Expectations of increased production from Libya pushed down
crude prices by 6%. Natural gas also dipped slightly on bearish
inventory data and predictions of a break in colder
Among the newsmakers, Anglo-Dutch supermajor
Royal Dutch Shell plc
) closed the acquisition of Spanish oil group Repsol's liquefied
natural gas assets, while legendary investor Warren Buffett's
Berkshire Hathaway agreed to buy a subsidiary of
Crude prices came under pressure last week, as markets braced
for an imminent increase in Libyan oil exports to near-normal
levels following months of political turmoil. The commodity was
also hit by soft Chinese manufacturing data and dismal readings
from a survey of purchasing managers in the manufacturing-heavy
Sentiments were further weakened by the Energy Information
Administration (EIA) report that showed a build in fuel (gasoline
and distillate) supplies, which outweighed a hefty drop in oil
As per the EIA's weekly 'Petroleum Status Report,' crude
inventories dropped by a larger-than-expected 7.0 million barrels
for the week ending Dec 27 to 360.57 million barrels. But
worryingly, gasoline and distillate supplies were both up from
the week-ago levels.
As a result of these factors, by close of trade on Friday,
West Texas Intermediate (WTI) oil was in the red and settled at
$93.96 per barrel, losing 6.0% for the week.
Investors continue to focus on temperature patterns to
understand the fuel's economic dynamics. As it is, natural gas
fundamentals look uninspiring with supplies remaining ample in
the face of underwhelming demand. In fact, it is expected to take
many years for the commodity's demand to match supply in the face
of newer projects.
Natural gas fell slightly last week, pulled down by a
smaller-than-expected decrease in supplies and forecasts of a
break in cold weather conditions.
The EIA's weekly inventory release showed that natural gas
stockpiles held in underground storage in the lower 48 states
fell by 97 billion cubic feet (Bcf) for the week ended Dec 27,
lower than the guided range (of 116-120 Bcf drawdown).
Moreover, milder weather forecasts - in the central and
eastern regions over the next few days - are likely to limit the
commodity's demand for heating.
Influenced by these factors, natural gas spot prices ended
Friday at $4.30 per million Btu (MMBtu), down 0.9% over the
Energy Week That Was:
The week's energy coverage was dominated by the following
Shell, Repsol Wrap Up LNG Asset Sale
Europe's oil giant Royal Dutch Shell plc closed the
acquisition of liquefied natural gas assets of Repsol S.A.
outside North America. The transaction was completed for a net
cash purchase price of $3.8 billion, lower than the originally
expected $4.4 billion that Shell agreed to pay in Feb 2013.
The reduced value could be traced back to the $200 million
sale of the Basque power plant to BP plc by the Spanish oil and
gas firm in Oct and the overall financial position of the
company. The assets under consideration include liquefaction
facilities in Trinidad & Tobago and Peru.
Phillips 66 to Divest PSPI
Refiner Phillips 66 announced that it has entered into an
agreement with Warren Buffett's Berkshire Hathaway Inc. to divest
its wholly owned subsidiary Phillips Specialty Products Inc.
("PSPI"). Following regulatory review, the transaction is
expected to close in the first half of 2014.
Per the agreement, Phillips 66 will exchange all of its common
stock in PSPI for approximately 19 million shares of its shares
owned by Berkshire Hathaway. The company expects PSPI's balance
sheet at closing to include approximately $450 million of cash
and cash equivalents.
Petrobras P-55 Starts Production
Brazilian state-run energy giant, Petroleo Brasileiro SA or
) brought online its P-55 platform. The semi-submersible platform
started production from the Roncador field, at the Campos Basin,
in Rio de Janeiro. The vessel set sail for its destination on Oct
6 from the Rio Grande Shipyard, after completion of necessary
tests and certifications.
The platform has an expected production capacity of 180,000
barrels of oil and can treat 6 million cubic meters of gas per
day. The 52,000 ton P-55 - the largest semi-submersible platform
built in Brazil - will be connected to 11 oil producing wells in
Statoil Hits Oil & Gas in Askja
Norwegian oil giant
), along with its partners, has struck oil and gas in the Askja
prospects in the North Sea. The mid-water semisubmersible rig
Ocean Vanguard was used to drill two exploration wells - 30/11-9S
and 30/11-9A - located between the Oseberg and Frigg fields and
about 13 kilometer southeast of the Statoil-operated
Krafla/Krafla West discoveries.
The main wellbore 30/11-9 S tested the Askja West prospect,
where a net gas column of 295 feet (90 meters) in Late and Middle
Jurassic rocks was proven. In the same geological formation,
side-track 30/11-9 A tested the Askja East prospect and proved a
net oil column of 131 feet (40 meters). The reservoir properties
in both wells met expectations.
Valero Shares Hit 52-Week High
Shares of the largest domestic independent refiner
Valero Energy Corp.
) hit a 52-week high of $50.54 on Dec 31. The stock closed the
session at $50.40, which reflects a solid return of 47.2% over
the past six months.
The average trading volume for the last three months
aggregated 6,407,968 shares. Among all the independent refiners,
Valero offers the most diversified refinery base with a capacity
of 3.0 million barrels per day in its 16 refineries throughout
the U.S., Canada and the Caribbean. More importantly, Valero is
best positioned to profit from increased refining margins mainly
on account of its strategic refinery structure that enables it to
use cheaper oil for over one-half of its needs.
Performance Chart of Some Major Companies:
The following table shows the price movement of the major oil
and gas players over the past week and during the last 6
Last Week's Performance
6 month performance
Other Headline News on Energy:
Eni Abandons Ca Ngu-1 Well in Vietnam
) joint venture partner KrisEnergy revealed that the Italian oil
major has stopped work at a 15.2 meter hydrocarbon column in Ca
Ngu-1 exploration well in Block 120, offshore Vietnam. Since the
well did not come across any significant volume of hydrocarbons,
the well has been plugged and abandoned. The well encountered oil
and gas in the primary objective that confirmed the presence of
petroleum system in the area.
FMC Tech, Statoil in $114M WOS Deal
Oil drilling equipment maker,
FMC Technologies Inc.
) was awarded a contract by the Norwegian oil major Statoil ASA,
to manufacture and supply a Workover System (:WOS) for the Snorre
B platform, located in the northern part of the Statoil-operated
Snorre oil and gas field. The contract is valued at around $114
million in revenues.
This Week's Outlook:
Apart from the usual suspects - the U.S. government data on
oil and natural gas - market participants await a number of
top-tier economic reports that will shed further light on how
well the economy has done in the fourth quarter. Of particular
significance is Friday's non-farm payroll report for Dec.
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