Oil is set to close out the week with the largest weekly loss.

Volf
FRO 28.09.2019 kl 10:33 1611

Oil is set to close out the week with the largest weekly loss in months. Crude fell on news that Saudi Arabia has declared a partial cease-fire in Yemen, raising hopes that several years of war could come to an end. It would also dial down tension with Iran.

Saudi Arabia insists on Abqaiq timeline, but analysts remain skeptical. Saudi Aramco has promised to restore production at the Abqaiq and Khurais facilities by Monday, but oil traders are not so sure. “I would like to see real evidence that they are going to resume [production] in the coming weeks,” a Middle East oil company official, told S&P Global Platts. Middle East-based petroleum engineer Einstein Millan Arcia added: “I seriously doubt Saudi Aramco's capability to recommission such facilities [by September 30] considering the depth of the damage and all the associated testing protocol needed prior to restart.”

Aramco accelerates IPO preparations. After some reports suggested that Saudi officials were considering delaying the IPO of Aramco, it now appears that the government is pressing forward and even accelerating the effort. The offering could come as soon as November.

Saudi exports plunge. Despite assurances that there would be little interruption in exports, a report from Petro-Logistics, reported on by Reuters, estimates that Saudi oil exports averaged 5.875 mb/d in the 10 days after the Abqaiq attack, down 1.494 mb/d from prior.

Return on capital falling for oil majors. Low oil prices and a slow but unfolding energy transition is cutting into the returns for the oil industry. ExxonMobil’s (NYSE: XOM) return on invested capital (ROIC) was 25 percent in 2011, but was less than 10 percent last year, according to the Wall Street Journal. Meanwhile, the ROIC for Vestas Wind Systems (CPH: VWS) was negative 5 percent in 2011, but averaged 22 percent over the last five years.

U.S. and China make goodwill gestures. The atmosphere between the U.S. and China is thawing just a bit after a series of back-and-forth goodwill gestures. On Thursday, China said that it was willing to buy more U.S. products after Washington waived tariffs on some Chinese products. Talks are scheduled to restart in early October.

Halcon Resources restructures $750 million in debt. Halcon Resources (OTCMKTS: HKRSQ) shed $750 million from its balance sheet in a debt restructuring. That could allow the company to exit bankruptcy in the coming weeks, the company’s second time in bankruptcy. Halcon blamed unforeseen operational issues, according to the Wall Street Journal, including poor well performance and falling oil prices.

IEA may cut oil demand forecast on souring economy. The head of the IEA said that the agency may slash its oil demand growth forecast once again if the global economy continues to deteriorate. “It will depend on the global economy. If the global economy weakens, for which there are already some signs we may lower oil demand expectations,” Fatih Birol told Reuters. “But at the same time, we shouldn’t forget low oil prices also (put) upward pressure on the demand.”

Biofuels groups fear impeachment inquiry could delay agreement. Biofuels groups are concerned that the impeachment inquiry into President Trump could delay a pending deal on biofuels policy. The battle between ethanol and oil refineries has been fierce and ongoing, but Trump was poised to hash out an agreement that could boost biofuels demand in 2020. “It seems his interest has waned,” one industry source told Reuters. Another source said that he would not be surprised if the deal was put on hold indefinitely.

Shareholders push to breakup Marathon. Two large shareholders in Marathon Petroleum (NYSE: MPC) are calling for the removal of the company’s CEO and the breakup of the company into three parts. The push comes from Elliott Management Corp. and former board members of Andeavor, a refiner that was acquired by Marathon last year. “This experience, combined with Marathon’s stagnation and destruction of value, causes us great concern with your decision to ignore our perspectives and insights,” the group of shareholders wrote in a letter to the company.

Tanker costs soar on sanctions. Oil tanker costs are rising sharply after the U.S. put sanctions on Chinese companies accused of handling Iranian oil.

Tesla’s stock up on delivery figures. Tesla (NASDAQ: TSLA) saw its stock price jump by more than 6 percent on Thursday after Elon Musk said that the company would deliver more than 100,000 Model 3 vehicles this quarter, a new high.

U.S. oil exports could hit 4 mb/d. U.S. oil exports could top 4 mb/d for the first time by the end of the year thanks to new Permian pipeline capacity and the outage in Saudi Arabia. The “market call on the U.S. will increase because the U.S. is effectively the marginal supplier,” Sandy Fielden, oil research director at Morningstar, told Platts.

Total to hike dividend. Total SA (NYSE: TOT) said that it would accelerate its dividend growth “in the coming years” as it looks to return more cash to shareholders. The group will increase its “dividend by 5 to 6 percent per year instead of the 3 percent per year as previously announced,” Total said.

Refinery disruptions could push California gasoline over $4. An outage at a Valero (NYSE: VLO) refinery and a failed restart at a Chevron (NYSE: CVX) refinery could temporarily push California gasoline prices over $4 per gallon.

Venezuela production falls. Venezuela’s Orinoco Belt saw production fall to 246,000 bpd on Tuesday, down from 370,000 bpd from earlier in the month, according to Platts. Lack of tankers and depleted storage has forced production curtailments.

