Energy Journal: Saudi Tough Talk Isn’t Enough to Bolster Oil

Oil Wavers Despite Hopes for a Rebalanced Market

Oil prices vacillated as positive signals from a weak dollar and tough talk from Saudi Arabia’s oil minister failed to overcome a bearish market sentiment.

 

Crude futures showed a glimmer of hope and edged up in early morning trade, bolstered by a soft dollar and comments from Saudi Arabia’s energy minister Wednesday that the oil-rich kingdom and the Organization of the Petroleum Exporting Countries were committed to sticking with production cuts for the rest of the year.

 

“We believe we have to err on the safe side and make sure that the market has balanced,” Mr. Falih said at a news conference. “And if we have to overbalance the market a little bit, then so be it.”

But prices soon gave up their gains, as lingering concerns on inventories took hold.

Brent crude, the global benchmark, fell 0.54% to $64.01 a barrel, on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.15% at $60.52 a barrel.

Energy News

Louisiana Port Edges Closer to Oil Export on Supertankers

A giant U.S. crude import terminal is moving closer toward loading large vessels that could carry oil abroad, a move that would allow bigger shipments to Asia and open up other overseas markets.

 

Brazil’s Petrobras Announces New March Bidding Round for Gas Pipeline

State-owned Petroleo Brasileiro SA, or Petrobras has decided on a late-March deadline to receive bids for the sale of a major gas pipeline network. Several bidders including Australia’s Macquarie Group Ltd are lined up, Reuters reports. Petrobras is considered the most indebted oil company in the world and is in the midst of a restructuring aimed at restoring its financial health.

“We’re seeing tension shift back to the idea that even with the bearish reports we’ve seen, global growth in the next year is going to boost energy demand”

– Gene McGillian, Research Manager at Tradition Energy

 

Trump Backs Gasoline Tax Hike

President Donald Trump surprised a group of lawmakers by voicing supportfor a 25-cent-per-gallon increase in federal gasoline and diesel taxes to help finance an national infrastructure plan backed by the White House. According to several lawmakers the measure is unlikely to pass Congress, Bloomberg reports.

 

Big Number

15

Efforts by OPEC and external producers such as Russia to eliminate about 2% of global supply seem to be paying off in Asia where the oil market has tightened, Reuters reports.

Floating storage data for the region shows only 15 supertankers are currently filled with oil anchored off the coasts of Singapore and surrounding Malaysia, Asia’s main trading and storage hub for crude.

FutureCurve

Feb. 20-22: The Energy Institute hosts the International Petroleum Week conference in London. The speakers include BP Chief Executive Bob Dudley and Dr. Faith Birol, executive director of the International Energy Agency.

March 5-9: Cambridge Energy Research Associates hosts the CERAWeek energy conference in Houston. The speakers include IHS Markit Vice Chairman Dr. Daniel Yergin and Amin Nasser, president and CEO of Saudi Arabia Oil Co., or Saudi Aramco

Reporter’s Notebook

The WSJ’s Bradley Olson on oil investment. Global oil and gas companies are set to spend almost $60 billion in the North Sea in the next three years, according to an estimate from GlobalData. That includes about $36 billion on traditional oil projects, $5 billion on heavy oil and about $18 billion for natural gas projects through 2020, GlobalData says. On average, that will equate to a cost per barrel of about $12.82, with the lowest cost being projects in shallow waters, according to GlobalData

WSJ Correspondent Christopher Alessi on shale oil growth. There is “more downside” for oil prices ahead, as the “sentiment cycle deflates and strong shale growth challenges the tightening narrative,” according to Norbert Ruecker, head of commodity research at Julius Baer. The International Energy Agency warned Tuesday that U.S. shale output could outpace global demand this year, while reiterating its prediction that U.S. crude production will surpass that of Saudi Arabia. “The shale boom shows strong momentum, with drillers adding rigs at a rapid pace and U.S. oil production surpassing historic records earlier than expected,” Mr. Ruecker wrote in a note Tuesday. “The much-watched U.S. inventory levels are set to increase seasonally over the coming week as refineries go into maintenance.”