Crude prices weakened on Iran nuke deal, while natural gas
rocketed higher on weather forecasts.
Crude prices declined last week, responding to the landmark
Iran nuclear deal that seeks to arrest the West Asian country's
alleged march towards nuclear power, while possibly bringing more
of its oil to global markets.
On Nov 24, Iran reached a temporary accord with six world
powers - the U.S., Great Britain, France, Russia, China and
Germany - to restrict its nuclear activities in return for
Tehran's relief from international sanctions on oil, auto parts,
gold and precious metals. Though Iranian oil export is not
expected to rise significantly and flood international markets,
the groundbreaking agreement will surely go a long way in make it
easier for the country to sell oil.
Sentiments were further dampened by the Energy Information
Administration (EIA) report that showed another big jump in
inventories, which remains well above the upper limit of the
average for this time of the year.
As per the EIA's weekly 'Petroleum Status Report,' crude
inventories climbed by an unexpected 2.95 million barrels for the
week ending Nov 22 to 391.42 million barrels. A surge in
production - now at their highest level in almost 25 years - led
to the stockpile pile-up with the U.S. What's more, storage at
the Cushing terminal in Oklahoma, the key delivery hub for U.S.
crude futures traded on the New York Mercantile Exchange, was
also up 676,000 barrels, the seventh straight weekly gain.
Concerns that the Fed may taper its $85 billion bond
repurchase plan in coming months also held back crude prices.
Traders have voiced concerns that Fed's shift away from the bond
buying policy may lead to dollar-denominated oil prices to
increase in local-currency terms in emerging markets, thus
As a result of these factors, by close of trade on Friday,
West Texas Intermediate (WTI) oil was firmly in the red and
settled at $92.72 per barrel, losing 1.9% 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.
Despite these issues, natural gas rallied last week on the
back of a larger-than-expected decrease in natural gas supplies
and forecasts of 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 13 billion cubic feet (Bcf) for the week ended Nov 22,
higher than the guided range (of 7-11 Bcf drawdown). Chilly
weather forecasts - in the key U.S. consuming regions over the
next fortnight - are likely to further spur the commodity's
demand for heating.
Influenced by these factors, natural gas spot prices ended
Friday at $3.95 per million Btu (MMBtu), up 4.5% over the
Energy Week That Was:
The week's energy coverage was dominated by the following
PetroChina Buys Exxon Stake in Iraq
Chinese energy giant
PetroChina Co. Ltd.
) has acquired a 25% interest in the West Qurna-1 oilfields in
Iraq from U.S. oil major
). The deal - whose financial details were not disclosed - should
help PetroChina to set a stronger foothold in Iraq and synergize
with its other projects in the nation. This should also aid the
Chinese government which has become a significant importer of
Iraqi crude. With a slowdown in domestic oil output, China is
looking at other international oil fields to meet its energy
Weather Hurts Pioneer Texas Biz
Pioneer Natural Resources Company
) output and drilling operations in the Spraberry, Wolfcamp,
Eagle Ford Shale and Barnett Shale Combo plays were hurt by a
severe cold spell in Texas. Shares of the company felt the chill
as the price dropped 2.5% and 0.6% in the two trading sessions to
touch $177.75 on Friday.
Spraberry and Wolfcamp were the worst hit areas. Intense icing
and low temperatures resulted in widespread power outages,
facility hindrances, loading curtailment, and restricted access
to production and drilling facilities in these plays. A lengthy
recovery period is expected and the full impact of the weather
condition will be known in a couple of weeks. Pioneer had not
accounted for this unforeseen severe weather in its production
and financial guidance for the fourth quarter of 2013, which was
released along with the company's third quarter earnings.
ConocoPhillips Divests Algerian Arm
U.S. energy giant
) has completed the sale of its Algeria business unit to
Indonesia's state owned oil company - PT Pertamina. The sales
consideration totaled $1.75 billion. ConocoPhillips' divestment
of its Algerian unit will be value accretive for its shareholders
as well as raise funds to concentrate on higher return assets. It
will facilitate the company to focus on capital investments that
will benefit production and cash margins and enhance returns on
NOV Hives Off Distribution Biz
Global large-cap energy equipment maker
National Oilwell Varco Inc.
) is on track with the previously announced spin-off of its
Distribution business segment. For this purpose, a new
corporation christened NOW Inc. based in Delaware has been
formed. This new entity will, in time, operate as an independent,
publicly traded company under the proposed name of
Weatherford Gains on Settlement News
Shares of oilfield service biggie
Weatherford International Ltd.
) rose 1.5% on Tuesday, Nov 26, after it agreed to shell out
around $253 million to settle various bribery-related cases with
the Department of Justice, the Securities and Exchange
Commission, and the Departments of Treasury and
Other Headline News on Energy:
After Profit Misses Estimates
Norwegian oilfield service firm
) fell to nearly 4-month low following weaker-than-expected
third-quarter results. Earnings per share came in at 60 cents,
failing to beat the Zacks Consensus Estimate of 67 cents. The
miss can be attributed to significant increase in operating
Jones Energy Rallies on Asset Buy Deal
Oil and gas explorer Jones Energy Inc. has agreed to acquire
certain producing and undeveloped properties in the Anadarko
Basin from an undisclosed private seller for $195 million. The
market reacted positively to the news, which was announced after
market hours on Monday, Nov 25. Shares of the exploration and
production company opened at $14.31 on Nov 26 - up 3% from the
previous close. The stock price rose further, settling at $14.66,
when the market closed yesterday.
Statoil to Keep '14 Spending Flat Y/Y
Norwegian oil major Statoil ASA's share prices surprised with
a respective 1.4% and 0.3% drop in the two trading sessions after
it announced its intent to keep exploration spending for 2014
close to the 2013 record level. The company also intends to be
more selective in choosing exploration targets to lessen risk and
control spending. Statoil's focus will be directed toward areas
where it has made recent discoveries. These include Norway, the
Gulf of Mexico, Brazil, Canada, Angola and Tanzania.
Lime Energy Drops on Chief Executive Departure
Energy services provider Lime Energy Co. terminated the
employment of Chief Executive John O'Rourke and promoted Adam
Procell - President and Chief Operating Officer - as his
replacement. The sudden management shakeup spooked investor
sentiment, pulling down the company's shares by 5.7%.
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
This Week's Outlook
Apart from the usual suspects - the U.S. government data on
oil and natural gas - market participants will be closely
tracking Friday's non-farm payroll report for Nov that will shed
further light on the economy's wellness and the need for the bond
buying policy. Energy traders will also be focusing on the OPEC
meeting in Vienna on Wednesday.
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