What to Watch

Oil Market Weighs Conflicting Messages on Dollar by U.S. Administration

Inconsistent remarks by President Donald Trump and his Treasury secretary about the dollar this week sent the U.S. currency on a rollercoaster ride that was shadowed in reverse by crude oil prices.

 

The greenback had fallen to three-year lows earlier in the week after Treasury Secretary Steven Mnuchin’s comment that a “weaker dollar is good for trade,” buoying oil prices, only to have sentiment do an about face late Thursday after Mr. Trump said he wants to “see a strong dollar.” Comments by both Messrs. Trump and Mnuchin came during the World Economic Forum in Davos, Switzerland.

 

The U.S. currency tends to have an inverse relationship with dollar-denominated commodities like oil.

 

But by Friday morning, the dollar was losing traction, once again sending oil prices north.

 

The president “did attempt yesterday evening to dispel the impression that his government prefers a weak U.S. dollar…but he didn’t really succeed,” according to analysts at Commerzbank.

 

“For as long as the U.S. dollar remains on the defensive, no more pronounced price fall on the oil market is likely to ensue,” the analysts wrote in a note Friday.

 

In an interview with The Wall Street Journal Friday, Mr. Mnuchin said his statement about a weaker dollar was not intended to “endorse it or encourage it in any way,” adding that the dollar’s short-term direction is “not a concern of mine one way or the other.”

Energy News

U.S. Reverses Air Pollution Policy

The Trump administration is getting rid of a decades-old emissions policymeant to limit some of the biggest sources of hazardous pollutants like mercury and lead, reports The Wall Street Journal’s Timothy Puko.

 

The government is withdrawing a “once-in always-in” policy that indefinitely keeps sites classified as “major sources” of hazardous air pollution after they meet that classification, the Environmental Protection Agency said Thursday

 

Oil Price Rise Drives U.S. Business Investment

The recovery in global oil prices has helped fuel a recovery in U.S. business investment, with corporate spending on new structures, equipment and intellectual-property products having risen for six straight quarters, reports The Wall Street Journal’s Ben Leubsdorf.

 

The upswing in capital investment was mainly the result of the energy sector increasing spending following a significant downturn during the period after oil prices crashed in late 2014, according to experts.

 

The dollar’s short-term direction is

U.S. Treasury Secretary Steven Mnuchin

 

U.S. Edges Towards Energy Independence

The U.S. could become the world’s biggest oil producer by the end of the year, surpassing Saudi Arabia’s crude output and possibly Russia’s in 2018, with production in excess of 10 million barrels a day for the first time since 1970, reports Javier Blas for Bloomberg Businessweek.

“The U.S. crowing form the top of a hill long occupied by Saudi Arabia or Russia would scramble geopolitics. A new world energy order could emerge. That shuffling will be good for America but not so much for the planet,” Mr. Blas writes.

 

WSJ Energy In-Depth

Freezing Temperatures Heat Up Natural-Gas Market

The possibility of another spate of arctic temperatures descending on the U.S. has sent natural-gas futures prices to their highest level in over a year, reports Alison Sider.

 

Prices surged this past week after weather forecasts predicted a wave of intense cold at the end of the month would hit the Midwest, moving down to Texas and eastward.

 

“The cold could strain natural gas supplies, which have already been depleted by record-low temperatures across much of the country early this month,” Ms. Sider writes.

 

The freezing temperatures at the start of the month resulted in record demand for gas, with 359 billion cubic feet withdrawn from storage, according to the U.S. Energy Information Administration.

 

Big Number

20%

Oil giant Royal Dutch Shell PLC aims to cut the carbon intensity of its energy operations by 20% by 2035 and close to half by 2050.

 

FutureCurve

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

Monday: Chatham House in London holds its 2018 energy conference Jan. 29-30. Invited speakers include Claudio Descalzi, CEO of Italy’s Eni, Jabar Ali al-Luaibi the minister of oil for Iraq and Mustafa Sanalla, chairman of the National Oil Corporation of Libya.

Tuesday: The American Petroleum Institute releases its weekly forecast of U.S. crude inventories.

 

Reporter’s Notebook

WSJ reporter Bradley Olson on Big oil pulling in cash. 

The world’s biggest oil companies are poised to generate record amounts of free cash flow in 2018, even exceeding what they achieved when crude sold for more than $100 a barrel, according to Simmons & Co. The biggest seven oil companies that operate wells and refineries–Exxon Mobil, Chevron, Royal Dutch Shell, Total, BP, Statoil ASA and Suncor Energy–will generate about $60 billion in cash in excess of spending on new investments, dividends and stock buybacks in 2018, according to Simmons.

 

WSJ reporter Christopher Alessi on Chinese crude demand. 

Expected refinery maintenance and weaker refining margins have halted the crude-price rally for the moment, according to analysts at consultancy Energy Aspects. “But aside from this seasonal softness, the broader fundamentals remain sound,” the analysts said. They highlighted Chinese de-stocking over the last quarter of 2017, suggesting Chinese buyers would soon return to the market and bolster demand. “So, if Chinese majors plan to raise crude imports once there is a pullback in prices, then any correction will be limited,” the analysts argued.