What to Watch

 Is the U.S. Shale Boom Hitting a Bottleneck?

 The U.S. shale boom in the Permian basin has hit a speed bump, as the industry faces worker shortages and logistical bottlenecks, write The Wall Street Journal’s Alison Sider and Bradley Olson.

The oil producing area of West Texas and New Mexico has been one of the few growth engines for oil output world-wide. The region is on track to pump enough crude to rival Iran or Iraq.

Output is projected to climb from three million barrels a day to more than four million barrels a day within two years. The International Energy Agency forecasts that last year’s production level will double by 2023.

But Permian producers are starting to encounter congested pipelines and shortages of materials and workers—bottlenecks that have caused some investors to sour on the region. Some energy executives question whether sky-high forecasts are achievable.

Meanwhile, oil prices hit a more-than-three-year high on Thursday, extending gains on tightening U.S. inventories. The rally comes ahead of a meeting between major producers on Friday, where oil exporting countries are expected to renew their commitment to draining global inventories.

Brent crude, the global oil benchmark, was up 0.9% to $74.15 a barrel on London’s ICE Futures exchange having earlier reached $74.44, their highest level since November 2014. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.9% at $69.07 a barrel, having earlier touched a more-than-three-year high of $69.27.

Crude also received support from reports that Saudi Arabia wants oil prices to reach as much as $100 a barrel.

Energy News

 Don’t Rule Out an EU-U.S. Trade War

 The European Union’s disagreement with the U.S. over the latter’s levies on key metals is coming to a head  on May 1 as the EU’s reprieve from steel and aluminum tariffs expires. Europe is demanding the Trump administration permanently exempt it from the tariffs. But the U.S. has made clear that it is seeking concessions in return. It regards the EU-U.S. trade relationship as unbalanced and unfair.

Brazil’s State Oil Firm Close to Inking Deal With China’s CNPC

 Brazil’s state-run goliath Petróleo Brasileiro SA is on the verge of signing a deal where China National Petroleum Corp Ltd would invest in a petroleum refinery in exchange for crude oil, Reuters reports.

“Texas is booming…Energy has gone from being a headwind to a tailwind.”

– Robert Kaplan, president of the Federal Reserve Bank of Dallas

 Exxon Hits a Hurdle in Deal With Iraq

 Exxon Mobil is facing difficulties completing a deal in Iraq involving the construction of a water treatment facility intended to boost the country’s oil production.

Energy Journal Exclusive

 The Devil Is in the Trade Details

 Invstors should beware of the unintended consequences than can flow from trade disputes such as the current U.S.-China spat, said Mark Herlach, a partner at Eversheds Sutherland law firm, where his areas of expertise include energy and international trade.

Mr. Herlach said the current dispute is much larger than this latest salvo over tariffs. The U.S. already placed levies on imported solar panels  in January of this year, after two U.S. firms sought relief from foreign products largely from Asia.

Washington also slapped 25% tariffs on foreign steel and 10% on foreign aluminum, which hit several countries including China and riled the U.S. energy sector.

The American Petroleum Institute warned that its members including Exxon Mobil and Chevron Corp. could have difficulties finding specialized steel products for activities such as drilling and building pipelines and refineries.

Now, Washington is considering further punitive action  under a legal statute called section 301 as it seeks to address what it says are unfair Chinese trade practices, such as the requirement that foreign companies share their technology with Chinese partners.

Some investors have been chewing antacids to calm their stomachs in anticipation of the next move by the Trump administration.

Meanwhile, China, which has engaged in a war of words with the U.S., hasn’t really taken further action beyond referring the matter to the World Trade Organization.

The following are edited excerpts from an interview in April with The Wall Street Journal:

Q: Should people be concerned about the U.S.-China trade impasse?

A: As potentially disruptive as this is in the short term, if everybody continues to respect the basic norms of the WTO, I would say this will pass.

If, on the other hand, this became the first step in the unraveling of the WTO and undercuts a rules-based trading system, that I think would be a negative development that people should be worried about.

Q: What is the U.S. trying to achieve with this latest move?

A: This represents a forcing mechanism to engage in substantive talks about the way that the U.S. and China relate on trade.

It is unlikely to provide complete solutions and it has limitations because some of the issues complained about are fundamental to the Chinese approach… [Also] this measure works better when the U.S. is the 300-pound gorilla in the room–not so much when you have two economies of equivalent size.

Q: What can people do to protect their interests?

A: With respect to 301 there is going to be a process…you can submit comments  to Office of the U.S. Trade Representative by May 11 explaining why you don’t believe a specific item should be included in the list of products that are subject to increased tariffs and there is going to be a public hearing on May 15.

Q: What do you mean by the unintended effects of trade actions?

A: Trade relief measures often have unintended consequences that are difficult to foresee, like in the example with the relief given to U.S. semiconductor manufacturers against competitors from Japan in 1987. Back then U.S. manufacturers were forced to offshore production as a result of the relief granted to their semiconductor suppliers, [because the tariffs raised the prices for their input].

Big Number

 58 million

BHP Billiton Ltd., the world’s largest mining firm, said it would produce  less iron ore than expected this fiscal year, writes Rhiannon Hoyle. On Thursday BHP, which also has oil assets, reported iron-ore production of 58 million metric tons for the three months through March, up 8% on-year but 6% lower than the quarter immediately prior.

FutureCurve

 Today: The IQPC hosts the Oil & Fuel Theft Summit in Geneva, which concludes today. Speakers include Mahmoud Al-Bayati, the director general for counter-terrorism for Iraq, William J. Waggoner, the chief executive of the Mexico Petroleum Company and Daniel Gianfalla, a member of the national maritime security advisory committee at the U.S. Department of Homeland Security.