Today's ENERGY News - April 15, 2015

Top Stories 

OPEC trims 2016 oil demand growth, says its output rises slightly

OPEC on Wednesday predicted global demand for its crude oil will be less than previously thought in 2016 as consumption slows down, increasing the excess supply on the market this year. The monthly report from the Organization of the Petroleum Exporting Countries lowered its forecast of world oil demand growth by 50,000 barrels per day (bpd) and said further downward revisions could follow. OPEC pumped 32.25 million bpd in March, the group said citing secondary sources, up about 15,000 bpd from February. The report points to a 790,000-bpd excess supply in 2016 if the group keeps pumping at March’s rate, up from 760,000 bpd implied in last month’s report. (Reporting by Alex Lawler; Editing by Keith Weir)

 www.reuters.com

Oil Can Top $50 a Barrel With Freeze Deal, Bank of America Says

Oil prices can climb above $50 a barrel if an output freeze deal is struck in Doha this weekend, according to Bank of America Corp. “A flat output profile for OPEC (excluding Iran) and Russia would tighten global balances by almost 0.5 million barrels a day in the second half relative to our expectations and push the oil market into a deficit in the third quarter,” the U.S. bank wrote in a note on Wednesday. That would “push prices above $50 near term,” it said. […]

  www.bloomberg.com

OPEC demand forecast drags oil prices lower

A three-day rally for crude oil prices came to an end Wednesday after OPEC said in its monthly report for April that demand was expected to falter. The Organization of Petroleum Exporting Countries said its forecast for growth in world oil demand in 2016 was lowered by 50,000 barrels per day to 1.2 million bpd. That’s lower than the estimated growth for 2015 by more than 20 percent. In its macroeconomic forecast, OPEC said the global economy was expected to grow from 2.9 percent last year to 3.1 percent in 2016. “While many soft spots in the global economy remain, recent data is pointing at some improving momentum in the […]

 www.upi.com 

Non-OPEC oil supply to fall 730,000 b/d in 2016

OPEC warns oversupply persists amid record inventories OPEC believes crude supply outside the producer group is set to fall more than expected, with weaker Chinese, Colombian, UK and US oil output eclipsing better outlooks for Canada, Norway, Oman and Russia. The outlook for non-OPEC supply has been hit largely by lower expectations for crude oil production from China’s onshore mature fields. OPEC also cited the postponement of major new projects due to reduced cash flow as the impact of lower prices takes its toll. Article Continues below… Oilgram News brings you fast-breaking global petroleum and gas news on and including: Industry players, upstream and downstream markets, refineries, midstream transportation and financial reports Supply and demand trends, government actions, exploration and technology Daily futures summary Weekly API statistics, and much more The […]

 www.platts.com

Little Impact Seen on Oil Supplies If Doha Deal Struck, IEA Says

An agreement by producing countries to freeze crude production at the Doha meeting on Sunday would have a limited impact on oil flows, the International Energy Agency said Thursday. OPEC and non-OPEC countries — including Russia and Saudi Arabia, the world’s two biggest crude producers — will meet in Doha on April 17 in a bid to freeze production at January levels. A deal would represent the first attempt at coordinating oil production between the Organization of Petroleum Exporting Countries and producers outside the group in 15 years. Yet the IEA sees scant impact on physical oil flows if a deal is struck. “If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited,” the IEA said in its monthly report. Part of the reason is that Saudi Arabia and Russia are “already producing at or near record rates,” […]

 www.bloomberg.com

Huge Oil Supertanker Lines Forming “World’s Biggest Traffic Jam”

What a Mess

“It may be the world’s biggest traffic jam.” Last week we revealed what we thought was a “ shocking photo ” of nearly 30 oil tankers caught in a traffic jam off the Iraqi coast, an indication of just how much excess oil is currently parked offshore. To be sure, the record offshore storage is a problem because with the front-end contango collapsing, DB warned just several weeks ago when comparing the current level of floating storage (157.3 million barrels) versus that in early February (126.6 million barrels), that there may be an additional 31 million barrels of inventory to be drawn down between now and the next inventory trough over the next several months. It calculated that “depending on the duration of drawdown (three months or six months) this could mean anywhere from 165-330 kb/d of incremental supply.” But the photo above, meant to do DB’s thesis justice, […]

 peakoil.com

Traders Look for Lower Oil Prices

 

Oil traders lose faith in

 recent rally, position

 for lower prices

Oil traders have ramped up their bets in the futures and options market that April's rally will run out of steam, as the outlook for demand weakens and with few clear signs of an end in sight to a supply glut.

