Friday, March 3, 2017
Oil prices dropped to a three-week low on Thursday following a bearish
data release from the EIA. Crude inventories broke a new record at 520.2
million barrels, and U.S. oil production figures jumped to 9.032 million
barrels per day, a gain of 31,000 bpd from the previous week. Rising production
and inventories weighed on prices. However, a weaker dollar buoyed WTI and
Brent towards the end of the week.
OPEC compliance reaches just about 100 percent. Data for February is in
and it shows that OPEC increased its compliance rate. Saudi Arabia took on the
additional burden, cutting deeper than it promised as part of the November
deal. The oil kingdom cut output by 90,000 bpd in February from January levels,
taking output down to 9.78 million barrels per day. Reuters puts the compliance
rate at 94 percent, while Bloomberg has it at 104 percent. Saudi Arabia is
making up for a handful of countries that are falling short on their
commitments, including Iraq, the UAE, Angola and Venezuela. Plus, this does not
take into account rising output from Libya, Nigeria and Iran. When included,
OPEC is producing 415,000 bpd above its target. Moreover, Russia has not
slashed its production beyond the 100,000 bpd reduction in January.
Saudi cuts prices for its crude for April. Saudi Aramco discounted its
oil by 50 to 75 cents for its light oil to be delivered to Asia in April, and
cut prices for its light and medium grades by 30 cents per barrel, according to
the WSJ. They also offered discounts to oil heading to North America and
Northwest Europe. The price changes do not necessarily mean much, but changes
in prices have been closely watched over the past few years by analysts hoping
to glean clues from Saudi officials on their strategy.
Oil to trade between $50 and $60. Daryl Liew of REYL Singapore sees oil
trading within a range of $50 and $60 for much of this year. OPEC compliance
will keep prices from falling but rising U.S. shale production will cap any
price gains.
Natural gas inventories rise unexpectedly. Normally, U.S. natural gas
stocks are drawn down in the winter as heating demand spikes, only to be
replenished between April and November. But the EIA just reported a shocking
increase in natural gas inventories, a major development given that winter is
not over yet. The increase of 7 Bcf puts gas stocks at 295 Bcf above the
five-year average for this time of year. With only a few weeks left of winter,
the disappointing drawdowns suggest that the market will be well supplied for
the rest of the year, potentially heading off any chance of meaningful price
gains. Natural gas spot prices are already down 30 percent from their December
peak, sitting at $2.80/MMBtu.
U.S. EPA scraps methane plan. Under the Trump administration, the EPA
reversed this week the Obama-era request for methane data from oil and gas
companies, the basis for which future methane regulations were to be drawn up.
Without the data, the EPA would have a tough time designing methane regulations
– which is exactly what the EPA under President Trump is hoping to achieve.
Trump’s energy cabinet confirmed. Former Texas Governor Rick Perry was
confirmed this week as the new Secretary of Energy and former Congressman Ryan
Zinke took the helm at the Interior Department.
Keystone XL exempt from “Buy American.” President Trump made a show of
the fact that TransCanada (NYSE: TRP) would be able to build the Keystone XL
pipeline, but would have to do so with American-made steel. He even signed an
executive order calling on all new pipelines to be used with American steel.
But a White House spokesperson told Politico that because the Keystone XL
pipeline is not “new,” it won’t be subjected to those requirements. Some
analysts question whether the executive order will have any legal power at all,
since it only instructs the Commerce Department to develop a plan for the use
of American steel. The upshot is that TransCanada will be able to build its
project without any local content rules, keeping the cost of the project lower.
Exxon goes big on U.S. shale. New ExxonMobil (NYSE: XOM) CEO Darren
Woods gave his first presentation to investors this week, where he outlined a
strategy to step up investment in U.S. shale. Exxon will allocate a quarter of
its 2017 budget to short-cycle shale projects. The move will help the oil major
navigate an uncertain market, as cash can be returned to the company much
quicker from shale drilling than it can from the major offshore projects that
Exxon has long been accustomed to. Still, Exxon will move forward aggressively
on its large offshore discovery in Guyana, hoping to bring it online in the
next few years.
Libyan violence takes place near oil export terminals. Libya’s major
oil export terminals Es Sider and Ras Lanuf have been crucial elements in the
latest upswing in Libyan oil production. But violence once again erupted near
the terminal this week. Rival factions fighting for territorial control have
torn the country apart, and this week airstrikes occurred within a few dozen
miles of both ports. Libya is targeting a dramatic ramp up in production this
year and next, but if the terminals were disrupted, those plans would likely be
derailed.
http://nangalama.blogspot.com/2017/03/oil-and-gas-report-shows-oil-is-taking.html
http://nangalama.blogspot.com/2017/03/oil-and-gas-report-shows-oil-is-taking.html
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