Oil prices rally, gasoline slumps as Gulf Coast refineries come back after Harvey

Oil prices rally, gasoline slumps as Gulf Coast refineries come back after Harvey

Published: Sept 5, 2017 6:31 a.m. ET

Refineries are rapidly ramping up capacity

Getty Images

Petroleum is processed at a Gulf Coast plant.

Gasoline prices turned sharply lower and crude oil rallied Tuesday, as Gulf Coast refineries powered back up after the disruptions caused by Hurricane Harvey last week.

West Texas Intermediate crude oil for October delivery CLV7, +2.79%  advanced 54 cents, or 1.1%, to $47.83 a barrel, setting it on track for its highest settlement since Aug. 25.

Meanwhile, gasoline for October RBV7, -3.62%  slid 7 cents, or 4%, to $1.68 a gallon, after rallying last week when Hurricane Harvey hit the Texas and Louisiana coast and shut down around 25% of U.S. refining capacity due to severe flooding. There was no settlement for oil and gasoline on Monday because of the Labor Day holiday.

However, refineries are now going back online quickly and only about 11% of all U.S. refining capacity was still closed on Monday, according to Commerzbank. That means demand for crude at the refineries will increase, while the shortage that has buoyed gasoline prices is likely to ease.

“Furthermore, it is important to remember that Labor Day yesterday marked the end of the summer driving season in the U.S., so the market focus is likely to move away from gasoline again. Generally speaking, little attention should be paid in the next few weeks to reports of crude and oil product stocks and trade given the numerous short-term disruptions,” the Commerzbank analysts said.

The first inventory data for last week will be published by the American Petroleum Institute on Wednesday, delayed a day due to the holiday. Official supply figures from the U.S. Energy Information Administration are slated for Thursday.

Brent oil LCOX7, +1.76%  rose 10 cents, or 0.2%, to $52.44 a barrel on Tuesday. The global benchmark last week widened its spread against WTI, as Harvey reduced demand for U.S. oil and was seen as increasing the need for imported oil. The spread, however, has started to come back down again, as operations on the Gulf Coast normalize.

In other energy products on Tuesday, natural gas for October NGV17, -2.90%  lost 1.3% to $3.03 per million British thermal units, while heating oil for the same month HOV7, -0.30%  dropped 1.7% to $1.72 per gallon.

 

http://www.marketwatch.com/story/oil-prices-rally-gasoline-slumps-as-gulf-coast-refineries-come-back-after-harvey-2017-09-05

Oil prices tiptoe higher after EIA-fueled selloff

Oil prices tiptoe higher after EIA-fueled selloff

Published: Aug 17, 2017 11:51 a.m. ET

U.S. crude production has jumped to a two-year high

Reuters

 

Oil prices tiptoed higher Thursday, attempting to recoup some of the losses they suffered a day earlier, as traders continued to weigh data showing the biggest weekly fall in U.S. crude supplies in 11 months, but also the highest total domestic production level in more than two years.

Thursday’s move higher is “likely just technical buying interest after breaking below the $47 support level” Wednesday, said Troy Vincent, oil analyst at ClipperData. “Fundamentally speaking, although U.S. crude stocks are set to continue to drop through August, there has been no bullish news since yesterday’s report.”

On the New York Mercantile Exchange, September West Texas Intermediate crude CLU7, +0.36%  added 20 cents, or 0.5%, to $46.98 a barrel after spending time swinging between small gains and losses. October Brent crude LCOV7, +0.97%   on London’s ICE Futures added 53 cents, or 1%, to $50.80 a barrel.

September gasoline RBU7, +0.20% meanwhile, traded up by less than half a cent at $1.567 a gallon, while September heating oil HOU7, -0.06%  shed under half a penny to $1.572 a gallon.

Oil’s latest moves come after WTI and Brent crude tumbled Wednesday, as investors focused more on the climb in average daily U.S. oil production to its highest since July 2015, instead of the drop in crude inventories, which was the largest weekly fall since September of last year.

The Energy Information Administration reported on Wednesday a rise of 79,000 barrels a day in total crude-oil production to 9.502 million barrels a day last week. The EIA, however, also said that oil inventories fell by 8.9 million barrels, more than double the decline expected by analysts polled by S&P Global Platts.

The Organization of the Petroleum Exporting Countries and the global production-cap agreement has “faded to the back burner, as the resilient trend of U.S. production continues to keep a lid on prices,” said Tyler Richey, co-editor of the Sevens Report.

‘Barring any geopolitical catalysts, $50 [for WTI] will likely remain a stubborn resistance level in the near term.’

Tyler Richey, Sevens Report

“Barring any geopolitical catalysts, $50 [for WTI] will likely remain a stubborn resistance level in the near term, and if production continues to grind higher in the U.S., expect prices to remain under pressure,” he said in its latest report.

