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)
According to Moody’s agency, new US sanctions create the risk of weakening the position of Gazprom in talks with Ukraine on tariffs for gas transit. Source: Sputnik
German energy giant EON, the Essen-based group, a reported bottom-line net profit of 356 million euros ($418 million) in the period from April to June, compared with a net loss of 54 million in the second quarter of 2016. Source: France24
China has threatened to attack Vietnamese bases over gas drilling in the disputed waters of the South China Sea, according to diplomatic sources in Hanoi and the Asian oil industry. Source The Sidney Morning Herald
Turkey wants Israel to use its clout to push Cyprus into allowing a pipeline to pass through its waters so the region’s natural gas can be exported to Europe. Source: Bloomberg
The Iranian government is planning to announce tenders for the exploration of 14 oil-and-gas blocks over the next three months, a top executive at Iran’s NIOC state oil company has said.
Last week, France’s Total became the first Western company to sign a development agreement with Iran since the partial lifting of sanctions in exchange for restrictions on Iran’s nuclear program. Source: RadioFreeEurope
France is giving Nicosia full support in drilling for natural gas and oil in Cyprus’ exclusive economic zone (EEZ), and French President Emmanuel Macron has assured Greek Prime Minister Alexis Tsipras of that, a Real.gr report said. Source: Greek Reporter
Royal Dutch Shell PLC sold its stake in a controversial Irish gas field for up to $1.23 billion to one of Canada’s biggest pension funds in a deal that will result in accounting losses of as much as $750 million for the Anglo-Dutch energy company.Source: The Wall Street Journal
Japanese Prime Minister Shinzo Abe and his Danish counterpart Lars Loekke Rasmussen have agreed that the two countries will cooperate in the Arctic, including on the development of resources in Greenland. Denmark’s autonomous territory, is said to have natural resources such as oil.Source:Nikkei Asian Review
Turkey warned Greek Cypriots on Friday not to make a grab for energy reserves around the divided island and President Tayyip Erdogan told oil companies to be careful they did not lose a “friend” by joining in. Source Reuters
Royal Dutch Shell Plc plans to spend as much as $1 billion a year on its New Energies division as the transition toward renewable power and electric cars accelerates.Source: Bloomberg
Alexey Miller, Chairman of the Gazprom Management Committee, and Wang Yilin, Chairman of the Board of Directors of CNPC, has signed in Moscow a Supplementary Agreement to the Sales and Purchase Agreement for Russian gas to be supplied via the eastern route, which had been inked by the parties on 21 May 2014. According to the Supplementary Agreement, gas supplies to China via the Power of Siberia gas pipeline will commence in December 2019.Source: Energy Global World Pipelines
Hungary signed a deal with Russia’s Gazprom (MM:GAZP) to link the country with the Turkish Stream pipeline by end-2019 on Wednesday, a day ahead of President Donald Trump’s trip to Poland, where he is expected to promote U.S. LNG exports. Source Reuters
French energy giant Total will finally sign its multi-billion-dollar agreement to develop an Iranian offshore gas field on Monday, the oil ministry said, in the biggest foreign deal since sanctions were eased last year. Source France24
Freight rates for very large crude carriers (VLCCs) could creep higher as more ships are chartered for floating storage and crude oil shipments increase ahead of the northern winter, brokers said. Source Hellenicshippingnews
Bahrain’s foreign minister accused Qatar of creating a military escalation in a dispute with regional powers, in an apparent reference to Doha’s decision to let more Turkish troops enter its territory. Bahrain, alongside Saudi Arabia, the UAE and Egypt issued an ultimatum, including demands that Qatar shut down a Turkish military base in Doha. Source Reuters
Donald Trump will tout surging U.S. exports of oil and natural gas during a week of events aimed at highlighting the country’s growing energy dominance. The president also plans to emphasize that after decades of relying on foreign energy supplies, the U.S. is on the brink of becoming a net exporter of oil, gas, coal and other energy resources. Source Bloomberg
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