Oil Drops as Traders Digest Dim Economic Data From China
SECTOR COMMENTARY:
The energy sector is set for a lower start, pressured by weakness in the underlying commodities and the major equity indices which are extending yesterday’s losses as optimism for aggressive rate cuts this year continues to fade away.
WTI and Brent crude oil futures dropped this morning as traders digested dim economic data from China, which raised concerns about future demand and on a higher dollar. China’s economy grew less-than-expected in the fourth quarter amid their ongoing property crisis, deflationary pressures, and weak demand. The world’s second largest crude importer’s GPD grew 5.2% in October-December from a year earlier, higher than 4.9% in the third quarter but slightly off a 5.3% forecast in a Reuters poll. The U.S. dollar index rose near a one-month high on comments from Federal Reserve officials which lowered expectations for aggressive interest rate cuts. OPEC’s Monthly Oil Market Report showed the global oil demand growth forecast for 2024 remains unchanged at 2.2 mb/d, with the OECD growing by around 0.3 mb/d and the non-OECD by about 2.0 mb/d. However, the report shows that global oil demand in 2025 is expected to see a robust growth of 1.8 mb/d, y-o-y. The OECD is expected to grow by 0.1 mb/d, y-o-y, while demand in the non-OECD is forecast to increase by 1.7 mb/d.
Natural gas futures are extending yesterday’s sharp losses on forecasts for temperatures to turn warmer after the recent winter storms.
BY SECTOR:
US INTEGRATEDS
A severe winter storm shut a U.S. Gulf Coast refinery in Texas on Tuesday, triggered malfunctions at others and halved North Dakota oil production as it dumped snow and rain across a broad swath of the nation. TotalEnergies' 238,000 barrel-per-day (bpd) refinery in Port Arthur, Texas, was examining units after a plantwide power outage on Tuesday morning as a winter storm brought frigid temperatures to the U.S. Gulf Coast, sources familiar with the company's operations said. North Dakota's oil production fell by half on Tuesday due to extreme cold weather and operational challenges, the state's pipeline authority said. Oil production was estimated to have fallen between 600,000 and 650,000 barrels per day, according to the North Dakota Pipeline Authority. Exxon Mobil returned a gasoline-producing fluidic catalytic cracker and a coker at its 564,440-bpd refinery in the Houston suburb of Baytown, Texas, to normal operation after a malfunction triggered when severe cold crossed the area on Monday night.
INTERNATIONAL INTEGRATEDS
Aramco allocated an additional $4 billion to its global venture capital arm, Aramco Ventures. It will more than double the capital allotted to Aramco Ventures, increasing its total investment allocation from $3 billion to $7 billion. It will take Aramco's overall venture capital allocation to $7.5bn, which also includes the $500 million venture capital fund Wa'ed Ventures that focuses on the start-up ecosystem in the Kingdom of Saudi Arabia. The decision reflects the growing significance of Aramco's venture capital program in enabling the development of disruptive new technologies, creating diversification opportunities for Aramco, and paving the way for collaborations with innovative start-ups. In doing so, it aims to help advance the Company's long-term strategy, which includes a focus on new energies, chemicals and transition materials, diversified industrial businesses, and digital technologies.
BP interim boss Murray Auchincloss was named permanent CEO, pledging to stick with energy transition plans as the board seeks to steady the company which was rocked by the sudden resignation of Bernard Looney last September. Auchincloss, 53, has led BP for the last four months and is well known to investors, having previously led BP's finances and helping Looney shape the company's current strategy calling for growing renewables and reducing oil and gas output by 2030.
According to Reuters, BP to acquire GETEC ENERGIE GmbH. Financial details of this private transaction are not being disclosed.
According to Reuters, Shell invests in Victory Gas Field in UK North Sea. Shell anticipated Victory Field will come online in middle of decade and at its peak, produce enough gas to heat almost 900,000 homes per year.
UBS downgraded Shell to Neutral from Buy.
UBS downgraded Equinor ASA to Sell from Neutral.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
TPH Energy Research upgraded Antero Resources to Buy from Hold.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Schoeller-Bleckmann Oilfield Equipment AG announced its preliminary results for the fiscal year 2023, demonstrating excellent financial performance both top and bottom line. SBO achieved an all-time high in sales totaling MEUR 585 for the year, an impressive 17% growth on top of already high sales in 2022 (MEUR 501.2). Profit from operations (EBIT) also outperformed last year’s results, increasing from MEUR 96.2 to MEUR 104 in 2023. Adjusted for foreign exchange gains and losses, EBIT grew by 22 % to MEUR 111 (adj. EBIT 2022: MEUR 90.9), leading to a remarkable adjusted EBIT margin of 19 % for the full year (adj. EBIT margin 2022: 18.1 %). Profit before tax of MEUR 95 was also above last year (2022: MEUR 93.3) whereby the higher EBIT in 2023 was largely offset by one-off expenses in the financial result.
TechnipFMC has been awarded a significant(1) contract by bp for its Argos Southwest Extension project in the Mad Dog field. TechnipFMC will install pipe and an umbilical, tying back three new wells to the Argos platform in the Gulf of Mexico.
Total Energy Services announced that its wholly owned subsidiary Savanna Energy Services Australia Pty Ltd. (“Savanna Australia”) has entered into an agreement with SLB to acquire all of the shares of Saxon Energy Services Australia Pty Ltd. (“Saxon”) for US $37.0 million cash (the “Acquisition”). The Acquisition is expected to be completed during the first quarter of 2024, subject to the satisfaction of certain conditions including the receipt of regulatory approvals.
DRILLERS
No significant news.
REFINERS
No significant news.
MLPS & PIPELINES
EnLink Midstream announced that the EnLink Board of Directors (Board) completed its expanded 2023 common unit repurchase authorization of $250 million, authorized a 2024 common unit repurchase plan, increased its quarterly distribution for the fourth quarter of 2023 by approximately 6%, and updated EnLink's financial policy to reflect a long-term leverage target of 3.5x debt-to-EBITDA.
MARKET COMMENTARY
U.S. stock index futures dropped as hawkish comments from the Federal Reserve lowered hopes for a March rate cut, while attention turned to regional bank earnings and December retail sales data due later in the day. Meanwhile, European equities fell as remarks from ECB officials tempered interest rate cut expectations. In Asian markets, Japan's Nikkei retreated from previous session gains on profit taking, while China's blue-chip index closed at near five-year lows as domestic growth appeared shakier and weak property data deepened concerns. Oil declined more than 1% on China economic worries and a strengthening dollar, while gold prices edged lower.
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 Rich Pontillo.
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Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services. 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.
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