OPEC and a group of non-cartel countries led by Russia have agreed to cut oil production through March next year in an effort to rebalance the oil market that has been suffering from a global supply glut in recent years. However, recent data showed OPEC production rose in July because of weaker compliance with the accord, as well as a resurgence in output in Libya and Nigeria—which are exempt from the pact because their oil industries have been disrupted by civil unrest.

There’s also concerns that the OPEC-led cuts are incentivizing other oil producing nations, like the U.S., to ramp up output to gain market share.

Elsewhere in energy trading, prices for natural gas headed higher as traders parsed through the latest EIA report on supplies of the fuel.

The EIA said U.S. supplies of natural gas rose by 53 billion cubic feet for the week ended Aug. 11. The data, however, included revisions to figures for previous weeks tied to a reclassification of natural gas in storage from working gas to base gas. Read the EIA report for details

On average, analysts were looking for a build of 47 billion cubic feet, according to commodity brokerage firm iiTRADER.

September natural gas NGU17, +1.07%  traded at $2.911 per million British thermal units, up 2.1 cents, or 0.7%.

–Biman Mukherji contributed to this article

 

http://www.marketwatch.com/story/oil-prices-rebound-after-eia-fueled-selloff-2017-08-17

The Myth of Natural Gas as a Bridging Fuel

ENERGY 

The Myth Of Natural Gas As A Bridging Fuel

I often disagree with the consulting group Bloomberg New Energy Finance, but they may be spot on in questioning whether natural gas can serve as a bridge to the future.  Of course, they would say no, renewables will take over quickly, while I would say it will continue to be an important fuel, not a bridge, and that forecasters, including the oil industry, are greatly understating its potential. It all reminds me of the many times in the early 1980s when oil company executives would say, “natural gas is the fuel of the future,” and some smart aleck would respond, “and always will be.” I finally jumped in and said, you’re producing twenty trillion cubic feet a year, it seems like natural gas is a fuel of the present. Contrast this with the late Matthew Simmons’ view that world gas production had peaked, based on short-term declines in four major producers. Indeed, peak oilers like Jean Laherrerre regularly produced pessimistic views of future gas production and resources, while oil industry mavens like Robert Hefner III, and maverick academics like Peter Odell, countered that it was somewhere between abundant and superabundant. Now, some climate activists and renewable energy advocates are arguing that gas should be left in the ground and/or that it will be because of declining costs of wind and solar.  Most oil company forecasts see only minor changes in demand, specifically moderate growth (see figure). Amazingly, nearly all of these either ignore prices or treat them as high and rising, due to bad economic theory and a simplistic or incorrect view of the market. Typical comments focus on the “quality” or cleanliness of natural gas, without considering prices. This is enough deja vu to make Yogi Berra’s head spin. For my entire career, beginning with the Carter Administration’s review of the proposed Alaska Natural Gas Transportation System (yes, ANGTS), long-term natural gas prices have almost always been predicted to rise by almost everyone (except my colleagues at MIT and myself).  And apparently based on nothing more than a belief that a) gas is better than oil, and b) depletion will drive us from cheaper to more expensive sources. The first is not relevant (it’s supply and demand, not just demand) and the latter suffers from an omitted variable problem. The next figure shows the current state of natural gas price forecasts around the world. Most groups no longer present detailed forecasts, perhaps due to budget cuts but possibly also in response to past embarrassing failures.  Natural gas prices in international trade have been linked to oil prices for decades, and long-term oil price forecasts have been atrocious (the reasons are explained in my book.)  The problem is that too many believe that oil and gas prices should be linked or tend to converge, which means that gas prices are forecast to be high.  (The Figure below shows some Asian gas price forecasts, with actual Japanese LNG prices.)
North America is the only truly competitive market in natural gas, as close to a free market as it is possible to come.  And while some think they perceive convergence on energy prices, natural gas prices are set by supply and demand, and only marginally influenced by developments overseas since the high cost of transportation precludes easy long-distance shipping. This is why U.S. gas prices have often been well below those in Europe and Asia (see figure). Basic facts: Natural gas is superabundant as a resource, although the bulk of it is methane hydrates which are not currently economically feasible. The remaining resource is still superabundant, with supergiant discoveries still occurring and production rates generally exceeding those of conventional wells. Two things have kept the global market for natural gas from achieving its true potential: the cost of transportation and the price. The latter is something that can and hopefully will change. Natural gas prices in many countries are controlled, with the industry treated as a monopoly if not outright state-owned. Often gas prices are kept low to provide cheap fuel for the electricity monopoly and thus supposedly improving the welfare of the poor. But this also retards the development of gas resources (and usually benefits the wealthy more). In gas-importing countries in Asia and Europe, gas is often priced similar to oil on the basis of their respective heat content. This makes as much sense as pricing tea according to its caffeine content relative to coffee. It is a historical artifact of the industry which has survived because of oligopolistic behavior by producers, who are happy to reap oligopolistic profits. But it means that natural gas imports often don’t compete with oil, let along coal. Countries like Korea and Taiwan still burn some oil for power generation. Natural gas is cheap, at least cheap to produce. Witness North America, one of the world’s most mature petroleum provinces yet one where the natural gas wellhead price is approximately one-half to one-third the equivalent petroleum price. Gas from Iran to India and Russia to China could displace enormous amounts of coal being burned and reduce greenhouse gas emissions by a tremendous degree. These countries account for over 60% of the world’s coal consumption, and coal accounts for about half of the global CO2 emissions. This is the lowest hanging fruit on the planet, but the desire of exporters to achieve extremely high price has been an obstacle.
In the U.S., natural gas from shale has meant a boost to the economy while reducing GHG emissions, all at no cost to the taxpayer (indeed, strong benefits). Market share for gas has risen sharply (Figure below) even though the U.S. was already a mature market, rising at 0.8% per year from 2006 to 2016, while global gas market share was increasing at 0.1% per year. Most forecasts anticipate a slightly faster rise, about 0.2% per year, despite the many benefits of natural gas, primarily because they assume that international natural gas prices will remain uncompetitive. The U.S. petroleum industry is poised to change that, not just because of the volume of exports but the willingness of exporters like Cheniere to provide attractive price clauses. The contracts typically specify that the gas will be at U.S. Henry Hub prices plus a fixed amount to cover liquefaction and transportation. In other words, if oil prices return to $100/barrel, U.S. LNG exports could be half the price of competing countries (and/or make huge profits). The preferred solution (for the planet) would be for a flood of U.S. LNG exports breaking the informal exporter cartel which has kept prices high and demand low for many years. That would obviously hurt the Russian, Algerian, Norwegian, and Australian economies in particular, but it would do far more to reduce GHG emissions than any international agreement.

