Energy Journal: Oil Hits 3-year High on Iranian Turmoil

What to Watch

Geopolitical Tensions Drive Oil to Three-Year High

 

Oil prices hit a three-year high on Thursday, fueled by ongoing protests in major producer Iran

 

West Texas Intermediate futures on the New York Mercantile Exchange were trading up 0.2% at $61.77 a barrel. Brent crude, the global oil benchmark, eased 0.1% to $67.79 a barrel on London’s ICE Futures exchange, having earlier peaked at $68.27, the highest level since May 2015.

 

Antigovernment protests in Iran over the past week have been partly driven by economic grievances after the lifting of international sanctions two-years ago did not generate the expected windfall.

Energy News

Petrobras to Pay $2.95 Billion to Settle U.S. Suit Over Corruption

Brazilian state-run oil company Petróleo Brasileiro SA said Wednesday that it would pay $2.95 billion in one of the highest-value settlements in history to end a class-action lawsuit by U.S. investors who had sought to recoup corruption-related losses.

 

China’s LNG Prices Drop

 

Liquefied natural gas prices in northern China have dropped more than 40% from record highs reached less than two weeks ago as a supply crunch has eased and curbs have been enacted on industrial users of the fuel, Reuters reports.

 

“Tesla would have done well to be far more realistic from the start about setting lofty production volumes, having no experience with manufacturing at high volume”

Michelle Krebs, analyst for Autotrader

 

 

Dominion Energy to Buy Scana, Absorb Costs of Failed Nuclear Plant Project

Dominion Energy Inc. has struck a deal to buy troubled energy company Scana Corp. in a $7.43 billion all-stock deal. The agreement is the final chapter for Scana’s South Carolina nuclear project which was abandoned when construction costs skyrocketed.

 

WSJ Energy In-Depth

Big Oil Investors Rethink Their Bets

 

Norway’s sovereign-wealth fund is one of several investors who may pull back from investments in the oil and gas sector, because of the uncertainty of future oil demand, write Sarah Kent and Nina Adam.

 

Big investors and banks are rethinking investments in the fossil-fuel industry amid rising concerns about the link between carbon emissions and global warming, which has provoked increased government regulation and spurred potentially lower-carbon technologies like electric vehicles.

 

In Norway, the government says it will decide this year whether to wind down its $1 trillion sovereign-wealth fund’s investments in the oil and gas sector. Its assets include multibillion-dollar stakes in Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron Corp. and BP PLC.

 

Others, including French insurance giant AXA Group and Dutch bank ING Groep, are pulling back from parts of the industry that contribute most to climate change, like Canada’s oil sands.

 

In a world where the heaviest polluting industries could be penalized, some investors say the financial risks of such investments could outweigh the rewards.

Big Number

7%

Big firms oil firms are hesitant to spend money chasing crude after the collapse in oil prices in 2014 led to a deep retrenchment in spending for the sector.

 

Global investment in exploration, vital to increase output and offset the natural decline of existing fields, will reach $37 billion in 2018, down 7 % from a year earlier, according to WoodMac.

 

FutureCurve

 

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

 

The state oil firm Saudi Aramco releases its monthly crude prices for the U.S., Europe and Asia.

 

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

 

Reporter’s Notebook

WSJ London correspondent Benoit Faucon on OPEC output. Production from the twelve OPEC members subject to oil-production curbs rose by 85,000 barrels a day to 29.795 million barrels a day in December, says Vienna-based consultancy JBC Energy. Much of the boost came from Saudi Arabia, where output was up 50,000 barrels a day last month, as well as more modest increases in Angola, Algeria and Iraq. While compliance to agreed OPEC cuts of 1.2 million barrels a day has fallen from 131% in November, it remains at 124%.

 

WSJ Dallas correspondent Dan Molinski on oil-price predictions. An informal bet among oil analysts, journalists and others on where oil prices will end each year suggests these would-be oracles finally started to get a handle on price forecasts in 2017 after being wildly wrong ever since prices collapsed in 2014. In previous years, the winner of the bet — organized on Twitter by The Fuse’s Leslie Hayward — was simply the one who bet the lowest because virtually everyone predicted prices would end much higher than they did. But 2017’s winner, energy analyst Chris Nelder, won with a middle-of-the-pack Brent forecast of $65/bbl (it ended just under $67). For end-2018, the bets are already in, and the lowest among 24 players is $39/bbl, while Nelder’s bet is highest, at $81/bbl.