Oil barrels
Oil

Crude Decline Continues on Impending Oversupply, Rising COVID-19 Cases

The energy sector is poised for a lower start, pressured by weakness across the underlying commodities while major equity indices were flat as investors fretted over early rate hikes by the Federal Reserve after strong retail earnings and data showed continued economic recovery.

SECTOR COMMENTARY: 

The energy sector is poised for a lower start, pressured by weakness across the underlying commodities while major equity indices were flat as investors fretted over early rate hikes by the Federal Reserve after strong retail earnings and data showed an economic recovery was on track.

WTI and Brent crude oil futures extended yesterday’s declines into this morning’s session, falling after the IEA and OPEC warned of impending oversupply and as COVID-19 cases in Europe increased the downside risks to demand recovery. Declines however were buoyed by last night’s API report that showed a fall in U.S. gasoline stocks but traders will be looking to the official EIA data later today to confirm. The IEA warned that while the "oil market remains tight by all measures, a reprieve from the price rally could be on the horizon ... due to rising oil supplies".  The agency said that high price levels will see U.S. oil production rising again in 2022, accounting for about 60% of its forecast of 1.9 million barrels per day for non-OPEC supply growth. OPEC Secretary General Mohammad Barkindo said the group sees signs of an oil supply surplus building from next month adding that its members and allies will have to be "very, very cautious". New waves of COVID-19 cases in Europe which drove some governments to re-impose restrictions also weighed on prices.

Natural gas futures turned lower this morning and have already erased most of yesterday’s rally, pressured by reports showing output continues to rise and on forecasts for lower heating demand this week than previously expected. The decline came despite record gas futures in Asia and a 32% jump in European prices over the past three days on worries Russian’s Gazprom will not deliver enough fuel to Europe for this winter after Germany's energy regulator suspended the approval process for Gazprom's Nord Stream 2 gas pipe from Russia to Germany. Data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.0 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October and a monthly record of 95.4 bcfd in November 2019. Refinitiv projected average U.S. gas demand, including exports, would jump from 104.2 bcfd this week to 112.2 bcfd next week as the weather turns colder and homes and businesses crank up their heaters. The forecast for this week was lower than Refinitiv projected on Tuesday.

BY SECTOR:

US INTEGRATEDS

No significant news.

INTERNATIONAL INTEGRATEDS                                           

Equinor signed a Memorandum of Understanding (MoU) with Korean East-West Power (EWP) to cooperate on 3 GW of offshore wind projects in South Korea. Together the partners will contribute significantly to the country's ongoing energy transition and development of an offshore wind industry in Korea.

Scotiabank upgraded Shell to Sector Outperform from Sector Perform.

CANADIAN INTEGRATEDS

No significant news.                       

U.S. E&PS

APA Corporation announced results from flow testing at the Sapakara South appraisal well and drilling results from the Bonboni exploration well, both operations recently completed on Block 58 offshore Suriname. APA Suriname holds a 50% working interest in the block, with TotalEnergies (TTE), the operator, holding a 50% working interest. Flow and subsequent pressure build-up tests were recently completed at Sapakara South-1 (SPS-1), an appraisal well drilled earlier this year on the eastern edge of Sapakara nearly 4 kilometers from the discovery well. As disclosed earlier this year, SPS-1 encountered approximately 30 meters (98 feet) of net black oil pay in a single zone of high-quality Campano-Maastrichtian reservoir.

Scotiabank upgraded APA Corporation and Continental Resources to Sector Outperform from Sector Perform. Meanwhile, the firm downgraded Diamondback Energy and Marathon Oil to Sector Perform from Sector Outperform.

Comstock Resources announced it has closed on the sale of the previously announced divestiture of its Bakken shale non-operated properties for total consideration of $154 million, before selling expenses with an effective date of October 1, 2021. The properties sold include non-operated interests in 442 producing wells (68.3 net) producing approximately 4,500 barrels of oil equivalent per day. Comstock expects to recognize a pre-tax loss of $150-$160 million on the divestiture.

Northern Oil and Gas, Inc. today announced that it has agreed to acquire substantially all of the non-operated Permian Basin assets owned by certain entities affiliated with Veritas Energy, LLC. Northern has entered into a definitive agreement to acquire non-operated oil and gas properties located in the Delaware and Midland Basins for a cash purchase price of $406.5 million, subject to typical closing adjustments. The assets are primarily located in Lea and Eddy counties, NM, and Loving, Reeves, Ward and Winkler counties, TX.

UBS upgraded Southwestern to Neutral from Sell

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

BMO upgraded Compass Minerals International to Market Perform from Underperform. Deutsche Bank also upgraded the company to Buy from Hold.

DRILLERS

No significant news.

REFINERS

No significant news.

MLPS & PIPELINES

No significant news.

MARKET COMMENTARY

U.S. stock index futures were little changed as investors fretted over early Fed rate hikes amid strong retail earnings and upbeat retail sales data. Shares in Europe made slim gains on some positive earnings reports, while a surge in British inflation weighed on FTSE 100 index. In Asian equities, China stocks closed higher, led by non-ferrous metals and new energy shares, while Japanese stocks reversed course to end lower on worries over rising costs and a weaker yen. The dollar eased after scaling a 4-1/2 year high against the Japanese currency. Oil prices fell after the International Energy Agency and OPEC warned of impending oversupply. Gold prices advanced. Housing starts and building permits numbers are due for release later in the day.


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


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