What to Watch

Oil Boosted by IMF Growth Expectations

 

The world’s seven biggest economies—the U.S., China, Germany, Japan, France, the U.K. and India—each grew above one percent in 2017, a feat that could set the world economy up for more solid growth and boost oil’s prospects.

 

The global economy should grow by 3.9% a year in 2018 and 2019, up 0.2% from a previous estimate, driven in large part by recently approved U.S. tax-code changes, the International Monetary Fund said Monday at the World Economic Forum in Davos.

 

Oil prices perked up following the IMF’s statements on hopes that a stronger world economy would boost demand for crude.

 

On Tuesday Brent crude, the global benchmark, was up 0.41% at $69.31 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.47% at $63.87 a barrel.

 

“The IMF’s upward revision of its growth forecast is generating a tailwind,” according to analysts at Commerzbank in a note. “This further improves the already fairly rosy demand prospects on the oil market.

 

Currently the International Energy Agency projects a rise in global oil demand of 1.3 million barrels per day, which “could prove too low,” analysts said. Meanwhile, the Organization of the Petroleum Exporting Countries and the U.S. Energy Information Administration forecast that demand will grow by 1.5 million and 1.7 million barrels per day respectively.

Energy News

FirstEnergy Gets $2.5 Billion From Elliott, Bluescape Investor Group

FirstEnergy Corp. raised $2.5 billion in a private stock offering from a group led by activist investor Elliott Management Corp. and private-equity firm Bluescape, the Ohio-based utility said Monday.

Five Missing After Well Explosion in Oklahoma

Five oil-field workers in Oklahoma were missing Monday after an explosion at a natural gas well owned by Red Mountain Operating LLC. The cause of the accident was unknown.

“Assuming the geopolitics don’t turn nasty, I would think the [world’s economic] expansion probably continues for at least a couple more years”

Jay Bryson, global economist for Wells Fargo Securities

BP, Kosmos Win Rights to Two Oil Blocks in Sao Tome and Principe

A consortium of BP and Kosmos Energy has won exploration rights to two offshore oil blocks in Sao Tome and Principe’s exclusive economic zone. Sao Tome and Principe, a tiny island nation in Africa’s Gulf of Guinea, is surrounded by oil-rich neighbors Nigeria, Cameroon, Equatorial Guinea and Angola.

WSJ Energy In-Depth

U.S. Imposes New Tariffs, Ramping Up ‘America First’ Trade Policy

 President Donald Trump has potentially kicked off a trade war in renewable energy and appliances by slapping steep tariffs on imports of solar panels and washing machines, reports the WSJ’s Jacob M. Schlesinger and Erin Ailworth.

The tariffs are aimed mainly at Chinese makers of solar panels and South Korean producers of washing machines, but will also affect trading partners from Mexico and Canada to Europe.

The Trump administration is imposing the new barriers under a 1974 trade law that permits companies to seek relief if they can prove “serious injury” from a sudden surge in imports.

That law was last invoked by the George W. Bush administration in 2002 to protect steelmakers, but it later removed the tariffs after the World Trade Organization pushed back.

The Trump administration acted on petitions for relief by Suniva Inc. and SolarWorld Americas Inc., two embattled solar panel makers with operations in the U.S. that have filed for bankruptcy protection.

The washing machine petition was filed by Whirlpool Corp., which is locked in a tough competitive fight with Samsung Electronics Co. and LG Electronics Inc., both of South Korea. Whirlpool’s stock rose 3% in after-hours trading in response to the move, which was announced after U.S. markets closed.

Big Number

$9 billion

Puerto Rico is set to sell off its troubled power utility to the private sector, said authorities in the U.S. territory on Monday. The utility, PREPA, has yet to recover from Hurricane Maria, which in late September knocked out power to the entire island and killed dozens of people. It incurred about $9 billion in debt before declaring bankruptcy last year.

FutureCurve

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

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

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

Reporter’s Notebook

WSJ Deputy Texas Bureau Chief Lynn Cook on a new gas power plant. Entergy Corp. will build a huge new natural-gas-fired power plant near Lake Charles, La., a hub for the petrochemical and refining industry which is growing by leaps and bounds. The plant will likely burn gas extracted from the nearby Haynesville Shale, which is experiencing a renaissance as drillers race back in to serve the Louisiana industrial complex where dozens of petrochemical-related projects are under way. The power plant, located near the $11 billion Sasol chemical complex, will generate nearly 1000 megawatts and cost just under $900 million to construct. It’s due online in 2020.

The WSJ’s Christopher Matthews on the yet another embattled pipeline project. Analysts say regulators’ approval of the controversial PennEast Pipeline late Friday marked a major milestone, but hurdles still lurk. The Federal Energy Regulatory Commission conditionally approved the 120-mile natural gas pipeline in a 4-1 vote. The line, proposed by a consortium of six companies, would take natural gas from the Marcellus Shale in Pennsylvania to New Jersey to supply power generation and heat homes. ClearView Energy Partners says opponents of the project are likely to challenge FERC’s decision in court and that landowners have already blocked the companies from surveying their property along the proposed route. The pipeline also still needs approval from regulators in New Jersey and the Delaware River Basin Commission.

WSJ reporter Christopher Alessi on how cars that run on electricity might affect oil. If electric vehicles take off by the next decade, global oil demand could peak by 2030, according to analysts at Bank of America Merrill Lynch. “Electric vehicles present an alternative to oil-fired cars, which we think will likely start to erode the last major bastion of oil demand growth,” the analysts wrote in a note. The analysts expect electric cars to comprise 40% of total sales by 2030, rising to 95% of sales by 2050. “The only major sector that should continue to grow its oil demand long term is petrochemicals,” the analysts said.