What to Watch

OPEC’s Trouble: Oil Prices May Be Rising Too Sharply

OPEC and its allies should be careful what they wish for regarding oil prices, reports Benoit Faucon for The Wall Street Journal.

Last year major oil producers led by the Organization of the Petroleum Exporting Countries agreed to cut almost 2% of global supply to prop up sagging crude prices.

Their efforts have been paying off with crude prices slowly shaking off an almost 3 year-old slump. But analysts and OPEC members are worried that prices going too high could cause some producers to abandon the supply action effort and cash in on oil’s rising fortunes.

Further increases in oil prices “would be an open invitation to cheat” on agreed production cuts, said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank. “That could lead to a collapse of the deal.”

Oil prices rose Monday morning following an unexpected fall in the number of U.S. rigs drilling for crude.

Brent crude, the global benchmark, was up 0.79%, at $63.76 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.66%, at $57.68 a barrel.

 

 

Energy News

Canada Oil Producers Are Running Out of Options to Transport Crude

 Canadian oil producers have lots of oil coming online but are running out of options to get crude to market as pipeline and rail capacity fills up, driving prices to four-year lows and increasing the risk of firms having to sell cheaply, reports Reuters.

Statoil Buys 25% Stake in Major Petrobras Oilfield

Norway’s Statoil has bought a stake in one of Brazil’s largest oilfields from national oil company Petrobras for up to $2.9 billion, nearly tripling its production off the South American country, the firm said on Monday.

“Essentially this spells a new era for Port of Newcastle. The world’s biggest coal port is now preparing for the end of coal”

Roy Green, the incoming chairman of Port of Newcastle

WSJ Energy In-Depth

Study Links Lower Birth Weights to Living Near Fracking Sites

 

A new study provided fresh evidence that babies born to women who live close to fracked natural gas wells have a higher chance of being born with a low birth weight, writes Russell Gold.

It isn’t the first study to find a connection, but the latest examination by researchers at the University of Chicago, Princeton University and the University of California, Los Angeles is the largest and most comprehensive to date.

The long-term success of fracking, both in the U.S. and globally, will have a lot to do with how it is received by people who live close to the wells. The study could spark a new focus on whether local, state or federal governments should set the rules.

“Health effects are the most compelling case for local control,” argues Hannah Wiseman, an assistant professor at the Florida State University law school. “It should give states pause as they attempt to preempt local control.”

The study was met with a strong backlash from industry groups who challenged its findings.

The bottom line is that fracking provides a host of positives: economic benefits, lower emissions and improved energy security. But while these benefits are widespread, the costs can be very localized.

Big Number

4.2%

Global demand for coal should remain nearly flat between 2017 and 2022, said the International Energy Agency in a recent report. Coal demand is down 4.2% over the last two years.

FutureCurve

Tuesday: API issues forecasts on U.S. crude inventory.

Wednesday: The U.S. Energy Information Administration releases U.S. production figures.

Friday: Oil-services firm Baker Hughes Inc. releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

Reporter’s Notebook

Coal will be largely driven out of the U.S. power generation sector by between 2030 and 2035, according to a former U.S. Energy Deptartment executive. “It’s happening, frankly, faster than I thought it would,” said Melanie Kenderdine, former energy counselor to the energy secretary under President Barack Obama, to a Houston audience at the Privcap energy conference this week. “Gas is the perfect complement to the intermittency of renewables right now,” she said, according to WSJ Deputy Texas Bureau Chief Lynn Cook.

Texas has more installed wind power than any other state by far, and more is on the way. For proof, just look to the Port of Corpus Christi, which predicts it will hit a wind-related “cargo milestone” by year end: handling more than 3,000 large wind turbine components, including blades and towers, in 2017. It handled 2,875 such parts last year and just over 2,600 in 2015. Meanwhile, wind energy generating capacity recently surpassed coal-fired capacity in Ercot, the electric grid that serves most of Texas. Texas currently has more than 20 gigawatts of wind capacity installed, according to WSJ reporter Erin Ailworth.

Bakken oil production is back over 1.1 million b/d, and ESAI Energy forecasts it will rise another 90,000 b/d next year. But bottlenecks in the gas processing system could stymie future growth by 2019. That’s because gas coming out of oil wells in two core North Dakota counties exceeds local processing capacity. Two more gas processing expansions are in the works, but it may not be enough. The state’s gas-capture requirements are set to rise to 88% next year, up from the current 85%, and to more than 90% by 2020. That means less gas flaring is allowed and if requirements aren’t met, output caps may be put on oil producers, said Elisabeth Murphy, ESAI analyst, reports WSJ’s Deputy Texas Bureau Chief Lynn Cook.