What to Watch
Foreign Trade Houses Grab Dominant Share of U.S. Crude Exports
A handful of international trade houses have taken over the buying and selling of U.S. crude exports amid the shale oil boom, writes The Wall Street Journal’s Sarah McFarlane.
Shipments by three of the world’s top five oil traders, Vitol Group, Trafigura Group Pte. Ltd. and Mercuria Energy Group Ltd., accounted for 22% of U.S. crude exports in the past 12 months.
These mainly Europe-based trade houses buy and sell physical oil and ship it around the world.
Still, the traders’ edge in U.S. exports is expected to diminish over time as logistical issues are ironed out and oil majors such as Exxon and Royal Dutch Shell PLC follow through on plans to buy up shale acreage and bring their own trading expertise to bear on the market.
Oil Gains as Questions Linger Over Iran Deal
Potentially disruptive global events continued to support oil on Tuesday. Brent crude, the global benchmark, was up 0.40% at $69.80 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.35% at $65.78 a barrel.
“Newly heightened geopolitical risks of a more hawkish U.S. policy towards Iran….clearly raises the likelihood of oil trade disruptions,” according to Ehsan Khoman, head of research for the Middle East at The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Denmark Faces Decision Over Russian Gas Pipeline
Denmark is under pressure to decide on whether to allow the construction of a controversial Russian gas pipeline project near its coast. The Nord Stream 2 pipeline is a Gazprom venture backed by a consortium of five European companies to transport gas from Russia to Europe through the Baltic Sea.
“If U.S. shale does not deliver the levels that are currently expected, then that could lead to larger than expected drawdowns in OECD stocks.”
– Analysts for JP Morgan
How a Tiny Latvian Bank Became a Haven for the World’s Dirty Money
The U.S. Treasury last month designated ABLV Bank in Latvia as a money laundering shop for corrupt clients in Russia and elsewhere. A Ukrainian gas mogul named Serhiy Kurchenko used ABLV to launder money, Treasury officials allege. Regulators say the bank is emblematic of the lax enforcement of money laundering laws that has made parts of Europe a haven for illegal money.
WSJ Energy In-Depth
A Trade War Might Be a Commodities Buying Opportunity
A trade war between the U.S. and China might spell trouble for commodities such as oil and metals in the beginning but end up being a boon for commodity buyers, writes Nathaniel Taplin for Heard on the Street.
Oil and metals would likely sell off sharply at the outset of an actual trade war: Copper already has, falling around 4% in March. Still, if saner heads prevail—and news of behind-the-scenes trade talks between the U.S. and China is encouraging—the current tensions may not escalate into a full-blown trade war.
But if tensions do ratchet up, it might be a commodities-buying opportunity, thanks to Beijing’s likely response: another big round of stimulus measures that would push demand higher again.
India’s appetite for diesel is returning following anemic demand in 2017, according to analysts for Energy Aspects. In January, diesel demand increased by 0.20 million barrels per day, up from growth of 0.13 million barrels per day in December.
“Heavy government infrastructure spending will underpin demand, with the government—doubtless keeping the upcoming general election in mind, “said analysts for Energy Aspects in a recent note.
Today: The American Petroleum Institute releases its weekly forecasts on U.S. petroleum inventories for the week prior.
Wednesday: The U.S. Energy Information Administration releases U.S. production figures
April 18–19: IQPC hosts the Oil & Fuel Theft Summit in Geneva. Speakers include Mahmoud Al-Bayati, the director general for counter-terrorism for Iraq, William J. Waggoner, the Chief Executive Officer for the Mexico Petroleum Company and Daniel Gianfalla, a member of the national maritime security advisory committee at the U.S. Department of Homeland Security.
The WSJ’s Alison Sider on the consequences of high oil prices. As oil prices rise, so does the risk that demand will fall. “The fastest growth in oil demand around the global economy is happening in countries that are more sensitive to the rising oil price environment like India, China, Turkey, or the Philippines,” analysts at Bank of America Merrill Lynch point out. And those economies are also “heavily exposed” to potential shocks from risks to global trade or rising interest rates. The analysts still think demand for oil will increase by 1.5 million barrels a day this year and 1.3 million barrels a day next year. But they think Brent crude prices will be capped at $80 a barrel.
The WSJ’s Mike Spector on the U.S. debate about vehicle emissions. Sen. Edward Markey (D., Mass.) blasts the EPA’s apparent decision to ease future vehicle emissions standards, calling it “imperative” to maintain rules that the Obama administration locked-in requiring car companies to cut tailpipe pollution enough so cars and trucks sold average more than 50 mpg by 2025. That target equates to 36 mpg in real-world driving. Trump reopened review of standards covering 2022-2025 and the EPA plans by April 1 to determine rules should be revised, an action long sought by auto makers, according to a person familiar with the matter. “Despite what EPA Administrator Scott Pruitt and his Big Oil cronies say, these standards are not only economically feasible and technologically achievable, they are imperative,” said Markey, a longtime environmentalist and industry critic.