What to Watch

U.S. Shale Surge Stymies OPEC Effort to Rein In Output

Rising U.S. shale output is pushing the global oil supply to its highest level this year, despite an effort by major producers to rebalance the market and choke off the production flow, the International Energy Agency said Thursday.

 

In its closely watched monthly oil market report, the IEA said the amount of crude on the global market rose by 170,000 barrels a day in November to 97.8 million barrels a day. The agency said the increase was due to a surge in U.S. shale production and increased drilling and completion activity, writes The Wall Street Journal’s Christopher Alessi.

 

The report comes just two weeks after the Organization of the Petroleum Exporting Countries and 10 producers outside the cartel, including Russia, agreed to extend curbs on production through the end of 2018. The group first agreed a year ago to cut almost 2% of global oil production in an effort to rein in a global supply glut that has weighed on prices since 2014.

 

On Thursday Brent crude, the global oil benchmark, fell 0.51% to $62.11 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.28% at $56.44 a barrel.

Energy News

OPEC Oil Output Falls to Six-Month Low but U.S. Fills Gap

OPEC production fell to its lowest in six months but rival U.S. production grew faster than expected, meaning oil markets may not rebalance before the end of 2018, the oil cartel said Wednesday.

 

Warburg Pincus Group Reunites With Texas Wildcatters, Staking $780 Million in Shale Startup

A group led by Warburg Pincus LLC agreed to invest $780 million in an oil-exploration company, one of the largest private equity investments in a shale startup.

 

“Every bull market has its poster children… Tesla is one of the bad ones”

Jim Chanos president and founder of hedge fund Kynikos Associates Ltd.

Bitcoin Points Way to ‘Massive Change’ for Commodity Businesses

Blockchain is changing the world’s financial markets with the rise of bitcoin, and now BP PLC and other firms want to apply the technology to commodities including food and energy.

 

Blockchain is an online ledger that records transactions using encryption to ensure security while allowing a network of users to verify them. The most-prominent use is in the virtual currency bitcoin.

 

WSJ Energy In-Depth

U.S., Japan Fret Over China’s Interest in Saudi Oil Giant

The U.S. and Japan have urged Saudi Arabia to pursue an international listing for state oil giant Aramco, fearing the possible sale of a stake to China would give Beijing too much sway in the Middle East.

 

Saudi Arabian Oil Co., or Aramco, was slated to become the world’s largest-ever public offering, with a domestic and international listing next year.

 

Aramco planned to list around 5% of the firm, a stake that could be valued at as much as $75 billion. Exchanges in Hong Kong, London and New York have all been vying for the international listing.

 

More recently, Riyadh has instead considered selling a private placement to a Chinese consortium of state-held entities.

 

The U.S. is concerned that a Chinese stake in Aramco would create a close bond between Beijing and Riyadh, by cementing China’s status as a steady consumer of Saudi Arabian crude. China is the world’s top oil importer.

 

U.S. concerns come amid increased tensions in the region, where Saudi Arabia and its allies are facing off against Iran while Riyadh deals with domestic political turbulence.

 

Big Number

50%

Same-day U.K. gas prices rose almost 50% to a high of 99p a therm on Tuesday, the highest level since 2013, as the shutdown of a major European oil node caused the closure of the British North Sea Elgin-Franklin and Britannia gasfields, reports the Financial Times.

FutureCurve

Today: The International Energy Agency released its Oil Market Report.

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: API issues forecasts on the U.S. crude inventory

 

Reporter’s Notebook

U.S. shale production is the main impediment to the oil markets fully rebalancing in the first half of 2018, according to the International Energy Agency. It “may not necessarily be a happy New Year for those who would like to see a tighter market,” the IEA said Thursday in its monthly oil market report for November. The agency raised its growth forecast for U.S. crude production for this year and next, suggesting it would continue to undermine OPEC’s plan to rebalance the markets through production cuts. “Just as the OPEC oil ministers were sitting down in Vienna, our colleagues at the U.S. Energy Information Administration released data showing that for September U.S. crude oil output increased…to the highest monthly average since April 2015 and 928,000 barrels a day above a year ago,” the report noted, according to WSJ correspondent Christopher Alessi.

 

Oasis Petroleum, a shale company that operates primarily in North Dakota, has fallen more than 17% since Monday after announcing a deal to issue equity in order to purchase acreage in the Permian basin. The price tag of about $40,000 an acre was not unusual last year, when many companies made similar transactions that investors welcomed as smart steps into one of the hottest regions in global oil. Shareholders were less enthused by the Oasis deal yesterday, although some analysts believe the quality of the acreage will be enough to make the transaction worthwhile, according to Tudor Pickering Holt & Co., reports the WSJ’s Houston-based correspondent Bradley Olson.

 

Plains All American announced an open season on its proposed pipeline project to take to Corpus Christi from the Permian Basin. The company said it had received sufficient interest to begin a binding open season with customers. The announcement comes just days after Phillips 66 and Enbridge Inc. announced open season for the Gray Oak Pipeline, another proposed line to take oil out of the Permian, the epicenter of U.S. oil drilling. The plains project will combine existing lines with two new ones to get carry 575,000 barrels per day to Corpus where it can be used by refiners or exported from access to the Gulf of Mexico, according to WSJ reporter Christopher Matthews.