Oil is set to close out a sixth consecutive week of price gains
Friday, April 12, 2019
Despite losses on Thursday, oil is set to close out a sixth consecutive week of price gains. The market has been steadily tightening for quite some time, but the instability in Libya this week was the main contributor. “Demand is mixed” but “the tightness of the market is going to win out,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said in a Bloomberg television interview.
OPEC production falls 534,000 bpd. OPEC production in March fell by 534,000 bpd, led by a massive 324,000-bpd reduction from Saudi Arabia, putting overall output at just below 9.8 million barrels per day (mb/d), well below its 10-mb/d ceiling as part of the OPEC+ deal. Meanwhile, Iraq lowered output by 126,000 bpd, and Venezuela saw a sharp 289,000-bpd decline in output, due in large part to power outages. On the other hand, Libya saw 196,000 bpd come back online, owing to the ramp up of the Sharara oil field. However, fighting in Libya now puts those gains at risk.
IEA: Oil supply and demand fundamentals relatively bullish. The IEA said that supply declines and steady demand have helped tighten up the oil market. However, the agency noted that there are some concerns about demand, and even as the agency maintained its 1.4-mb/d demand growth estimate, it conceded that there are downside risks to that forecast.
ExxonMobil in talks on floating LNG in Israel. ExxonMobil (NYSE: XOM) is reportedly in talks with Noble Energy (NYSE: NBL) and Delek Drilling (OTC: DKDRF) on building a floating LNG gas ship to help develop the Leviathan gas field in Israeli waters. Such a project would allow gas to be exported beyond the region and it would also avoid having to build infrastructure to connect the field to Egypt.
Investors see climate change as threat to profits. Investment advisory firm Mercer LLC says that climate change could cut into profits in entire sectors. While coal, oil and gas lose out if the world gets serious about addressing carbon emissions, sectors such as industrials and agriculture could lose out if there is inaction. “Asset owners should consider climate change at every stage of the investment process, from investment beliefs, policy and process to portfolio construction decisions,” said Deb Clarke, global head of investment research for Mercer.
New gas pipeline could help Permian, and Mexico. Kinder Morgan received a greenlight from federal regulators to begin construction on its Sierrita Compressor Expansion, which would expand the existing Sierrita Gas Pipeline from Arizona to Mexico. More capacity could ease gas bottlenecks in the Permian.
IMF downgrades global GDP. The IMF warned about slower economic growth in an April 9 report, downgrading estimated GDP growth to 3.3 percent this year, down from 3.6 percent in 2018. Previously, the Fund expected growth of 3.5 percent.
Trump issues executive order on pipelines. President Trump signed an executive order intended to streamline the permitting of new energy infrastructure, an effort to strip states of their authority to regulate projects. The effect of the order is unclear since many legal experts think that the order cannot get around federal Clean Water Act legislation that grants states such authority.
Texas flaring enough gas to power the entire state. The Permian natural gas crisis has become so acute that oil producers were flaring gas at the end of 2018 in volumes equivalent to Texas’ entire residential gas demand, according to Bloomberg. The lack of pipelines has resulted in a glut of gas, but because drillers are focusing exclusively on oil, the associated gas continues to come out of the ground. With nowhere to go, natural gas prices have crashed to zero and companies have increased their rates of flaring. “It’s a black eye for the Permian basin,” Pioneer Natural Resources Chief (NYSE: PXD) CEO Scott Sheffield said at a conference at Columbia University this week. “The state, the pipeline companies and the producers -- we all need to come together to figure out a way to stop the flaring.”
Singapore said it will have enough supply for IMO regulations. Forthcoming regulations on marine fuels have raised fears that ship-owners may not have enough low-sulfur fuels, but Singapore, which is home to the world’s largest maritime refueling port, said that it will have ample supply when the IMO regulations take effect at the start of 2020.
Chevron to buy Anadarko for $33 billion. Chevron (NYSE: CVX) has agreed to purchase Anadarko Petroleum (NYSE: APC) for $33 billion in a cash-and-stock deal. The acquisition will boost Chevron’s shale assets, as well as some offshore and natural gas plays. Chevron agreed to purchase all of Anadarko’s shares at $65, a 39 percent premium. Chevron said it would dispose of $15 to $20 billion worth of assets between 2020 and 2022 as a result.