LNG glut now, shortage later. Because of long lead times for LNG projects, there is often imbalance between supply and demand. A wave of projects came online this year, pushing prices down to decade-lows. But by 2021, very few new projects will hit the market, a legacy of the shortfall in investment from several years ago during the market downturn. That could lead to market tightness in the early- to mid-2020s. “The supply outlook is very much a feast-to-famine situation,” Nicholas Browne, Asia gas and LNG director at Wood Mackenzie, told the WSJ.

Thanks for reading and we’ll see you next week.

Best Regards,

Tom Kool
Editor, Oilprice.com

Investor Alert: There has never been a mining opportunity like the quadrillion dollar one that our Global Energy Alert research team has just discovered. Get your hands on the report today!
Volf
28.09.2019 kl 10:36 1601

A Geopolitical Earthquake In The Middle East
This is now the ultimate game of leverage between Iran and the United States, with Saudi Arabia’s oil infrastructure being used by Tehran to win concessions from Washington.

There has been no call to war. The highest level this has reached (and keep in mind that the markets have already largely written off the incident) is for the US to announce a troop deployment to the Middle East, to defend Saudi Arabia and the UAE. That move in itself can be seen as a sign of weakness for these Gulf giants whose own alliance has been wrecked by Yemen and whose defense systems are now glaringly incapable of protecting strategic assets - even from the rogue Houthis (with, of course, Iranian aid).

Iran is now laying all of its cards on the table, offering to meet with Trump should the American president “do the right thing” and lift sanctions.

Back in Saudi Arabia, there is little time to consider the new geopolitical reality of a weakened Gulf Cooperation Council (GCC). They’re too busy wondering what this will all mean for OPEC leadership, future vulnerability of oil installations, and the Aramco IPO.

There is a certain amount of skepticism as to whether the Saudi oil leadership will be able to meet its promise of getting Abqaiq - the world’s largest oil processing facility - repaired and fully operational by the end of this month.

Recent announcements, such as a notice to Japan’s NXTG Nippon Oil & Energy (Japan’s biggest oil distributor) that exports to Tokyo would be downgraded from light grade to heavy and medium in October quite possibly suggests things are not on track to meet the completion date.

The Saudis have made a point to note that they realize they are largely alone now, with the UAE having abandoned them in Yemen, and Trump having failed to push the red button on Iran. This is a Saudi Arabia weakened to the point that it becomes clear that being the world’s oil giant is not enough.

Qatar, for one, is having a media parade in celebration of this sentiment. Having been the victim of a rather unsuccessful economic blockade by Saudi Arabia and its allies, as it turns out, natural gas giant Qatar is far better protected. Qatari-run media has also been quick to point out that Aramco employees have ostensibly been threatened with severe disciplinary actions for sharing any images or videos of Saudi oil facilities that are currently being repaired.

We are set for a dramatic geopolitical reshuffling: The Saudis are suddenly openly vulnerable, the Aramco IPO is looking far less attractive, and the US under Trump doesn’t fit the profile of a country willing to go to bat wholeheartedly for the losing side.

What does this mean for OPEC? More importantly, what does it mean for Saudi Arabia’s dominance of OPEC? That was already in question long before the attacks, when the Saudis had to bring on Russia in order to make an oil price output cut relevant. And in the event of a war with Iran, oil prices would soar through the roof and there would not be a thing OPEC could do about it (which is exactly what Iran is banking on).

For now, MBS’ attempt to save face is to make sure everyone knows that he is considering doubling the stake offering in the Aramco IPO, news of which was leaked on Tuesday via the Wall Street Journal. That would mean floating up to 10% of Aramco, rather than only 5%.
Reserven
28.09.2019 kl 21:26 1394

Takk til Flipper og Volf for interessante artikler.

Ser for meg følgende:
"Iran" sender flere bølger med 20-30 dårlige, gamle, utdaterte, høytflyvende og langsomme droner uten sprengstoff. Når USA/Kongedømmet har brukt opp alle Patriots/annet på å skyte ned dem, kommer hovedangrepet med +100 av de beste dronene lastet med maks sprengstoff.
Volf
02.10.2019 kl 08:26 1101

The EIA forecasts that global CO2 emissions from energy sources will grow uninterrupted through 2050, expanding by about 1 percent per year on average in non-OECD countries, but declining by 0.2 percent per year in OECD countries.

- The agency says that large and growing populations in the developing world will mean increased demand for air conditioning, electronics, personal vehicles and other energy services.

- The EIA’s forecasts do not include any policies related to climate change that might alter the trajectory of emissions. A future in which emissions continue to grow unabated is directly at odds with stated goals from governments around the world that signed onto the Paris Climate Agreement.

Market Movers

• Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM) and Royal Dutch Shell (NYSE: RDS.A) are among 14 oil companies that registered for a November offshore oil auction in Brazil. The Brazilian government is hoping to raise $25 billion from the sale.

• Enbridge (NYSE: ENB) fell 2.7 percent on Monday after the Canada Energy Regulator stopped the company from auctioning the right to ship oil through its Mainline system, due to the “perception of abuse of Enbridge’s market power.”

