Wednesday, July 12, 2017

Weekly Crude Oil Data Will Come Out Today; The Energy Page, T+173 -- July 12, 2017

Updates

July 18, 2017: from Barron's -- "NRG's plan to divest of renewables could prove short sighted."

Original Post
 
Yellen: following the "real news" regarding Janet Yellen this morning, stock market futures are surging. Wow. 

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have possibly read here.

Global oil production: OPEC's first 2018 outlook -- the cartel is still pumping too much. OPEC sees 2018 demand for its crude below current production. OPEC output also exceeded demand during first half of this year. Tell me again about the OPEC cut (wink, wink).

Halcon: quick note. Yesterday it was announced that Halcon would exit the Williston Basin; focus on the Permian. Today Zacks reports that shares of US-based upstream company Halcón Resources Corporation (HK) moved up 51.35% to eventually close at $6.75 on Jul 12.

NRG: lots and lots of buzz about NRG Energy yesterday.  Huge debt problem; high consumer electric prices in Texas because of wind energy. NRG says it is making "transformational changes." The only "transformational change" I'm interested in when it comes to NRG is a) whether our electric rates in Texas will drop; and/or, b) whether NRG will backtrack on wind energy. Here's the press release:
NRG Energy Inc. announced Wednesday a "transformation plan" aimed at cutting recurring costs by $1.1 billion, slashing debt obligations by $13 billion and completing assets sales worth up to $4.0 billion.
The integrated power company said it plans to deploy up to $6.3 billion in excess cash through 2020, including $4 billion by end of 2018, in either projects or investments or shareholder return programs. As part of the plan, the company is targeting divesting 50% to 100% of its interest in NRG Yield and its leading renewables platform.
NRG is surging about 17% this morning.

XLNX: could hit new high today. [Yup, hit a new high. Whoo-hoo!]

Drop in US crude oil inventories: Reuters: oil rises above $48 as API reports drop in US fuel stocks. If this number holds up, it's very, very bullish ... and quite surprising. The API reported yesterday that US crude oil inventories fell by 8.1 million barrels.

EIA has also lowered its forecast for the amount of US oil production forecast for next year. Previously, the EIA suggested that US oil production would hit 10 million bopd -- an all-time record sometime next year (I thought there were even suggestions that the10-million threshold would be hit by the end of the year). Now, the EIA suggests US crude oil production will "only" reach 9.9 million bopd next year.

And then, of course there are all those reports of "stealth" demand no one is noting.

Goldman Sachs, recently admitting that it had really been burned on its crude oil prognostications, now warns that crude oil could drop below $40.

Citi says there could be some short term pressure on crude oil but by the end of 2017, WTI could approach $60.

My wishy-washy reading of the tea leaves: the fundamentals suggest that WTI cannot get to $60 by the end of the year, but oil trading is as much "emotional" as "rational." Thus, if we have several weeks of crude oil inventory declines greater than expected, the price of oil could rise significantly. The problem for Saudi: the smaller operators in the Permian are starting to show significant stress: they spent a lot to enter the Permian and will have to spend even more to develop it. They will take every increase in the price of oil as an opportunity to increase Permian production. For the Permian, it looks like the "magic number" for many operators is $50.

And so it goes.

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Refinery Operations

From the EIA today:
As of January 1, 2017, U.S. operable atmospheric crude distillation capacity reached 18.6 million barrels per calendar day (b/cd), 1.6% higher than at the beginning of 2016.
This increase in operable capacity was slightly lower than last year’s increase of 2.0%.
The capacities of secondary units that support heavy crude oil processing and production of ultra-low sulfur diesel and gasoline, including thermal cracking (coking), catalytic hydrocracking, and hydrotreating/desulfurization, also increased.
Catalytic hydrocracking and deasphalting units experienced the largest capacity increases over the past year, rising by 4.5% and 6.1%, respectively. --- EIA
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US Refinery Inputs Hit Record
MAGA


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Breaking News Vs Real News

I'll be gone most of the day -- family outing -- so I won't be blogging until later this evening, so trying to "catch up" before I leave for the day.

The CNBC news teaser: the Fed (Janet Yellen) would "shrink its balance sheet appreciably." This should have put huge pressure on the stock market. But then the "rest of the story" was reported:
  • the Fed's balance sheet would still take quite some time to be brought down (bullish)
  • the Fed's balance sheet would still be greater than what it was pre-crisis (wow, bullish, unexpected)
So, again, the teaser suggested news that was going to put huge pressure on the market but when we saw the actual report, it was a surprise in the opposite direction.

Market reaction? Futures surged.

'Nuf said.

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Honesty Is The Best Policy

When no one is listening to you anyway, you might as well try something new -- like speaking the truth.

2 comments:

  1. Bruce Oksol said: "The problem for Saudi: the smaller operators in the Permian are starting to show significant stress: they spent a lot to enter the Permian and will have to spend even more to develop it. They will take every increase in the price of oil as an opportunity to increase Permian production. For the Permian, it looks like the 'magic number' for many operators is $50."

    Yep. If the price of oil goes above $50, then the smaller independents will hedge their 2018 production at those prices and off to the races they'll go again.

    OPEC is operating within a very narrow range if it doesn't want to lose market share.

    Saudi Aramco President and Chief Executive Officer Amin Nasser, nevertheless, downplayed the threat from US shale. Earlier this week he said, “Investments in smaller increments such as shale oil will just not cut it.”

    Could Nasser be talking his book (the planned public offering)?

    Nasser has no way of knowing whether US shale will “cut it” or not. The Saudi oil ministers severely underestimated US shale once before, a miscalculation that cost them dearly.

    From his complete comments, it’s pretty clear Nasser is in a defensive posiiton, believing he is fighting a battle on two fronts, one against US shale and the other against renewables.

    https://www.bloomberg.com/news/articles/2017-07-10/aramco-to-spend-300-billion-as-ceo-frets-about-world-oil-supply

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    Replies
    1. Thank you. I can't recall if I posted that link earlier, but I saw the story about Saudi "fretting about future global oil supplies." Got a kick out of it. Saudi fretting about a global oil shortage. If only.

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