Markets

Energy Market Commentary: North Korea, Harvey Weigh On Energy Stocks

Tuesday, August 29, 2017

Sector Commentary

Energy stocks remain under pressure following yesterday’s weakness as escalating developments with North Korea trigger risk aversion in the broader markets and with crude prices extending the 3% losses of the prior session. North Korea’s launch of a ballistic missile over Japan ignited knee-jerk selling in equities around the world, including a sharp sell-off in U.S. index futures, in the flight to safety that also saw USD weakness and strength in the Japanese yen and gold.

The impact of Hurricane Harvey remains front and center for the energy markets as gasoline futures remain strong at two-year highs, up again this morning, and as crude prices are moderately lower but appear to stabilize after the hefty losses on Monday. Refiners in the Corpus Christi area noted that they were preparing to restart while the market braced for more closures of bigger refineries in Eastern Texas that could potentially bring 30% of U.S. refining capacity offline, up from the 15% that is currently shut down. Analysts noted that Asian refineries will run harder to make up for U.S. closures and that high inventories in the U.S. should help to cushion the blow.

Natural gas prices are extending yesterday’s 1%+ strength, gaining nearly 1% this morning, as Gulf of Mexico production outages provides some support against a backdrop of cooler temperatures.

U.S. INTEGRATEDS

(Late Monday) Reuters – Exxon Mobil may begin shutting units as early as Tuesday at its 362,300-barrel-per-day Beaumont, Texas, refinery due to high water in the plant from Tropical Storm Harvey.

Press Release - Exxon Mobil completed its acquisition of Jurong Aromatics Corporation's Jurong Island plant, one of the largest aromatics facilities in the world.

INTERNATIONAL INTEGRATEDS

Press Release - LukOil reported that for the first half of 2017, its EBITDA increased to 386.7 bln RUB, or by 1.3% year-on-year. In the second quarter of 2017, EBITDA was 179.1 bln RUB, down 13.8% quarter-on-quarter. For the first six months of 2017, profit attributable to PJSC LUKOIL shareholders was 201.0 bln RUB, up 90.7% year-on-year.

Reuters - Egyptian Oil Minister Tarek El Molla signed three oil and gas exploration deals for 16 new fields in the Western Desert worth at least $81.4 million in total with Royal Dutch Shell and the U.S.-based Apex Oil Company.

CAnadian INTergrateds

Press Release - TechnipFMC has been awarded an Engineering, Procurement, Construction and Installation contract from Husky Energy for the West White Rose Project in Eastern Canada.

U.S. E&PS

KLR Group started Ultra Petroleum at ‘Buy’.

CANADIAN E&PS

(Late Monday) Press Release - Baytex Energy announced that due to Hurricane Harvey, on August 25, 2017 our Eagle Ford operations were shut-in and drilling and completion operations were suspended.

OIL SERVICES

Portzamparc downgraded CGG to ‘Sell’ from ‘Hold’.

Press Release - TechnipFMC has been awarded an Engineering, Procurement, Construction and Installation contract from Husky Energy for the West White Rose Project in Eastern Canada.

MLPs & Pipelines

Reuters - Kinder Morgan said terminals along Houston ship channel, gulf coast secured; mobilizing resources to resume full operations as soon as possible.

MARKET COMMENTARY

U.S. stock index futures pointed to a sharply lower open on Tuesday, as geopolitical concerns surrounding North Korea and the West were amplified, following news that a missile had passed over Japan. Markets worldwide showed signs of nervousness, with investors turning to safe-haven assets. Markets in Asia and Europe fell into the red on the back of the geopolitical news.

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