 

https://www.forbes.com/sites/michaellynch/2017/08/14/the-myth-of-natural-gas-as-a-bridging-fuel/print/

This is What the End of Shale Will Look Like

INVESTING 

This Is What The End Of Shale Will Look Like

Since approximately 2010, the arrival of shale oil on the global market has altered geopolitical power scales as well as the price of the commodity. Shale has been extracted in the last decade from fields in North America such as Permian Basin in Texas, Bakken in North Dakota and Eagle Ford in the northeast United Sates. In March 2016, American shale accounted for half of all U.S. oil production and produced 4.3 million barrels per day. The emergence of shale is a significant reason, if not the preeminent reason, that the price of oil dropped from $140 per barrel in 2008 (and over $100 per barrel as recently as 2014) to around $50 per barrel today. All of this is often referred to as “the Shale Revolution.” And now we know how the Shale Revolution will end. The Shale Revolution has a big problem. It is heavily dependent on institutional investors and lenders, and they are starting to lose interest in the business. Investment in shale has benefited from a Silicon Valley-like syndrome of focusing more on growth than profitability. But in the past similar strategies of growth-at-all-costs have led to busts. In a boom/bust industry like oil, businesses fall hard. When investors give up waiting for profits, they flee in unison, and when that happens, the Shale Revolution will end.

