Oil prices fell back on Friday as traders awaited US-China.

Oil prices fell back on Friday as traders awaited more solid evidence that the U.S.-China trade deal will be completed. News reports this week suggested that both sides would lower tariffs as part of the “phase one” agreement. But the deal has been delayed until December. “The U.S.-China trade talks are heading in the right direction” but “there are still several obstacles that will need to be overcome,” Stephen Brennock, an analyst at PVM Oil Associates Ltd., told Bloomberg.

Equinor agrees to sell Eagle Ford business. Equinor (NYSE: EQNR) has agreed to sell its 63 percent interest and operatorship in its onshore Eagle Ford shale business to Repsol (OTCQX: REPYF) for $325 million.

Brazil oil auction fails badly. International oil firms stayed away from a highly-anticipated offshore oil auction in Brazil, an unexpectedly poor result for the country. “Total disaster is the best way to describe this morning’s round,” Ross Lubetkin, CEO at Welligence Energy Analytics, a consultancy, told Bloomberg. The only blocks awarded went to state-owned Petrobras and Chinese state-owned CNODC. Four blocks received no bids at all. “All majors are focused on capital discipline and value versus volume. They will not bid at any cost for pre-salt assets,” Marcelo de Assis, head of Latin America upstream at Wood Mackenzie, told Reuters. Brazilian officials suggested that they need to reform laws that currently puts Petrobras at the forefront of development in the pre-salt. A second auction on Thursday only saw one bid. Brazil’s economy minister said the results left him “terrified.”

Canadian oil prices fall on Keystone outage. TC Energy’s (NYSE: TRP) Keystone pipeline leaked more than 9,000 barrels of oil in North Dakota last week, and U.S. federal regulators said the company needed to send a portion of the damaged pipeline to an independent lab for testing before it could be restarted. Western Canada Select prices fell, widening to a discount in excess of $22 per barrel, up from around $16 per barrel before the spill. TC Energy said the pipeline could partially restart next week, pending regulatory approval.

Saudi Aramco inks Asia deals. Saudi Arabia signed agreements with buyers in China, hoping to increase shipments to the east, which will make up from dwindling exports to the U.S.

OPEC not pushing for cuts. The largest oil producers from within OPEC+ are not pressing for deeper cuts. Sources told Bloomberg that the most likely outcome at the upcoming meeting in Vienna would be an extension of the current cuts. “It will prove very difficult to formally agree new, deeper cuts,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, told Bloomberg. “A rollover of current cuts for the rest of 2020, with an emphasis on compliance by all members, is the path of least resistance.”

U.S. shale titans say drilling frenzy is over. Several high-profile U.S. shale executives made predictions on their recent earnings calls that the U.S. oil boom is coming to an end. The Permian basin is “going to slow down significantly over the next several years,” Pioneer Natural Resources (NYSE: PXD) CEO Scott Sheffield said. Mark Papa, CEO of Centennial Resource Development (NASDAQ: CDEV), added that the slowdown is largely due to “the shift to Tier 2 and 3 drilling locations in all shale plays and increasing parent-child issues in the Permian.” Meanwhile, Chesapeake Energy (NYSE: CHK) warned that it might not continue as a “going concern.”

EOG Resources beats estimates. Bucking the trend from out-of-favor drillers, EOG Resources (NYSE: EOG) saw its share price jump after it beat earnings estimates. The company reported higher-than-expected production while spending less than anticipated.

Total to leave American lobby group. Total SA (NYSE: TOT) said that it would not renew its membership in the powerful American Fuel & Petrochemical Manufacturers association because the lobby group’s position on climate change does not align with the French oil company. Total said it had different views on the Paris Climate agreement, carbon pricing and renewable energy. That follows a similar decision from Royal Dutch Shell (NYSE: RDS.A) earlier this year to leave AFPM.

India smog hits crisis levels. India declared a public health emergency as air pollution in New Delhi hit acute levels. People stayed indoors, factories and schools closed and flights were grounded. The smog is a drag on India’s economy, the FT reports. Fuel demand growth is at a six-year low, and may only expand by 170,000 bpd this year.

NY Fed: Climate change can’t be ignored. “The U.S. economy has experienced more than $500 billion in direct losses over the last five years due to climate and weather-related events,” Federal Reserve Bank of New York Executive Vice President Kevin Stiroh said at a risk forum on Thursday at the bank.

“Supervisors should take a risk management perspective, not a social engineering one. It is beyond our mandate to advocate or provide incentives for a particular transition path.”

GM to sell shuttered plant to electric truck maker. GM (NYSE: GM) confirmed plans to sell its shuttered Lordestown facility in Ohio to an electric truck manufacturer.

Saudi Arabia bullies rich on IPO. Saudi Arabia is bullying wealthy Saudi citizens into buying stock in Saudi Aramco.

China could cut EV subsidies again. China is considering further cuts to EV subsidies, which would deal another blow to the sector.

