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Crude Falls, Pressured by Weaker Demand Outlook


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Wednesday, June 12, 2019

SECTOR COMMENTARY

The energy sector is poised for a lower start, weighed down by heavy weakness in crude complex and broader equity futures which slid ahead of key inflation data and renewed trade worries after Washington took a tougher stance on its talks with China. Sector news is light with the EIA data later this morning the next major catalyst.

WTI and Brent crude oil futures are down well over 2% in early trading, pressured by weaker outlook for demand, a bearish API report and renewed trade war concerns. The U.S. EIA cut its forecasts for 2019 world oil demand growth and U.S. crude production but despite the slowdowns this year, the agency expects U.S. output to continue to set new records in 2019 and 2020, culminating with average production of 13.5 million bpd by the end of 2020. The report follows last night's API report which showed surprise increase in U.S. crude stockpiles last week ahead of the official EIA inventory data later this morning.

Natural gas futures seesawed in early trading, continuing to see support from the new EIA consumption forecast and pressured by weakness in the crude and broader equity markets.

U.S. INTEGRATEDS

Press Release - ExxonMobil said that it has completed an expansion at its Singapore refinery to upgrade its production of EHC Group II base stocks, strengthening the global supply of high-quality base stocks and enhancing the integrated facility's competitiveness.

Reuters - Exxon Mobil reported process upset resulting in boiler shutdown at Beaumont, Texas refinery. The operations personnel have restored normal operations and emissions from fluid catalytic cracking unit (FCCU) scrubber stack at Beaumont, Texas refinery.

INTERNATIONAL INTEGRATEDS

Press Release - StoreDot and its strategic partner BP demonstrated a live, full-charge of a two-wheel electric vehicle (EV) in just five minutes. An electric scooter equipped with StoreDot's ultra-fast charging battery demonstrated that this technology can charge an electric vehicle in only five minutes. This proof-of-concept represents a major milestone for ultra-fast charging battery technology and its game-changing potential to accelerate the adoption of EVs.

Reuters - Petroleo Brasileiro plans to invest $105 billion within five years and divest up to $35 billion in the same period, Chief Executive Roberto Castello Branco said. The figures, cited during a hearing at the lower house of the Congress, surpass the $84.1-billion investment plan for 2019-23 announced by Petrobras at the end of last year, before he took the position of CEO.

(Late Tuesday) Press Release - Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), a subsidiary of Royal Dutch Shell announced it has reached an agreement for the sale of Shell's Martinez Refinery in California to PBF Holding Company, a subsidiary of PBF Energy, for $1.0 billion consideration plus the value of hydrocarbon inventory, crude oil supply and product offtake agreements, and other adjustments. This divestment aligns with Shell's strategy to reshape refining efforts towards a smaller, smarter refining portfolio focused on further integration with Shell Trading hubs, Chemicals, and Marketing.

U.S. E&PS

Jefferies assumed coverage of Marathon Oil at 'Hold.'

Reuters - Murphy Oil Corp filed an 8k, updating its slides to show Q2 production guidance unchanged at 143 to 147 Mboe/d vs FS 152.8, sales volume ex-NCI 142.5 to 146.5 Mboe/d, capex ex-NCI $1.15B to $1.35B. 5 yr outlook: Total production CAGR +8%, oil production CAGR +12%, FCF $1.4B after dividends.

CANADIAN E&PS

(Late Tuesday) Press Release - Canacol Energy provided the results of the Acordeon 1 exploration well located on its 100% operated VIM 5 block in the Lower Magdalena Valley Basin of Colombia. Given the magnitude of this new discovery the Corporation is altering its previously announced 2019 drilling program and has spud the Ocarina 1 well in order to prove up its reserve potential. Additionally, Promigas S.A. has received all regulatory approvals, including approvals of the two modifications to the Jobo to Majaguas pipeline segment, required to complete the construction of the pipeline expansion. The Corporation estimates that the 80 million standard cubic feet ("MMscfpd") of new pipeline capacity will be on stream by mid-July 2019, lifting Canacol's gas sales to approximately 215 MMscfpd.

OILFIELD SERVICES

Press Release - Subsurface Imaging, part of CGG 's Geoscience division, has delivered a step-change in subsalt image quality over the Mad Dog field in the Green Canyon area of the Gulf of Mexico. Through continued investment in imaging technology and supercomputing capacity, CGG was able to reduce project cycle time by almost half while delivering greatly improved subsalt images. Fast access to high-quality images was critical to BP and partners in modifying and optimizing the ongoing drilling program.

(Late Tuesday) Press Release - Fluor announced that the U.S. Department of State awarded the company a position on the Diplomatic Platform Support Services (DiPSS) program indefinite-delivery/indefinite-quantity contract. The period of performance is five years.

(Late Tuesday) Press Release - ION Geophysical announced an expansion to the Company's 2D multi-client program offshore Newfoundland, Canada. Due to continued client interest, the second phase of GrandSPAN has now more than doubled in size from last year's expectation to nearly 11,000 km.

Press Release - KBR announced it has been awarded an indefinite-delivery, indefinite-quantity (IDIQ) contract by the U.S. Department of State (DoS) for life support, logistics, operations and maintenance services at U.S. government facilities worldwide. The Diplomatic Platform Support Services (DiPSS) contract, which has a maximum ceiling of $6 billion, is a new award for KBR.

Press Release - Pioneer Energy Services announced that it has been notified by the New York Stock Exchange (the "NYSE") that its common stock does not satisfy one of the NYSE's standards for continued listing. The NYSE requires that the average closing price per share of a listed company's stock be no less than $1.00 over a consecutive 30 trading-day period. As of June 11, 2019, the date of the NYSE notice, the 30 trading-day average closing price of Pioneer Energy Services common stock was $0.89 per share.

Redburn upgraded Petrofac to 'Neutral.'

REFINERS

Press Release - PBF Energy announced that its subsidiary has signed a definitive agreement to purchase the 157,000 barrel-per-day Martinez refinery, and related logistics assets, from Equilon Enterprises LLC d/b/a Shell Oil Products US (the "Seller" or "Shell"), a subsidiary of Royal Dutch Shell. With the acquisition, PBF's total throughput capacity will increase to over one million barrels per day and its refining system will have a consolidated Nelson Complexity of 12.8.

MARKET COMMENTARY

Futures for U.S. stock indexes fell, along with European shares, as the White House's latest tough stance on China kept worries about a global slowdown intact. Meanwhile, Hong Kong's Hang Seng lost 1.7% as protesters clashed with police during a mass demonstration against legislation that would allow citizens to be extradited to China. The dollar fell against the yen and edged up against a basket of major currencies. Gold prices gained on safe-haven demand. The Labor Department's consumer price index report is due later in the day.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services -- the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.




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