Crude Slips on Strong Dollar, Recession Fears, Soaring Inflation Rates
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 after Federal Reserve officials said the central bank needs to keep raising interest rates to rein in inflation, while deliberating on how fast and how high to lift them.
Following two days of gains, WTI and Brent crude oil slipped in early trading and are heading for weekly losses as a strong dollar and concerns about a global economic slowdown weigh amid soaring inflation rates. Giving a floor to prices, U.S. crude inventories fell sharply as the nation exported a record 5 million barrels of oil a day in the most recent week, with oil companies finding demand from European nations looking to replace Russian crude. Supplies could tighten again when European buyers start seeking alternative supplies to replace Russian oil ahead of European Union sanctions which take effect from Dec. 5.
Natural gas futures dropped in early trading after touching a fresh 14-year high the previous session, with output on track for a record high this month.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
Petrobras informed that, after compliance with all the precedent conditions set forth in the share purchase and sale agreement, the purchase of Edison S.p.A.'s stake (50%) in Ibiritermo S.A. has been completed and the transfer of the Usina Termelétrica Ibirité (UTE Ibirité) to Petrobras has been carried out.
Brazilian Economy Minister Paulo Guedes said he hopes President Jair Bolsonaro gives "adequate treatment" to state-controlled oil firm Petrobras to increase oil production if he is reelected this year.
Petrobras informed that the Executive Board approved on August 18, 2022, the 1st issuance of book-entry commercial notes, without collateral and personal guarantee, in up to two series (Book-entry Commercial Notes), which will be subject to public distribution, with restricted distribution efforts, under mixed regime of firm guarantee and best placement efforts, pursuant to CVM Rule No. 476, of January 16, 2009, as in force (CVM Rule 476) and other applicable laws and regulations (Offering). The Issuance will comprise of up to 3,000,000 Book-entry Commercial Notes, with a nominal unit value of BRL 1,000.00 (Nominal Unit Value), totaling up to three billion Reais (BRL 3,000,000,000.00) (Total Issue Amount), provided that (a) the Total Issue Amount, the total amount to be allocated between the Book-entry Commercial Notes of the first series and the Book-entry Commercial Notes of the second series, as well as the existence of both series, will be defined through a bookbuilding procedure, and that (b) the Total Issue Amount and the number of Book-entry Commercial Notes may be reduced due to the Partial Distribution.
Crédit Agricole CIB advised Repsol Ibereólica Renovables Chile SpA - a joint venture between Repsol Chile S.A. and Ibereólica Renovables Chile S.A. - on a USD$118 million project finance debt raise for the construction and operation of Project Atacama, a 165.3 MW greenfield wind farm in northern Chile.
Bloomberg reported that South Africa expects TotalEnergies to submit a production plan within weeks to utilize a prolific offshore gas discovery that will form a key part of increasing investment in the sector.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Chesapeake Energy announced that it has commenced exchange offers relating to its outstanding (i) Class A warrants, (ii) Class B warrants and (iii) Class C warrants, each to purchase shares of common stock, par value $0.01 per share, of the Company. The warrant structure was originally implemented as part of the Company's restructuring. By reducing the potential dilutive impact of the warrants through the Offers, the Company expects to simplify its capital structure, eliminate complexity and align the interests of all equity holders with minimal increase to the fully diluted share count. The Company intends to resume its $2 billion board authorized share repurchase program following the completion of the Offers.
Tudor Pickering Holt downgraded Occidental Petroleum to hold from buy.
Tudor Pickering Holt downgraded Pioneer Natural Resources to hold from buy.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Raymond James assumed coverage on Eagle Materials with an Outperform rating.
Raymond James upgraded Martin Marietta Materials to Outperform from Market Perform.
Shawcor announced that its pipe coating division has received a formal contract valued at approximately C$500 million from Transportadora de Gas Natural de la Huasteca, S. de R.L. de C.V., the Mexican subsidiary of TC Energy, to supply pipe coating services on the Southeast Gateway Pipeline project, an offshore natural gas pipeline in southeast Mexico.
Raymond James upgraded Vulcan Materials to Outperform from Market Perform.
DRILLERS
No significant news.
REFINERS
No significant news.
MLPS & PIPELINES
A state of Michigan lawsuit that aims to force Enbridge to stop operating the Line 5 oil pipeline underneath the Straits of Mackinac in the Great Lakes will be heard in federal court, a judge ruled.
MARKET COMMENTARY
Stock index futures pointed to a lower opening for Wall Street as fears surrounding global economic slowdown weighed on the sentiment and investors awaited annual Jackson Hole symposium next week for clues on Fed’s rate hike trajectory. European shares fell after data showed German producer prices jumped at the fastest pace on record, underscoring the gloomy outlook. The euro and sterling slipped versus the dollar and gold prices fell. Asian stocks ended in the red on concerns about the health of China's economy. Oil prices slumped, hurt by skepticism in demand outlook.
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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