The price of oil is in a difficult situation to find a bottom that moves up months but faces Tuesday.
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– Gas production in the Gulf of Mexico has fallen for two decades. But 10 new projects will start operating in 2018, according to the EIA, followed by another 8 in 2019.
– These 18 projects have a combined resource estimate of 836 billion cubic meters.
– Together, they could allow Mexican gas production to come back.
Moving the market
• Cheniere Energy (NYSE: LNG) produced almost enough LNG at its Corpus Christi export terminal to deliver its first load, according to S & P Global Platts.
• Kosmos Energy (NYSE: KOS) dropped nearly three percent after Monday's hours when it announced the sale of 15 million common shares in a secondary public offering.
• Total SA (NYSE: TOT) announced a shutdown of the 253,000-bp Gonfreville refinery in Normandy due to a strike.
Tuesday, November 27, 2018
Saudi Arabia pushes for "quiet cut". A few weeks ago, rumors threw a potential reduction in aggressive production at the next OPEC + meeting, probably as high as 1.4 million barrels per day. However, this seems unlikely because President Trump simultaneously protected Saudi Arabia from an international revolt on the Khashoggi crime, while exerting pressure on the low oil price maintenance. Russia also does not want a significant reduction in production. That goes from Saudi Arabia in search of a "quiet cut", which means that production will return to the previously agreed production limit – about 10 mb / d, down from the current 11 mb / day.
Trump wants low oil prices, but shale in the US could have a success. The White House pressure campaign to discourage OPEC + from cutting production could manage to keep prices low, but prices are approaching a level that could damage US shale companies. "We are at the point where we are approaching the full production cycle breaks for licensed producers and, depending on how long it lasts, we may notice an impact on short-term budgets over the next few months," Muhammed Ghulam, Raymond James, told CNBC. Related: Can the price of oil fall to 40 dollars?
Saudi Aramco looks 500 billion dollars. Saudi CEO Aramco told Bloomberg that the company will spend $ 500 billion for the next decade to become a major refiner and petrochemical producer, not just an oil producer. "Saudi Arabia will take full advantage of these prospects with global chemicals investments of approximately $ 100 billion over the next 10 years – in addition to potential acquisitions," said Amin Nasser, CEO of Aramco. Overall, Nasser highlighted spending plans of $ 500 billion. Long-term demand for oil is becoming more and more fragile, but the petrochemical sector is the one that will focus on the largest increase in demand, according to the IEA.
The Russia-Saudi Alliance is faced with a test. Saudi Arabia is clearly eaten for a cut in production at OPEC + next week, but Russia is much more hesitant. Russian oil companies oppose production cuts, and the Russian economy does not benefit as much as the Saudi economy. However, President Vladimir Putin has strategic reasons to maintain partnership with Saudi Arabia. But after the production increased in June, Moscow and Riyadh are no longer on the same page.
Venezuela comes to an agreement with Crystallex. The Canadian mining company Crystallex tried to force the PDVSA in Venezuela to sell Citgo as a compensation for a gold mining project expropriated in 2011. However, Venezuela and Crystallex only hit an agreement that would allow the PDVSA to maintain Citgo. Under these circumstances, Venezuela initially paid $ 425 million to Crystallex and will pay its remaining balance until 2021.
Venezuela rejects BP's bid. BP (NYSE: BP) proposed purchases Total SA (NYSE: TOT) a stake in the natural gas project in Venezuelan waters. The project is located along the maritime border of Venezuela and Trinidad and Tobago. BP holds the rights to the Trinidad side and wants to buy Total stake from Venezuela and could use the gas to expand its operations in Trinidad. Caracas has blocked the bid, according to Reuters.
Goldman Sachs: Lack of Oil in 2020. The oil market could be overcome now, but Goldman Sachs says there is a gap in 2020. "In 2020 we will have a clear physical shortage of oil because no one is allowed to invest fully in future oil production," said Michele Della Vigna, head of EMEA's research on natural resources at Goldman Sachs.
Nigeria has lost $ 6 billion for Shell and Eni. A new report notes that Nigeria has lost estimated revenues of nearly $ 6 billion due to the strange structure of an oil deal in 2011 Royal Shell Shell (NYSE: RDS.A) and Eni (NYSE: E). The business is now at the center of attention due to a corruption case in Milan, where directors Eni are in the hot seat.
France and Germany are moving to keep their deal with Iran alive. The EU has previously proposed setting up a Special Purpose Vehicle (SPV) to allow European companies to continue doing business with Iran, working around US sanctions. France and Germany have agreed to host the financing agreement together and take aggressive measures to try to keep alive the Iranian nuclear agreement, even if the US continues to press European capitals not to move forward.
US Iraqi pressures stop in Iran. The US is trying to push Iraq out of Iranian energy, according to the Wall Street Journal. Iraq depends on Iran for natural gas, which is used to generate electricity. The United States has granted Iraq a 45-day derogation for sanctioning gas imports, but Iraq says it will take more time. Iraq warns that the US could destabilize the country if it pushes too hard.
Related: Goldman: Oil prices are set to come back in 2019
China imports from Russia on the basis of Iran's sanctions. China reduces oil imports from Iran ahead of US sanctions and, on the other hand, relies heavily on Russia. Chinese oil imports to Russia reached a record high in October.
Chevron announces the first oil project in the Gulf of Mexico. Chevron (NYSE: CVX) announced last week its first oil from the Big Foot project in the Gulf of Mexico. The project is located 225 miles south of New Orleans and has a 35-year life span.
France protests with fuel. France saw a second week of protests over a proposed tax hike for gas oil. Diesel prices rose in France by about 20% this year, though this is largely due to the rise in oil prices (until recently). The tax is designed to harmonize petrol and diesel prices – diesel has long been underestimated in relation to gasoline in France.
Trump keeps a firm line in China. Trump is preparing to meet with Xi Jingping this week but on Monday suggested he will advance with a rise in tariffs in January. The 10 percent Chinese import quota of 200 billion dollars will reach 25 percent at the beginning of 2019. Trump said he is unlikely to take this increase into account. He also said he is ready to advance with additional tariffs for another 267 billion Chinese goods if the two leaders do not reach an agreement this week.
By Tom Kool for Oilprice.com
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