What to Watch
OPEC Divided on the Right Price for Oil
Major oil producers are clashing over how to fine tune the price of oil, amid fears of provoking an avalanche of U.S. crude output, write the Wall Street Journal’s Benoit Faucon and Summer Said.
The Organization of the Petroleum Exporting Countries is breaking into two camps after more than a year of unity on the necessity to curtail a global oil surplus and prop up oil prices.
On one side is Saudi Arabia, which wants oil prices at $70 a barrel or higher, and on the other is Iran, which wants them around $60.
The split is driven by differing views over whether $70 a barrel would send U.S. shale companies into a production frenzy that could cause prices to crash.
Iran wants OPEC to work to keep oil prices around $60 a barrel to contain shale producers, Oil Minister Bijan Zanganeh told The Wall Street Journal in a rare interview.
“If the price jumps [to] around $70…it will motivate more production in shale oil in the United States,” he said.
Meanwhile, Saudi Arabia has played down shale’s ability to upset the market.
Saudi Arabia and Iran are also at odds politically. They have backed different sides in the Syrian civil war, the Saudis have lobbied for tighter sanctions on Tehran, and Riyadh accuses Iran of funding and arming Yemeni rebels.
Still, Mr. Zanganeh said OPEC could agree in June to begin easing current production limits in 2019. The Saudis have expressed openness to that idea.
Meanwhile, oil prices fell Monday, weighed down by concerns about a rapid rise in U.S. crude output as cracks emerged in OPEC’s united front on output cuts.
Brent crude, the global oil benchmark, fell 0.53% to $65.11 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.55% at $61.70 a barrel.
Eni Sells Stake in Offshore Egypt Concession
Over the weekend, Italy’s Eni SpA announced its intentions to sell a 10% stake in the Shorouk concession, offshore Egypt, to Mubadala Petroleum for $934 million, writes Marc Bisbal Arias for Dow Jones Newswires. Separately the firm said it bought a stake in two Abu Dhabi assets for $875 million.
Economic Recovery Lifts Construction Industry
Hiring in the construction industry has increased partly due to rising oil prices that have fueled the energy sector and spurred the construction of oil rigs, pipelines and other infrastructure.
“If [North Korea] can get some of their energy requirements from the U.S… you can sort of see how something might develop out of this.”
– Senate Majority Whip John Cornyn of Texas
German Energy Giants E.On and RWE to Swap Some Assets
Germany’s two largest energy companies will swap assets with each other, the latest in a yearslong series of deals unleashed by Chancellor Angela Merkel’s 2011 renewable-energy revolution. E.On SE on Sunday said it had agreed to swap a range of assets with rival RWE AG, which said that the deal would help it create a leading European utilities business with diversified power-generation methods, including both renewables and coal.
The portion of coal in the global energy mix is expected to fall to 26% in 2022, down from 27% in 2016 because of anemic demand for the fossil fuel as compared with other energy sources, said the International Energy Agency in a recent report.
Tuesday: API issues forecasts on the U.S. crude inventory.
Wednesday: The U.S. Energy Information Administration releases U.S. production figures.
June 5-6: The London Crude Oil Summit. The speakers include Shell Vice President of Crude Trading Mike Muller and Franco Magnani CEO, of Eni Trading and Shipping.
WSJ reporter Christopher Matthews on steel tariffs. Natural gas pipeline owners are asking the Trump Administration to exempt them from steel tariffs. The Interstate Natural Gas Association of America asked the administration on Tuesday to exempt the steel products used to build natural gas transmission pipelines due what it called a scarcity of domestic supply and national security considerations. The large, thick-walled steel used to construct the pipelines is a niche product with unique technical specifications and limited domestic manufacturing capacity, according to the trade group. “For certain steel products used in pipelines, there is zero domestic availability today,” INGAA President Don Santa said.
The WSJ’s Yantoultra Ngui on Asia’s petrochemicals market.Malaysia’s petrochemicals sector is in a sweet spot as strong industry demand and tight supply are fueling healthy margins, said investment bank Maybank Kim Eng. Maybank attributes the positives, which could result in exceptional first quarter results, to many petrochemical producers in the Middle East undergoing prolonged shutdowns and Chinese producers stocking up ahead of the Lunar New Year holiday last month. Moreover, China’s pollution-fighting efforts have led to the closure of many local producers that utilize older technology, requiring more imports.