The crux of the issue is that the breakeven costs of shale oil production are still too high for the market. The high costs of extraction and production for shale producers is the greatest variable impacting profit. Some global oil companies can produce for very little cost. It is estimated that Saudi Aramco’s cost is between $4 and $12 per barrel. In the current market, North American shale can be produced for somewhere between $30 and $50 per barrel. When oil was priced at $80, $90 or $100 per barrel, average breakeven prices for shale were much higher, exceeding $100. As the price of oil dropped from its pre-2015 numbers, the costs to shale producers dropped as well. At the time, many proclaimed that the breakeven point had come down enough to make shale profitable in a changing market. Many claimed this was primarily due to better technology. Shale oil companies were still good investments, they said, even at low oil prices. Recently, however, industry experts and economists have begun to offer other, more plausible, explanations. Some experts, such as Art Berman, have explained that the lower costs were largely due to lower labor costs in a depressed market as well as desperate vendors giving discounts. In addition, shale producers lower their costs by capping wells and delaying rigs in less economical environments, such as North Dakota, and focusing solely on the best prospects, primarily in Texas. But even Texas shale operations have suffered during this price downturn. It appears that most of the drop in the breakeven point for shale was not due to technology or newly-discovered efficiencies in the last couple of years. Compared to most offshore or conventional drilling, shale oil production is still a service-heavy industry. And those service costs (and payroll costs) seem to be falling and rising in line with the movement of oil prices. This would mean that when oil prices rise again, so would the costs to shale producers. shaleDr. Anas Alhaji, an economist and oil industry consultant based in Texas, along with Al Rajhi Capital, compiled the breakeven points for the largest shale producers between 2014 and the start of 2017. When placed alongside a graph of the spot price of WTI oil from the end of three quarters prior, it appears the breakeven points for shale are actually a function of the past price of oil itself. This indicates that because shale costs are not fixed or even stable, the industry will likely struggle to achieve consistent profit unless the labor market and vendor markets are transformed. Essentially, shale should struggle to achieve sustained profitability, no matter the price of oil.
An industry that cannot make a profit will eventually end when investors and creditors begin to demand profits. The press recently profiled a Houston private equity firm that failed spectacularly because shale producers in which it was invested were not making profits. Other stories coming out of Texas and New York alike have highlighted a growing skepticism about the business plan of shale firms as a whole. Even the CEO of “Schlumberger” Limited, the largest oil services company which benefits from a robust shale industry, blamed shale company investors for encouraging a recent increase in shale drilling based on a drive for growth. Yet Wall Street still seems stuck in the mindset that growth is the most important metric, which only creates a scenario for a worse bust. When many shale oil companies released earnings reports in the middle of the summer, Wall Street rewarded the companies that showed growth regardless of profit or loss. Companies that reduced their expenditures, like Sanchez Energy Corporation, or revealed plans to slow their growth in the future, saw their stock prices plummet for what might have been prudent action. No one knows at this point if shale really can be profitable at large scales at any time in the near future, but more analysts and traders are becoming doubtful that it can. And yet shale producers still must spend and pump to show growth so they don’t lose funding. Harold Hamm, who runs “Continental, has said his firm will no longer take on debt, but Continental is the best positioned shale firm and likely the only one able to wean itself from new sources of funding. Shale producer Sanchez Energy share priceThe fact of the matter is that shale oil assets are not going anywhere. If the Shale Revolution ends tomorrow, the oil will still be in the ground to be extracted when it is economically propitious. However, Wall Street’s growth-at-all-costs mindset is not sustainable over the long-term, and today’s shale firms cannot survive forever without consistent profits . Shale cannot create consistent profits until the costs are detached from the boom/bust wave of oil prices, and the signs are that investors just might be catching on. When the financiers lose interest, the Shale Revolution will be over. 

Ellen R. Wald, Ph.D. is a historian & scholar of the energy industry.  She consults on geopolitics & energy. Her book, Saudi, Inc., will be published in 2018 by Pegasus Books.

 

 

https://www.forbes.com/sites/ellenrwald/2017/08/11/this-is-what-the-end-of-shale-will-look-like/#7b7add145a05

Innovate, cut costs: how a Russian oil firm navigates global supply curbs

AUGUST 9, 2017 / 2:06 AM

Innovate, cut costs: how a Russian oil firm navigates global supply curbs

ALMYETYEVSK, Russia (Reuters) – A global deal cutting crude output has forced mid-sized Russian oil company Tatneft to curb flows at some fields, leaving it with lower revenues but little relief from maintenance and running costs. Its response: innovation.

Yelkhovneft, a Tatneft unit in the semi-autonomous republic of Tatarstan some 1,200 km (750 miles) southeast of Moscow, has cut oil output by 6.6 percent since May, following an extension of the supply-reducing deal led by Russia and Saudi Arabia.

“Faced with lower profits due to the cut in production, we have put greater emphasis on bringing down operating costs,” Azat Khabibrakhmanov, head of the Tatneft unit, which produced 3.3 million tonnes of oil last year, told Reuters.

The unit has oil pumps in two colors: green brings lighter crude to the surface while yellow draws heavier oil. Under the global deal, aimed at boosting the price of oil, Yelkhovneft’s output of both types is down.

Standing near one of the pumps, surrounded by yellow rapeseed flowers, Khabibrakhmanov said his unit was scaling back production mainly at wells with low flow rates, particularly those with a high water content.

“This has given us a certain stimulus to find new solutions for cutting production costs, bringing in new energy-efficiency technologies,” he said.

Yelkhovneft, which accounts for around 12 percent of Tatneft’s oil production, is not altering key processes such as drilling or enhanced oil recovery – indeed, the company wants to be able to ramp up output quickly once the supply deal expires.

Instead, Yelkhovneft is scaling back measures aimed at limiting water flow and various other types of work, including in the rock formation at the bottom of a well.

“This way, we will be able to restore oil production to its previous levels quite quickly, I think in a month or two,” Khabibrakhmanov said.

Yelkhovneft has also started drilling more smaller-scale wells, allowing it to halve drilling-related spending. It has begun to use lighter or fewer metal parts in equipment, cutting costs further, Khabibrakhmanov said.

