Oil Inches Lower, Pressured by Bearish Economic Data out of China and Europe
SECTOR COMMENTARY:
The energy sector is set to kick off the holiday-shortened week slightly lower, pressured by weakness in the underlying commodities and in the major equity futures.
After seven-consecutive days of strong gains, WTI and Brent crude oil futures inched lower this morning, pressured by another round of bearish economic data out of China and Europe and further strength the dollar. A private-sector survey released today showed that China's services activity expanded at the slowest pace in eight months in August, with analysts commenting that the markets had priced in China's recent effort to boost the economy, offsetting support from expected oil supply cuts. Also dampening sentiment was a survey in Europe which showed a steeper-than-expected decline in euro zone business activity last month as the bloc's dominant services industry contracted, suggesting the bloc could drop into recession. Traders also digested a report from Britain that showed service activity fell in August as higher interest rates reduced consumer and corporate demand and a data showing household spending in Japen fell 5.0% in July from a year earlier, deeper than a forecast decline of 2.5% and continuing into a fifth month of falls. Eyes will now shift to the next round of U.S. economic data for clues on whether the Fed will end its aggressive interest rate hike campaign. Expectations of an extension in supply cuts by leading OPEC+ producers limited losses. Saudi Arabia is widely expected to extend voluntary oil cuts into October and Russia will unveil a new OPEC+ supply cut deal this week, according to its deputy prime minister. Moscow has already announced it will cut exports by 300,000 bpd in September, following a 500,000 bpd cut in August. Riyadh is also expected to roll over a voluntary 1 million bpd cut into October
Natural gas futures extended their slide lower for the third-straight session and are currently off an additional 6% in early trading, pressured by new forecast that expect seasonally cooler weather in the eastern lower 48 next week.
BY SECTOR:
US INTEGRATEDS
Workers at Chevron's Wheatstone and Gorgon liquefied natural gas (LNG) projects in Australia would strike for two weeks from Sept. 14 if their demands for higher wages and better working conditions were not met, a union alliance said on Tuesday.
Mediation talks to avert strikes at Chevron's two major liquefied natural gas (LNG) facilities in Australia will begin on Monday after workers rejected the company's offer on wages and working conditions last week.
INTERNATIONAL INTEGRATEDS
BP Bernard Looney said he will not further scale back his energy transition strategy after ceding some ground earlier this year, despite investors penalizing the group over its plan to break away from rivals in cutting oil and gas output.
Eni and Saudi Acwa Power signed a Memorandum of Understanding (MoU) to jointly develop a green hydrogen project in the Middle East and Africa at the Investment Forum between Italy and Saudi Arabia in Milan.
Eni signed agreement to sell nigerian subsidiary Naoc to Oando.
Petrobras said it has made its first ever carbon credit purchase, a move that marks its entrance into the voluntary carbon market.
Petrobras said it has decided it will no longer sell the Urucu and Bahia Terra clusters, as well as the Manati oilfield and Petrobras Operaciones, its subsidiary in Argentina.
Shell Executive Vice President Steve Hill on Tuesday slammed what he called the "deceitful actions" of U.S. LNG developer Venture Global LNG, which he said are "damaging and dangerous to the industry."
TotalEnergies planned to begin restarting by Monday the large crude distillation unit (CDU) at its 238,000 barrel-per-day (bpd) Port Arthur, Texas, refinery, according to people familiar with plant operations.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Viper Energy Partners, a subsidiary of Diamondback Energy, announced it has entered into a definitive purchase and sale agreement to acquire certain mineral and royalty interests from affiliates of Warwick Capital Partners and GRP Energy Capital in exchange for approximately 9.02 million Viper common units and $750 million of cash, subject to customary adjustments. The cash portion of this transaction is expected to be funded through a combination of cash on hand, borrowings under the Company’s credit facility, and up to $200 million of committed equity from Diamondback, as well as proceeds from one or more capital markets transactions, including a potential bond offering, subject to market conditions and other factors.
Gerdes Energy downgraded Vital Energy, Chord Energy, and Callon Petroleum to Neutral from Buy.
Western Midstream Partners said it is acquiring Meritage Midstream Services II LLC for $885 million to expand its footprint in the Powder River Basin.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Venture Global LNG announced its long-term expansion plan to increase production from 70 million tonnes per annum (MTPA) to more than 100 MTPA of nameplate LNG export capacity. To support this initiative, Venture Global and Baker Hughes have executed an expanded master equipment supply agreement for the delivery of additional liquefaction train systems and power island systems for Venture Global’s future LNG export projects. The expanded agreement was announced on the margins of Gastech in Singapore in the presence of Venture Global CEO Mike Sabel and Baker Hughes Chairman and CEO Lorenzo Simonelli.
DRILLERS
BTIG initiated Diamond Offshore with a Buy rating.
Stifel initiated Patterson-UTI Energy to with a Buy rating.
REFINERS
No significant news.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
U.S. stock index futures fell as higher Treasury yields weighed on growth stocks, while a slow pace of expansion in services activity in China stoked worries over demand in the world's second largest economy. European shares fell, with economically sensitive sectors leading the selloff and the euro zone fuelled concerns about slowing global growth. Japanese stocks closed at their highest levels in a month, even as profit-taking emerged as the Nikkei index rose afresh above the key 33,000 mark and speculation about new share sales also weighed on sentiment. Gold slipped while the dollar rose. Oil prices dipped as fresh data added to gloom over the state of China's post-pandemic recovery, although expectations of an extension in supply cuts by leading OPEC+ producers limited losses.
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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