ExxonMobil accuses DOE of selling tainted oil from SPR. ExxonMobil (NYSE: XOM) said that some oil it purchased from the federal government’s strategic petroleum reserve (SPR) last year was tainted, containing “extremely high levels” of hydrogen sulfide, according to Bloomberg. That follows complaints from other companies, and raises the concern that the SPR may not offer the supply assurance that the government and the market have long thought.
U.S. approves 40 percent more drilling permits under Trump. The U.S. government has approved nearly 40 percent more oil and gas drilling permits on public lands in 2018 because of an automated online system, helping to clear a backlog, according to Reuters. Notably, however, the online system was setup in the last days of the Obama administration. Meanwhile, Politico reports that the Trump administration is considering opening up the eastern Gulf of Mexico near Florida to offshore drilling, a politically dangerous move that both parties have steered cleared from for a long time.
Despite losses on Thursday, oil is set to close out a sixth consecutive week of price gains. The market has been steadily tightening for quite some time, but the instability in Libya this week was the main contributor. “Demand is mixed” but “the tightness of the market is going to win out,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said in a Bloomberg television interview.
OPEC production falls 534,000 bpd. OPEC production in March fell by 534,000 bpd, led by a massive 324,000-bpd reduction from Saudi Arabia, putting overall output at just below 9.8 million barrels per day (mb/d), well below its 10-mb/d ceiling as part of the OPEC+ deal. Meanwhile, Iraq lowered output by 126,000 bpd, and Venezuela saw a sharp 289,000-bpd decline in output, due in large part to power outages. On the other hand, Libya saw 196,000 bpd come back online, owing to the ramp up of the Sharara oil field. However, fighting in Libya now puts those gains at risk.
IEA: Oil supply and demand fundamentals relatively bullish. The IEA said that supply declines and steady demand have helped tighten up the oil market. However, the agency noted that there are some concerns about demand, and even as the agency maintained its 1.4-mb/d demand growth estimate, it conceded that there are downside risks to that forecast.
ExxonMobil in talks on floating LNG in Israel. ExxonMobil (NYSE: XOM) is reportedly in talks with Noble Energy (NYSE: NBL) and Delek Drilling (OTC: DKDRF) on building a floating LNG gas ship to help develop the Leviathan gas field in Israeli waters. Such a project would allow gas to be exported beyond the region and it would also avoid having to build infrastructure to connect the field to Egypt.
Investors see climate change as threat to profits. Investment advisory firm Mercer LLC says that climate change could cut into profits in entire sectors. While coal, oil and gas lose out if the world gets serious about addressing carbon emissions, sectors such as industrials and agriculture could lose out if there is inaction. “Asset owners should consider climate change at every stage of the investment process, from investment beliefs, policy and process to portfolio construction decisions,” said Deb Clarke, global head of investment research for Mercer.
New gas pipeline could help Permian, and Mexico. Kinder Morgan received a greenlight from federal regulators to begin construction on its Sierrita Compressor Expansion, which would expand the existing Sierrita Gas Pipeline from Arizona to Mexico. More capacity could ease gas bottlenecks in the Permian.
IMF downgrades global GDP. The IMF warned about slower economic growth in an April 9 report, downgrading estimated GDP growth to 3.3 percent this year, down from 3.6 percent in 2018. Previously, the Fund expected growth of 3.5 percent.
Trump issues executive order on pipelines. President Trump signed an executive order intended to streamline the permitting of new energy infrastructure, an effort to strip states of their authority to regulate projects. The effect of the order is unclear since many legal experts think that the order cannot get around federal Clean Water Act legislation that grants states such authority.
Texas flaring enough gas to power the entire state. The Permian natural gas crisis has become so acute that oil producers were flaring gas at the end of 2018 in volumes equivalent to Texas’ entire residential gas demand, according to Bloomberg. The lack of pipelines has resulted in a glut of gas, but because drillers are focusing exclusively on oil, the associated gas continues to come out of the ground. With nowhere to go, natural gas prices have crashed to zero and companies have increased their rates of flaring. “It’s a black eye for the Permian basin,” Pioneer Natural Resources Chief (NYSE: PXD) CEO Scott Sheffield said at a conference at Columbia University this week. “The state, the pipeline companies and the producers -- we all need to come together to figure out a way to stop the flaring.”
