Oil
Oil

Oil Prices Head for Weekly Decline as Recession Fears Outweigh Tight Global Supply

The energy sector is poised for a lower start pressured by weakness in the underlying commodities and in the major market indices. U.S. stock index futures fell sharply after stronger-than-expected job growth in June and a low unemployment rate fueled bets of aggressive rate hikes by the Federal Reserve.

WTI and Brent crude oil turned negative in early trading and are headed for a weekly decline as concern over a potential recession-driven demand downturn outweighed tight global supplies. The flow of gas from Russia to Germany through the Nord Stream 1 pipeline will stop on Monday for a planned 10-day maintenance period. Germany is largely dependent on Russian gas to fuel its export-led economy and to keep homes warm. However, Europe's largest economy has been bracing for a possible complete halt in Russian supplies if Moscow steps up its use of gas as an economic weapon against the West while it wages war in Ukraine. Venezuela's largest refinery restarted one of its five crude distillation units on Wednesday following a power outage last week that completely paralyzed the 645,000-barrel-per-day facility. Warren Buffett's Berkshire Hathaway bought another 12 million shares of Occidental Petroleum Corp this week, giving it an 18.7% stake in the oil company.

Natural gas futures fell, following a ~13% gain yesterday on smaller than expected weekly storage build and as the NOAA's 6-10 day outlook showed seasonal temps across the Pacific NW and northern Calif, and below-normal temps across much of the Northeast. Above-normal temps are expected over much of the rest of the US, especially in the Central and Southern Plains.

BY SECTOR:

US INTEGRATEDS

No significant news.

INTERNATIONAL INTEGRATEDS

Norway government has approved the plan for expanding the country's second largest gas field Ormen Lange, the oil and energy ministry said. The field, operated by Shell and located in the Norwegian Sea, will as a result increase gas recovery from 75 to 85 percent, while at the same time accelerating gas production, the ministry said.

Shell said it had loaded and shipped a cargo of liquefied natural gas (LNG) this week at its Prelude floating LNG facility after workers scaled down industrial action at the site off northwestern Australia.

CANADIAN INTEGRATEDS

E3 Lithium Ltd. announced further to its news release of June 23, 2022, that it has received TSX Venture Exchange approval to issue 3,413,979 prepaid warrants to Imperial Oil as well as 128,024 common shares to the finder in respect of the transaction with Imperial Oil Ltd.

A worker has been killed at Suncor Energy's oil sands base plant in northern Alberta, the company said, the second fatality at the site this year and the latest in a string of incidents at Canada's third-largest oil producer.

U.S. E&PS

Warren Buffett's Berkshire Hathaway said it bought another 12 million shares of Occidental Petroleum this week, giving it an 18.7% stake in the oil company.

Ranger Oil announced the current status of its ongoing share repurchase program along with an expansion of its cash return framework, increasing its share repurchase program and initiating an inaugural quarterly cash dividend. Since early May 2022, Ranger has repurchased more than $40 million (approximately 1.2 million shares) of its Class A common stock, representing more than 2.5% of total common stock outstanding, at an average price of approximately $33.76 per share. After giving effect to shares repurchased to date, Ranger expects to have approximately 42.5 million shares of common stock outstanding. Given the continued strength in Ranger's financial position and outlook, the Company's Board of Directors authorized an increase in the share repurchase program from $100 million to $140 million, effectively reloading the capacity in the program for amounts repurchased to date. In addition, the Board extended the term of the program by one quarter through June 30, 2023. The Company's Board of Directors also declared an inaugural quarterly cash dividend of $0.075 per share of Class A common stock, payable on August 4, 2022 to Class A common stockholders of record as of the close of business on July 25, 2022. This dividend is 20% higher than previously announced expectations.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

MRC Global announced it has raised its 2022 guidance and provided selected preliminary second quarter 2022 results. Revenue is now targeted to be $3.3 billion, up from the previous guidance of $3.1 billion, which would be a 24% increase in 2022 revenue over 2021. The company expects third quarter revenue will be higher than the second quarter with a seasonal decline in the fourth quarter. Based on preliminary results, MRC Global now expects its second quarter 2022 sales to be up approximately 14% over the first quarter, as compared to the high single-digit improvement previously communicated. All four of the company’s end-markets reflect strong sequential revenue growth, led by greater than expected increases in the Gas Utilities and Downstream, Industrial and Energy Transition (DIET) sectors.