Yelkhovneft has more than 5,800 wells drilled in Tatarstan’s Almetyevsk area, in a swathe of land three times the size of Hong Kong. Of those, 2,300 produce oil. This number was cut from 2,500 after Russia backed the extension of the OPEC/non-OPEC deal until March next year.

CUTTING COSTS

Tatneft, which itself produces almost 600,000 barrels of oil per day, is substituting revenues it would have otherwise received without the cuts by trying to limit costs.

The logo of Russia’s oil producer Tatneft is pictured at its Taneco refinery complex in Nizhnekamsk, in the Republic of Tatarstan, Russia, July 26, 2017.Sergei Karpukhin

“This (cost-cutting) project … is actively developing and will allow the company to reach its strategic goal of increasing production while cutting costs,” Khabibrakhmanov said.

Khabibrakhmanov did not say how much Tatneft had saved. In total, Tatneft will cut its oil output by around 350,000 tonnes (2.6 million barrels) this year under the global deal.

Tatneft was spending an average of 235 rubles ($4) to extract a barrel of oil in the first quarter of this year, down almost 15 percent quarter-on-quarter thanks to cost savings, the company’s latest report showed.

Tatneft, which did not provide a comparison with global oil producers, has yet to present second-quarter results.

Rosneft, Russia’s biggest oil producer, has long said the cost of extracting oil in Russia is among the lowest in the world thanks to a favorable rouble exchange rate.

Before the global oil pact took effect in January, officials had said Moscow would find it hard to cut production without risking damage to some of its wells, due to harsh, icy weather.

But the decision was made and output is being curbed in different ways: some are curbing flows at the newest fields, such as Rosneft; others, including Gazprom Neft and Tatneft, are focusing on aging deposits.

Apart from adapting to output curbs, the Russian oil industry was forced to seek new ways to extract crude after the imposition of sanctions in 2014 that limited the use of Western equipment in offshore Arctic, shale and deepwater projects.

Although Tatneft was not affected by the sanctions, it started to substitute foreign equipment essential for its high-viscosity oil projects – which it sees as a source of future growth – with domestic equipment.

Tatneft mainly operates mature fields in its native Volga-Urals region of Tatarstan, where the Romashkinskoye oilfield, launched more than 70 years ago, still accounts for more than half of the company’s production.

Of 29 million tonnes of oil planned to be extracted this year, some 1.5 million – double last year’s amount – should be high viscosity, which requires heating to extract crude.

“At the beginning (of the high-viscosity oil project), we used mostly foreign equipment, starting to implement substitution step-by-step. Now, over 95 percent of the equipment is domestically produced,” Robert Akhmadullin, first deputy head of Tatneft’s high-viscosity oil department, told Reuters.

Tatneft plans to invest around 20 billion rubles into developing high-viscosity deposits in 2017-2018 compared to an overall investment program of 100 billion rubles for this year.

High-viscosity oil resources in Tatarstan are estimated to be over 1.4 billion tonnes, Tatneft says, hoping the company will be able to substitute aging deposits for this type of crude as time passes.

Additional reporting by Maxim Nazarov; Writing by Katya Golubkova; Editing by Dale Hudson

 

 

http://www.reuters.com/article/us-russia-opec-tatneft-idUSKBN1AP0M7

Oil bulls aren’t out of the woods yet

AUGUST 4, 2017 / 6:36 AM / 3 HOURS AGO

Oil bulls aren’t out of the woods yet

LONDON (Reuters) – Oil investors seem to buy the idea that recovery is finally underway after three years of gluts, but a price boom seems unlikely as the options market shows that at least until OPEC’s supply deal expires, producers will pounce on any rallies.

The oil price LCOc1 has gained about 20 percent in the last two months to above $52 a barrel, doggedly posting higher highs and higher lows, which would suggest this rally is more robust than the recoveries seen in March and May this year.

“It has been a good rally since June but now crude oil has to prove that it can break its downtrend channel,” Petromatrix analyst Olivier Jakob said.

Investors have been rattled by nagging doubt about the ability of the Organization of the Petroleum Exporting Countries and its partners to stick with a pledge to restrict output by 1.8 million barrels per day until March, especially given resurgent output from Libya and Nigeria, which are exempt.

A 10 percent rise in U.S. production this year and the painfully slow decline in global oil inventories, which OPEC says must return to their longer-term average before the output restriction can disappear, has fed trader and investor scepticism.

Since OPEC and its 11 partners, including Russia, began curtailing production in January, oil inventories across the world’s most developed nations have risen by around 40 million barrels and are still some 200 million barrels above their five-year average, OPEC’s target.

However, year-on-year, inventories have fallen for two months in a row, marking the first annual declines in stocks in over three years, according to data from the U.S. Energy Information Administration.

