What to Watch

U.S. Support for Weaker Dollar Buoys Oil

 Oil prices edged up Thursday morning, as the dollar declined in response to the Trump administration’s apparent endorsement of a weaker greenback.

Speaking at the World Economic Forum on Wednesday, U.S. Treasury Secretary Steven Mnuchin said “a weaker dollar is good for trade,” boosting the price of oil and other dollar-denominated commodities.

Bjarne Schieldrop, chief analyst for commodities at SEB Markets, argues the “intimate relationship” between oil prices and the dollar works both ways, with higher oil prices pushing the dollar lower at the same time that a weaker greenback supports crude. “This circle could spiral higher with Brent crude rising another 10% to $77 a barrel, while the USD Index moves back to its 2014 level of 80 points,” Mr. Schieldrop wrote in a note Thursday.

However, Tom Pugh, commodities economist at Capital Economics, expects the dollar to strengthen this year on the back of monetary policy tightening in the U.S. That’s “likely to put downward pressure on prices,” he said.

Brent crude, the global benchmark, was up 0.34%, at $70.76 a barrel, on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.64%, at $66.03 a barrel.

Energy News

GE Under Investigation

 The U.S. Securities and Exchange Commission has opened a probe into General Electric Co.’s accounting practices, the company said Wednesday, reports The Wall Street Journal’s Thomas Gryta.

The news comes on the heels of Chief Executive John Flannery’s announcement last week that he is evaluating whether to break apart the company’s business units into separate public entities. GE is already looking to shed its majority stake in oil services firm Baker Hughes Inc., which has housed GE’s former oil and gas business since last July.

Big Oil Back in the Black

 The world’s largest oil companies should earn more cash this year than at any other point this decade—but, for the moment, most are playing it safe, Reuters reports.

Even as the price of Brent crude has climbed to around $70 a barrel this month—its highest level in over three years—“frugality remains high on the agenda of boards and investors to ensure that the energy majors produce enough cash to pay dividends, while reducing debt that ballooned during the downturn,” Reuters notes.

“At the moment there is likely a self-reinforcing cycle feeding a higher crude oil price and a softer USD”

Bjarne Schieldrop, Chief Commodities Analyst, SEB Markets

Chinese Wind Firm Guilty of Stealing U.S. Tech

A federal jury found Chinese wind-turbine maker Sinovel Wind Group Co. Ltd. guilty of stealing technology from a former U.S. supplier, American Superconductor Corp., reports The Wall Street Journal’s Erin Ailworth.

Prosecutors had alleged a disgruntled employee at American Superconductor provided Sinovel executives with proprietary source codes for software that controls wind turbines in exchange for money.

WSJ Energy In-Depth

Germany Misses Emissions Targets

Germany is falling short of European climate targets and will have to purchase greenhouse gas emissions allowances for 2019 and 2020 from other European Union members,  Andrea Thomas reports.

As part of the EU’s efforts to curb global warming under last year’s Paris agreement, Germany had agreed to cut CO2 emissions by 14% by 2020, compared with 2005 levels—a goal the government said it will not meet.

The announcement is a setback for Chancellor Angela Merkel, who had once put clean energy transformation at the center of her agenda.

“Germany’s failure to meet the targets comes as it continues to have a high number of high polluting and heavy gas-consuming cars on its motorways and roads as well as intensive livestock farming, which is also believed to increase greenhouse gas emissions,” Ms. Thomas writes.

Big Number

19%

In a new report, credit rating agency Moody’s predicts that electric vehicles will account for 17% to 19% of all new car sales by 2030.Electric vehicles currently make up less than 1% of worldwide car sales.

FutureCurve

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

Monday: Chatham House in London holds its 2018 energy conference Jan. 29-30. Invited speakers include Claudio Descalzi, CEO of Italy’s Eni, Jabar Ali al-Luaibi the minister of oil for Iraq and Mustafa Sanalla, chairman of the National Oil Corporation of Libya.

Tuesday: The American Petroleum Institute releases its weekly forecast of U.S. crude inventories.

Reporter’s Notebook

WSJ Deputy U.S. Energy Editor Lynn Cook on trends in energy M&A. The oil majors could make moves in offshore Brazil and U.S. shale, according to consultancy Wood Mackenzie, as some producers try to bolster long-term growth prospects with potentially large acquisitions. But U.S.-focused producers are the wildcard. Wood Mac predicts that private equity will grasp the buying and drilling opportunity to seize out-of-favor oil-and-gas assets if U.S. equity markets do not. National oil companies, particularly in China, will also have to step up buying and development to tackle steep oil-pumping declines that have come to their aging fields, the consultancy said.

WSJ reporter Dan Molinski on oil firms that hedged too soon. Oil companies that hedged 2018 production months ago to lock in “lofty” prices just above $50/bbl are watching the rally to $65 from the cheap seats. Pioneer’s chief executive Tim Dove is on record at a conference back in September saying it was 70% hedged for 2018 in the low-to-mid $50s. Executives from WPX Energy are quoted saying they hedged the majority of this year’s output at $52 and even started hedging 2019. Adding insult to injury, the rally is lifting oilfield services costs, making it more difficult to profit with oil hedged in the low $50’s.