rex Tillerson to face nomination hearing. A wave of nomination hearings are taking place this week in Washington, including EPA nominee Scott Pruitt and ExxonMobil (NYSE: XOM) CEO Rex Tillerson for the State Department. Meanwhile, a new report finds that Exxon did business with Iran, Syria and Sudan through a European subsidiary while Tillerson was a top executive at the company. The findings could be a problem because the countries were under U.S. sanctions for sponsoring terrorism at the time of the sales in 2003, 2004 and 2005.

By Evan Kelly of Oilprice.com

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