Europe is planning on recolonizing Libya, and so it will send in armed forces in the coming months to restore order and stem the flow of migrants coming from Africa. If this expedition army succeeds in securing parts of the country and restoring law and order, Italian and German engineers from ENI and Wintershall will follow suit to help resume the country’s oil production, which will add 1.3 million barrels per day (Libya produced 1.7 million barrels per day before Muammar Gaddafi was toppled in 2011) to the world oil glut . Continue reading
Oil and Gas
Last month we saw the iPath S&P GSCI Crude Oil ETN (USA) making an unusual dive, doing completely the opposite of what it was designed to do. Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN) are mainly designed to follow an index. To explain the basic principles of an ETF real quick, we take the AEX index as an example. The AEX is formed out of 25 funds each with their own weighing. The ETF issuer buys the shares of the companies according to their weighing in the AEX index. One is able to track the index pretty accurately this way. The ETF issuer buys it on a big scale and sells shares of their basket of AEX shares. The share that they are selling are called ETFs. The difference between an ETF and an ETN is the fact that the ETN is a note. The problem is the third party risk, with an ETN you’re facing the risk of the issuing party going bankrupt. If they do, the chances are that you will lose your money. Continue reading
World oil consumption is more than 90 million barrels a day. Between 2009 and 2014 oil was traded for about 110 dollars a barrel; now oil is changing hands for 32 dollars a barrel. Roughly a 7-billion-dollar cash flow a day is vanishing from the global market. Norway’s sovereign wealth fund that has accumulated a stake of 4.5 billion dollars in Apple over the past years1, will turn from an Apple buyer into an Apple seller.
The China Development Bank (a Chinese policy bank) has poured nearly 50 billion dollars into Venezuela in return for oil, with the country now collapsing under the Chinese debt, having no other choice but to drill for more oil. These are just some of the challenges the world is facing in 2016 as oil prices are heading towards 20 dollars a barrel.
Speculators and manipulators were able to manipulate the oil price to more than 120 dollars a barrel, with the production cost being roughly between 20 and 80 dollars. With a huge profit margin the world was digging for more and more liquid gold. Continue reading
Oil price has collapsed and is not going to rebound quickly. But not all the oil-consumer countries benefit from low prices in the same way. And not all oil-producer countries suffer equally.
Oil prices change as the values of currencies do. Purchase or sale contracts for oil are usually long term ones, the price of oil in such contracts does not change very frequently. Fluctuating exchange rates of currencies are still enormously important for the economies. Oil for $40 per barrel does not mean that this barrel is also as cheap in all countries as consumers have to buy dollars in order to purchase a barrel. Or producers sell their barrels for dollars and then exchange these dollars for their own currency. The domestic price based on the exchange rate is not always stable. Continue reading
Ukraine does not plan any additional purchases of gas from Russia by the end of this year. The reversed flow from the EU and the falling consumption have allowed gas storage tanks to be filled up to 53 percent, from about 46 percent last year, according to Gas Infrastructure Europe data. Russia is losing its blackmailing-tool on Ukraine.
Source: Ukrtransgaz statictics
After many years of prosperity, the tough time has come for the US shale industry. Dramatic US oil production decline is inevitable and many shale companies face bankruptcy. Their assets can end up to larger producers, reinforcing market concentration. US energy independence can only be saved by government intervention. US government will remove exports limitation and FED September rate hike suspension is related to the unsustainable debt levels US oil industry is keeping afloat. But that is simply not enough to prevent a collapse of the US oil industry. From our research we learn that cost per barrel declined slightly but decreasing production cost is not enough to compensate for lower oil price. US oil production already declined 400K barrels per day from its April peak. We estimate an other 2 to 3 Million barrels can be wiped out the coming year.
A few months ago, when the oil price rise again before the June crush, the US oil industry seemed to be able to go through the difficult times. „It is too late for OPEC to stop the shale revolution”1, „OPEC can’t stop the shale industry”2 – roared the headlines. However, after last publications of Energy Information Administration (EIA) the OPEC and Saudi Arabia are the only one to triumph. Continue reading
CRUDE OIL (WTI)
CRUDE OIL (BRENT)
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Shell, one of the world’s largest oil companies, has warned that the low price of oil could reduce the value of its assets by up to $22bn (£17.9bn). It said it expects oil to change hands at $60 per barrel in the long term and to be priced at $35 this year and $40 next year. Source BBC
The German government has “noted with regret” a U.S. proposal to expand sanctions over the Nord Stream 2 gas pipeline between Russia and Germany.
