WEEKLY ENERGY RECAP: Spot market tightens

Oil prices were relatively steady with Brent crude holding above $63 per barrel near an eight-week high. (Reuters/File)
Updated 23 November 2019

WEEKLY ENERGY RECAP: Spot market tightens

  • US crude inventories rose by 1.8 million barrels despite refinery runs increasing by 519,000 bpd

Oil prices were relatively steady with Brent crude holding above $63 per barrel near an eight-week high and WTI finishing above $57 per barrel.

The physical spot market is getting tighter and strong demand for Arabian Gulf medium sour crude has reflected that trend.

So as yet, there are no signs of any weaker oil demand as had been anticipated.

Both OPEC and the International Energy Agency (IEA) have pointed to a swelling oil glut next year due to booming non-OPEC supplies, especially in the US.

The physical market tells a different story. The scenarios envisaged by both OPEC and the IEA are based around unrealistic outlooks that focus on lower projected oil demand as a likely consequence of the ongoing trade war between the US and China. As a result, the pair have warned about a looming supply glut which could emerge in 2020.

But again, the real physical market tightness suggests otherwise.

US crude inventories rose by 1.8 million barrels despite refinery runs increasing by 519,000 bpd. However, US crude in storage at the Cushing, Oklahoma, delivery hub for WTI fell 2.3 million barrels, which represents the biggest drawdown in three months, as reported by the IEA.

The US oil and gas rig count continued to fall in what was the 13th drop for the past 14 weeks. 

According to Baker Hughes, the US oil rig count is down three from last week to 671, with gas rigs unchanged at 129. US shale oil rigs also continued to drop.

The overall positive demand picture has encouraged money managers to continue to increase their net-long positions in Brent crude oil futures for the 4th consecutive week in a row. That followed nine months of decline.

Brent crude oil futures and options money managers increased their net-long positions by by 543 contracts to 311,304 in the week ending Nov. 19.

However, they cut net long positions in WTI crude oil futures and options by 19,593 contracts to 133,581, over the same period.


BP said to be considering sale of Mideast ‘stranded assets’

Updated 08 August 2020

BP said to be considering sale of Mideast ‘stranded assets’

  • Major oil companies typically hold assets for the long term

LONDON: BP is preparing to sell a large chunk of its oil and gas assets even if crude prices bounce back from the COVID-19 crash because it wants to invest more in renewable energy, three sources familiar with BP’s thinking said.

The strategy was discussed at a BP executives meeting in July, the sources said, soon after the oil major lowered its long-term oil price forecast to $55 a barrel, meaning that $17.5 billion worth of its assets are no longer economically viable.

But even if crude prices bounce back to $65-$70 a barrel, BP is unlikely to put those assets back into its exploration plans and would instead use the better market conditions as an opportunity to sell them, the three sources said.

Major oil companies typically hold assets for the long term, even when crude prices plunge, with a view to start bringing more marginal production online when market conditions improve.

However, BP’s new divestment strategy, which has not previously been reported, means there will be no way back for the British energy company once it has offloaded its so-called stranded oil and gas assets.

BP did not respond to requests for comment.

The new strategy also sheds more light on chief executive Bernard Looney’s plan to reduce BP’s oil and gas production by 40 percent, or at least 1 million barrels per day, by 2030 while expanding into renewable energy.

“It is a simple calculation of natural production decline and planned divestment,” said a BP source, explaining how BP became the first big oil company to pledge a large cut in its oil output.

For decades, BP and rivals such as Royal Dutch Shell and Exxon Mobil have promised investors that production would continue to rise. But as climate activists, investors, banks and some governments raise pressure on the industry to reduce emissions to help cool the planet, European oil firms are changing tack and pledging to invest more in renewable energy sources.

US rivals are under less government pressure and have not made similar commitments on renewables.

“As we look at the outlook for BP over the next few years and as we see production declining by 40 percent it is clear we no longer need exploration to fund new growth,” Looney said this week. “We will not enter new countries to explore.”

He said that BP would continue to explore for oil near its existing production infrastructure as those barrels would be low cost — and help boost BP’s cash flow to fund its transition to cleaner energy.

BP also raised its target this week for returns from asset sales to $25 billion between 2020 and 2025, of which about $12 billion has already been lined up.

Parul Chopra, analyst at Rystad Energy, said in addition to Angola, he expected BP to move out of Azerbaijan, Oman, the UAE and Iraq.

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