In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week.
We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.
Chart of the Week
The Era of Golden Oil Profits Is Over, For Now
– After oil companies’ net income peaked in Q2 2022, results from the past quarter are set to tally $36.5 billion for the five largest oil and gas companies globally, down by a little less than 40% year-on-year.
– The general market expectation is that even with lower net incomes, oil majors would seek M&A deals, having curbed outstanding shares by 8% in aggregate and having paid down $87 billion of debt in 2022.
– Whilst US oil major ExxonMobil was rumoured to be in preliminary talks to buy Pioneer Natural Resources, BP was said to be seeking smart M&A whilst Shell is set to disclose its new policies under CEO Wael Sawan at its June meeting.
– Weak natural gas prices might be the biggest downside factor for US majors’ profits with Henry Hub pricing languishing below $3 per mmBtu since January, whilst year-on-year European gas pricing was relatively unchanged.
Market Movers
– Despite having sold most of its Nigerian assets, US oil major ExxonMobil (NYSE:XOM) is still eyeing West African drilling opportunities as it applied for four offshore oil blocks in Liberia.
– Chile’s national lithium champion SQM (NYSE:SQM) saw its market value plummet 20% after last week’s shock announcement that the country would be nationalizing its lithium industry, forcing it to seek a deal with the government.
– Seeking to build on recent gas discoveries in South Africa’s offshore, French major TotalEnergies (NYSE:TTE) received approval to drill blocks 5,6 and 7 in the same area, planning to drill 5 wells in Q4 2023-Q1 2024.
Tuesday, April 25, 2023
In a week that is going to have only minor macroeconomic data releases, air travel figures from China (published by the country’s Civil Aviation Administration) have caught the attention of the oil community as the upcoming Golden Week holidays in the first week of May are expected to see 9 million air passenger trips, a 30% increase to 2019 levels. Strong Chinese product demand helped offset the price declines late last week, with ICE Brent trading around $83 per barrel.
Oil Positioning Build-up Runs Out of Steam. Managed money investors have purchased a net equivalent of 20 million barrels in the six key futures and options contracts in the week ending April 18, the lowest growth in net length in April and a sign of the build wearing out.
Appalachians Feels the Pain of Low Natgas. Depressed by low natural gas prices in the US, gas production in the Appalachian Basin fell to 34.3 BCf per day, the lowest since the deep freeze of February 2023, as weaker demand and pricing pressures force producers to curb output.
Colombian Pipeline Gets Bombed Again. Over the course of the past five days, both of Colombia’s trunk crude pipelines connecting fields inside the country with export terminals along the shore were bombed, with the Cano Limon-Covenas line recording its ninth sabotage attack in 2023 alone.
No Country for Gas Bans. The US 9th Circuit Court of Appeals overturned Berkeley’s 2019 ban on feeding natural gas into new construction, arguing the 1975 federal Energy Policy and Conservation Act preempts municipalities from banning energy sources, paving the way for more legal challenges.
US Refiners Flag E15 Cost Risks. According to a study funded by US refiners, the government’s suggestion that some states retain year-round sales of 15% ethanol-containing gasoline would cost consumers up to $1 billion, translating into an extra 8-12 cents per US gallon.
Norway to Vote Against Stricter BP Commitments. Norway’s sovereign wealth fund, one of the largest investors globally controlling $1.4 trillion, said it would vote against a resolution calling for oil major BP (NYSE:BP) to adopt more stringent GHG targets, angering climate activists.
China Steps in to Depress Iron Ore. Iron ore prices fell to $110 per metric tonne for delivery to northeast China after the country’s economic planning body, the National Development and Reform Commission, said it would investigate “irrational” price increases, despite prices falling for four straight weeks.
Ukraine Seeks to Lure US Majors. Ukraine’s national oil and gas company Naftogaz has held talks with US firms ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) as it seeks foreign investment to kickstart its oil production, however the ongoing war with Russia keeps the majors’ interest cool.
UK North Sea Paralyzed by Strikes. Unite, the largest trade union in the United Kingdom, started the largest industrial action across the country’s offshore platforms in may years, with 1,300 upstream employees joining a 48-hour strike for better wage conditions.
Keystone XL Rupture Caused by Pipeline Fatigue. Canada’s TC Energy (TSO:TRP) said that the 14,000-barrel oil spill that limited pipeline throughput into the United States because of a leak in rural Kansas was caused by progressive fatigue crack, raising hopes that things would get back to normal soon.
Guyana Rejects India’s Discount Suggestions. Whilst the Guyanese government has been in talks with India for almost two years on a crude oil purchase agreement, the South American country has rejected Delhi’s request that those barrels be discounted, sticking with BP (NYSE:BP) as its marketer.
White House to Veto Solar Tariffs. US President Joe Biden promised to veto any congressional motion to overturn his solar tariff waiver for four Southeast Asian nations believed to be trans-shipping Chinese panels, meaning trade could go on unimpeded until at least 2024.
Drillers Return to Mozambique. Following years of downtime triggered by Islamic State attacks on critical infrastructure in Mozambique, improved security conditions are luring oil drillers back to the country with Italian major ENI (BIT:ENI) preparing to drill the first exploration well since 2015.