Energy Journal: Crude Off to Bumpy Start

What to Watch

Oil Holds Near Two-Year High, Eyes on Iran

Oil prices started the new year by hovering around聽a 2陆-year high on Tuesday, after supply disruptions eased in the North Sea and Libya, while rising tensions in major oil exporter Iran underpinned the market.

Brent crude, the global oil benchmark, rose 0.09% to $66.90 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.08% at $60.52 a barrel.

Energy New

BP Takes $1.5 Billion Charge Related to U.S. Tax Overhaul

BP PLC is joining a host of companies whose earnings will be dented by the U.S. tax overhaul, saying Tuesday it would suffer a $1.5 billion accounting charge in the fourth quarter because of the bill. Earlier, Royal Dutch Shell PLC and Barclays Bank PLC said they would take large charges attributable to the U.S. tax overhaul. Both companies said that despite the big paper losses, they viewed the drop in U.S. corporate taxes as a positive.

 

Russian Daily Oil Output Edges Up in 2017 to 30-Year High

Russian oil production has continued to grow in 2017, with average daily output at a 30-year high of 10.98 million barrels a day, though the pace of growth slowed from 2016 because of the country’s participation in an OPEC-led global supply pact, Reuters reports.

 

“There are cracks appearing in the model of the Permian being one single, perfect oilfield”

Bob Dudley, Chief Executive Officer BP

 

WSJ Energy In-Depth

Trump Backs Protesters in Iran

People have taken to the streets in Iran since last week to protest their government and poor economic conditions. In response the Trump administration has threatened to impose fresh sanctions if Tehran forcefully cracks down on the demonstrations.

 

Iran’s President Hassan Rouhani, who has been a favorite of the country’s moderates has come under fire from the largest demonstrations to hit, major oil producer, Iran in almost a decade.

 

As president, Mr. Rouhani has sought to revive Iran’s fortunes. He spearheaded 2015’s nuclear deal which removed a large number of international sanctions that held back Iran’s economy in exchange for curbs on its disputed nuclear program.

 

But with inflation and unemployment still in double digits, Mr. Rouhani has come under fire despite his efforts.

 

U.S. President Donald Trump chimed in on Monday with a strong statement of support for the protesters. Police have arrested more than 350 people since the unrest began, according to Iranian media.

 

Iran, a member of the Organization of the Petroleum Exporting Countries, produces approx. 3.8 million barrels of crude oil a day, making it the cartel’s third-largest producer.

 

“It is feared that oil shipments could be hampered if the situation were to escalate further,” said analysts for Commerzbank in a recent note.

 

Big Number

9.66 million

According to the Energy Information Administration U.S. petroleum imports fell 40,000 barrels a day in October to 9.66 million barrels a day, year on year. ”The lowest level since 2015,” said analysts for Barclays in a recent report.

 

Meanwhile, oil exports jumped 2.18 million barrels a day in the same time period to a record 7.16 million barrels a day.

 

FutureCurve

Today: Canada moves ahead with plans to implement a carbon tax starting in 2018.

Wednesday: The U.S. Energy Information Administration releases its weekly petroleum status report.

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

The Permian Basin has shattered its 1973 record to produce 815 million barrels of oil during 2017, or more than 2.23 million barrels a day, according to IHS Markit. The previous peak of 790 million barrels, or 2.16 million barrels a day, was set 44 years ago. “The magnitude of the rebound in Permian Basin liquids production is unprecedented,” said Reed Olmstead, director of energy research and analysis. The vast oil field in West Texas and New Mexico is projected to push total U.S. oil output to a new all-time high by the end of next year. “We see U.S. production exceeding 10.5 million barrels per day by the end of 2018,” reports WSJ’s Deputy Texas Bureau Chief Lynn Cook.

 

Oil prices are expected to keep rising in 2018 on the back of OPEC-led production cuts and a growing global economy. A survey of 15 investment banks by The Wall Street Journal estimates that Brent crude, the international oil-price gauge, will average $58 a barrel in 2018, up from an average of $54 in 2017. The banks expect West Texas Intermediate, the U.S. oil gauge, to average $54 a barrel in 2018, up from $51 in 2017, writes WSJ’s London-based correspondent Georgi Kantchev.

 

EDF Energy Services continues to revamp and expand in the North American power market. Following the recent shake-up of its Houston trading floor, the subsidiary of the French electricity conglomerate said it would buy TransCanada Power Marketing’s commercial contracts and assets in the northeast. TransCanada, the Canadian company behind the proposed Keystone XL oil pipeline and a vast network of gas delivery lines, has been trying to wind down its power marketing business in 2017. EDF is the world’s biggest electricity generator and has been actively pursuing deals to boost its U.S. footprint. The deal significantly increases EDF’s presence in North American power markets, particularly on the eastern seaboard where pipelines shortages and extreme weather can create big electricity and gas price spikes in volatile trading. The deal is expected to close during the first quarter of 2018, according to WSJ’s Deputy Texas Bureau Chief Lynn Cook