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)
Libya is pumping the most oil in four years after a deal with Wintershall enabled at least two fields to resume production, adding to the challenge that Opec and allied producers face in trying to pare global crude inventories. The North African country is currently producing about 900,000 bpd Source Gulf Times
According to Reuters, Japan-based JERA, the world’s largest buyer of LNG, is already using the crisis to push for less rigid contracts with Qatar, and allowing more imports from the US. Source GulfNews
In an overwhelming vote of 97-2, the U.S. Senate approved a new round of sanctions on Russia in response to the nation’s likely interference in the 2016 U.S. presidential election, as well as its involvement in the Syrian civil war. The deal also prevents President Trump from loosening or rolling back restrictions on Russia without Congress’s approval. Source The Atlantic
The Qatar crisis is reverberating in Libya, inflaming political divisions in Libya and dragging Glencore into a dispute over crude sales. The row involves competing administrations of the National Oil Corp. that are vying to control crude exports from the OPEC member. In eastern Libya, the military is backed by Saudi Arabia, the United Arab Emirates and Egypt. Source Libya
Libya’s National Oil Corporation (NOC) has agreed with the German oil firm, Wintershall, on an interim deal to resume oil production, a step forward to resolve a contract dispute that has been blocking almost 160.000 barrels per day (bpd) of oil output, according to a statement by the NOC. Source The Libya Observer
The People’s Republic of China and Venezuela will invest $ 4,250 million in infrastructure and other developments in the oil field , including two projects for the extraction of heavy crude oil in the Orinoco Oil Belt . Planning Minister Ricardo Menendez said a refinery in the Chinese province of Canton will be built to transform 400,000 barrels of oil per day. Source Globovision
A group of U.S.-listed oil companies wrote down their proved reserves in the Canadian oilsands by nearly eight billion barrels in 2016, as energy firms continue to defer investments in major heavy oil projects. Source Financial Post
Sales have plunged in Denmark because of the 2015 announcement that tax breaks for electric cars would be phased out. With those incentives going away, Danes are suddenly much less interested in green vehicles. For example, Tesla sold 2,738 units in Denmark in 2015 and just 176 in 2016. Source The drive
As Brent crude oil closed on Wednesday at its lowest level since before OPEC and other nations agreed to cut output, someone bet half a million dollars on prices surging to $80 by year-end.Options to buy 10 million barrels of Brent crude for $80 a barrel in December traded Wednesday, far exceeding the next-largest contracts, according to exchange data compiled by Bloomberg.“That is clearly a geopolitical insurance premium,” Source Rigzone
The world’s biggest liquefied natural gas (LNG) exporter Qatar is facing supply problems with the Saudi-led alliance isolating the country’s trade. This may help Russia on the European gas market.
Qatar’s tanker fleet is barred from using regional ports and anchorages, posing a threat to the country’s LNG supplies. Source RT
Qatar’s liquefied natural gas (LNG) and oil exports will not be affected unless the crisis between Qatar and some Gulf states escalates to pre-war levels, Luiz Pinto, a joint visiting fellow at the Brookings Doha Center and Qatar University told Anadolu Agency (AA) on Wednesday. Source nadolu Agency
Hundreds of petrol stations around France and particularly in the Paris region are reportedly running out of fuel as a strike by fuel tanker drivers enters a fifth day. Drivers are being urged not to panic however. Source The Local
U.S. President Donald Trump’s White House wants to sell half of the nation’s emergency oil stockpile and open the Alaska National Wildlife Refuge to drilling as part of plans to balance the budget over the next 10 years. The White House budget, is meant as a proposal and may not take effect in its current form. But it reveals the administration’s policy hopes, which include ramping up American energy output. Source Reuters
Iraq backed a proposal from Saudi Arabia and Russia to extend output cuts for nine months, removing one of the last remaining obstacles to an agreement at the OPEC meeting in Vienna this week. Source Bloomberg
Russia is in talks with European countries to determine the entry point of the second line of the Turkish Stream gas pipeline flow, Russian Prime Minister Dmitry Medvedev told journalists. Source Tass
A proposal to extend an OPEC and non-OPEC supply cut for nine months is a positive idea, sources familiar with Iranian thinking said, suggesting OPEC’s third-largest producer is likely to go along with such a plan if there is a consensus. Source Reuters
Saudi Arabia and Russia, the world’s top two oil producers, agreed on Monday on the need to extend output cuts for a further nine months until March 2018 to rein in a global crude glut, pushing up prices. Source RigZone
A checkpoint has been reached and celebrated by construction personnel on the Power of Siberia pipeline project, with a cross-border section opened on the Russian-Chinese border. An inauguration ceremony for a temporary two-way checkpoint on the border has taken place in the Blagoveshchensky district of the Amur region. Source Become World Pipelines
“Implementation of the project is on schedule and our Turkish and European customers will from the end of 2019 have a reliable new route for importing Russian gas”. Russian gas giant Gazprom said Sunday it had started construction of a gas pipeline under the Black Sea to Turkey that also aims to provide gas to the European Union. Source PPPFocus
The Organization of Petroleum Exporting Countries deepened production cuts in April with laggards improving compliance with its historic deal to limit output. Overall, output fell by 40,000 barrels a day from a month earlier to 31.895 million barrels, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Iraq, the second-biggest producer in the group, and Venezuela came closer to their targets. Source Bloomberg
Nicosia has reacted to objections from Turkey to planned hydrocarbon exploration in block 6, within the island’s exclusive economic zone (EEZ), that was recently licensed to a consortium of Italy’s Eni and France’s Total. Source Ekathimerini
The $1.4bn (£1.1bn) profit, on the replacement cost measure, compared with a $485m loss a year earlier. Oil prices have been about 35% higher in the first three months of 2017 compared with a year earlier, boosting revenue from BP’s core oil and gas production division. BP chief executive Bob Dudley said: “Our year has started well.” Source BBC
Saudi Arabia, the world’s largest crude exporter, cut pricing for June oil exports to Asia as it fights to defend sales in its biggest regional market. The kingdom raised pricing to all other regions. Source Bloomberg
U.S. gasoline demand fell 2.4 percent in February from a year earlier, the second straight monthly decline, according to data released on Friday by the U.S. Energy Information Administration that suggested the market may have trouble repeating last year’s record volumes. Gasoline demand fell 218,000 barrels per day to 8.988 million bpd in February, according to the EIA’s petroleum supply monthly report. Source Reuters