Benchmark initiated coverage on MRC Global with a Buy rating.

DRILLERS

No significant news.

REFINERS

The Board of Directors of Valero Energy has approved a new share purchase authorization of up to $2.5 billion of its common stock, which replaces its previous purchase authorization announced on January 23, 2018. Valero has purchased approximately 45.4 million shares of its common stock since 2018.

MLPS & PIPELINES

Cheniere Energy has asked the Biden administration to exempt it from limits on emissions of cancer-causing pollutants, arguing they would force the top U.S. exporter of liquefied natural gas to shut for an extended period and endanger the country's efforts to ramp up supplies to Europe, according to documents reviewed by Reuters.

State of Michigan regulators ordered Enbridge to file additional information on safety and engineering for its proposed Line 5 oil pipeline tunnel, describing Enbridge's current application as "deficient."

An Energy Transfer natural gas transmission pipeline exploded on Thursday, setting off a two-hour fire in a rural area on the west edge of Houston, according to state and local officials.

According to Reuters, Kinder Morgan's Natural Gas Pipeline Company of America LLC declared force majeure at Gulf Coast #1 mainline; required to perform pipeline remediation.

As per SEC filing, on June 30, 2022, Marathon Petroleum Company LP, Marathon Petroleum Supply and Trading LLC (MPST), Marathon Pipe Line LLC (MPL), and Ohio River Pipe Line LLC (ORPL), entered into a Master Amendment to Transportation Services Agreements. MPC LP and MPST are wholly owned subsidiaries of Marathon Petroleum. MPL and ORPL are wholly owned subsidiaries of MPLX LP. Marathon owns the general partner and majority limited partner interest in MPLX. The Master Amendment extends through 2032 the term of six transportation services agreements, and provides for automatic renewals of up to two additional five-year terms after 2032, subject to either party providing written notice to terminate the applicable agreement at least six months prior to the end of the then-current term.

Plains All American Pipeline, L.P. and Plains GP Holdings announced their quarterly distributions with respect to the second quarter of 2022. PAA announced a quarterly cash distribution of $0.2175 per common unit ($0.87 per unit on an annualized basis), which is unchanged from the distribution paid in May 2022. PAGP announced a corresponding quarterly cash distribution of $0.2175 per Class A share ($0.87 per Class A share on an annualized basis), which is unchanged from the distribution paid in May 2022. With respect to PAA’s Series A Preferred Units, PAA announced a quarterly cash distribution of $0.525 per Series A Preferred Unit, or $2.10 on an annualized basis. Each of these distributions will be payable on August 12, 2022 to holders of record of each security at the close of business on July 29, 2022.

Scorpio Tankers announced that the Company has repurchased its common shares and convertible notes due 2025, and the Company has given notice to exercise its purchase options on six leased vessels. Scorpio Tankers has recently repurchased 364,474 of its common shares in the open market at an average price of $29.17 per share. The Company has recently repurchased $1.5 million in aggregate principal amount of its Convertible Notes due 2025 in the open market.  As of the date of this press release, the Company has $223.4 million available under its Securities Repurchase Program. The Company's securities include its common shares, Senior Notes due 2025, and Convertible Notes due 2025. The Company has given notice to exercise its purchase options on six 2014 built MR product tankers (STI Opera, STI Virtus, STI Venere, STI Aqua, STI Dama, and STI Regina). These vessels were sold and leased back by the Company in August 2018. The leases bear interest at LIBOR plus a margin of 3.50% per annum. The purchase, which is expected to occur in August 2022, will result in a debt reduction of $95.0 million for the Company.

MARKET COMMENTARY

Wall Street futures were down, while European shares were mixed ahead of the much-awaited U.S. jobs data. In Asian markets, Japan's Nikkei ended flat after former prime minister Shinzo Abe was shot while campaigning for a parliamentary election, while Chinese stocks ended lower as worries over COVID-19 flare-ups and geopolitical tensions weighed on sentiment. Gold prices steadied, while the dollar was lifted on safe-haven demand. Oil prices declined as demand downturn outweighed global supply crunch worries.


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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