Singapore said it will have enough supply for IMO regulations. Forthcoming regulations on marine fuels have raised fears that ship-owners may not have enough low-sulfur fuels, but Singapore, which is home to the world’s largest maritime refueling port, said that it will have ample supply when the IMO regulations take effect at the start of 2020.
Chevron to buy Anadarko for $33 billion. Chevron (NYSE: CVX) has agreed to purchase Anadarko Petroleum (NYSE: APC) for $33 billion in a cash-and-stock deal. The acquisition will boost Chevron’s shale assets, as well as some offshore and natural gas plays. Chevron agreed to purchase all of Anadarko’s shares at $65, a 39 percent premium. Chevron said it would dispose of $15 to $20 billion worth of assets between 2020 and 2022 as a result.
ExxonMobil accuses DOE of selling tainted oil from SPR. ExxonMobil (NYSE: XOM) said that some oil it purchased from the federal government’s strategic petroleum reserve (SPR) last year was tainted, containing “extremely high levels” of hydrogen sulfide, according to Bloomberg. That follows complaints from other companies, and raises the concern that the SPR may not offer the supply assurance that the government and the market have long thought.
U.S. approves 40 percent more drilling permits under Trump. The U.S. government has approved nearly 40 percent more oil and gas drilling permits on public lands in 2018 because of an automated online system, helping to clear a backlog, according to Reuters. Notably, however, the online system was setup in the last days of the Obama administration. Meanwhile, Politico reports that the Trump administration is considering opening up the eastern Gulf of Mexico near Florida to offshore drilling, a politically dangerous move that both parties have steered cleared from for a long time.
Volf
13.04.2019 kl 09:32
687
Countdown To A United Libya
Field Marshal Khalifa Haftar certainly knows the magic of appropriate timing. In a way, everything was pointing to his eventual charge on Tripoli – the internal escalation of discontent within Libya’s populace, who get all the disadvantages of living in a duality of power without any advantages arising therefrom, the marginalization of the Libyan agenda globally, the travails of Libya’s oilmen. Yet Haftar managed to orchestrate his strike at the least expected moment, taking avail of the Algerian uprising, the global market’s anticipation to see Libyan oil production back on track, launching an offensive when the UN Secretary General Antonio Guterres was in fact in Tripoli, the city he designated as the key target of his military operation.
Monday alone WTI futures rose by 1.3 USD per barrel, sending oil prices to their highest in five months. Tuesday witnessed tensions calming a little bit, as we all struggle to see clearly what exactly is going on around Tripoli. There are certainly limits to the ongoing hype - if one is to look at the grand picture of Libya’s oil geography, the Haftar attack ramifications need not be significant for the Libyan oil industry. They might be very significant for the Libyan political scene, without any doubt – people are dying as we speak, at least 35 people have died in the first four days of fighting. Yet there remains a lingering feeling that when it comes to settling oil issues, the Libyan NOC can cooperate (as it has already done before) with Haftar should there be a necessity to do so.
1. Most of Libya’s oil is already Haftar’s control
Just as the El Sharara field swung back to (almost) full operation, pumping out 280kbpd out of its 315kbpd production plateau, Haftar initiated his advance on Tripoli. Seemingly, this should wreak havoc in Libya’s oil and gas operations – international oil majors do not evacuate staff (ENI already did so in Tripoli) for no reason at all. Yet much of it might be pure precaution as by April 08, all of Libya’s ports were open and operating, except for those that were out of operation for years already – namely the Sirte and Derna terminals that suffered greatly from Libya’s internal battle against the Islamic State’s recruits. Even the port of Tripoli, which is not used as a crude export terminal, has been open despite ongoing fights for the Tripoli airport.
Moreover, if you ask any oil company with Libyan exposure, especially those that have cargoes loading there as we speak, so far none registered any drawbacks or fighting-related delays. Since Haftar’s siege started, 13 vessels have finished loading or are currently in transit thereof – including the New York-bound MT Stream Atlantic and the China-bound MT Silverway, sailing from Marsa El Hariga and Brega (however these ports were already controlled by Haftar’s LNA). The Mellitah terminal, just a couple miles off Zawiya, has loaded MT Energy Triumph, carrying more than 1 million barrels of Mellitah crude, as recently as yesterday.
