• 5 minutes Trump will capitulate on the trade war
  • 7 minutes China 2019 - Orwell was 35 years out
  • 12 minutes Glory to Hong Kong
  • 15 minutes ABC of Brexit, economy wise, where to find sites, links to articles ?
  • 16 hours Peaceful demonstration in Hong Kong again thwarted by brutality of police
  • 10 hours Here's your favourite girl, Tom!
  • 1 hour Canada Election Deadlock?
  • 1 hour Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 2 hours Clampdown on Chinese capital flight is shutting down their commercial construction in US
  • 10 hours IMO 2020:
  • 37 mins Nigeria Demands $62B from Oil Majors
  • 1 day China's Blueprint For Global Power
  • 1 day Civil Unrest Is Erupting All Over The World, But Just Wait Until America Joins The Party...
  • 1 day Australian Hydroelectric Plant Cost Overruns
  • 1 day Ford Planning Huge North American Charging Network
  • 20 hours Deepwater GOM Project Claims Industry First
  • 9 mins Devaluing the Yuan
Alt Text

Are U.S. Sanctions Killing Crude?

U.S. sanctions on Venezuela and…

Alt Text

A Crisis Is Brewing For Offshore Oil

Times are hard for both…

Alt Text

Bearish Sentiment Takes Hold Of Oil Markets

Oil prices were down on…

Editorial Dept

Editorial Dept

More Info

Premium Content

Speculators Are Abandoning Oil

Friday September 27, 2019

1. China’s bauxite imports surge

China

- There are concerns that Indonesia might put a ban on bauxite exports, the raw material used for aluminum production, following restrictions on nickel exports. Nickel prices recently spiked.

- “While such a development would support bauxite and in turn aluminum prices, it would be less impactful for China than the nickel ban, in our view,” Standard Chartered wrote in a note.

- A 2014 ban on exports led China to diversify away from Indonesia. Prior to 2014, Indonesia accounted for 77 percent of China’s bauxite supply, but in the first half of 2019, only 13 percent of China’s bauxite supply came from Indonesia.

- Now, more than half of China’s bauxite comes from Guinea.

- China’s bauxite imports hit an all-time high in July.

2. Big Oil bets on Big Wind

Big Oil

- Norwegian oil company Equinor (NYSE: EQNR) will spend $11 billion on the Dogger Bank wind project in the UK North Sea.

- According to Rystad Energy, this will not only be the company’s largest project through 2026, but it will rank as the six largest offshore project in the entire world over that period. That includes offshore oil and gas projects.

- In fact, offshore wind can offers a path forward for oil companies and for servicers. “Equinor’s mega offshore wind investment promises hope for a deflated service industry. An eleven-digit investment program - a rare occurrence within the offshore oil and gas industry - is entirely unprecedented in the offshore wind space,” Audun Martinsen, head of oilfield services research at Rystad Energy, said in a statement.

- The value of new offshore oil FIDs could fall from $60 billion in 2019 to $43 billion by 2022. “The influx of offshore wind contracts worth billions of dollars will be welcomed with open arms by marine contractors,” Martinsen said.

3. Gold demand rises as weak economic data multiplies

Gold

- Gold prices are down from their early September highs, but still traded above $1,510 this week as fears of a global economic slowdown continue to mount.

- Data from Germany showed a steep contraction in manufacturing activity, and the service sector, which has proved more durable, is also finally showing signs of a slowdown.

- “Gold was therefore in considerable demand as a safe haven yesterday, as reflected in high ETF inflows,” Commerzbank said in a September 24 note.

- “The gold ETFs tracked by Bloomberg registered inflows of 15.5 tons yesterday, their largest daily inflow in three months.”

4. Speculators abandon oil

Speculators

- While investors flocked to gold in recent days (see above), they are decidedly less enthusiastic about oil futures.

- Bank of America Merrill Lynch says that the muted price reaction following the initial spike in crude prices after the Abqaiq attack could be because of the decline of speculative positions.

- “Poor investor returns and reduced risk appetite across the broker/dealer community have reduced the involvement of non-commercial market participants for some time now,” Bank of America said.

- Meanwhile, producers used the brief spike in prices to hedge forward production.

- “Said differently, the oil market still does not reflect meaningful upside price risks despite the damage to Saudi Arabia's oil infrastructure, the largest single oil supply disruption ever recorded,” the investment bank said.

5. Outages reach record

Outages

- The muted price reaction in oil is remarkable given the scale of current outages. At 5.7 mb/d, the Abqaiq attack was the single largest supply disruption in history.

- Immediately after the attack, speculation spiked that the U.S. or Saudi Arabia (or both) would retaliate militarily against Iran. But the massive supply outages may help explain their reluctance.

- “With global oil supply disruptions already at exceptionally high levels due to supply losses in Venezuela and Iran, the blow to Saudi crude processing capacity makes any retaliation path dangerous to the market,” Bank of America Merrill Lynch said.

- “True, there are emergency stocks available across the OECD and China. But oil spare capacity around the world is minimal outside of Saudi Arabia,” the bank added.

6. Flaring soars this year, but could fall back

FLaring

- Natural gas flaring in the U.S. has spiked this year, with much of West Texas alight day and night. The U.S. has averaged 1.1 mcf/d of flaring this year, up from 0.835 mcf/d in 2018.

- Kinder Morgan (NYSE: KMI) brought the Gulf Coast Express pipeline online this week, with enough capacity to supply the equivalent of 10 million U.S. homes per day, according to Reuters.

- “We have long expected a quick fill of Gulf Coast Express from three sources - new production, existing production that is currently being flared and rerouting gas that is now flowing in directions that are not as economically alluring as sending it to the Gulf Coast,” Rich Redash, head of global gas planning at S&P Global Platts Analytics, told Reuters.

- More pipelines are expected to come online in 2020, which should help reduce the rate of flaring.

- More infrastructure will help Permian producers bring gas to market and trim rates of flaring, but it will also sink natural gas prices more broadly as more supply hits the market.

7. Oil industry under fire

Oil Industry

- Oil executives were given a frosty reception on the sidelines of the UN summit this week. Activists, governments and increasingly investors are demanding more drastic cuts to emissions.

- A report by the U.N.-backed Principles of Responsible Investing (PRI), representing investors with $86 trillion under management, warned that oil industry spending is not aligned with climate goals.

- The PRI report “aims to fundamentally reset investors’ forward-looking risk management, strategic asset allocation and company engagement.”

- The conclusion? The report predicts “an abrupt and disruptive” policy response from governments by 2025 as climate change worsens.

- That could lead to a peak in oil demand by 2026-2028 generally, and by 2025 in the transportation sector specifically. That is dramatically earlier than 2040, the baseline assumption from the IEA.

- “We foresee an inevitable policy response by 2025 that will be forceful, abrupt and disorderly because of the delay,” Fiona Reynolds, chief executive of the PRI, said in a statement. “This will create considerably greater disruption than many investors and businesses are prepared for today.”



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play