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Oil Markets On Edge Over Trade War Uncertainty

Tom Kool

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- The volume of natural gas that is flowing to export terminals in the U.S. reached a record high in July, hitting 6 billion cubic feet per day (bcf/d), or 7 percent of total U.S. natural gas production, according to the EIA.

- S. LNG exports reached a record high 5.2 bcf/d in July.

- Two more LNG export facilities – Elba Island LNG in Georgia and Freeport LNG in Texas – are set to begin operations within the next two months.

Market Movers

- Chevron (NYSE: CVX) has an edge over ExxonMobil (NYSE: XOM) because of its “superior” cash position, according to Barclays.

- Range Resources (NYSE: RRC) rose more than 8 percent on Monday after it was upgraded to a “Buy” rating by MKM Partners. Range Resources’ stock was at a year-to-date low prior to Monday, down two-thirds since January.

- Hess (NYSE: HES) has been the best performing oil and gas company this year, gaining 57 percent year-to-date. The company’s discoveries in Guyana, rather than its U.S. shale footprint, have much to do with the success.

Tuesday, August 20, 2019

Oil prices rose slightly on Monday after a Houthi drone attack on a Saudi oil field led to concerns about geopolitical unrest. That trend reversed on Tuesday however after Secretary of State Mike Pompeo issued harsh comments about Huawei and the threat of China.

Oil CEOs sell their own stock. An analysis from Raymond James found that top CEOs at U.S. oil and gas firms have sold an average of $4 million worth of stock in their own companies over the past five years, at a time when they talk up their stocks to investors.

Bakken flaring rises to 24 percent. Bakken flaring has spiked as production of both oil and gas rises amid a pipeline bottleneck. Drillers are now flaring roughly 24 percent of the gas produced in the Bakken, which is twice as high as state limits.

Related: The Revival Of A $53 Billion Megaproject

CNPC suspends purchases from Venezuela. China’s CNPC suspended oil purchases in August from Venezuela following stricter U.S. sanctions. “We were told that China oil will not load any oil in August. We don’t know what will happen after,” a source told Reuters.

Aramco to select Lazard Ltd. and Moelis & Co. Bloomberg reports that Saudi Aramco has picked Lazard Ltd. and Moelis & Co. to advise the company on its IPO.

Mercedes-Benz to join California on fuel economy. In a blow to the Trump administration’s efforts to slash fuel economy standards, Mercedes-Benz is preparing to join four other automakers in agreeing to the stricter fuel economy standards laid out by California. The New York Times also reported that the policy process within the Trump administration is in disarray. The balking of top automakers and the internal disorder could imperil the deregulation effort.

U.S. shows signs of easing off trade war. The U.S. government extended waivers on sanctions on companies doing business with Huawei, viewed as a conciliatory gesture towards China. Fears of an economic recession seem to have the Trump administration concerned, and top U.S. officials have talked up trade negotiations. The Trump administration is also reportedly exploring a payroll tax amid growing concerns about the economy. 

Dakota Access draws fire. The Standing Rock Sioux Tribe has asked a judge to toss out a federal permit for the Dakota Access pipeline, due to lack of consultation. The issue comes as the pipeline’s owner, Energy Transfer Partners (NYSE: ETP), hopes to double the pipeline’s capacity. Meanwhile, several Democratic presidential candidates vowed to revoke the pipeline’s permits if they became president.

Texas well completions decline by 12 percent. The number of oil and gas wells completed in Texas declined by 12 percent in the first 7 months of 2019 compared to the same period a year earlier. Permits to drill new wells also declined by 14 percent. Slower activity has been a blow for oilfield services companies.

YPF cuts spending after price controls. Argentine President Mauricio Macri unveiled a series of stimulus measures last week in response to a shockingly bad performance in the nation’s primary. The package also came in the wake of market gyrations that saw the peso lose roughly 25 percent. President Macri froze fuel prices for three months, a move that is a huge setback for the oil industry. YPF (NYSE: YPF) said that it would slash spending by $100-$120 million per month as long as the price controls remain in effect.

Hi-Crush idles mine amid poor sand prices. Hi-Crush (NYSE: HCR) announced plans to halt production at one of its frac-sand operations in Wisconsin because of decreasing profitability.

Related: Will Shale Rise From The Dead?

Iranian tanker heads for Greece. Gibraltar decided to release the seized Iranian tanker, despite efforts by the U.S., easing some tension between Iran and the UK. The tanker is destined for Greece. The U.S. warned Greece not to assist the tanker.

Oil industry succeeds in criminalizing protest. Several oil companies behind the Dakota Access Pipeline and other pipeline projects have succeeded in pushing through laws at the state level to make pipeline protests a felony, according to Bloomberg. “Oil refiners, especially Koch Industries and Marathon Petroleum, orchestrated this unholy alliance of oil, gas, chemical, and electric utility companies to crush resistance to polluting industries,” Connor Gibson, an investigator with Greenpeace who has tracked the efforts, told Bloomberg.

Fighting climate change good for economy. A new paper from the National Bureau of Economic Research finds that slashing greenhouse gases will be significantly better for global GDP than inaction. The paper estimates that abiding by the Paris Climate agreement will keep GDP losses at 1.07 percent by 2100, while faster warming could slash global GDP by 7.22 percent.

Trump admin secretly negotiating with Venezuela. The Trump administration has held secret talks with powerful members of the Venezuela government. Some officials are seeking assurances that they won’t face retribution if they allow Maduro to be removed from power. Venezuelan officials deny the report.

Sales of diesel cars in freefall in Norway. EVs are eating into the market share of diesel vehicles in Norway, which are in freefall. Sales of diesel vehicles have fallen 95 percent over the last six years.

By Tom Kool for Oilprice.com

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