• PetroChina (NYSE: PTR) said that it has achieved a breakthrough in its shale gas exploration and added 741 billion cubic meters of shale gas reserves in the Sichuan province plus 358 million tons of oil.

Tuesday October 1, 2019

Oil prices fell on Monday on diminished hopes of a breakthrough in the U.S.-China trade war. Prices then stabilized in early trading on Tuesday, on news that U.S. oil production fell in July (much of which could be attributed to temporary hurricane-related outages).

Saudi Aramco up to 9.9 mb/d. Saudi Aramco said that it is producing more than 9.9 mb/d, largely restoring production to levels seen prior to the Abqaiq attack. The company is still working on restoring damaged spare capacity.

Aramco sweetens IPO with $75 billion dividend. Saudi Arabia said that Aramco would pay $75 billion in annual dividends, an effort made to attract more investors ahead of the company’s IPO. The government also said that it would overhaul royalty payments and cut corporate tax.

Fitch downgrades Aramco. Fitch cut Saudi Aramco’s credit rating due to geopolitical risks from A+ to A, with a stable outlook. “The downgrade reflects rising geopolitical and military tensions in the Gulf region, Fitch’s revised assessment of the vulnerability of Saudi Arabia’s economic infrastructure and continued deterioration in Saudi Arabia’s fiscal and external balance sheets,” Fitch said in a release.

BP CEO to retire. BP’s (NYSE: BP) CEO Bob Dudley is expected to retire next year, ending his tenure at the British oil company that began in the wake of the Deepwater Horizon disaster nearly a decade ago.

Small U.S.-based oil companies look to London for capital. A growing number of U.S. oil companies are looking to list on the London Stock Exchange after falling out of favor with investors in New York and Toronto, according to the FT, which cited a few small-cap African-focused E&Ps that chose London rather than North America for a public listing. “There are investors in London with appetite for smaller cap African E&Ps,” Cary Bounds, Vaalco chief executive, told the FT. “Analysts in North America have an educated understanding of shale play but they struggle with us. London analysts understand how to value our business.”

Shell oil and gas production falls, LNG output up. Royal Dutch Shell (NYSE: RDS.A) provided a quarterly update ahead of its official third quarter earnings release at the end of October. Shell said its upstream production fell by 2.7 percent compared to a year earlier, while its LNG liquefaction rose by at least 10 percent. It also expects $250 to $350 million in write-offs due to unsuccessful exploration drilling.

Falling hotel rates in Midland a sign of the times. Liam Denning of Bloomberg Opinion wrote about the double-digit decline in hotel rates in West Texas. That magnitude of a percentage decline is “very, very rare,” said Jan Freitag, a senior VP at STR. “Normally, you get that when something like a hurricane hits; like a natural disaster.” The negative trend for hotel rates coincides with the contraction in drilling activity.

Trump-Rouhani meeting almost happened, but fell apart. Efforts by French President Emmanuel Macron to broker a meeting between Trump and Rouhani came close, but ultimately fell apart as the Iranian president declined to meet until sanctions are removed. “There were subtle suggestions from both Washington and Tehran about the prospect of negotiations, but I did not see a shift in either side’s bottom line,” Henry Rome, Iran analyst at the Eurasia Group, told the WSJ. “While neither side is ready to make peace, they are very keen to avoid war.”

Pemex wants control of oil discovery. Talos Energy (NYSE: TALO) found nearly a billion barrels of oil off Mexico’s southern Gulf Coast in 2017, but according to Reuters, Pemex wants to take control of the find. Oil executives and analysts told Reuters that doing so would chill investment, frightening away the private sector.

U.S. pipeline regulations to be unveiled. The US Pipeline and Hazardous Materials Safety Administration, or PHMSA, is expected to release three new natural gas pipeline safety rules this week, eight years after the U.S. Congress tasked the agency with doing so.

Banks maintain downbeat oil price forecasts. A Wall Street Journal survey of 13 major investment banks finds an average forecast price for Brent of $64.31 in the fourth quarter, nearly unchanged from the average forecast a month earlier. The assessments suggest that few analysts see lasting change to the market from the Abqaiq attack.

Republicans gain stronger control over FERC. By tradition, the powerful Federal Energy Regulatory Commission is typically made up of both Republicans and Democrats, but the agency is tilting more Republican.

BP finds exploration difficult in Brazil. BP (NYSE: BP) drilled some unsuccessful exploration wells in the Peroba deepwater block, in Brazil’s offshore pre-salt. The company, working with Petrobras, only found CO2 and natural gas, rather than oil.

We invite you to read several of the most recent articles we have published which may be of interest to you:

The Gulf Of Mexico Has A Billion Dollar Pirate Problem
$300 Oil: What If The Attacks In Saudi Arabia Had Destroyed Production?
It’s “Feast-to-Famine” For The Global Gas Industry

That’s all from your midweek intelligence report, we hope you enjoyed it and we´ll be back on Friday, with your latest energy market update, industry intelligence and special report.