The premium of oil for delivery in December this year compared with December next year has fallen to just 62 cents, from nearly $2.50 at the start of July.

The so-called “Dec/Dec” spread traded at an average premium of nearly $4.00 a barrel from late 2014 to early this year, when that structure turned negative after OPEC and its partners in late 2016 reached their historic decision to cut supply.

But a seemingly relentless rise in global inventories and disenchantment with OPEC’s ability to rein in exports as well as output drove the Dec/Dec spread to its widest in nine months by June.

PLENTY OF “VROOM” FOR IMPROVEMENT

The second half of the year typically marks a season of strong demand for refined products as drivers take to the roads.

U.S. fuel inventories, the most visible, have fallen by around 10 percent since hitting record peaks earlier this year, but this trend will have to continue to persuade longer-term investors, and OPEC itself, that the long-awaited stock draw is truly underway.

In the last month, funds have cut their combined bearish holdings of Brent and West Texas Intermediate futures and options by more than 40 percent to their lowest in three months.

“U.S. crude oil inventories have started to seasonally decline, but I think funds are probably going to wait and see where we stand at the end of the summer before going long again,” BNP Paribas head of commodity strategy Harry Tchilinguirian said.

“Interestingly enough, OPEC too will be waiting for the end of the summer to evaluate the impact of its supply cuts and judge what to do for the balance of the period of output restraint that runs to March next year.”

There are a few warning signals still keeping investors cautious over the resilience of this summer’s rally.

One tell-tale sign of producers locking in their future oil sales, which can dampen price rallies, is an increase in implied volatility on sell, or put, options relative to that for buy, or call options.

Implied volatility is one way of measuring how popular an option is at any given time.

The difference in implied volatility for put options with strike prices that are close to the current underlying Brent futures price expiring in six months’ time over that for calls has reached its largest in two months.

It hit a one-year low shortly after OPEC and its partners agreed in May to extend their supply deal to March 2018.

“Front-month crude oil prices are currently trending higher, buoyed by robust seasonal product demand, and tentative evidence that OECD stocks may be drawing closer to their five-year average. On the back of this trend … longer-dated options continue to meet sustained producer hedging,” Societe Generale said in a note.

Goldman Sachs equity analysts, who expect the global oil market to show a surplus next year when new projects come on stream, said recent stock draws were a good start.

“But we believe additional datapoints – particularly from OECD inventories – are needed, and we are not out of the woods yet.”

Reporting by Amanda Cooper; Editing by Veronica Brown and Dale Hudson

 

 

http://www.reuters.com/article/us-oil-prices-analysis-idUSKBN1AK19U

Oil prices rise as investors focus on U.S. data

Oil prices rise as investors focus on U.S. data

Published: Aug 3, 2017 11:29 a.m. ET

OPEC to review compliance in production quotas next week

Getty Images

 

Oil futures climbed toward the $50 level on Thursday, driven higher by a bullish outlook following weekly U.S. inventory data, but market participants expected the commodity to trade in a narrow range ahead of a OPEC meeting next week.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, +0.40%  climbed 23 cents, or 0.5%, to $49.84 a barrel, after trading as low as $49.12 earlier in the session.

October Brent crude LCOV7, +0.82%  on London’s ICE Futures exchange rose 38 cents, or 0.7%, to $52.74, bouncing back from a loss of as much as 0.9% earlier on Thursday.

Oil has experienced fitful trade over the past several weeks, but has managed to drift higher within range of its 200-day moving average at $49.45 a barrel, as investors have grappled with the Organization of the Petroleum Exporting Countries’s attempts to cap global output, along with other major producers. U.S. shale producers have been the biggest headwind to OPEC’s efforts to stem output. Meanwhile, an agreement led by the cartel and major crude producers is set to expire at the end of the first quarter in 2018.

“I think we are going to be relatively range-bound unless we see some kind of weather or political event,” said Tariq Zahir, managing member at commodity-trading advisor Tyche Capital Advisors.

Zahir said oil futures would be sensitive to any news, given its recent uptrend. He said U.S. traded oil has the potential to hit $51, if any supply disruptions or bullish news emerges.

Late Wednesday, the EIA reported a 1.5 million barrel drop in crude inventories last week, below analysts’ expectations. However, “a strong increase in demand was enough to appease the bullish investors,” said ANZ Bank. Refiners’ capacity utilization jumped to 95.4% last week, the government also said.

Data from the American Petroleum Institute out on Tuesday showed stockpiles unexpectedly increased last week.

The mixed signals on U.S. supply come as market players globally await signs that production caps led by OPEC and Russia are making notable dents into still-historically high global supplies. ANZ sees tightness coming in the fourth quarter, pushing oil prices into the high-$50s.