While prices for front-month delivery Brent crude futures rallied by as much as 20 percent this month, sparking hopes of an end to a rout that had previously pulled the market down by as much as 70 percent since 2014, data for contracts for later delivery looks much weaker.

The spread between Brent for delivery in December 2017 and those for delivery next month has halved since March 1 to just $4.40 per barrel, and in some cases even wiping out the contango, a price curve where contracts are more expensive going forward than for prompt delivery

  

U.S. bank Morgan Stanley said in a note to clients that it was "bearish oil prices" into the second half of the year and that "given producer hedging appetite into 2017 and the storage situation (full tanks), which requires at least some contango."

With no end in sight to a production glut and also increasing worries on the demand side, with the Organization of the Petroleum Exporting Countries (OPEC) cutting its consumption forecast this week, traders are positioning themselves for further price falls.

In the options arena, the number of put options tied to the July $30 strike price has increased by 150 percent, or 4,700 contracts, since mid-March, indicating a swell in bearish sentiment tied to that time frame.

Put options give a trader the opportunity to sell a product at a certain price, so a July put at $30 per barrel would make money if prices, currently around $43.50 per barrel, hit that level by summer.

Reuters

Today's ENERGY News - April 14, 2016

Top Stories 

IMF Cuts 2016 Global Economic Growth Outlook to 3.2%

The world economy is increasingly at risk of stalling, the International Monetary Fund warned Tuesday as it once again cut its forecast for global growth prospects. The IMF said it was forced to downgrade its growth forecast for this year to 3.2%, down by 0.2 percentage point from its projection issued in January. China’s slowdown and weak commodity prices are taking a deeper toll on emerging markets than expected and rich countries are still struggling to escape the legacies of the financial crisis, the fund said. The downward revision is the fourth straight cut in a year, putting world economic growth just a hair over last year’s 3.1% and only marginally above the 3% rate the IMF has previously considered a technical recession globally. “Consecutive downgrades of future economic prospects carry the risk of […]

 www.wsj.com

Venezuela says U.S. seeking to scuttle OPEC, non-OPEC deal

The United States is seeking to block a deal between OPEC and non-OPEC nations to stabilize oil markets, Venezuelan President Nicolas Maduro said on Tuesday, accusing Washington of applying “war-like” pressure to prevent an agreement. “You can’t imagine all the pressure that is coming from Washington to ensure the failure of the efforts we have made during the last year to create a common strategy among OPEC and non-OPEC producers to stabilize the market and prices,” Maduro said during his weekly televised broadcast. “These are almost war-like pressure on governments, on heads of state,” he said, adding that U.S. policy makers have a “fatal obsession” with Russia, OPEC and Venezuela’s leftist government. Maduro’s government said last week that at least 18 countries have confirmed they will attend […]

 www.reuters.com

Schlumberger to Pare Venezuela Services on Lack of Payments

Schlumberger Ltd. will reduce activity in Venezuela after the world’s largest oil services provider failed to collect enough payments from the national oil company. The reduction will take place this month in close coordination with all customers in Venezuela to continue servicing those with available cash flow, the Houston- and Paris-based contractor said in a statement Tuesday. Venezuela, which holds the biggest oil reserves of any country, has been battered by the collapse of prices as most of the government’s revenue comes from petrodollars. In October, Schlumberger was said to be shifting some of its workers from Brazil to Venezuela, reinforcing the contractor’s commitment at the time as others in the industry pulled back. By late January, Schlumberger said it had entered into a deal with Petroleos de Venezuela SA during the fourth quarter to receive certain fixed assets in lieu of payment of about $200 million of accounts […]

