Crude Tumbles on Stronger Dollar, Demand Concerns
The energy sector is set to extend yesterday’s declines into this morning’s session, pressured by further weakness in the crude complex and in the major equity indices which continued to fall on growing concerns over global economic growth.
WTI and Brent crude oil futures are down over 4% in early trading with the U.S. benchmark falling back below the $100-mark, driven by additional strength in the dollar, demand-sapping COVID-19 curbs in China and fears of a global economic slowdown. The euro lost ground and is trading near parity with the dollar. Multiple Chinese cities are adopting fresh COVID-19 curbs, from business shutdowns to broader lockdowns in an effort to rein in new infections from the highly infectious BA.5.2.1 subvariant of the virus. While U.S. President Biden will make the case for higher oil production from OPEC when he meets Gulf leaders in Saudi Arabia this week, analyst don’t expect much from the visit. U.S. Treasury Secretary Janet Yellen is in Asia to discuss ways to strengthen sanctions on Moscow, including a price cap on Russian oil to limit the country's profits and help to lower energy prices. The IEA Executive Director Birol said that any price caps on Russian oil should include refined products.
Natural gas futures continued to build on yesterday’s rally, surging to another one-week high as power generators burned more of the fuel to keep air conditioners humming during a brutal heat wave that has boosted electric demand to record highs in several parts of the country. Texas's power grid operator warned of potential rolling blackouts amid predictions demand would hit all-time highs on Monday and Tuesday on the increased cooling demand. Power demand also broke records in the Southwest Power Pool and in several parts of the U.S. Southeast over the past week. Traders also noted the ongoing outage at Freeport LNG's LNG export plant in Texas will leave more gas in the United States for utilities to quickly refill low stockpiles for the winter.
BY SECTOR:
US INTEGRATEDS
The United States said 14 companies had been awarded contracts for the latest sale of oil from the Strategic Petroleum Reserve as part of the Biden administration's efforts to ease oil prices boosted by reactions to Russia's invasion of Ukraine. Chevron, ExxonMobil and Valero Energy will be among the firms to take delivery of crude oil between Aug. 16 and Sept. 30, the Energy Department said in a release.
INTERNATIONAL INTEGRATEDS
Equinor announced that a gas leak in a contained area related to a turbine on Sleipner A was reported in the morning of 11 July. The incident was quickly clarified. During the process of resuming production and depressurisation, an additional gas leak occurred on the Sleipner R riser platform late Monday night.
Equinor has signed an agreement to buy a 100% stake in the US based battery storage developer East Point Energy LLC. The acquisition supports Equinor's ambition to be a leading company in the energy transition and provides a platform for broadening our energy offerings in the US.
Eesti Gaas signed a contract with Equinor for the purchase of 2 TWh of LNG, which will significantly increase Estonia's security of supply in the upcoming heating season. Gas will arrive at the Klaipeda LNG terminal in October and November.
Petrobras informed that it is reassessing the date for the start of operation of the Route 3 Integrated Project, scheduled for the second half of 2022, due to the demobilization of the workforce of the company SPE Kerui-Método, responsible for the works of the Natural Gas Processing Unit (UPGN) of the Gaslub Cluster, in Itaboraí, Rio de Janeiro.
Petrobras informed that it has finalized the sale of 51% of Petrobras Gás S.A. (Gaspetro) to Compass Gás e Energia S.A. (Compass). The transaction was concluded for R$ 2.097 billion, fully paid on this date.
Petrobras informed that it has completed a Drill Stem Test (DST) on the 1-BRSA-1383A-RJS wildcat well (Alto de Cabo Frio Central Noroeste) in the pre-salt of the southern portion of the Campos Basin. The new discovery, announced on April 1st, is located 230 km away from the city of Rio de Janeiro-RJ, in a water depth of 1,833 meters.
Reuters reported that Saudi Aramco has notified at least three North Asian buyers that it will supply full contractual volumes of crude oil in August.
Cathay Innovation, a global venture capital group backed by TotalEnergies, has launched a 1 billion euro ($1 billion) fund to invest in technology start-ups with an eye on sustainability, it said.
