Saturday, June 08, 2019

US crude output & Russia’s fossil fuel abundance

Another week, another upbeat projection for US oil production. The latest one has been put forward by Oslo, Norway-headquartered research and analysis firm Rystad Energy, which projects US production to hit 13.4 million barrels per day (bpd) by December 2019. That's well above 12.3 million bpd total that's emerged from the US Energy Information Administration's latest publication. 

Moving on from the US, abundant and cheap fossil fuels in Russia are likely to slow the country's shift to renewable, according to Moody's, with the rating agency opining that Moscow will struggle to meet its 2024 targets for renewable capacity.

"The future looks brighter for the Russian renewable energy sector from the mid-2020s, however, as old generation fossil fuel-fired capacity retires and controls on emissions tighten," says Julia Pribytkova, Senior Analyst at the agency.

Russia's Energy Strategy aims to tighten controls on CO2 emissions starting from mid-2020s, in part by increasing the share of clean energy, such as nuclear and renewables, improving energy efficiency and introducing caps on greenhouse gas emissions.

Away from supply-side chatter, looks like oil benchmarks registered an uptick as the end of the week approached, after having taken a hammering for much of May. Brent still ended the week down 1.86% compared to last Friday (May 31), but WTI futures made a better recovery ending up 0.92%. That’s all for the moment for folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo: Oil extraction site in Russia © Lukoil.

Friday, May 31, 2019

That over 10% slump in oil price

As the crazy month of May comes to a close, commentators using the supply constriction and geopolitical risk premium pretexts to big up prices have been left scratching their heads. Using Middle Eastern tension and murmurs of OPEC rolling over production cuts as the backdrop for predicting $80+ Brent prices didn't get anywhere fast. 

Instead prices went into reverse as the US-China trade spat, Brexit, Chinese and German slowdown fears weighed on demand sentiment. Here is yours truly's take via Forbes:
For what it is worth, at the time of writing this blog post both oil benchmarks are posting a May decline of +10% in what can only be described as a crude market rout. 

Away from the oil price, it seems rating agency Moody's has withdrawn all the ratings of Venezuela's beleaguered oil firm PDVSA including the senior unsecured and senior secured ratings due to "insufficient information." At the time of withdrawal, the ratings were 'C' and the outlook was 'stable'.

With Venezuela in free-fall and its oil production well below 1 million barrels per day (at 768,000 bpd in April) - not much remains to be said. In any case, the US will be importing less and less crude from Latin America not what happens in Caracas, given uptick in its shale-driven output. 

Away from 'crude' matters, the Oilholic also touched on LNG markets. Here is yours truly's take for Forbes on how the US-China trade spat will serve to dampen offtake for US LNG Projects; and here is a missive for Rigzone on the disconnect between US President Donald Trump's rhetoric on American LNG exports to the Baltics versus the ground reality

That's all for the moment for mad May folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. 

Saturday, April 27, 2019

Webcasting for ReachX & Trump's OPEC call

It's been quite a week in the oil market with Brent touching $75 per barrel for the first time in 2019, amid exaggerated long calls reminiscent of Q4 2018, and we all know how that ended. In this backdrop, the Oilholic did his first oil market webcast for independent financial platform ReachX.

The company is working to shake-up traditional financial market research and investment banking services via its technology platform. The idea was born out of creating an unbiased research, information and services hub fit for a post-MiFID II investment and operating environment, and the Oilholic has been involved in its progress since the summer of last year with co-founders Rafael S. Lajeunesse and Olivier Beau de Loménie.

The topic of the webcast was what's in store for the oil market in H2 2019, especially as the Oilholic believes the current set of market fundamentals suggest there's not much further for Brent to go than beyond $75 per barrel, and in fact it is likely to average towards the lower range of $70-75 per barrel this year.

Here's a recording of the webcast on YouTube, which has been converted into a podcast by the good folks at ReachX:



And should you wish to listen to it on SoundCloud; here's a link to that as well.

Away from the webcast, just as Brent hit $75, US President Donald Trump hit it. Ahead of a political rally, the President said he'd "called OPEC" and that oil prices were coming down. Cue a slide on that pretext in this Goldilocks Economy, where crude has little room to go further up. Here are the Oilholic's thoughts in more detail via a Forbes post. That's all for the moment folks, keep reading, keep it 'crude'!