  www.bloomberg.com

Cheapest Gasoline in 12 Years a Boon for Summer Motorists

Americans driving on their summer vacations will enjoy the cheapest gasoline in 12 years as prices stall just above $2 a gallon. Drivers will pay 59 cents a gallon less at the pump this summer than a year ago and $1.55 below 2014, when oil prices peaked above $100 a barrel, the Energy Information Administration said Tuesday. Gasoline demand this summer will increase 1.4 percent from last year to a record. “Low pump prices and continuing growth in employment contribute to more driving, resulting in a forecast of record-high gasoline demand this summer,” EIA Administrator Adam Sieminski said in an e-mailed statement. “For all of 2016, the average household will save about $350 on gasoline purchases compared to last year.” Americans might save as much as $15 billion on gasoline during June, July and August, compared to the same period last year, which would work out to about $70 […]

 www.bloomberg.com

China export surge points to improving economic outlook

China reported stronger than expected trade data on Wednesday, the latest sign of a tentative revival in fortunes that paves the way for Friday’s release of first-quarter economic growth.  Exports surged 18.7 per cent in renminbi terms in March over the same month last year, after declines in both January and February. Imports also stabilised, dropping just 1.7 per cent compared with an 8 per cent fall in February.  In dollar terms, exports rose 11.5 per cent while imports fell 7.6 per cent for the period, reflecting the renminbi’s recent rise. The currency has gained 1.9 per cent against the dollar over the past two months.  China’s export sector has been buffeted by the slowdown in global trade, the dollar value of which has been shrinking since 2012 largely because of the slump in international commodities prices.  The International Monetary Fund this week warned that the world risked a “synchronised slowdown” but highlighted China as a rare bright spot among major economies. Chinese officials have been working to counter international investors’ increasingly negative outlook for the country’s economy.  Their cause has been boosted by a slew of better than expected data releases, including March inflation figures that showed producer price deflation had moderated.

 www.ft.com

Today's ENERGY News - April 13, 2016

Top Stories

Banks Face Massive New Headache on Oil Loans

J.P. Morgan Chase Chairman and CEO James Dimon in February called the unfunded loans are… The $147 billion question for banks: Will energy companies max out their credit lines? When big banks announce earnings starting on Wednesday, the spotlight will be on massive energy loans that most investors didn’t know much about until recently. These unfunded loans have been promised to energy companies that haven’t yet tapped the money. Many banks historically haven’t disclosed these loans but have begun to recently following the extended slide in oil and gas prices. In the first quarter, a handful of energy borrowers announced more than $3 billion of drawdowns against these types of loans. Those commitments are expected to trickle down to bank earnings and saddle firms with more energy exposure at a time they are trying to pare it back. “Let’s not sugarcoat it, this is not necessarily a loan a […]

 www.wsj.com

Natural Gas Production Is About To Plummet

Summary As one of the seven largest natural gas producing regions in the U.S., the Eagle Ford is a significant area to understand for natural gas-oriented investors. In this article, I dig into the government’s data regarding production and forecast what output should look like by year-end. What I discovered is that, if something doesn’t change fast, we should see production fall materially in the region this year, which is bullish news for investors. In the past, I’ve written articles regarding the Eagle Ford and the oil production trend that we’ve seen coming out of the region. However, I have yet to analyze the amount of natural gas to come from the area and to see what the production trend of that commodity should look like moving forward. Now, after having the opportunity to dig into the data from the EIA’s (Energy Information Administration’s) Drilling Productivity Report and after […]

  peakoil.com

Wells Fargo Misjudged the Risks of Energy Financing

At its annual investor conference in San Francisco in May 2014, with oil trading at $102 a barrel, Wells Fargo & Co. boasted that in just two years it had almost doubled its energy exposure and seized the title of Wall Street’s top oil and gas banker. The timing couldn’t have been worse. Crude prices peaked a month later and have since plummeted to $40. Wells Fargo has downgraded 38 percent of its energy loans and set aside $1.2 billion to cover potential losses, according to company filings. The loans are coming under increasing scrutiny from regulators and investors, even though they make up only 2 percent of the bank’s portfolio. Wells Fargo’s foray into oil shows how Wall Street misjudged the risks hidden in an esoteric type of energy financing long thought to be bulletproof. To fuel the growth of its energy desk, the bank targeted some of […]

  www.bloomberg.com

The Halliburton-Baker Hughes Merger is Falling Apart. What Happens Next?