Among refined products, September gasoline RBU7, +0.50%  was up 0.2% at $1.649 a gallon.

Meanwhile, natural gas for September NGU17, -0.25%  climbed 0.4% to $2.821 per million British thermal units.

–Biman Mukherji contributed to this article

 

 

http://www.marketwatch.com/story/oil-prices-pull-back-but-investors-stay-bullish-on-us-data-2017-08-03

Oil prices flutter as U.S. supply data loom

Oil prices flutter as U.S. supply data loom

Published: Aug 2, 2017 8:03 a.m. ET

AFP/Getty Images

 

Crude oil futures swung between small gains and losses on Wednesday ahead of a closely watched report on U.S. oil supply that could add to recent fears that measures by major oil producers to balance the market aren’t working.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, -0.81%  were down 11 cents, or 0.2%, at $49.04 a barrel, but had both traded slightly higher and significantly lower earlier in the session.

October Brent crude LCOV7, -0.64%  on London’s ICE Futures exchange shed 1 cent to $51.77.

The market had taken a glass-half-full perspective last week amid pronouncements of major producers sticking with ongoing production cuts and Saudi Arabia planning to reduce oil exports this month.

But the cautious view returned Tuesday as both Reuters and Bloomberg reported that output among members of the Organization of the Petroleum Exporting Countries jumped in July, partly due to a surge in production in Libya. If correct, that goes against the view that the group is adhering to output caps. The next OPEC monthly oil report is due on Thursday.

After oil prices settled on Tuesday, the American Petroleum Institute said U.S. crude inventories rose 1.8 million barrels last week, going against forecasts of a decline. Traders are now waiting to see if the official data from the Energy Information Administration due at 10:30 a.m. Eastern Time will show the same trend. Reports last week showed a drop in U.S. inventories, spurring hopes the global supply glut is declining.

“Last week’s substantial decline in inventories—albeit a smaller one than API reported a day earlier—came as reports suggested that Saudi Arabia was cutting exports to the U.S. with the end goal appearing to be to cut inventories and grab markets attention,” said Craig Erlam, senior market analyst at Oanda, in a note.

“While this clearly had the desired impact initially, this week’s numbers—should EIA report something in line with API—could raise questions about the effectiveness of the measures or whether they’re being sustained,” he added.

OPEC is scheduled to hold a two-day meeting next week to review members’ commitments to the production caps they have agreed to. Several smaller producers, such as Ecuador, have already voiced their dissension, saying they don’t have economic prowess to keep sidelining production amid low prices.

Among refined products, reformulated gasoline blendstock RBU7, -1.85%  eased 0.1% to $1.66 per gallon, but August ICE gas oil rose 0.8% to $487.50 per metric ton.

Natural gas for September NGU17, +0.00%  fell 1% to $2.79 per million British thermal units.

 

http://www.marketwatch.com/story/oil-extends-losses-as-oversupply-fears-return-us-data-loom-2017-08-02

European oil majors seek to harness U.S. offshore wind

AUGUST 1, 2017 / 4:34 AM / 3 HOURS AGO

European oil majors seek to harness U.S. offshore wind

LONDON (Reuters) – Some European oil majors have made inroads into the emerging U.S. offshore wind energy market, aiming to leverage their experience of deepwater development and the crowded offshore wind arena at home.

Late entrants to the offshore wind game in Europe, which began with a project off Denmark 25 years ago and is now approaching maturity, they are looking across the Atlantic at what they view as a huge and potentially lucrative new market.

Norway’s Statoil (STL.OL) has won a license to develop a wind farm of the New York coast, is marketing its new floating turbine to California and Hawaii and is retraining some oil and gas staff to work in its wind division.

Royal Dutch Shell bid for a lease offshore North Carolina earlier this year while Denmark’s DONG Energy, a wind energy pioneer which agreed to sell its oil and gas business in May, is in a Massachusetts-based offshore wind consortium, holds a lease off the New Jersey coast and has opened an office in Boston.

Offshore wind generation began in the United States late last year, ironically after the election of President Donald Trump. He is skeptical about climate change, complains about subsidies for renewable energy and battled against an offshore wind farm near his Scottish golf resort.

However, a string of federal seabed leases were awarded before Trump took office and more are planned. The investment needed to get projects going is one of the biggest obstacles.

“Undeniably, offshore wind is a big boys’ game because it requires large amounts of capital because scale is such an important cost driver,” said Samuel Leupold chief executive of DONG Energy’s offshore wind business.

While DONG has shifted decisively toward renewables, Statoil and Shell are still firmly rooted in fossil fuels and other major European oil companies, in common with their U.S. counterparts, have so far steered clear of U.S. offshore wind.