Best regards,

Tom Kool
News Editor, Oilprice.com
Volf
04.10.2019 kl 22:27 863

Friday, October 4, 2019

Oil prices dropped sharply during trading on Thursday but recovered on hopes of more aggressive action from the Federal Reserve. The U.S. jobs report on Friday revealed more weakness, but it wasn’t as poor as feared. Geopolitical risk has receded from the top of minds of oil traders. Everything is about weak demand now.

OPEC production fell most in 16 years in September. Largely due to the Abqaiq attack, OPEC’s oil production fell sharply in September. It was the single-largest disruption in history when it occurred, although its short duration meant that the outage fell short of the PDVSA strike in 2002 in terms of total volumes lost. Still, oil prices languish as demand continues to weaken. “Oil-demand growth is hitting the skids as macroeconomic, trade, and political risk drivers continue to intensify, from Brexit to impeachment through Persian Gulf conflict risk and the U.S.-China trade war,” Bob McNally, president of Rapidan Energy Group, told Bloomberg.

Unrest in Iraq puts spotlight on oil. Iraqi security forces have tried to violently suppress widespread protests in the country, and there is little sign of a resolution. Oil production has not been affected yet.

U.S. SPR more limited than expected. The U.S. strategic petroleum reserve is thought to be a massive trove of oil that can be readily deployed. For instance, in a hypothetical outage in the Strait of Hormuz, the U.S. should be expected to withdraw 3.5 mb/d of oil from the SPR. But the reserve might not be able to pull that off. Changes in pipeline flows, and huge increases in upstream production mean that only about 1.5 mb/d can be drawn down at a time, according to Platts.

Volkswagen to spend $2.2 billion on EVs. Volkswagen’s Traton truck division plans to spend 2 billion euros ($2.2 billion) over the next five years on EVs.

Investor group urges climate action. Climate Action 100+, a group of investors overseeing $35 trillion, says that of the most polluting companies in the world, only about 9 percent have aligned their operations with the Paris Climate Agreement. The investor group has already pressured oil companies, including Royal Dutch Shell (NYSE: RDS.A) and BP (NYSE: BP) to take more aggressive action.

Exxon and Shell issue profit warnings. ExxonMobil (NYSE: XOM) and Royal Dutch Shell (NYSE: RDS.A) both issued profit warnings this week ahead of their third quarter reports later this month. Exxon said its earnings would be around 50 percent lower than the same quarter last year, largely due to lower oil prices.

Ecuador to leave OPEC. Ecuador said that it would leave OPEC in January due to fiscal problems.

Norwegian sovereign wealth fund to sell $6 billion in oil and gas stocks. After a two-year process, the sovereign wealth fund in Norway received approval to move forward with a $5.9 billion sale of oil and gas stocks.

Iran says French plan for talks with U.S. “broadly acceptable.” Iranian President Hassan Rouhani said that the French proposal to restart negotiations between Iran and the U.S. was “broadly acceptable.” They include Iran refraining from work on nuclear weapons and also helping to improve security for the region. In exchange, Iran would receive sanctions relief. Still, Rouhani said that mixed messages from the U.S., including President Trump saying publicly that he would escalate sanctions, undermined the possibility of talks.

Russia’s Rosneft wants payment in euros. Russia’s Rosneft is asking buyers of an oil cargo to pay in euros. “This could be a step to reduce U.S. dollar exposure, which makes sense for Russia, given the sanctions risk,” said Carsten Fritsch, an analyst at Commerzbank AG.

Chevron using joint ventures to scale up in Permian. Chevron (NYSE: CVX) is relying on joint ventures and partnerships to help scale up production in the Permian basin, according to Reuters. For instance, Chevron has a joint venture with Cimarex Energy (NYSE: XEC), which has been profitable since 2016. Chevron also has dozens of other agreements with other shale players in Texas and New Mexico. The model gives Chevron a share of the oil, but often relies on other companies to lead on drilling.

Pennsylvania joins cap-and-trade. The largest polluting state in the U.S. northeast will join RGGI, a regional cap-and-trade program with the mid-Atlantic and northeast. Entering the carbon market will put a cap on emissions from power plants, and utilities will have to buy and sell credits to comply. The measure could put more coal plants at risk. Pennsylvania regulators will have until July 2020 to draw up rules to join.

More signs of financial stress for Permian drillers. Private-equity-backed American Energy-Permian Basin LLC convinced creditors to restructure $2 billion in debt, helping the company to avoid bankruptcy. The company was founded by the late Aubrey McClendon, and the company missed an interest payment in May. Meanwhile, micro-cap driller Abraxas (NASDAQ: AXAS) said it was suspending drilling operations in the Delaware basin.

Chevron says it will cut emissions. Chevron (NYSE: CVX) said that it would cut greenhouse gas emissions by 5 to 10 percent from its upstream oil operations and by 2 to 5 percent in natural gas operations from 2016 to 2023.

Washington law impacts oil-by-rail to west coast. Phillips 66 (NYSE: PSX) has curtailed shipments of Bakken oil to its refinery in Washington State because of a law limited vapor pressure in oil-by-rail cargoes. A Phillips 66 refinery manager said that law is having a “significantly negative impact to refinery profitability.”

