What to Watch

Prices Climb as Key Pipeline Shuts Down for Repair

 

Global oil prices jumped to their highest level since 2015 as the shutdown of a key European pipeline sapped more crude from the market, writes The Wall Street Journal’s Georgi Kantchev.

 

Brent crude, the global benchmark, was up 0.40%, at $64.91 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.55%, at $58.31 a barrel.

 

Late Monday, British refining and chemicals company Ineos said it would shut down theForties Pipeline System for several weeks after discovering a widening crack.

 

The pipeline system delivers around 40% of the U.K.’s North Sea oil-and-gas production, carrying about 445,000 barrels of crude a day.

 

“The pipeline outage is the big driver right now,” said Tom Pugh, a commodities economist at Capital Economics. “When you take out so much oil out of the market, that inevitably adds to the tightness.”

 

The outage comes as production cuts by the Organization of the Petroleum Exporting Countries and other major producers like Russia take oil off what has been an oversupplied market.

 

Last month OPEC and its allies agreed to extend their production cuts by nine months to the end of 2018.

 

Energy News

 

China’s Clean Energy Future Has a $1.2 Trillion Problem

China’s need to keep its coal-fired power plants current on their massive loans is a key constraint on the country’s ability to quickly switch to greener power, writes Nathaniel Taplin for Heard on the Street.

 

Exxon to Provide Details on Climate-change Impact to its Business

Exxon Mobil Corp. on Monday said it would publish new details about how climate change could affect its business in a move aimed at appeasing critics and forestalling another proxy fight next year, Reuters reports.

 

“We will announce … a strategy in the June meeting [with OPEC]. That does not mean we will exit in June. That means we will come up with a strategy”

Suhail bin Mohammed al-Mazroui, energy minister United Arab Emirates

 

WSJ Energy In-Depth

Saudi Aramco Ramps Up Spending to Over $40 Billion a Year

Saudi Arabian Oil Co. unveiled a plan to invest more than $40 billion a year in projects over the next decade, a significant expansion for the world’s largest energy company ahead of its expected public listing next year, writes Summer Said.

 

The $414 billion proposal is up almost 25% from a 10-year spending plan outlined last year by Saudi Aramco, as the company is commonly known.

 

The increased spend is being driven by its goal of maintaining its production capacity at about 12 million barrels of oil a day, the most of any company in the world.

 

Saudi Aramco’s plans to increase spending buck a general trend in the global oil industry. Big publicly listed oil companies like Royal Dutch Shell PLC and Exxon Mobil Corp. have either pulled back expenditure or maintained current levels as they weather the market downturn.

 

 

Big Number

31 million

U.S. oil-and-gas production is expected to reach above 31 million barrels of oil equivalent per day in the 2030s, from around 24 mboe/d today.

This is 50% more oil and gas than any country has ever managed to produce in a year, according to the International Energy Agency.

 

FutureCurve

Today: S&P Global Platts is hosting its annual Middle East Crude Oil Summit in Dubai, followed by its second annual Middle East refining summit on Wednesday.

Wednesday: The Organization of the Petroleum Exporting Countries releases its closely watched Monthly Oil Market Report.

Thursday:The International Energy Agency releases its Oil Market Report.

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

Saudi Arabia has experienced significant demand growth for refined oil products in recent years, driving a country that had focused primarily on upstream oil production to grow its refining capabilities. “Low prices in the local market encouraged domestic consumption,” said Fahad Alturki, chief economist and head of research at Jadwa Investment. Mr. Alturki, speaking at the S&P Global Platts Middle East Crude Oil Summit in Dubai on Tuesday, said Saudi Arabia has significantly expanded its capacity to refine highly complex products, allowing it to not only meet domestic demand but also improve its refining margins and raise its exports of refined products, reports the WSJ’s  correspondent Christopher Alessi.

 

The rush for oil in the red-hot Permian Basin of West Texas is creating plenty of byproduct garbage, and San Antonio-based Petro Waste Environmental LP said it is building two more landfills in the zone that will make it the largest Permian operator. PWE said it just broke ground on its Deep Six and Big Lake landfills that’ll handle oil-based mud, water-based mud, oil-based drill cuttings, water-based drill cuttings, contaminated soil, and some non-hazardous exploration and production waste. The Big Lake facility will also sell fresh water. PWE notes new techniques in recent years for oil drilling and pumping “have increased the volume of non-hazardous solid wastes and high-solids-content waste fluids,” reports WSJ Texas correspondent Dan Molinski.

 

Few new refineries will start producing fuel in 2018, but roughly 800,000 barrels a day of new distillation capacity will come online next year as existing plants eliminate bottlenecks in their systems, according to OPEC. Kuwait’s national oil company is an investor in a new 200,000 b/d plant in Vietnam, which will run Kuwaiti crude. In Canada, a 50,000 b/d refinery in Redwater, Alberta will enter its first full year of operation – the first such plant built in Canada in 30 years. But the small refinery will process Canadian crude and sell refined products locally, so it’s not expected to impact trade flows, according to Poten & Partners, which tracks fuel movements, reports WSJ Deputy Texas Bureau Chief Lynn Cook.