“New sanctions would constitute a serious interference in European energy security and EU sovereignty,” a statement by the Foreign Ministry said on June 1 Source Radio Free Europe
Italian Economy Minister Roberto Gualtieri said on Friday that the country’s economic contraction this year may be slightly worse than the 8% decline currently forecast by the government. Source Reuters
U.S. crude oil stockpiles rose unexpectedly last week to an all-time high as refiners boosted imports, particularly from Saudi Arabia, while exports dropped to lows not seen since November. Source Reuters
The British energy giant said oil prices had dropped “well below the level” that the company needed “to turn a profit.” BP’s chief executive said the company had already planned to become “leaner.” Source BP
China’s oil demand has recovered to more than 90% of the levels seen before the coronavirus pandemic struck early this year, a surprisingly robust rebound that could be mirrored elsewhere in the third quarter as more countries emerge from lockdown. Source Reuters
Sections of 24 blocks outlined in the Turkish Government Gazette on May 30 stemming from the contentious maritime borders agreement signed last November between Turkey and the Tripoli-based government in Libya come within or beyond 6 nautical miles of the coasts of eastern Crete, Kasos, Karpathos and Rhodes, and overlap the Greek continental shelf. Source Ekathimerini
- The International Energy Agency said on Wednesday that global energy investment will fall by almost $400 billion in 2020 compared to last year due to the coronavirus pandemic.
- Before the pandemic, the global energy investment was on track for 2% growth, but now it fall by 20%.
- IEA is also forecasting that oil demand could drop by 9 million barrels per day by 2025 .Source Business insider
Russian gas giant Gazprom decreased its supplies to major clients Germany and Turkey in March, the Interfax news agency reported on Tuesday, citing Russian customs data.
Supplies to Germany fell by 45% year-on-year to 2.67 billion cubic metres in March, the news agency added.
Gazprom’s March exports to Austria and Belarus were also down – by 25% and 8%, respectively, while supplies to Italy and Hungary rose by 19%, Interfax said.. Source Reuters
Russian Foreign Minister Sergei Lavrov said on Tuesday the Nord Stream-2 gas pipeline project would be completed despite experiencing difficulties, the Interfax news agency reported. Source Reuters
A Russian pipe-laying vessel Academic Cherskiy which Moscow can use to finish laying pipes for the Nord Stream 2 gas project, has moored near the German logistics hub in Mukran, Refinitiv Eikon tracking data showed on Monday. Source Offshore Engineer
Russian gas giant Gazprom has begun a feasibility study for its Power of Siberia-2 pipeline project that would pump up to 50 billion cubic metres of natural gas to China per year via Mongolia, the Russian gas producer said. Source Reuters
The US Commodity Futures Trading Commission urged market participants to prepare for negative oil prices again when the West Texas Intermediate futures contract for June expires next Tuesday. Source Market Insider
The decision also allows companies to terminate employee contracts after six months of the coronavirus pandemic period. Saudi Arabia has issued a ministerial decision allowing private sector companies to cut salaries by up to 40 per cent, according to media reports, citing daily newspaper Asharq al-Awsat. The directive also allows the possible termination of contracts in view of the economic challenges in the aftermath of the Covid-19 spread. Source Gulf Business
An international agreement to build the EastMed gas pipeline, which will carry natural gas from the East Mediterranean to Europe through Greece, was submitted to parliament on Tuesday for ratification. Source Ekathemerini
Saudi Arabia dollar bonds pressured after Moody’s downgrade. Saudi Arabian government dollar bonds posted losses on Monday after the finance minister said Riyadh would have to take painful measures to deal with the impact of the coronavirus and Moody’s downgraded the country’s ratings outlook. Source Al Jazeera
The Libyan military on Monday conducted strikes on seven oil tankers belonging to militias loyal to renegade general Khalifa Haftar. The tankers were hit in an airstrike in the Al Qaryat region, 400 kilometers (248 miles) south of the capital Tripoli. The tankers were en route to the strategic city of Tarhuna to reach Haftar’s militia. Source Anadolu Agency
A special pipe-laying vessel that could be used by Russia to complete construction of the Nord Stream 2 gas pipeline to Germany has arrived in the Baltic Sea, a Reuters witness said on Sunday. Source Reuters
Ryanair has said it could take at least two years for passenger demand to return to normal and this could result in up to 3,000 jobs losses, mainly among pilots and cabin crew. Source RTE
The surprise move is the latest illustration of how the global spread of the deadly disease is causing the biggest upheaval for generations. Energy consumption is undergoing a historic plunge, as is GDP growth in many countries. The global economy that emerges from the other side of the crisis may look very different, with lasting changes to patterns of fuel demand. Source The Star
ExxonMobil posted its first quarterly loss following its 1999 merger and Chevron pledged to further slash spending on Friday as the two largest US oil companies grapple with the crash in crude. Source CNN
The largest oil producer in North Dakota has halted most of its production in the U.S. state and notified some customers it would not supply crude after prices dived into negative territory this week, people familiar with the matter said. Source Channel News Asia
Saudi Arabia could borrow around $26 billion more this year and will draw down up to $32 billion from its reserves to finance a government deficit caused by lower oil prices and the coronavirus crisis, the Saudi finance minister said. Source Reuters
The soon-to-expire May contract for the U.S. oil benchmark marked history on Monday, finishing deeply in negative territory and implying that investors will need to pay buyers to take delivery of crude oil, reflecting a growing glut of crude and a lack of storage space. Source Market Watch