Sec. of Energy Rick Perry to resign. The U.S. Secretary of Energy Rick Perry is set to step down before the end of the year. Perry took a trip to Ukraine in May and that trip is starting to receive scrutiny from the impeachment inquiry in Washington.

BP names successor to Dudley. BP (NYSE: BP) announced that Bernard Looney, head of the company’s upstream unit, will take over from Bob Dudley when he retires next year.

Thanks for reading and we’ll see you next week.

Best Regards,

Tom Kool
Editor, Oilprice.com

Investor Alert: There has never been a mining opportunity like the quadrillion dollar one that our Global Energy Alert research team has just discovered. Get your hands on the report today!
Volf
04.10.2019 kl 22:30 847

Trade talks between the US and China are expected to resume in October, but US LNG producers can already count the cost of earlier failed negotiations, which resulted in the imposition of 25% tariffs on their LNG exports to China. The number of US LNG cargoes heading to China so far this year has plummeted from levels in 2018.

Even for producers not facing tariffs, China’s LNG demand is not showing the dynamism of the last two years. China’s LNG boom in Winter 2017 reflected a lack of policy coordination between coal-to-gas switching on the one hand and the country’s domestic gas supply capabilities on the other. Two years later and China enters the 2019/2020 gas year better prepared.

In addition, the trade dispute has compounded the already evident slowdown in Chinese GDP growth. Chinese LNG demand is still expected to rise by more than 10% this year, but this is a far cry from the near 44% growth seen in 2017 and 39% in 2018.

Strong but not stellar demand growth now appears the order of the day. China’s LNG imports are expected to rise to 80 million tons per annum (mtpa) by 2025 up from around 54 million tons in 2018, according to forecasts made by the China National Petroleum Corporation.

Start-up at the end of the year or in early 2020 of the 38 Bcm/yr (3.7 Bcf/d, 27.8 mtpa) Power of Siberia pipeline will bring more Russian gas into China’s north, although flows will take time to ramp up and are not expected to reach full capacity until 2025.

In the meantime, Sinopec should have completed the 7.2 Bcm/yr Qingdao-Nanjing pipeline by October next year, which will take LNG from the company’s terminal in Qingdao 531 kilometres to the Nanjing gas station, passing through seven cities in Shandong and Jiangsu provinces, supporting the supply of regasified LNG into the north and east of China.

The government’s environmental policies and the build out of delivery infrastructure, including new LNG terminals, mean Chinese LNG demand is likely to remain on an upward curve in contrast to the more limited prospects for growth in Asia’s two other key markets, Japan and South Korea.

While the US-China trade war persists, this is a lost opportunity for US LNG producers in terms of immediate sales, but also in terms of a dearth of long-term purchase agreements from Chinese buyers and a lack of Chinese investment in new US LNG plant.

European dependence

It also creates a particular reliance on European LNG demand, but Europe’s ability to absorb cheap LNG is not infinite. According to Gas Infrastructure Europe, Germany’s gas inventories reached 93.9% of capacity September 29. Analysts put storage levels across Europe 12 Bcm higher than a year ago at record levels.

European LNG imports have come down from the peak levels seen in April to levels on a par with last year, reflecting both the filling up of storage capacity on the one hand and a lack of further capacity to switch from coal to gas in the power sector on the other.

There are of course uncertainties. A European Court of Justice (ECJ) ruling in September has restricted Russian state gas company Gazprom’s use of the Opal pipeline in Germany. Initially, from 2011, Gazprom was only allowed to use 50% of Opal’s 36 Bcm/yr capacity, limiting its ability to bring in gas via the Nord Stream import route. This restriction was lifted in 2016, but has been re-imposed by the ECJ decision, which prevents Gazprom from the right to participate in auctions for 40% of the pipeline’s capacity.

Whether the ruling results in a real cut in supply depends on whether Ukraine and Russia reach an agreement on gas transit through Ukraine beyond the end of the year, when the current contract expires. Both have economic incentives to reach a deal and the ECJ ruling certainly puts pressure on Russia as transits through Ukraine provide an alternative route into European gas markets for the lost capacity on Opal. Nonetheless, to say Russian-Ukrainian relations are fractious and unpredictable is an understatement.

While Ukrainian-Russian gas relations provide the backdrop, more immediate is the Dutch decision also announced in September to halt production at the once giant Groningen gas field by 2022, eight years earlier than previously anticipated. The field’s production has fallen from 54 Bcm in 2013, before earth tremors were felt, to just over 16 Bcm in the current gas year, which runs to October 1.

European gas prices have strengthened on the back of the developments surrounding Groningen and Russian gas supplies, alongside Norwegian gas field maintenance, but this may only serve to price Europe’s burgeoning coal stocks back into the power market. Even as Groningen output drops to an expected 12 Bcm next year and question marks hover over the volume of Russian supplies, record high levels of gas in storage mean security of supply concerns are low.