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© Gaurav Sharma 2019.

Wednesday, April 24, 2019

Discussing Algeria’s 2019 oil & gas potential

In the wider context of the global oil and gas industry and that of the continent of Africa, OPEC member Algeria is right up there. In volume terms, it is the number one producer of natural gas in Africa, and among the top three when it comes to crude oil.

The oil and gas sector accounts for 20% of the country's GDP and bulk of its exports. But of late Algeria has faced production challenges, including a double-digit decline in oil production last year; something the government is looking to change. 

The need for investment is pressing, and courting foreign direct investment (FDI) in the current climate of a fairly high oil price range [~$65-75 per barrel] could be timely. To further FDI, the government is drafting a new hydrocarbon exploration law that is expected to be released in July 2019.

The idea is a simple one - make Algeria more competitive in terms of royalties and taxation, simplify licensing and bidding procedures, and most importantly reduce red-tape. How this all pans out would matter because from an outside-in perspective the country is still relatively underexplored with less than 25 wells per 10.000 square metres. 

This for a nation which has the tenth-largest proven reserves of natural gas and the third largest proven reserves of shale gas in the world. Not to mention the fact that it is also the sixth-largest natural gas exporter in the world.

With an objective of reconciling thoughts over global market permutations and ongoing developments in the Algerian oil and gas sector, the Oilholic is delighted to be speaking at the Algeria Oil & Gas Summit in Algiers, November 19-21, 2019, being organised by IN-VR Oil & Gas

Arbiters of the country’s potential are the National Agency for Hydrocarbon Resources Valorization (ALNAFT) and Hydrocarbons Regulatory Authority (ARH). The domestic exploration project partner, as mandated by law, is state-owned national oil company Sonatrach, which holds around 80% of total hydrocarbon production in Algeria, with International Oil Companies (IOCs) tapping the remainder. 

BP, Equinor, Eni and Total, are among the many IOCs looking to expand within Algeria. So at this fitting time there should be no shortage of talking points, and this blogger keenly awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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Friday, April 19, 2019

Being careful of what Hedge Funds wish for

So it is that OPEC has moved its ministers meeting, and the OPEC/non-OPEC from April 17/18 to June 25/26, but the Oilholic decided to come to the Austrian capital anyway given that other 'crude' meetings could not be moved, and because Vienna is lovely in the spring anyway!

While spring might be in the air in Vienna, a bit of craziness has surfaced in the Oil market trading sphere. Yet again, no sooner has Brent crossed $70, chatter of three-figure crude prices is again rearing its head. Here's the Oilholic warning from very recent history (via Forbes); and why caution is merited.

There is nothing on the horizon to be overtly bullish about the oil market – bearish variables (i.e. China, President Donald Trump's trade salvos, Brexit, German slowdown and changing consumption patterns haven't materially moved yet) and bullish quips based on geopolitics (i.e. Libya, Venezuela and Nigeria) matter but are being countered partially, if not wholly, with sentiment around rising US production.

Few in Vienna, think an oil price spike is on the cards, having had three days of deliberations over, let's face it more than three friendly beers. That sentiment is echoed by both heavy sour and light sweet physical traders the Oilholic has spoken to in Shanghai and Rotterdam. 

Not many believe OPEC wants three-figure prices; and even if they do, more light sweet American crude is hitting the market heading to Asia. Yours truly has long maintained that we are stuck in a boring oscillation between $60-80 per barrel prices; a predictability that hedge funds find boring for very different monetary reasons. Let's leave it at that!

As for OPEC, it is not going to move until Trump decides on if and what kind/level of waivers he is going to grant importers of Iranian crude or not. That and balancing Russia’s concerns are probably the primary reasons behind postponing its ministers' meeting. That's that from Vienna until June.

Interspersed between crude meetings, the Oilholic also found time for a mooch about Vienna's Ring Road on a sunny afternoon, starting from the Intercontinental Hotel to the Rathaus up to Karlskirche; partially replicating the past-time of Ali Al-Naimi, the inimitable former Saudi Oil Minister. Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2019. Photo © Gaurav Sharma, 2019