Crude Rebounds After Heavy Declines
The energy sector is poised for a higher start, backed by a rebound in the crude complex and in the major equity futures which are attempting to bounce back from their lowest closing levels in nearly two years on little news. Treasury yields also came off their highs, slightly helping sentiment with the benchmark 10-year yield down nearly 5 basis points to 3.823%.
After two straight-sessions of heavy declines, WTI and Brent crude rebounded this morning and are currently up ~1.8% in early trading. Futures on both sides of the Atlantic bounced off a nine-month lows on the backs of supply curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian and a slight softening in the U.S. dollar. Also lending support were rising expectations that OPEC+ may take action to stem the drop in prices by cutting supply at their next policy meeting on October 5th. Iraq's oil minister on Monday said the group was monitoring prices and didn't want a sharp increase or a collapse. Several companies announced they have shut-in production at offshore oil platforms in the GoM ahead of powerful Hurricane Ian. Also in focus later today will be the first of the U.S. inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks
Front month natural gas prices continued to build on yesterday’s modest gains ahead of tomorrow’s expiration, backed by expectations of a small demand spike due to unseasonably cool weather in the North and a spike in European prices. Europe’s benchmark TTF was up as much as 12% this morning on news of Nord Stream damage and Baltic Sea pipeline leaks. German officials believe NS 1 was attacked near a Danish island. The events are prompting some European countries (Denmark, Norway) to raise the level of security at power and gas installations. TTF yesterday closed at a 2-month low, down (46%) from its peak levels last month.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
bp and Chevron said they have shut-in production at offshore oil platforms in the Gulf of Mexico, as a powerful Hurricane Ian bore down on the top U.S. offshore production region.
Hertz and bp announced the signing of a memorandum of understanding (MOU) for the development of a national network of EV charging stations powered by bp pulse, bp's global electrification and charging solution brand. The MOU sets the foundation for Hertz and bp to drive the future of mobility and accelerate EV consumer adoption.
GW Integrated Solutions LLC, a consortium of Worley and Grand Isle Shipyard, has been awarded a contract to provide engineering, procurement, fabrication and construction services to bp-operated offshore assets in the Gulf of Mexico, USA.
Tallgrass and Equinor have announced a collaborative effort to pursue opportunities for development of large-scale, low-carbon hydrogen and ammonia projects in North America. The partners will assess the production and market potential for hydrogen and ammonia, and associated distribution infrastructure to help facilitate broad decarbonization.
Global aviation fuel demand is expected to fully recover to pre-pandemic levels of 300 mln tonnes per year in the next one to two years, the head of aviation at Shell said.
Philippines' Cebu Pacific signed a memorandum of understanding with Shell, which will supply the low-cost carrier with 25,000 tonnes of SAF per year for five years starting from 2026. The airline said this was part of their long-term plan to achieve net-zero emissions by 2050.
INPEX announced that through its subsidiary INPEX Masela, Ltd., and on behalf of its joint venture partner Shell Upstream Overseas Ltd., it has extended a memorandum of understanding with PT PLN (Persero) concerning long-term liquefied natural gas supply and expanded the MOU to incorporate joint studies in hydrogen/ammonia and CCS in relation to the Abadi LNG Project.
TotalEnergies said further efforts would be needed in terms of decarbonisation, as it presented its 'Energy Outlook 2022' document, and that new oil projects would still be needed until the mid-2030s.
Overall oil demand will rise until the early 2030s and then decline by 2.3% per year, TotalEnergies said in presentation slides, showing the company's baseline scenario called "Momentum".
TotalEnergies said it would spend 1 billion euros ($962.60 million) over the next two years to help businesses become more efficient in their use of energy at a time when Europe faces a serious energy crunch amid the war in Ukraine.
Strike action has stopped refined products from leaving three of TotalEnergies’refineries and one fuel storage depot in France, a CGT union official told Reuters.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
CNX Resources announced the closing of its private placement of $500 million aggregate principal amount of its 7.375% senior notes due 2031. The Notes were offered under an indenture, dated September 26, 2022, among CNX, the subsidiary guarantors party thereto and UMB Bank, N.A., as trustee. The Notes are guaranteed by all of CNX's wholly-owned domestic restricted subsidiaries that guarantee its revolving credit facility.
Kosmos Energy reported on September 15, 2022 that the floating production, storage and offloading vessel for the Greater Tortue Ahmeyim project had drifted approximately 200 meters off the quayside following the impact of Typhoon Muifa. Kosmos has been informed by BP, the operator of the GTA project, that the FPSO has been returned to the quayside of the COSCO shipyard in China.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
U.S. Silica Holdings announced that its Industrial and Specialty Products segment will increase prices for most of its non-contracted silica sand, aplite, limestone, diatomaceous earth, perlite, engineered clays and non-activated clay products used primarily in glass, filtration, foundry, paints, coatings, elastomers, roofing, chemicals, recreation, building products and other applications. Price increases will range from 9% to 20% depending on the product and grade and go into effect for shipments beginning November 1, 2022.
DRILLERS
Valaris announced that Matt Lyne has commenced his role as Senior Vice President and Chief Commercial Officer, having been appointed to the role in late May.
REFINERS
Valero Energy reduced its debt by approximately $1.25 billion in September through its previously announced tender offers for various series of Valero’s senior notes, which Valero funded with cash on hand. This transaction, combined with debt reduction and refinancing transactions completed in the second half of 2021 and the first half of 2022, collectively reduced Valero’s debt by approximately $3.6 billion.
MLPS & PIPELINES
Stifel initiated coverage on Enlink Midstream LLC with a Buy rating.
Kinder Morgan announced that it has closed on the sale of a 25.5% equity interest out of its membership interest in Elba Liquefaction Company, L.L.C. (ELC) to an undisclosed financial buyer for approximately $565 million, subject to customary purchase price adjustments to reflect an economic effective date of July 1, 2022. These proceeds will reduce short-term debt and create additional capacity for attractive investments, including opportunistic share repurchases. The value of the equity interest implies an enterprise value of approximately $2.3 billion for ELC, which is approximately 13 times 2022E EBITDA. Upon closing, KMI and the undisclosed financial buyer will each hold a 25.5% interest and Blackstone Credit will continue to hold a 49% interest in ELC.
Scorpio Tankers announced that it has purchased its common shares in the open market. The Company purchased 222,396 of its common shares in the open market at an average price of $41.27 per share as part of the Company’s securities repurchase program.
MARKET COMMENTARY
U.S. stock index futures rebounded, following a bruising sell-off over the last few sessions on rate-hike induced recession fears. Europe's STOXX 600 index gained, led by automakers and travel stocks. In Asian equity markets, Japan's Nikkei closed up, supported by heavyweight Fast Retailing, while Chinese shares logged its best daily performance in six weeks as healthcare, consumer, and tourism stocks soared. Gold bounced off a 2-1/2-year low as a slight pullback in the dollar and Treasury yields helped tide over some pressure from prospects of more aggressive U.S. rate hikes. Oil prices rose, supported by supply curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian.
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