In the event of a mild northern hemisphere winter, LNG cargoes could well end up in floating storage – i.e. loaded on LNG carriers with nowhere to go. At that point, US LNG producers really will have cause to rue the tariff barriers pricing them out of the Chinese market.

Volf
11.10.2019 kl 22:19 545

Friday, October 11, 2019

Oil prices rose in early trading on Friday on hopes that the U.S.-China trade negotiations might result in a limited breakthrough. President Trump said that talks on Thursday went well, and the two sides resume negotiations on Friday. An attack on an Iranian tanker (more below) also bolstered oil prices.

IEA cuts demand forecast. The IEA cut its demand forecast once again to just 1 mb/d in 2019 and 1.2 mb/d in 2020, a cut of 100,000 bpd for both. The agency also raised its forecast for supply growth from non-OPEC sources by 400,000 bpd.

Iran says tanker was attacked. Two missiles apparently struck an Iranian oil tanker traveling through the Red Sea off the coast of Saudi Arabia on Friday. Oil leaked into the Red Sea. The incident could rachet up tensions once again between Iran and Saudi Arabia.

Pioneer Natural Resources upgraded, Continental downgraded. Pioneer Natural Resources (NYSE: PXD) rose by more than 2 percent on Thursday after Mizuho upgraded the company to Buy. Mizuho analyst Paul Sankey said the company has shifted its strategic focus to free cash flow. Meanwhile, Mizuho downgraded Continental Resources (NYSE: CLR) to Neutral over spending concerns and long-term quality of acreage.

Total SA wins big in Brazil auction. Total SA (NYSE: TOT) and partners won an offshore block in a Brazilian offshore auction, agreeing to pay $978 million.

Argentina could freeze energy tariffs. Argentina’s front-runner for president Alberto Fernandez is under pressure from his party to freeze natural gas and power tariffs, and also to peg oil product prices to pesos instead of dollars. Some economists warn that doing so would deter investment in the Vaca Muerta shale. The number of frac stages have already fallen by 25 percent since current President Mauricio Macri implemented temporary price freezes, according to S&P Global Platts.

ExxonMobil awards $13 billion to three companies for Mozambique. ExxonMobil (NYSE: XOM) awarded $13 billion to three companies as it seeks to develop its LNG project in Mozambique.

Saudi Aramco to publish prospectus by end-October. Saudi Aramco plans to offer 1 or 2 percent of the company and could publish a prospectus as soon as October 25.

Ecuador unrest disrupts oil. Ecuador’s President Lenin Moreno is fending off nationwide protests after his decision to remove fuel subsidies. He moved his government out of Quito, temporarily decamping to Guayaquil. Protestors seized some oil installations, disrupting 165,000 bpd, or nearly a third of production. On Wednesday, Ecuador’s state-owned oil company declared force majeure on trading operations. The cuts came as part of IMF prescriptions in conjunction with $4.2 billion in loans. U.S. West coast refiners are most exposed to the disruption, such as Marathon’s (NYSE: MPC) refineries in L.A. and San Francisco.

Chevron boss likes Texas. Chevron CEO (NYSE: CVX) Mike Wirth had disparaging words for his company’s home state of California, while praising Texas. “The policies in California have become pretty restrictive on a lot of business fronts, not just the environment,” Wirth said. “I don’t know there’s a better place in the world for us to do business than” Texas and the Gulf Coast, he said at an event in Houston. Chevron’s home may be in California, but its largest office is in Houston, which continues to grow with the company’s increased focus on the Permian Basin. Wirth also said that Chevron will cut flaring rates.

Halliburton slashes jobs. Halliburton (NYSE: HAL) announced that it would cut 650 jobs across four U.S. states this week. The oilfield services company blamed the slowdown in shale drilling.

World’s 50 largest oil companies to increase supply by 7 mb/d. The world’s 50 largest oil companies have plans to increase oil production by 7 mb/d over the next decade, according to The Guardian. The research suggests that the companies could add 35 percent more between 2018 and 2030 compared to the previous 12 years. The Guardian notes that these plans stand in direct contradiction to greenhouse gas emissions reductions required to avoid the climate crisis.

Nigeria gains higher OPEC quota. OPEC granted Nigeria a larger production quota as part of the curtailment agreement with non-OPEC countries. Nigeria has been allocated 1.774 mb/d, up from 1.685 mb/d previously.

Large oil traders bearish on prices. Vitol Group and Trafigura, two of the world’s largest oil traders, see oil prices languishing in the $50s next year. “Without some resolutions to the trade wars then we remain a little bit bearish, a five handle for us,” said Russell Hardy, chief executive officer at Vitol.

India’s Reliance to resume Venezuela oil loadings. Indian refiner Reliance Industries Ltd. is set to resume purchasing oil from Venezuela in October after a four-month pause, according to Reuters.

Fort McMurray goes bust. Fort McMurray in Alberta was once the booming capital of Canada’s oil sands industry. Now it has gone bust.

California blackout; Tesla tells car owners to charge up. PG&E (NYSE: PCG) issued a historic pre-planned blackout of nearly a million people in northern California in order to head off fire risk. Tesla (NASDAQ: TSLA) sent a message to owners of its vehicles to charge up ahead of the blackout in order to ensure they can still drive. PG&E’s share price fell nearly 30 percent on Thursday.

