What to Watch
In the Oil Patch, Bigger Is No Longer Better
Investors are showing a preference for smaller firms such as ConocoPhillips, a company that has prioritized returning money to its shareholders over pursuing relentless growth, writes The Wall Street Journal’s Bradley Olson.
The firm’s strategy has been to reduce its size and aim for share buybacks and dividends over growth in recent years.
Conoco’s shares have risen 29%, beating the S&P 500 and significantly outperforming the company’s U.S. rivals. Exxon Mobil Corp. which recently laid out plans to increase spending by 25% or more beginning in 2020, have fallen by about 9% in that time.
The success of ConocoPhillips suggests that investors are looking for something different from big oil companies these days. Fading are the days when shareholders bought Exxon or Chevron to get exposure to the big profits that could come with rising oil prices.
An increasing number of investors want conservative, stable returns–often a motive for investment in the utility industry.
Oil Prices Regain Footing After Selloff
Oil futures edged up from recent lows after trade tensions between the U.S. and China put pressure on prices at the start of the week.
Brent crude, the global benchmark, was up 0.65% at $68.08 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.59% at $63.38 a barrel.
Australia’s Santos Gets Takeover Bid Worth Nearly $10.4 Billion
A group led by U.S. private equity firm Harbour Energy Ltd. is closer to inking a landmark $10 billion deal to buy Australia’s Santos Ltd. If the sale goes through, Harbour would get a stake in two big liquefied natural gas plants in Australia and another in Papua New Guinea.
“The intensification of trade disagreements between China and the U.S… may have repercussions on global trade and the global economy.”
– Analysts for JBC Energy
Cobalt Prices Cruise to the Top
Cobalt prices have extended a record run surging more than 20%, outpacing other commodities as demand for the metal, used in the rechargeable batteries that power iPhones and electric cars, has increased.
WSJ Energy In-Depth
Get Ready for Another LNG Boom
Industry executives see the market for natural gas getting tight again by 2022, writes Spencer Jakab for Heard on the Street.
Last week, Lorenzo Simonelli, chief executive of oil-field-services giant Baker Hughes, a GE Company, painted a bullish long-term picture.
While overall fossil-fuel demand has slowed, liquefied natural gas is seen growing by 4% to 5% a year through 2040. He said the industry was surprised by how quickly demand grew last year.
Still, market players seem hesitant to commit more money to increase capacity in an over-supplied sector.
Analysts at HSBC point out that only 12 million tons per annum of capacity were added in 2016 and 2017—about half the pace of 2009 through 2014 and not enough to meet projected demand. Growth in consumption just last year was 27 million tons.
China has reduced its tax on shale gas production by 30%, Reuters reports.
Today: API issues forecasts on U.S. crude inventories.
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 reporter Erin Ailworth on a bankrupt coal firm’s chances of survival. Industry watchers aren’t holding out much hope for FirstEnergy, which requested an emergency declaration from the Department of Energy to keep many of its coal and nuclear plants open. “We see the request to the DOE as a last-ditch effort that is very unlikely to succeed,” wrote Katie Bays, an analyst at Height Securities, on Monday. Analysts at Capital Alpha Partners were also skeptical, questioning “how long it will take the Department of Energy to dismiss the petition.” Though they view the legal obstacles to such an order as appearing “insuperable,” the analysts wondered whether the DOE might entertain the petition, at least briefly, “to get whatever policy and political leverage it can.”
The WSJ’s Rhiannon Hoyle on Beijing’s role in deciding the value of thermal coal. China will remain the biggest risk to thermal-coal prices over the short- and medium-term, according to Commonwealth Bank of Australia. The bank forecasts stronger import demand from China in early 2018, “particularly with policymakers relaxing their stance on imports.” Still, foreign coal will likely have to compete with rising output locally, as Chinese production is “also expected to rise with authorities looking to boost output by 7.3% in 2018,” CBA says.