What to Watch

Oil Edges Up Amid Pipeline Outage

Oil prices firmed on Friday, supported by a pipeline outage in the North Sea and ongoing cuts by major producers, but higher forecasts for U.S. output in 2018 this week limited gains, reports The Wall Street Journal’s Sarah McFarlane.

Brent crude, the global oil benchmark, rose 0.02% to $63.33 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $57.33 a barrel.

The timing of a restart of the Forties Pipeline System remained uncertain after owner Ineos discovered a crack in a pipe last week. The outage stops the flow of around 450,000 barrels of North Sea oil per day.

Energy News

Cobalt International Energy Files for Bankruptcy

Oil firm Cobalt International Energy Inc. filed for bankruptcy on Thursday. The publicly traded company, whose major investors include the Carlyle Group, was assailed by a host of factors—the failed sale of operations in Angola, a prolonged downturn in the exploration and production industry and nearly $3 billion in debt and looming interest payments.

Venezuelan Creditors Eyeing Citgo Assets Face Uphill Battle

As Venezuela edges close to possibly defaulting on its massive national debt, Citgo Petroleum may look like a tempting target for bondholders of its parent company, Venezuelan-owned oil driller PDVSA. Experts caution that the refinery operator’s complex debt structure could make its assets difficult for creditors to seize.

“Unless [the Forties pipeline shutdown] proves to be a more serious situation than what it currently appears, then I think most of that is already priced in the oil market”

Paul Horsnell, the head of commodity research at Standard Chartered.

WSJ Energy In-Depth

Elliott Preps for Potential Fight With Hess, Seeking CEO Ouster

Elliott Management Corp., an activist hedge fund, is gearing up for another bruising fightwith Hess Corp., in which it hopes to either remove its chief executive or push the oil firm to put parts of its operations on the auction block, write David Benoit and Bradley Olson.

The hedge fund and Hess, both based in New York, fought a nasty battle in 2013 that forced the firm’s chief executive John B. Hess to give up his role as chairman and added Elliott nominees to the board.

Since then, the firm’s stock has underperformed. Shares of Hess have lost 30% in 2017, despite a 21% gain in the S&P 500 and a 14% rise in oil prices.

A fight over Hess could hinge on sentiment over multibillion-dollar oil-and-gas projects that are making investors impatient.

In 2015, Hess, along with Exxon Mobil Corp., announced a giant oil discovery off the coast of Guyana. Some analysts have suggested Hess’s share of it may be worth more than $6 billion; Hess’s current market capitalization is about $13.5 billion.

Elliott has proposed selling a stake in the Guyana assets.

Big Number

$60 billion

U.S. exploration and production companies have raised $60 billion in bond sales in 2017, more than in any year since the slump in oil prices began in 2014, reports the Financial Times.

FutureCurve

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

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

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

Reporter’s Notebook

The U.S. solar industry continues to have an off year thanks to rising solar prices and uncertainty over whether the Trump administration will impose tariffs or other trade protections on imported solar panels and cells. Solar power installations in the U.S. are down 22% year-to-date, even as more than 2 gigawatts of solar capacity were installed in the third quarter, according to GTM Research and the Solar Energy Industries Association. Those capacity additions represented a 51% drop year-over-year. President Trump faces a January deadline regarding the trade protections, writes the WSJ’s Houston-based correspondent Erin Ailworth.

Brazil is the world’s 9th-largest producer of oil and other liquids and it has continued to ramp up production in 2017 despite the costly price of extracting from offshore, pre-salt deposits. The EIA said in a report today Brazil has already produced 3.3 million barrels a day of petroleum and other liquids through August, topping 2016’s 3.2 million. “Brazil’s pre-salt oil production in 2016 reached a record 1.02M bpd surpassing the 2015 production level by 33%,” the report said. The EIA added that production from pre-salt oil deposits require “substantial investment to extract,” since they’re offshore under deep, thick layers of rock and salt. “Despite these challenges, however, pre-salt crude oil production in Brazil has increased significantly since it began in 2009,” reports WSJ Texas correspondent Dan Molinski.

Texas power grid operator, ERCOT, has endorsed a major transmission project to help address growing electricity needs in Freeport, Tex., which is emerging as an energy export hub. Oil exports from the U.S. got their start in Freeport two years ago, and in 2018 a new liquefied natural gas (LNG) plant will start shipping fuel abroad. The area is home to several chemical plants that are also expanding. CenterPoint Energy proposed the new 48-mile 345-kV transmission line and an upgrade to the 345-kV line already there to keep up with the industrial growth. Peak customer demand in Freeport is projected to be 92% higher in 2019 than it was in 2016, and will continue rising through 2022. The $247 million power project will be completed in 2022, pending approval from the Public Utility Commission of Texas, reports WSJ Deputy Texas Bureau Chief Lynn Cook.