Sanctions on Chinese shipper interrupts LNG. U.S. sanctions on Chinese shipping company COSCSO could interrupt LNG shipments from Southeast Asia to China, according to S&P Global Platts. Shipping rates have also gone through the roof in the wake of the sanctions.

Thanks for reading and we’ll see you next week.
Volf
11.10.2019 kl 22:20 540

A Long-Term Crisis Looms For Oil
The US oil rig count continues to drop, falling by 3 to 710 for the week ending October 4, according to Baker Hughes data. It is now 18 percent down on the same week last year, a loss of 151 rigs, reflecting weaker oil prices, a steady deterioration in the global economic outlook and consequent downward revisions to forecast oil demand.

However, US shale will enter a period of dormancy rather than defeat. Shale oil’s most enduring legacy has been the introduction of a large element of price-responsive oil production. Shale producers retreat in the face of weaker market sentiment so that production responds to price changes, both up and down, over a period of about six to 12 months. Shale drillers also have a unique storage option in the form of drilled-but-uncompleted wells, which allows production capacity to remain in the wings ready to be brought on-stream if demand rises.

Automatic cost adjustment

Moreover, a pull-back in shale drilling has an immediate impact on the US oil services sector. Less drilling results in spare capacity pushing down the price of everything from fracking sand and chemicals to on-site power generation and drilling rig day rates. Inefficient rigs are laid up and less prolific shale plays are temporarily abandoned.

Just as production volumes react to lower oil prices, the cost of producing shale also falls. US shale goes into a period of dormancy from which it retains the capacity to emerge as strong as ever. The longer the period of dormancy the longer the recovery takes, but US shale is resilient even in retreat.

This will be an enduring problem for OPEC, particularly if, gradually, shale oil production internationalizes, for example emerging at scale in Argentina, Canada and Russia post-2025.

Long-cycle oil investment costs

However, long-cycle oil production has by no means disappeared although it has taken longer to adjust to the crash in oil prices from mid-2015. The difference to US shale is that it does not respond to short-term movements in the oil price.

The first of the new breed is Norway’s giant 2.7 billion barrel Johan Sverdrup oil field, which came on-stream in early October. Production is expected to ramp up to 440,000 b/d by summer next year and eventually hit 660,000 b/d at the end of 2022 when the second phase of the project is completed.

What is remarkable about the development is not just its size, but the $2/b operating costs claimed by developer Norwegian state oil company Equinor. Some $4.4 billion of capital expenditure was wiped off the field’s initial development plan.

This reflected major oil companies pushing back hard on the offshore oil services sector, but also rethinking their field designs and incorporating digital technologies into almost every aspect of development to replicate the cost reductions and efficiency gains achieved on the US shale oil patch.

South America re-emerges

Next in line is Guyana, which will also reap the benefits of offshore project rationalization and emerge as a new source of oil supply in 2020. Again, like Johan Sverdrup, these fields will be long-life assets producing regardless of short-term pricing signals.

ExxonMobil’s first Floating Production, Storage and Offloading vessel, the Liza Destiny, arrived off the coast of Guyana at the end of August. Liza Phase 1 is expected to start up in early 2020. The US company has gradually ramped up expectations for the oil basin based on further exploration success. The company now believes it will be producing 750,000 b/d of Guyanese oil by 2025.

With some larger caveats, given years of missed targets, Brazilian oil production also now appears to be on a steady upward trend finding ready markets in China and the US, where refiners remain short of heavier grades as a result of the collapse of Venezuelan oil production and sanctions.

With further auctions for new licenses scheduled for this year, interest is likely to be high. The ramp-up of existing FPSOs and new ones being deployed suggest Brazilian oil production could jump by almost a quarter to 3.2 million b/d by 2022. This is all being led by the country’s giant pre-salt fields, while output from other Brazilian production centers are expected to decline.

Maintaining a supportive and inviting investment environment remains critical to long-term progress, but there is little question about the prolific and giant nature of Brazil’s pre-salt discoveries.

Output up as demand falls

As a result, 2020 will see more non-OPEC oil production coming on stream, the key difference being that it will not be the result of US shale, but a result of the readjustment and rejuvenation of long-cycle non-OPEC offshore production.

This might mean little if demand were roaring ahead, but it isn’t.

Demand forecasts for oil demand this year and next remain on a downward curve. Much hangs on the outcome of renewed trade talks between the US and China and on the debacle represented by Brexit, which looks likely to come to a head by the end of October. The world economy already appears to be flirting with recession, but it and oil demand will take further body blows, if US-China trade antagonism becomes entrenched and Brexit proves hard rather than soft.

Dear Reader,

James Stafford here, the founder and CEO of Oilprice.com.

I've spent the last decade turning Oilprice.com into the world's number one hub for oil & gas investors and professionals. I've built out an unrivaled network of human resources and assets around the world, and they reach into every industry.

