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

Tom Kool

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

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Is This Oil Price Rally Sustainable?

Oil

Oil prices have recovered as a result of a flurry of bullish catalysts, and while most oil majors see earnings improve, upstream investments are falling.

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Friday, July 28, 2017

Oil prices are on track for the biggest weekly gain so far this year, with Brent solidly above $50 per barrel and WTI not far behind.

Shell’s CEO: Oil prices “lower forever.” Royal Dutch Shell’s (NYSE: RDS.A) CEO Ben van Beurden said this week that oil prices will likely remain “lower forever,” not just because of too much supply, but also because the coming wave of EV adoption will lead to peak demand, possibly as soon as the late-2020s. His company now produces more natural gas than oil and will continue to diversify. Meanwhile, the company posted better-than-expected profits for the second quarter at $3.6 billion, or more than three times larger than the year before.

JBC Energy: Oil to drop below $40 in 2018. Unless OPEC makes deeper production cuts, oil prices are in danger of falling below $40 per barrel in the first quarter of next year, according to JBC Energy GmbH. The consultancy sees oil prices trading between $45 and $47 later this year, but then it gets “very tricky,” as demand slows. “If OPEC stays the same and we have the same output restrictions even in the first quarter, we’re looking at a lot of surplus in the market,” Richard Gorry, managing director at JBC Asia, told Bloomberg. “To really tighten the market, OPEC will have to cut more, and I don’t know if they want to do that.”

Saudi Aramco IPO leaning towards London. Financial advisors for Saudi Aramco have recommended the company list its shares on the London Stock Exchange, rather than Yew York, citing tougher disclosure rules in the U.S. The final decision for the estimated $100 billion IPO is not expected until later this year.

Related: China Outpaces Competition In Renewable Race

Oil majors see profits improve. So far, the largest oil companies are posting much better financials in the second quarter. Shell’s profits tripled, but it wasn’t the only one enjoying profits on the upswing. Total (NYSE: TOT) saw adjusted profit of $2.5 billion, a 14 percent increase from a year earlier. Statoil (NYSE: STO) said profits jumped to $3 billion, or triple the level from a year ago. And ExxonMobil (NYSE: XOM) said its earnings doubled to $3.35 billion in the second quarter, year-on-year. Still, most of the majors feel pressure to remain cautious with oil prices not showing any signs of a rebound.

UAE: We will increase compliance. The UAE said that it would cut production deeper in the near future in order to boost compliance with the OPEC cuts. “The U.A.E. is committed to its share in the OPEC production cut,” the UAE’s Minister of Energy Suhail Al Mazrouei said in a tweet on Tuesday. The IEA estimates that the UAE has only achieved a 54 percent compliance rate.

UK to ban gasoline and diesel cars by 2040. The announcement from the UK this week that it would ban sales of gasoline and diesel vehicles by 2040 is the clearest sign yet of the coming energy transition. The move is a signal to the oil industry that while the fears of peak supply are long gone, the industry could be legislated out of existence. Of course, the world will still need oil for years and decades to come, but the fears of peak demand are more real than ever.

New oil and gas projects get green light. The oil industry has given the greenlight to more oil and gas projects in the first half of 2017 than all of last year, according data from Wood Mackenzie, cited by the FT. Also, average development costs are down 40 percent since 2014, making now a good time to invest. “The industry took a while to get its collective mind around the idea of ‘lower for longer’ and now people are getting used to lower for even longer,” Readul Islam, analyst at Rystad Energy, told the FT. There were 15 large conventional oil and gas projects that moved forward in the first six months of 2017, encompassing 8 billion barrels of oil equivalent, compared to just 12 projects in all of last year, which covered 8.8 billion barrels.

U.S. sanctions Venezuelan officials; Venezuelan labor unions stage general strike; U.S. evacuates embassy families. The U.S. decided to sanction more than a dozen top Venezuelan officials as the government proceeds with a July 30 effort to rewrite the constitution and consolidate power. The move from Washington was one of the more mild options on the table, and it appears that an effort to ban Venezuelan oil imports won’t be taken up right now. Still, the troubles for the South American OPEC member are not going away. More than 300 Venezuelan labor unions launched a two-day general strike to put pressure on the government of President Nicolas Maduro. Several people were killed in clashes between protestors and security forces this week. The violence and turmoil has escalated ahead of Sunday’s vote and the U.S. government has ordered family members of embassy staff in Venezuela to leave the country.

More shale drillers cut spending. In addition to the decision by Anadarko Petroleum (NYSE: APC) to cut spending this week, other shale drillers began to follow suit. Whiting Petroleum (NYSE: WLL), the largest producer in the Bakken, said it would slash its 2017 spending by 14 percent. Hess (NYSE: HES) also lowered its capex for the year. Others are cutting spending, a sign that the recent downturn in prices are erasing any hopes of higher prices this year. The lower spending is also a sign that the shale boom is bumping up against its limits with oil at or below $50 per barrel.

Related: Libya’s Oil King Won’t Be Stopped By OPEC

Total to cut off funding for oil sands. Total (NYSE: TOT) decided to cut off funds for the major oil sands project it is working on with Suncor Energy (NYSE: SU). The Fort Hills project is still expected to start up later this year. The companies played down the dispute, but it highlights the waning interest in Canada’s high-cost oil sands.

Petronas cancels major LNG export project in Canada. Malaysian-owned Petronas announced that it was shelving its proposed $29 billion Pacific Northwest LNG terminal in British Columbia, a major blow for Canadian gas exports. The company cited low prices for LNG globally.

By Tom Kool for Oilprice.com

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