What to Watch

China Makes a Play for Dominance in Oil Trading

China, the world’s biggest importer of crude oil, is set to launch its own crude futures contract at the end of March on the Shanghai International Energy Exchange, the China Securities Regulatory Commission said Friday.

Chinese regulators first announced plans for the contract nearly five years ago, as part of the country’s efforts to create a rival benchmark to London’s Brent crude futures and New York’s West Texas Intermediate futures. The contract is also an opportunity for China to raise the status of its currency, the yuan, and challenge the supremacy of the U.S. dollar.

For decades, oil traders have used dollars to buy and sell barrels of oil, both in the physical market and in crude futures. China is looking to change that as it overtakes the U.S. in oil consumption. A successful China-based crude-futures contract would make the yuan one of the world’s important currencies.

Energy News

Sell-Off, Rising U.S. Produciton Weighs on Oil

 A renewed sell-off in equity markets and fresh signs of mounting U.S. shale production continued to weigh on oil prices Friday morning.

Brent crude, the global oil benchmark, fell 0.43% to $64.53 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.67% at $60.74 a barrel. Brent has retreated nearly 6 % this week.

Canada to Toughen Oversight of Energy Projects

 Canada on Thursday unveiled strict new oversight rules for energy projects, reports The Wall Street Journal’s Paul Vieira.

The new rules, announced Thursday by the Liberal government of Prime Minister Justin Trudeau, are meant to strike a balance between addressing environmental concerns and encouraging investment in a sector that is a significant driver of economic growth.

“OPEC is now playing Russian roulette with global demand growth.”

Bjarne Schieldrop, chief commodities analyst, SEB Markets

Gazprom’s London Trading Head to Leave

 The head of Russian oil-and-gas giant PAO Gazprom’s London trading division is leaving the company as part of a broader restructuring, Reuters reports.

WSJ Energy In-Depth

U.S. Tax Law to Bring Lower Revenue for Pipeline Operators

The new U.S. tax regime is expected to force many oil and gas pipeline operators to lower the rates they charge  customers, potentially cutting revenue by hundreds of millions of dollars, reports Christopher M. Matthews.

While pipeline companies should broadly gain from the reduction in the corporate tax rate to 21% from 35%, many “will likely be required by federal regulators, who oversee how much operators charge on interstate systems, to cut their rates and pass the savings on to their customers,” writes Mr. Matthews.

For some major pipeline groups such as Williams Cos., TransCanada Corp and Dominion Energy Inc., most of the their revenue on natural-gas pipelines would be subject to a rate decrease, according to a WSJ analysis.

Big Number

$190 Million

SandRidge Energy Inc., a pioneer in the American shale boom, said Thursday it would limit 2018 capital spending to $190 million, while reshuffling top management amid investor pressure.

FutureCurve

Today: Baker Hughes releases weekly data on the number of rigs drilling for oil in the U.S.

Wednesday: Three important oil-industry groups hold a symposium in Riyadh: The International Energy Forum, the International Energy Agency and the Organization of the Petroleum Exporting Countries.  Saudi energy minister Khalid al-Falih, Russia’s energy minister Alexander Novak and OPEC’s secretary general Mohammad Sanusi Barkindo will speak.

February 20-22: The Energy Institute hosts the International Petroleum Week, conference in London. The speakers include BP Chief Executive Bob Dudley and Dr. Faith Birol, executive director of the International Energy Agency.

March 5-9:  Cambridge Energy Research Associates hosts the CERAWeek energy conference in Houston. The speakers include IHS Markit Vice Chairman Dr. Daniel Yergin and Amin Nasser, president and CEO of Saudi Arabia Oil Co., or Saudi Aramco.

Reporter’s Notebook

Wall Street Journal correspondent Paul Vieira on pipeline politics in Canada. Amid heightened political tension in western Canada about the fate of Kinder Morgan’s Trans Mountain pipeline expansion project, Canadian Prime Minister Justin Trudeau says, “We are going to ensure that pipeline gets built because it is in the national interest.” British Columbia is mulling new environmental measures that legal experts say could kibosh the project, which received federal approval in late 2016.

Wall Street Journal reporter Christopher M. Matthews on U.S. pipeline construction. Pennsylvania regulators lifted a ban on construction of Energy Transfer Partners’ Mariner East 2 pipeline. The company agreed to pay a $12.6 million fine and can now resume drilling on the project, which will transport natural gas liquids through Pennsylvania to an export facility. The Pennsylvania Department of Environmental Protection had halted drilling after drilling fluids had contaminated water sources along the pipeline’s route. The project has sparked protests in some of the densely-populated counties it runs through.