Costs in Europe have fallen to a level that enabled DONG to place a zero subsidy bid earlier this year, but offshore wind farms are still multi-billion dollar projects. A push into deeper U.S. waters and the bigger turbines needed to compete without subsidies will keep price tags high.

Early Days

Trump signed an executive order in March expected to roll back his predecessor Barack Obama’s plan requiring states to slash carbon emissions from power plants. There is also no carbon price mechanism across the United States like those in Europe and elsewhere, although there are two regional ones.

U.S. oil companies have some investments in solar and onshore wind, but when it comes to offshore wind, many say they are waiting for a time when government support is not needed.

“Chevron (CVX.N) supports renewables that are scalable and can compete without subsidies,” said Morgan Krinklaw, a spokesman for Chevron, which owns an onshore wind farm.

A report from analysts at Lazard in December pegged the cost of U.S. offshore wind at $118 MWh, around twice as much as onshore wind or combined-cycle gas turbines.

Asked to comment on that figure, Statoil, which is building its first floating wind turbine park off the Scottish coast, said costs were coming down and it was working to drive them down further, partly by redeploying existing staff.

The company has about 1,000 employees in the U.S. oil industry, said Stephen Bull, senior vice president of the company’s wind business. “There’s scope for us to plug into our existing oil and gas supply chain,” he added, referring to existing contracts with equipment and service suppliers.

Statoil spokeswoman Elin Isaksen said she did not expect any of its offshore wind projects in the U.S. to have begun construction by 2019 and that it was too early to quote numbers for the New York project, while acknowledging there was, as yet, no supply chain.

“We expect to see – and will help – the supply chain evolve rapidly in step with the broader industry as offshore wind takes hold in the U.S. in the coming years,” she said.

In Virginia, where Spanish utility Iberdrola’s (IBE.MC) Avangrid has secured an offshore wind license, a rich marine engineering heritage is expected to help local companies gain work. Smaller European oil and gas firms are also gaining work. JDR Cable Systems, a British company that has traditionally supplied subsea power lines to oil and gas platforms, earlier this year won a $275 million contract to provide electric cables for the largest U.S. offshore wind farm off the Maryland coast. “We are well placed to develop business in the U.S. because of the existing relationships we have in Europe,” said John Price, global sales director for renewables at JDR.

Massachusetts, where DONG has secured a seabed license, last year issued a law requiring its utilities to buy up to 1.6 GW of offshore wind power by June 2027, with a tender to be held later this year.

DONG’s North America wind power president Thomas Bostrom said it would bid in the Massachusetts power purchase tender in December and would not comment on costs ahead of that. He too, emphasized his company was playing the long game.

“As excited as we are for offshore wind in the U.S., we are still in the early days of the industry,” Bostrom said.

Additional reporting by Ernest Scheyder in Houston and Nichola Groom in Los Angeles; editing by Philippa Fletcher

 

 

http://www.reuters.com/article/us-oil-majors-offshore-wind-idUSKBN1AH3R2

Oil pauses ahead of U.S. rig data, but 7% weekly gain in sight

Oil pauses ahead of U.S. rig data, but 7% weekly gain in sight

Published: July 28, 2017 5:44 a.m. ET

Baker Hughes rig count on deck

Getty Images

 

Oil futures edged slightly lower Friday as investors widely moved to the sidelines in commodities and equities after this week’s strength.

Light, sweet crude futures for delivery in September CLU7, +0.41%  were down 3 cents at $49.01 a barrel on the New York Mercantile Exchange. But September Brent crude LCOU7, +0.76%  on London’s ICE Futures exchange turned up 22 cents, or 0.4%, to $51.73 a barrel.

Reformulated gasoline RBU7, +0.66%  was down 0.1% to $1.644 but ICE gasoil rose $1.50, or 0.3%, to $476.75 per metric ton.

Crude has risen every day this week, gaining 7% in the process to hit two-month highs amid a raft of positive data points and a renewed commitment from the Organization of the Petroleum Exporting Countries to rein in production and exports.

Analysts have said Friday’s weekly report on U.S. oil-rig activity will be an important factor in determining how producers there are coping with prolonged soft prices. After strong growth in the first half of this year, increases have largely stopped this month.

“What we will be looking for is if the growth has plateaued,” said Gao Jian, an energy analyst at Shandong-based SCI International.

More market watchers are getting upbeat about the market, saying falling U.S. and European inventories along with still-robust demand from Asia means oil prices should hold up near-term.

London-based Energy Aspects noted Thursday that in Europe, daily crude demand rebounded strongly in May as “solid vehicle sales, a stronger euro, low retail prices and a booming construction sector (including roadbuilding) mean European demand growth will be well-supported,” the firm said.

 

http://www.marketwatch.com/story/oil-pauses-ahead-of-us-rig-data-after-logging-nearly-7-gain-for-the-week-2017-07-28