The power of the publishing world brings you into contact with a sea of opportunities - nine out of ten of which are usually junk and are going nowhere. But that means that one in ten makes it worth it.

Getting to that one good deal out of ten means doing a lot of original research on companies, and taking a lot of time to meet with management teams. When I find that perfect combination--an undervalued potential market disruptor with an exceptional leadership team - I invest.

I've never shared information about my investments before with subscribers, but by popular demand, I'm going to start doing that now on a regular basis. That could be as frequently as once a week, or simply when a company comes along that meets my criteria. I'll only share those in which I'm investing my own money.

When I'm investing heavily myself, the criteria are strict. I'm looking for a company that is:

in a market with near-infinite growth potential
providing a unique solution to a major problem
significantly undervalued by all standards

So, for this first foray into sharing my investments with subscribers I think I've found something that ticks all those boxes, which is why I've already invested heavily.

The market? The ~$130B digital advertising space

The problem? Publishers are desperate to win back their share of over $5 billion in ad revenues that gets spent using Google's news platform.

The solution? A new, independent platform that gives the power back to the people who are actually producing content.

And the company? Frankly Inc. (TSX:TLK, OTCQX:FRNKF), a media firm with a data gold mine and a new way for publishers to escape the stranglehold of Google and Facebook.

The first thing that popped out to me with Frankly was its reach: It's already reaching 100 million people.

So, I backtraced that. What does that actually mean in dollar terms? Forbes figures that the personal data of each individual is worth at least $175 when monetized. That would mean that Frankly could be sitting on a potential ~$20 billion in commercial value.

That's a huge number, so I wanted to better understand why I hadn't heard of Frankly before. This is what I learned: Frankly's been operating in the shadows of some of the biggest mainstream news outlets in the U.S., including CNN. In other words, it's been building up its platform arsenal and quietly increasing its reach to 100 million people while no one's paying attention.

I like secretly grown solutions to big problems; and in this case, to me, it means that Frankly is the biggest thing in publishing that I'd never heard of, and it's positioning itself to become the future of publishing. The giants have grown complacent, and they're not paying attention.

Consider this: The global digital advertising market alone is set to reach nearly $665 billion by 2026.

Then, consider this: Just in the U.S., this is a $100 billion market... and 80% of it is in the hands of Google and Facebook.

From where I'm sitting, it appears that Frankly could upend the total control these tech giants have in the markets.

So, how is Frankly planning to do this, exactly? Through its one-of-a-kind platform that gives all the power back to the publishers.

Publishers (like ourselves) are desperate for Frankly. While Google made $4.7 billion in revenue from news content without actually writing anything last year, the entire news industry combined (over 2,000 publishers) only made around $5 billion.

That's over 2,000 publishers—just for starters—who would jump on the Frankly bandwagon with outsized enthusiasm.

That ticks another box on our criteria: Voracious demand.

Frankly has also impressed us with the type of data it collects, it's reach and its digital property portfolio.

The company is undervalued by any means. The $15 million market-cap company has got over 100 million monthly active users in its network, and 1,200 digital news, information and entertainment properties across the US.

The recent $50 million multi-year deal it closed with Newsweek is a great example of Frankly's dealflow... and there could be more in the pipeline.

First-party data is where the money is: It's all the behavioral, personal and subscription information your audience shares with you. It's what makes targeted advertising one of the most lucrative businesses in the world.

The biggest thing Frankly has going for it is it's management. The bottom line is that this trumps all other criteria. Without good management, potential undervaluation becomes simply low valuation.

We've had a lot of time to get to know the team behind Frankly, and that has boosted our confidence more than anything. The first-party data capture and the ability to take advantage of a clear publishing need in a $100-billion industry is the stuff of management genius.

They've also been quick on the uptake for other streams of revenue and growth expansion, most recently through their acquisition of Vemba, a video-on-demand asset that boasts CNN and VICE as clients, among other big names. For Frankly, Vemba just opened up another very lucrative first-party data collection point in a world obsessed with streaming.

Frankly is where former tech pioneers and publishing executives come together to take advertising revenue back, and its chairman, Tom Rogers, knows what needs to be done. He's a strategist extraordinaire, who has been a VP of NBC, created MSNBC and even served as Senior Counsel to the US House of Representatives Telecommunications.

He and his team know every angle of this business, and they know what comes next.

As I've said, I already have a large position in Frankly, I was adding more last week and will continue buying this week, especially at these levels. Where in my opinion the company is insanely undervalued following the recent pullback. Now, I'm bringing the opportunity to your attention as well, before Frankly steps out of the shadows.

You can find their Canadian listing here: https://finance.yahoo.com/quote/TLK.V/?p=TLK.V

And their US listing here: https://finance.yahoo.com/quote/FRNKF/?p=FRNKF

Their website is: https://www.franklymedia.com/

Should any asset managers wish to learn more about the company I would be happy to make an introduction to the CEO.

That's it for this letter. Stay tuned for the next one. We'll be highlighting a promising oil explorer with a major potential upside that you can't afford to miss! (but you have to wait 3 weeks)

Enjoy your week.

Kind regards,

James Stafford
Publisher, Oilprice.com