Reuters reported that TotalEnergies SE’s 238,000 barrel-per-day Port Arthur, Texas, refinery was operating at 90% capacity on Monday after completing restarts on all units.
CANADIAN INTEGRATEDS
Suncor Energy faces a long slog to fix its poor safety record and regain investor confidence, analysts said, after Chief Executive Mark Little resigned following another worker fatality at a company site.
U.S. E&PS
Travis Stice, Chief Executive Officer and Chairman of the Board of Directors of Diamondback Energy, announced that effective July 7, 2022, the Company increased the size of Diamondback’s Board of Directors to ten members, adding Rebecca A. Klein and Frank D. Tsuru as independent directors.
EQT Corp disclosed it expects to report a loss on derivatives not designated as hedges of $845M for the three months ended 30-Jun-22, comprised of: Net cash settlements paid on derivatives not designated as hedges of $1.75B. Non-cash fair value (gain) loss of ($908M).
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Fluor announced that it was awarded a full notice-to-proceed (FNTP) contract by New Fortress Energy, for the engineering, procurement and fabrication management of the NFE Fast LNG 2 project. The project is a nominal 1.4 million tonnes per annum LNG gas treating and liquefaction plant to be placed on fixed offshore platforms. Fluor will book the undisclosed reimbursable contract value in the second quarter of 2022.
U.S. Silica Holdings announced that it has completed a $100 million voluntary term loan principal repayment. The debt was retired at a discount to par using excess cash on hand.
Weatherford International plc announced it intends to use cash on hand to redeem $50 million principal amount of its 11.0% senior notes due December 1, 2024 on August 10, 2022.
DRILLERS
No significant news.
REFINERS
Reuters reported that the catalytic cracker at PBF Energy's 172,800-barrel-per-day oil refinery in Toledo, Ohio was running on Monday at a reduced rate, a person familiar with plant operations said. The 82,000-bpd gasoline-producing catalytic cracker is expected to return to full operating capacity on Tuesday, the source said. The unit was shut to below 50% capacity.
MLPS & PIPELINES
Crestwood Equity Partners LP announced the closing of the previously announced Delaware Basin acquisitions of Sendero Midstream Partners LP for approximately $600 million in cash and First Reserve’s 50% interest in Crestwood Permian Basin Holdings LLC for 11.3 million Crestwood common units. Additionally, on July 1, 2022, Crestwood completed the previously announced divestiture of its Barnett Shale assets for $275 million in cash. On July 1, 2022, Oasis Petroleum, Crestwood’s largest customer in the Williston Basin, completed its merger with Whiting Petroleum, forming Chord Energy. The formation of Chord creates a financially strong unconventional U.S. oil producer focused on development in the Williston Basin. Following the formation of Chord, Oasis has transferred to Chord its Crestwood common units and its contractual right to nominate two members to the Board of Directors of Crestwood’s general partner, Crestwood Equity GP, LLC, which right was received by Oasis as part of Crestwood’s acquisition of Oasis Midstream Partners LP and is subject to meeting on-going ownership thresholds. As a result, the previously appointed members by Oasis to the Board of Directors, Mr. John Lancaster, Jr. and Mr. John Jacobi, resigned effective July 1, 2022. Chord has nominated Ms. Samantha F. Holroyd and Mr. Paul J. Korus to serve as their replacements. Crestwood expects that Ms. Holroyd and Mr. Korus will be formally appointed to the Board of Directors in the coming weeks.
RBC upgraded DCP Midstream LP to Outperform from Sector Perform.
According to Reuters, Compagnie Maritime Belge NV (CMB) said it does not support the proposed Frontline takeover bid of Euronav NV. It does not believe the combination with Frontline will create additional value for Euronav’s stakeholders.
MARKET COMMENTARY
Wall Street futures fell as the prospect of further central bank tightening and worries about the health of economies worldwide unnerved investors. European equities were down, weighed by energy supply crunch concerns. Japan's Nikkei and Chinese equities closed lower as rising domestic cases of COVID-19 in respective countries raised worries of an economic slowdown. Gold prices strengthened, while the dollar jumped to a 20-year high against the euro on safe-haven demand. Oil prices plunged as renewed COVID-19 curbs in China weighed on fuel demand outlook.
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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