The long wait is finally over; the U.S. Justice Department has announced it will sue to block the merger of Halliburton and Baker Hughes. This makes the merger much less likely to be consummated – so much so that I think it’s fair to operate using a base assumption that the deal is dead, even if that position is not yet official. A key tenant in industrial organization theory is that it takes three strong competitors to make an efficient market. Without three competitors, industries and companies fall prey to problems of tacit collusion, resulting in slowly higher prices and less overall economic efficiency. The HAL/BHI merger was done in by the lack of a third strong competitor. While Halliburton showed a willingness to do whatever it took to get the deal done by agreeing to divest billions of dollars of assets, in the end it was not enough. […]

 oilprice.com

Exxon faces calls for climate change ‘stress test’

Dozens of investors are backing the call for ExxonMobil, the US oil group, to “stress test” the potential impact on its business of policies to address the threat of climate change.Shareholders have submitted proposals for the annual meetings of Exxon and eight other US energy companies, recommending that they analyse the financial risks they face if governments attempt to limit the increase in global temperatures to 2C, which was the objective agreed at the Paris climate talks at the end of last year. Calpers, the California state retirement fund that had $301bn under management as of last June, has registered with the Securities and Exchange Commission, the US regulator, to be able to lobby other investors in support of the proposal at Exxon. The moves reflect growing interest among investors in the financial implications of climate change. They also show how environmental campaigners have become increasingly adept at working with shareholders in fossil fuel companies to raise awareness of the issue. The New York state retirement fund and the Church of England submitted the proposal at Exxon, asking the company to publish an annual assessment of the financial impact on its proved reserves and potential resources of restrictions on carbon intended to hit the 2C target.

  next.ft.com

BULLS Lead BIG Charge in #Crude

Crude Charging Higher Ahead Of Big Week

By Matt Smith

Thirty-three years after REM released their debut album, and the crude complex today is being driven by murmurs again. As the producer meeting in Doha approaches (but not fast enough…), here are seven things to consider in the oil market today:

1) Economic data flow was kicked off overnight by a weaker print for Chinese inflation in March. Inflation dropped on the prior month by -0.4 percent, limiting the year-on-year rise to 2.3 percent, below consensus of +2.5 percent. Nonetheless,food prices increased by 7.6 percent, driven by rising vegetable and pork costs.

2) As for Chinese producer prices, despite being negative on a year-over-year basis since 2012, the first month-on-month increase was seen since 2013. Year-on-year prices are showing easing deflation, down less than expected at -4.3 percent.

Related: Horizontal Land Rig Count Summary 8th April 2016

3) Economic data is thin on the ground elsewhere today. Fortunately, us energy folk get the EIA’s monthly drilling productivity report today, assessing the health of oil and gas production at key U.S. shale plays. We then get the triumvirate of key monthly oil reports, with the EIA’s short term energy outlook tomorrow, OPEC’s oil market report out on Wednesday, with the IEA the caboose on Thursday. Doha lurks in the distance on Sunday.

4) Despite the worldwide rig count reaching its lowest level since September 1999 at 1,551, rigs in Saudi Arabia, Kuwait and UAE have been on the rise.

While the worldwide rig count has dropped 60 percent in little over a year, the three countries on the Arabian Peninsula have seen rigs more than double in recent years as they attempt to boost production capacity:

5) According to the International Group of LNG importers, global supplies of LNG are set to be boosted by 14 percent this year as new capacity comes online, predominantly from Australia.

Related: Oil Up As Bullish Sentiment Returns To Markets 

Hence, as capacity continues to outpace demand – and is set to through the duration of the decade – LNG prices are set to remain under pressure. Singapore Spot LNG prices have slumped to $4/MMBtu, falling from $14/MMBtu back in September 2014, when price assessments started.

6) The latest CFTC data show that hedge funds are once again increasing short positions in WTI crude oil. Shorts increased, while long positions were little changed; this meant that the net long position held by speculators dropped for a second consecutive week.

7) We have discussed recently how the reversal in crude prices from January lows has been in tandem with a return to dollar weakness and a risk-on appetite. Hence, as equities start the week moving higher as quarterly earnings season is kicked off after-hours, the yen has rallied to its highest level versus the dollar since late 2014, while the euro is pushing on above 1.14 for the first time since last fall.

Related: The Oilfield Services Model Is Broken

Crude is pushing higher once again, while emerging market currencies are on a tear. As the chart below illustrates, crude has rallied over 40 percent since late January, while the Ruble has appreciated by over 20 percent.

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