Best Regards,

Tom Kool
Editor, Oilprice.com
08.11.2019 kl 22:31 347

Can Saudi Arabia Hold OPEC+ Together?
The descent of choking smog on New Delhi in the last week cannot help but refocus India’s political attention on the contribution of coal-fired plants and roadside emissions to urban air pollution, even if nearly half of the recent incident was attributed to stubble burning from farmers by the country’s Supreme Court.

Whether the immediate impact of air pollution in China or longer-term concerns over climate change have been the biggest driver of Chinese environmental policy is a point of debate, but the combination has certainly been powerful. India now has a reminder that it needs to actually deliver on its ambitious renewable energy targets and plans for alternative transport.

The likely impacts will be to bear down on coal-fired power and redouble efforts to electrify and gasify transport and city energy use more broadly – in other words air pollution is positive for renewables and LNG demand but negative for coal and oil.

For a country expected soon to become the most populous in the world, and one which should benefit economically from its demographic dividend of young workers, India’s energy and environmental policies will become an increasingly important factor in global energy commodity demand, just as China’s have been over the last decade.

Upside oil factors

In the short term, positive news flow on the trade front is supporting oil prices as China and the US inch towards a phase one trade deal. This looks likely to at least avoid the imposition of new US tariffs on Chinese goods and potentially reduce those already in place, but it will not return the global trading system to the pre-trade war environment.

Tariffs on billions of dollars of goods are likely to remain as Washington will want to retain leverage going into phase 2, which will deal with the much more difficult issues of Chinese industrial subsidies and the forced transfer of technology.

There is unlikely to be a return to rules-based trade dispute resolution, at least not while US Donald Trump remains in power. And the damage inflicted on global trade cannot be reversed although it can be recovered from. The persistence of substantial tariffs into phase 2 of the talks will drag on this recovery, which has yet to get underway. But, for the moment, sentiment at least sees recovery on the horizon rather than a further slowing of global economic growth.

Iraq unrest

Major unrest, social protests and increasingly severe responses to public demonstrations have re-ignited concern over the stability of Iraq, which has become not only OPEC’s second-largest oil producer but one with the most significant long-term production growth prospects. The government’s solution to the disturbances, a general election under a proposed new electoral law, will be difficult to construct to all parties’ satisfaction.

The governing elite’s lack of social license, the country’s sectarian divisions and the potential for a re-established ISIS presence in northern Iraq are long-term sources of instability.

Changes to the political system are also likely to have implications for relations between the Kurdish Regional Government and the federal government in Baghdad, potentially affecting northern crude oil exports.

Although total oil exports appear unaffected for the moment, Iraq’s unstable political situation remains an upside risk to oil prices. Political paralysis will make delivery of the large-scale infrastructure projects necessary to take oil production beyond its current levels even slower.

Saudi IPO

It is in this environment that Saudi Arabia announced its plans to go ahead with the sale of a portion of Saudi Aramco shares on the Saudi stock exchange, the Tadawul, next month. Shares will be offered to invited investors and on the main market, with the price, volume and timing to be determined by a book-building period.

Opting for the Tadawul rather than London or New York will limit accessibility, but allows Saudi Aramco to act more quickly. Although Initial Public Offering plans have been long in gestation, the timing of the move might be taken as a signal that 2020, at least the first half, is unlikely to prove a strong period for oil and it is better to act early before pricing conditions deteriorate.

Given the timing of OPEC’s next meeting on December 5-6, Riyadh has an interest in talking up a firm OPEC output policy as the book building proceeds and the IPO takes place.

Given also the likely rise in non-OPEC oil production expected next year from a diverse set of countries extending beyond the US shale sector, Riyadh appears to be grasping at a fleeting window of opportunity to monetize its oil reserves through a share sale rather than production.

OPEC’s big decision

The wider conditions surrounding OPEC’s position do not look overly positive. The organization functions best in an environment of strong oil demand growth in which non-OPEC production is static or declining. Neither of these conditions currently prevail.

Oil demand growth is weak both in the short term, as a result of slow trade growth stemming from the US-China trade war, and longer-term as a result of the growth of alternative modes of transport. While OPEC glumly mulls oil demand growth of about 1 million b/d this year, it is worth remembering that in its 2018 World Energy Outlook, the International Energy Agency predicted oil demand would grow by just 0.25 million b/d a year on average post-2025.

While OPEC-plus controls a huge share of the oil market, it is not the size of the remainder that matters so much as its dynamism, and US shale is unquestionably dynamic. Moreover, it is not the only source of activity as evidenced by the success of Brazil’s 16th bidding round, even if the prospects for Argentinian shale appear to have suffered a serious reversal as a result of a Peronist government being elected in Buenos Aires.

Moreover, while the OPEC-plus group may have extended OPEC’s reach hugely from a market share of 41.5% to 60.8%, based on 2018 data, it also brings a more unstable coalition of producers with more internal competing interests. A downside of the creation of OPEC-plus is the fall out if OPEC proves unable to carry the OPEC-plus group with it, whatever decision OPEC itself reaches

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08.11.2019 kl 22:34 335

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