Obviously, western Libya should not experience any disturbances as it is controlled either by the LNA or entities affiliated to it. The oil production hub in the southeastern part of Libya, namely the trouble El Sharara and El Feel (Elephant) fields, were seized by the LNA early February on the pretext of battling smugglers and roaming jihadi fighters and turned over to the Libyan NOC a couple of weeks later. Thus, Field Marshal Haftar already controls (in a military sense, the operations are done by the NOC) almost all of Libya’s output. It is very unlikely to imagine any maritime action launched against Libya’s offshore production – Al Jurf or Bouri – so out of Libya’s oil infrastructure it is only the Zawiya and Melittah ports that might be under pressure.
2. Haftar is unlikely to attack the Zawiya terminal
Further to the above, with El Sharara being already under the Field Marshal’s control, there is little incentive for him to attack Zawiya, the export point for El Sharara crude some 45km to the west of the Libyan capital. It makes no sense strategically – he can use the genuine disgruntlement of Sharara oilmen that did not see a promised salary increase for several years already to his own political benefit, promising them change as soon as takes over the whole of the country, and it makes no sense tactically as by blocking the Sharara crude stream he would undermine his own carefully nurtured pro-business credentials (to the extent possible from a man whose military career spans more than 4 decades).
It is an open question to what extend did leading regional powers know about Haftar’s plans – he visited the Saudi King Salman as recently as March, is a frequent visitor to Moscow and is alleged to maintain a communication line with the American CIA after the many years spent in his US exile, in the vicinity of the CIA headquarters in Virginia. Almost all great powers are caught in a moral dilemma when they have to balance between their natural inclination to accept Haftar as Libya’s new leader and the ruthless methods he has chosen to attain this powerful status. But the ongoing fights for Tripoli relate to Libya’s oil only marginally, they are most likely carried out as a pre-election PR campaign.
3. What is Haftar Seeking Then?
It is no coincidence than Field Marshal Haftar’s attack takes place amid top-ranking UN officials being in Libya, against the background of an upcoming national conference, scheduled to take place April 14-16 in Ghadames, the purpose of which was to facilitate a reconciliation of the two rival governments. The fact that the LNA could quite easily reach the outskirts of Tripoli backs his strongman claim, especially if the long-mooted national elections are to take place at some point in the future. The international community led by the United Nations will not let Field Marshal Haftar go the whole distance, yet that would only buttress his domestic appeal as the nation’s prime dealmaker.
Mustafa Sanallah, the head of the Libyan NOC has already stated his neutrality in the ongoing confrontation, stressing that production continuity, whoever is at the helm of the executive power, for him is tantamount. That suits Field Marshal Haftar who heretofore had had little to no appeal on the streets of Tripoli and stands to benefit from pressurizing the Government of National Accord, but bodes well for Fayez al-Sarraj, the head of the Tripoli-based GNA. As long as the fights are revolving around Tripoli, do not expect any significant adverse oil-related impacts, the only scenario in which Libyan exports might be greatly jeopardized would take place if the Libyan hinterland explodes.
Field Marshal Khalifa Haftar certainly knows the magic of appropriate timing. In a way, everything was pointing to his eventual charge on Tripoli – the internal escalation of discontent within Libya’s populace, who get all the disadvantages of living in a duality of power without any advantages arising therefrom, the marginalization of the Libyan agenda globally, the travails of Libya’s oilmen. Yet Haftar managed to orchestrate his strike at the least expected moment, taking avail of the Algerian uprising, the global market’s anticipation to see Libyan oil production back on track, launching an offensive when the UN Secretary General Antonio Guterres was in fact in Tripoli, the city he designated as the key target of his military operation.
Monday alone WTI futures rose by 1.3 USD per barrel, sending oil prices to their highest in five months. Tuesday witnessed tensions calming a little bit, as we all struggle to see clearly what exactly is going on around Tripoli. There are certainly limits to the ongoing hype - if one is to look at the grand picture of Libya’s oil geography, the Haftar attack ramifications need not be significant for the Libyan oil industry. They might be very significant for the Libyan political scene, without any doubt – people are dying as we speak, at least 35 people have died in the first four days of fighting. Yet there remains a lingering feeling that when it comes to settling oil issues, the Libyan NOC can cooperate (as it has already done before) with Haftar should there be a necessity to do so.
