What to Watch

Trump Administration Proposes Massive Expansion of Oil Drilling

 The Trump administration has proposed opening up nearly all the country’s  offshore areas for oil and gas drilling, a move that  has provoked fierce debate in the oil industry, write Timothy Puko and Lynn Cook.

Under the plan announced by Interior Secretary Ryan Zinke, the government would offer for sale the largest number of oil and gas leases in U.S. history starting late next year.

The department also proposed reversing drilling-safety rules implemented after the 2010Deepwater Horizon accident, which killed 11 workers on the drilling rig and caused a massive oil spill.

The U.S. government hasn’t sold leases for oil drilling off of the Atlantic and Pacific coasts in more than 33 years, so the proposal is meeting broad opposition, including from environmental groups.

“It’s absolutely radical,” said Diane Hoskins, climate and energy campaign director at Oceana, an environmental group. “Expanding offshore drilling threatens the livelihood and the coastal economies that rely on a healthy ocean.”

Still, oil-industry groups and their supporters who want more access to domestic oil lands are cheering the move.

“Today’s proposal is exactly the signal industry needs to drive this work forward,” said Dan Naatz, senior vice president of government relations and political affairs at the Independent Petroleum Association of America said in a statement.

The Wall Street Journal’s Editorial Board also waded in to the discussion with support and a word of caution.

“If Mr. Zinke wants to avoid a political backlash, we trust he understands that he can’t afford more Deepwater Horizons. His regulators have to enforce drilling safety and accident-prevention standards. But if he does that, there is no good reason not to exploit America’s offshore resources for the public good.”

Meanwhile, the resent sale of  government-owned  acreage in the Artic drew a tepid response from buyers as the global market remains over supplied.

Energy News

An $820 Million Bet That It’s a Buyer’s Market in West Texas

 Energy investment firm The Texas-based energy investment firm NGP said Thursday that it has plowed $820 million into Austin-based Luxe Energy LLC., to build another oil explorer, a sum that represents one of the largest checks ever written to an oil patch startup.

Saudi Arabia Converts Aramco Into Joint-stock Company Ahead of Historic IPO

Saudi Arabia has changed the status of its national oil giant Saudi Aramco to a joint-stock company as of Jan. 1, in a key step for an initial public offering planned for later this year. Analysts estimate the sale of up to 5 percent of Saudi Aramco, expected to go ahead in the second half of 2018, could generate about $1 billion in fees.

“The historical investment model which assumed that higher oil prices would always lead to higher share prices in energy appears disrupted. It failed in 2017 and will again in 2018, in our view”

Doug Terreson, senior managing director at Evercore ISI

Oil Slips After Hitting Three-Year High

 Oil prices fell Friday as some investors cashed in on the week’s strong gains and others mulled ambiguous U.S. inventory data. Brent crude, the global benchmark, was down 0.8% at $67.53 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.9% at $61.48 a barrel.

Oil prices have recently reached multi-year highs and overall commodities are on their longest winning streak in history, Bloomberg reports.

WSJ Energy In-Depth

New England Gas Prices Jump Because of Severe Storm

A major winter storm pounding the East Coast is driving up heating demand and energy prices, as the eastern half of the U.S. grapples with a stretch of extreme cold not seen in years, writes Stephanie Yang.

The National Weather Service issued a warning for “bitterly cold temperatures and dangerous wind chills” stretching from the Southeast to New England through the rest of the week.

The storm, referred to by some meteorologists as a “bomb cyclone”, which occurs when there is a rapid drop in atmospheric pressure, is leading to a surge in demand for commodities used for heating, such as natural gas and fuel oil.

Substantially lower-than-average temperatures across half the country have led to record heating demand. According to PointLogic Energy, total natural-gas consumption reached a record high of 143 billion cubic feet on Jan. 1.

Big Number

90%

According to S&P Global Platts, gas prices in New England jumped to $38.40 a million British thermal units Wednesday, up nearly 90% from $20.58/mm Btu the previous day.

FutureCurve

Friday: Oil-services firm Baker Hughes Inc. releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

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

Wednesday: The U.S. Energy Information Administration releases its weekly petroleum status report.

Reporter’s Notebook

WSJ’s Deputy Texas Bureau Chief Lynn Cook on the U.S. oil trade. Tanker exports of Urals crude pumped in Russia will fall 200,000 barrels a day, on average, in 2018, as pipeline deliveries to China increase and other developments divert Urals oil away from Europe, according to consultancy ESAI Energy. That creates an opening for other crude suppliers to Europe, such as the U.S. More American oil is steadily making its way across the Atlantic. France and The Netherlands more than doubled their U.S. oil imports in October compared to September, according to the latest federal data. Italy and Spain also bought more that month and Poland and Turkey took their first cargos of American crude. U.S. oil is trading at a $6 discount to the global benchmark, making more exports to Europe likely.

WSJ’s Dallas-based correspondent Dan Molinski on the effects of the cold snap on energy. Oil has surged 10% in three weeks to a three-year-high of $62/bbl, but blizzard conditions slamming the East Coast threaten to squeeze demand and end the rally. More than 4,200 flights within, into or out of the US were cancelled today, says Flightaware.com, a big jump from 278 cancellations Tuesday, just before the storm cranked up. About 2,500 of the cancelled flights so far today are at the three New York City-area airports — JFK, La Guardia and Newark — while Boston’s airport has cancelled 780. Those, and more tomorrow will sap jet fuel usage, while driving fuel will also take a hit. Meanwhile, oil production that’s centered around Texas isn’t affected, though eastern refineries may have trouble.

WSJ’s London-based correspondent Christopher Alessi on crude’s value. Oil prices have been buoyed this week by anti-government protests in Iran, even though the country’s oil infrastructure has not been threatened by the demonstrations. “The price reaction has been overdone,” analysts at consultancy JBC Energy argued in a note Thursday. But they cautioned that Iran’s oil output could, indeed, come under pressure and disrupt the global supply if the U.S. were to reinstate sanctions on the Islamic Republic. “The middle of this month will bring a new deadline for the U.S. administration to extend waivers from sanctions [that] had previously led to significant curtailments” in Iranian crude flows to Asian countries, including Japan.