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OPEC+ is taking massive amounts of oil off the market, allowing crude prices to post yet another week of gains. 

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Friday, February 22nd, 2019

Oil is set to close out another week of gains, this time juiced by optimism over the U.S.-China trade negotiations. But the gains are also coming because OPEC+ is taking supply off of the market. “Saudi Arabia is delivering on the cuts it pledged, and I have no doubt they’ll deliver on pledges to do more,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB. “It was a production boost from OPEC and an equity sell-off that pushed oil down during the fourth quarter, and now as both of those elements are in reverse prices are going up.”

U.S. shale production to grow by 84,000 bpd in March. U.S. shale production is expected to grow by 84,000 bpd in March, according to the EIA, marking another month of strong increases. The gains will be led by the Permian (+43,000 bpd), followed by smaller contributions from the Niobrara (+16,000 bpd), the Bakken (+13,000 bpd), the Eagle Ford (+9,000 bpd) and Appalachia (+3,000 bpd). The number of drilled but uncompleted wells (DUCs) rose to 8,798 in January, a 2.4 percent increase from December. Meanwhile, weekly EIA data suggest that total U.S. production surpassed 12 million barrels per day last week, another record high.

Trump could let trade deadline slide. Press reports suggest that the U.S. and China are making progress on trade negotiations, and President Trump has indicated he would be willing to let the talks continue past the March 1 deadline if progress was significant. Trump is expected to meet with China’s vice premier and top trade negotiator on Friday. There are still thorny issues that will be difficult to solve, but markets are welcoming the potential breakthrough in trade talks. Related: The Top Geopolitical Trends Of 2019

Oil and gas M&A activity to slow. U.S. upstream M&A activity is set to slow this year, after dipping in 2018 compared to the year before. Last year, the number of deals declined to 93, compared to 125 in 2017, according to PwC. Deals in the U.S. shale industry fell from 106 in 2017 to 85 in 2018, although the value of the deals ballooned from $67 billion to $90 billion. Despite the expected slowdown, consolidation will continue, with smaller players selling out to larger ones as the industry pushes for scale. “The rationale for consolidation has never been higher,” Wells Fargo Securities managing director David Humphreys told Argus Media. “Scale is the key.”

Canadian oil titans warn of squandered opportunity. Royal Bank of Canada CEO Dave McKay said this week that Canadian oil companies, pipeline companies and banks need to make the case for more pipelines in order to provide enough political cover for politicians. “They need the support of the business community to take the political risk to move forward with this agenda,” McKay said, according to the Financial Post. Enbridge (NYSE: ENB) CEO Al Monaco warned about the exit of international investment from Canada because of a lack of pipelines and political uncertainty. “We’re squandering an opportunity here to really drive our economy and supply energy in the most sustainable way,” he said.

Glencore’s coal exit pushed by investors controlling $32 trillion. Glencore (LON: GLEN) announced that it would cap its coal production going forward, an announcement that sent shockwaves through the global market for coal. As the largest coal exporter in the world, the move highlights the coming decline for the coal industry. The announcement was likely influenced by Climate Action 100+, a network of 300 shareholders in control of $32 trillion worth of assets. As Bloomberg reports, the group has already forced concessions from BP (NYSE: BP) and Royal Dutch Shell (NYSE: RDS.A).

Oil FIDs to triple in South America. The pace of FIDs for new oil and gas projects in Latin America is set to soar this year. “16 fields are up for final investment decisions (FIDs) in 2019, more than a tripling from the year before,” Rystad Energy said in a report. “With expectations of eight projects of over 25 million boe reaching FID this year, Brazil will be the key driver behind the numbers for South America.” Brazil is expected to see 10 projects receive FIDs.

Eastern Libyan forces take control of El Feel oil field. The Libyan National Army, controlled by Khalifa Haftar, reportedly took control of another oil field in Libya, the El Feel. Reuters said that production of the 75,000-bpd field was not affected. This comes after the LNA seized the largest field, the Sharara, last week.

Anadarko’s LNG project in Mozambique attacked by gunmen. Gunmen in Mozambique attacked an Anadarko Petroleum (NYSE: APC) convoy near its LNG project. Bloomberg said it was the first attack on an energy company since an insurgency began in the country 16 months ago. Anadarko’s share price fell more than 3 percent on the news. Related: 5 Giant Game-Changing Energy Trends To Watch

Trump admin scraps talks with California over CAFE standards. The Trump administration ended negotiations with California over new fuel efficiency rules, aimed at watering down Obama-era standards on cars and light trucks. Instead, the Trump administration will go it alone, crafting new federal rules to replace the more stringent ones on the books. The problem is that California has the legal right to set its own standards, something that the Trump administration wants to take away. New federal rules weakening fuel efficiency standards, as well as an attempt to defang California’s authority, will likely get bogged down in legal fights, creating a lot of uncertainty for automakers.

Saudi Aramco and China ink $10 billion petrochemical deal. Saudi crown prince Mohammed bin Salman wrapped up a trip to China, where the two sides agreed to a $10 billion petrochemical deal. Saudi Aramco will supply 70 percent of the crude feedstock for the 300,000-bpd refinery, which will also have a 1.5-million-metric-tonnes-per-year ethylene cracker. Aramco will also buy a 9 percent stake in Zhejiang Petrochemical. The deal cements a growing Saudi-Sino relationship based on oil and petrochemicals.

Pioneer Natural Resources CEO to retire. Pioneer Natural Resources (NYSE: PXD) CEO Timothy Dove announced his retirement, effective immediately. Board Chairman Scott Sheffield will take over as CEO.

By Tom Kool for Oilprice.com 

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Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as news editor for Oilprice.com. More

Comments

  • bob bobert - 27th Feb 2019 at 6:26pm:
    Up goes oil, down goes the world economy. Basic economics. Watch and learn again and again and....... ..
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