1. Most of Libya’s oil is already Haftar’s control
Just as the El Sharara field swung back to (almost) full operation, pumping out 280kbpd out of its 315kbpd production plateau, Haftar initiated his advance on Tripoli. Seemingly, this should wreak havoc in Libya’s oil and gas operations – international oil majors do not evacuate staff (ENI already did so in Tripoli) for no reason at all. Yet much of it might be pure precaution as by April 08, all of Libya’s ports were open and operating, except for those that were out of operation for years already – namely the Sirte and Derna terminals that suffered greatly from Libya’s internal battle against the Islamic State’s recruits. Even the port of Tripoli, which is not used as a crude export terminal, has been open despite ongoing fights for the Tripoli airport.
Moreover, if you ask any oil company with Libyan exposure, especially those that have cargoes loading there as we speak, so far none registered any drawbacks or fighting-related delays. Since Haftar’s siege started, 13 vessels have finished loading or are currently in transit thereof – including the New York-bound MT Stream Atlantic and the China-bound MT Silverway, sailing from Marsa El Hariga and Brega (however these ports were already controlled by Haftar’s LNA). The Mellitah terminal, just a couple miles off Zawiya, has loaded MT Energy Triumph, carrying more than 1 million barrels of Mellitah crude, as recently as yesterday.
Obviously, western Libya should not experience any disturbances as it is controlled either by the LNA or entities affiliated to it. The oil production hub in the southeastern part of Libya, namely the trouble El Sharara and El Feel (Elephant) fields, were seized by the LNA early February on the pretext of battling smugglers and roaming jihadi fighters and turned over to the Libyan NOC a couple of weeks later. Thus, Field Marshal Haftar already controls (in a military sense, the operations are done by the NOC) almost all of Libya’s output. It is very unlikely to imagine any maritime action launched against Libya’s offshore production – Al Jurf or Bouri – so out of Libya’s oil infrastructure it is only the Zawiya and Melittah ports that might be under pressure.
2. Haftar is unlikely to attack the Zawiya terminal
Further to the above, with El Sharara being already under the Field Marshal’s control, there is little incentive for him to attack Zawiya, the export point for El Sharara crude some 45km to the west of the Libyan capital. It makes no sense strategically – he can use the genuine disgruntlement of Sharara oilmen that did not see a promised salary increase for several years already to his own political benefit, promising them change as soon as takes over the whole of the country, and it makes no sense tactically as by blocking the Sharara crude stream he would undermine his own carefully nurtured pro-business credentials (to the extent possible from a man whose military career spans more than 4 decades).
It is an open question to what extend did leading regional powers know about Haftar’s plans – he visited the Saudi King Salman as recently as March, is a frequent visitor to Moscow and is alleged to maintain a communication line with the American CIA after the many years spent in his US exile, in the vicinity of the CIA headquarters in Virginia. Almost all great powers are caught in a moral dilemma when they have to balance between their natural inclination to accept Haftar as Libya’s new leader and the ruthless methods he has chosen to attain this powerful status. But the ongoing fights for Tripoli relate to Libya’s oil only marginally, they are most likely carried out as a pre-election PR campaign.
3. What is Haftar Seeking Then?
It is no coincidence than Field Marshal Haftar’s attack takes place amid top-ranking UN officials being in Libya, against the background of an upcoming national conference, scheduled to take place April 14-16 in Ghadames, the purpose of which was to facilitate a reconciliation of the two rival governments. The fact that the LNA could quite easily reach the outskirts of Tripoli backs his strongman claim, especially if the long-mooted national elections are to take place at some point in the future. The international community led by the United Nations will not let Field Marshal Haftar go the whole distance, yet that would only buttress his domestic appeal as the nation’s prime dealmaker.
Mustafa Sanallah, the head of the Libyan NOC has already stated his neutrality in the ongoing confrontation, stressing that production continuity, whoever is at the helm of the executive power, for him is tantamount. That suits Field Marshal Haftar who heretofore had had little to no appeal on the streets of Tripoli and stands to benefit from pressurizing the Government of National Accord, but bodes well for Fayez al-Sarraj, the head of the Tripoli-based GNA. As long as the fights are revolving around Tripoli, do not expect any significant adverse oil-related impacts, the only scenario in which Libyan exports might be greatly jeopardized would take place if the Libyan hinterland explodes.