An escalation of the trade war sent oil prices plunging on Thursday, and China is threatening to retaliate if the new tariffs come into play
Oil prices fell by 7 percent on Thursday, the worst single-day performance in over four years. President Trump’s surprise announcement that he would put a 10 percent tariff on $300 billion worth of Chinese imports caused a widespread selloff in equities and oil prices. China said that it would retaliate if the tariffs go into effect. Trump left open the possibility that the U.S. could hold off, but only if China offered concessions.
Oil rebounds. With a selloff as steep as the one seen on Thursday, it was unsurprising that traders bought on the dip. Oil was up 3 percent in early trading on Friday.
Natural gas down. While oil received all of the attention, natural gas has also fallen sharply. Nymex prices for September delivery fell to $2.10/MMBtu on Friday, another multi-year low. Meanwhile, in Europe, natural gas and LNG hit 10-year lows in June and while they rose on Thursday, the outlook is bearish. There is some concern that storage could fill up by the end of summer in parts of Europe. “I think it will be a rough August in general,” a gas trader told Reuters.
Energy stocks meltdown. With oil down 7 percent, nobody in the energy sector was spared. Many companies saw their share prices fall 7 or 8 percent, some fared better but others posted even deeper loses. Energy Select Sector SPDR Fund (or XLE) fell more than 2 percent.
Concho misses earnings. Concho Resources (NYSE: CXO) reported a surprise 25 percent decline in quarterly profit on Wednesday, mostly due to lower oil and gas prices. Concho said its Permian wells were spaced too close together, and the company said it would slow the pace of development. Concho’s share price fell by 22 percent on Thursday.
Iran exports plunge, perhaps down to 100,000 bpd. Iran’s oil exports plunged to just 100,000 bpd in July, although there is a dispute over the accuracy of that data. If true, volumes are down sharply from the 400,000 bpd in June. Meanwhile, the Iranian government approved a plan to lop off a few zeros from its currency and rename it amid bad inflation.
Libyan production falls below 1 mb/d. Libya’s oil production fell to just 950,000 bpd after the Sharara field went offline for the second time in as many weeks. The outage is a sign of deteriorating security as the 4-month civil war drags on.
OPEC production falls to 8-year low. OPEC production fell to just 29.42 mb/d in July, down 280,000 bpd from June. Voluntary cuts from Saudi Arabia and steep losses from Iran contributed to the lower figure.
Trump considers quarantine of Venezuela. When asked if he was considering a blockade or quarantine of some kind of Venezuela, President Trump said: “Yes, I am.” He did not offer any further details.
Enbridge pipeline explodes. Enbridge (NYSE: ENB) had one of its natural gas pipelines explode in Kentucky, which killed 1 and injured six others. The incident puts a spotlight on Enbridge’s safety record as it seeks to build controversial replacement pipelines for Line 3 and Line 5.
ExxonMobil Baytown fire injures 37. An explosion and fire at ExxonMobil’s (NYSE: XOM) Baytown petrochemical complex injured 37 people and sent a plume of black smoke over the Houston area. The fire hit Exxon’s olefins plant. Harris County filed a lawsuit against Exxon over the pollution from the fire. Related: The Bakken Oil Boom Is Facing A New Bottleneck
Exxon reports $3.1 billion in quarterly profit. ExxonMobil (NYSE: XOM) reported a $3.1 billion profit for the second quarter, down 21 percent from a year earlier. Upstream liquids production up 8 percent. Permian production was up 90 percent from the same period last year. Capex was also up to $8 billion, a 22 percent increase from a year earlier.
Chevron earnings up 27 percent. Chevron (NYSE: CVX) reported stronger-than-expected earnings on Friday, pushed higher by production increases. Chevron’s profit jumped by 27 percent, although that was magnified by a one-off $740 million termination fee from Occidental Petroleum (NYSE: OXY) after the Anadarko takeover.
Occidental earnings off 25 percent. Occidental Petroleum (NYSE: OXY) reported a $635 million profit in the second quarter, which was down 25 percent from a year earlier. However, investors are more focused on the $38 billion acquisition of Anadarko Petroleum, which should close this month. Meanwhile, Oxy announced a joint venture with Colombia’s Ecopetrol to develop 100,000 net acres in the Permian. Ecopetrol will pay $750 million up front and will carry another $750 million in capital. Oxy will maintain a 51 percent stake in the joint venture.
Shell disappoints on earnings, cites low LNG and natural gas prices. Royal Dutch Shell (NYSE: RDS.A) reported disappointing earnings for the second quarter on Thursday, with earnings down 26 percent. Shell was hit on all fronts, and sounded downbeat about the trajectory of the economy. “We’ve seen some very severe macroeconomic headwinds -- probably most pronounced in our downstream business where we saw some weaker refining margins -- but especially a much weaker trading environment for petrochemicals,” Chief Executive Officer Ben Van Beurden said in a Bloomberg TV interview on Thursday. “In our upstream, we’ve seen headwinds particularly in North American gas.” With Shell more heavily invested in gas and LNG than its fellow oil majors, the downturn in global gas markets hit hard. Related: A Surprising Innovation In Energy’s Hottest Market
BlackRock lost $90 billion in fossil fuel investments. A new report found that BlackRock (NYSE: BLK), the world’s largest investor, lost around $90 billion over the past decade through investments in fossil fuel companies.
North Dakota challenges Washington rail law. Washington State has a law set to take effect in January 2020 that would prevent refineries from unloading oil from trains with a psi above 9, which could exclude oil from the Bakken. The law is intended to reduce the risk of oil-by-rail accidents that result in explosions. North Dakota fears the law could impact as much as 200,000 bpd of production, and the state is seeking help from the Trump administration, asking regulators to overrule Washington’s law.
LNG prices hit 3-year low. Asian spot prices for LNG fell to a 3-year low this week, with spot prices for September delivery down to just $4.10/MMBtu.
By Tom Kool of Oilprice.com
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