What to Watch

Stock Rout Pushes Down Crude

The global stock-market sell-off is weighing down oil prices and sending energy shares skittering lower on Tuesday.

Markets in Japan and Hong Kong fell close to 5% as this year’s rising sectors—technology, resources and financial shares—led the way lower.

The Stoxx Europe 600 dropped 3.2% in the early minutes of trading, marking a fall of nearly 7% from its peak this year.

Energy stocks weren’t spared the turmoil.

BP’s share price dropped over 0.4% in London trading on Tuesday, after the firm reported its first quarterly loss since mid-2016 largely because of charges from the 2010 Gulf of Mexico blowout and the U.S. tax overhaul.

Meanwhile rival Royal Dutch Shell PLC was down 2.15 % and smaller firms like Tullow PLC and utility shares were also lower in London.

Analysts said recent worries about rising bond yields and higher inflation could be partly to blame.

“The rise in risk aversion that this expresses is prompting speculative financial investors to get out of their crude oil forward contracts,” said Commerzbank in a recent note.

Brent crude, the global benchmark, was down 0.89% at $67.02 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down by 0.65% at $63.74 a barrel.

Energy News

Scientists Study Plans to Cool the Planet

Scientists are struggling with how to slow global warming and are coming up with far fetched plans as hope is dimming that humankind can effectively curb carbon emissions. One idea is to manipulate the climate by planting millions of trees to clear the air.

 

Oil Slides as Stock Markets Falter, Shale Drilling Accelerates

The number of rigs searching for crude in American shale fields jumped to the highest level in more than five months last week, reports Bloomberg.

“All in all, the strong plunge indicates that we have arrived at the start of a weaker demand phase”

– Analysts for JBC Energy

WSJ Energy In-Depth

Banks Raise Oil Forecasts but See Risks

 Banks raised their oil-price forecasts for the fourth month in a row in January, as rebalancing in the crude supply pushed prices to multiyear highs.

A poll of 15 investment banks by The Wall Street Journal near the end of January predicted that Brent crude, the international benchmark, will average $61 a barrel this year, up $3 from the December survey.

Investor sentiment toward oil has become more positive on a range of factors, including strong global growth and supply limits by big producers but analysts say higher prices are stimulating U.S. drillers to ramp up output.

 

Big Number

$4 trillion

The selloff in global stock markets has wiped out $4 trillion from what just eight days ago were record high portfolio values, reports Reuters.

 

FutureCurve

Tuesday: The American Petroleum Institute issues its weekly forecasts on U.S. crude inventories.

Wednesday: Norway’s Statoil announces its financial results for the full year of 2017.

The U.S. International Energy Administration releases official weekly data on U.S. crude stocks.

Thursday: France’s Total reports its financial results for 2017.

Friday: Baker Hughes releases weekly data on the number of rigs drilling for oil in the U.S.

 

Reporter’s Notebook

WSJ Reporter Dan Molinski on U.S. fossil fuel exports. The US now produces a near-record 10 million barrels per day of crude oil, while two other fossil fuel-based commodities — natural gas and natural gas liquids — have already soared past record production levels. “And for all three commodities, the U.S. market has only one way to balance: exports,” says RBN Energy. “One-third of all NGL production is getting exported, 15% of crude production now regularly moves overseas, and the completion of several new LNG export facilities will soon have more than 10% of U.S. gas hitting the water.” Said another way, RBN says “the U.S. is now producing for global markets…[and] the implications are enormous.”

WSJ’s Deputy Texas Bureau Chief Lynn Cook on shale oil investment. Private equity is launching another Permian fracker into the wilds of West Texas. Warburg Pincus ponyed up $300 million to fund Ridge Runner Resources, an exploration and production outfit that will drill in the Delaware Basin portion of the Permian. The Delaware is one of the hottest shale areas in America. U.S. producers have piled up, unlocked vast new quantities of oil and also driving up the cost of oil-and-gas acreage to record levels. Scott Germann, an Exxon-trained geologist with more than 20 years of experience in the Permian, is Ridge Runner’s new CEO. Until last year he was president of BC Operating, a Delaware Basin driller that Marathon Oil bought in June 2017 for $1.1 billion.