Oil Lower After Saudi Aramco Makes Sharp Price Cuts to Arab Light
SECTOR COMMENTARY:
The energy sector is set for a lower start, pressured by weakness in the underlying commodities. Meanwhile, the major equity futures are mixed, as investors remain uncertain around the timing of interest rate cuts.
WTI and Brent crude oil futures are kicking off the week sharply lower after Saudi Aramco made sharp price cuts to Arab Light, which offset ongoing tensions in the Middle East. Saudi Aramco lowered the official selling price of Arab Light for February to Asia by $2.00/barrel to a $1.50 premium vs Oman/Dubai, the largest m/m cut in over a year. At least three Asian customers told Bloomberg the price drop was unlikely to lead to requests for incremental deliveries while two Chinese buyers said they won't be lifting any term cargoes from KSA this month. Aramco also cut the price of Arab Light to the U.S. and NW Europe by $2.00/barrel. The ongoing war in the Middle East and a force majeure by Libya's National Oil Corporation on Sunday at its Sharara oilfield, is limiting losses.
Natural gas futures dropped this morning as investors take profits following last week’s 16% price gain and on forecasts for colder temperatures for the most of the L48 the third week of January.
BY SECTOR:
US INTEGRATEDS
Exxon Mobil warned it would write down about $2.5 billion of California assets in the fourth quarter, and said lower energy prices reduced operating profits. The snapshot by the largest U.S. oil producer showed operating results could drop to about $8.9 billion, down 30% from the $12.7 billion net profit a year earlier, and 3% weaker than in the third quarter.
Jefferies upgraded Chevron to Buy from Hold.
INTERNATIONAL INTEGRATEDS
Top oil exporter Saudi Arabia cut the February price of its flagship Arab Light crude to Asian customers to the lowest level in 27 months, a company statement showed, amid competition from rival suppliers and concerns about supply overhang. Saudi Aramcoslashed the official selling price (OSP) for February-loading Arab Light to Asia by $2 a barrel from January to $1.50 a barrel over Oman/Dubai quotes, a level last seen for November 2021. The price cut, the biggest in 13 months, is in line with market expectations, as refiners called for competitive prices from Saudi Arabia comparing to crude oil supplied from other Middle Eastern producers and the arbitrage cargoes from the Atlantic Basin.
According to Reuters, Petrofac announced that it secured a four-year operations services contract from BP.
Some of BP's largest shareholders have urged the company to approach Charles Woodburn, the BAE Systems chief executive, about becoming the company's next boss, Sky news reported.
According to Reuters, Eni to place new fixed rate bond with 10-year maturity.
Libya's National Oil Corporation (NOC) on Sunday declared a force majeure with immediate effect at its Sharara oilfield, which can produce up to 300,000 barrels per day, due to protests in the area. Libya's oil output has been disrupted repeatedly in the chaotic decade since the 2011 NATO-backed uprising against its former leader Muammar Gaddafi. NOC said in a statement that the Sharara closure has suspended crude oil supplies from the field to Zawiya terminal. The Sharara field, one of Libya's largest, has been a frequent target for local and broader political protests. The field is located in the Murzuq basin in southeast Libya. It is run by state oil firm NOC via the Acacus company, with Spain's Repsol, France's Total, Austria's OMV, and Norway's Equinor.
Shell announced fourth quarter 2023 update. The company sees qtrly integrated gas production 880 - 920 kboe/d. The company sees qtrly integrated lng liquefaction volumes 6.9 - 7.3 mt. The company sees qtrly upstream production 1,830 - 1,930 kboe/d. The company sees qtrly upstream exploration well-write offs are expected to be about $0.2 billion. Qtrly integrated gas trading & optimisation expected significantly higher than Q3'23 due to seasonality & increased optimisation opportunities. The company sees qtrly non-cash post tax impairments / (impairment reversals) $ 2.5 - 4.5 billion.
TotalEnergies announced that Libra Consortium has taken the final investment decision to develop an innovative natural gas and CO2 separation and reinjection facility for the Mero field in the Brazilian deep offshore pre-salt. This pilot unit, using a pioneer high pressure subsea separation technology (HISEP), will separate oil from CO2-rich gas at the bottom of the ocean and reinject the gas directly into the reservoir. This technology has the potential to reduce the amount of gas sent to the topside FPSO, thus enabling to reduce the GHG emissions intensity while increasing the field production capacity. This innovation is part of the Libra Consortium's research and development programs. The HISEP subsea separation pilot unit will be connected to the Marechal Duque de Caxias FPSO (Mero 3 project), which is currently under construction.
Morgan Stanley downgraded Equinor ASA to Underweight from Equal Weight.
Piper Sandler downgraded BP to Neutral from Overweight.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
No significant news.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
TETRA Technologies announced the completion of a Technical Resources Study for its 6,138 acre "Evergreen Brine Unit" in Arkansas. TETRA previously announced the Evergreen Brine Unit comprises brine assets contributed by TETRA and Saltwerx, LLC, a wholly owned subsidiary of ExxonMobil, that was unanimously approved in September 2023 by the Arkansas Oil and Gas Commission ("AOGC") to form the first newly established brine unit in Arkansas in nearly 28 years. TETRA had previously announced the results of its maiden inferred resources report on its 5,100 gross acres proposed unit. The Report that is being announced today further advances the resources and includes both "measured" and "indicated" resources in addition to the "inferred" category, reflecting higher confidence in the existence of the resources evaluated by the Report.
Piper Sandler downgraded Championx to Neutral from Overweight.
DRILLERS
Piper Sandler downgraded Helmerich and Payne to Neutral from Overweight.
REFINERS
PBF Energy plans to shut a crude distillation unit (CDU) next week at its 190,000 barrel-per-day (bpd) Chalmette, Louisiana refinery, according to two people familiar with the company’s plans. The 96,000-bpd Crude 2 CDU and a sulfur recovery unit are scheduled to be shut for a planned overhaul, the sources said.
Piper Sandler downgraded PBF Energy to Neutral from Overweight.
MLPS & PIPELINES
Energos Infrastructure, an international marine LNG infrastructure company, majority-controlled by Apollo-managed funds and minority shareholder New Fortress Energy, announced that the Company has completed the acquisition of two state-of-the-art Floating Storage and Regasification Units ("FSRUs") from affiliates of Dynagas. The two 174,000 m3 closed-loop FSRUs, built in 2021, will be renamed Energos Force and Energos Power.
MARKET COMMENTARY
Wall Street index futures edged lower as Boeing shares tumbled, while uncertainty over Fed rate cuts remained. Meanwhile, European shares slipped, dragged down by energy shares and a rise in government bond yields. In Asia, Chinese shares fell amid economic concerns and rising geopolitical tensions. The dollar edged higher against its major peers as investors braced for inflation data due on Thursday, while gold prices fell. Sharp price cuts by Saudi Arabia and a rise in OPEC output pushed oil prices 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.
This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, “Nasdaq”), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Other Topics
Energy Commodities Nasdaq Advisory Services
Nasdaq Energy News
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.
Read Nasdaq Energy News' Bio