Oil Trading Higher as Oil Tankers Divert Course From Red Sea

SECTOR COMMENTARY:

The energy sector is poised for a broadly higher start, despite mixed performances in the major equity indices, supported by strength in the underlying commodities. U.S. stock index futures pared declines as investors cheered a softer-than-expected inflation print that bolstered expectations of early interest-rate cuts. Data showed the PPI increased 1% on a yearly basis in December compared with a 1.3% rise expected by economists. On a monthly basis, it ticked lower 0.1%, compared to an estimated 0.1% rise.

WTI and Brent crude oil futures are trading higher for the second-consecutive session as oil tankers diverted course from the Red Sea following overnight air and sea strikes by the United States and Britain on Houthi targets in Yemen after attacks on shipping by the Iran-backed group. Meanwhile, A Houthis spokesperson said the group would continue to target shipping heading towards Israel. Attacks by the Houthis in the Red Sea have disrupted international commerce on a route between Europe and Asia which accounts for about 15% of the world's shipping traffic.

Natural gas futures are extending gains for the second-straight day as the NOAA's 6-10 day outlook shows below-normal temps over much of the central and eastern US, especially across the Great Plains to the OH Valley.

BY SECTOR: 

US INTEGRATEDS

The winners of an auction for oil exploration blocks off Guyana's coast were given until the end of the month to submit additional information requested by the government before awarding the contracts, the country's vice president said. Following delays, the Guyanese government in September received bids for eight of 14 offshore blocks offered in the auction. The list of bidders included established players in the Guyana-Suriname basin, including consortia led by Exxon Mobil and TotalEnergies, along with smaller foreign and local firms.

INTERNATIONAL INTEGRATEDS  

Both crude distillation units (CDUs) and two vacuum distillation units (VDUs) shut down at TotalEnergies 238,000 barrel-per-day (bpd) Port Arthur, Texas refinery, sources familiar with plant operations said. The units, which convert crude oil into feedstock for all other units at the refinery, were shut following a malfunction on the gasoline-producing fluidic catalytic cracker (FCC), the sources said.

CANADIAN INTEGRATEDS

No significant news. 

U.S. E&PS

Texas LNG Brownsville LLC, a four million tonnes per annum (“MTPA”) liquefied natural gas (“LNG”) export terminal to be constructed in the Port of Brownsville, Texas, a subsidiary of Glenfarne Energy Transition, LLC, has signed a Heads of Agreement (“HOA”) with EQT Corporation for natural gas liquefaction services. The HOA anticipates the finalization of a definitive 15-year LNG tolling agreement for 0.5 MTPA of LNG from the first train of Texas LNG. 

According to Reuters, EOG Resources said it anticipates a net gain of $298 million on mark-to-market of its financial commodity derivative contracts for Q4 of 2023. The company also announced that during Q4 of 2023, net cash received from settlements of financial commodity derivative contracts was $18 million.

Ovintiv announced that Sippy Chhina has been named as an independent member of its board of directors, effective January 15, 2024. 

According to Reuters, Chesapeake Energy announced if merger deal is terminated co to pay Southwestern Energy company a termination fee of $389 mln

Citigroup upgraded Chesapeake Energy to Buy from Neutral.

Mizuho upgraded Chesapeake Energy to Buy from Neutral.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

No significant news. 

DRILLERS

No significant news.

REFINERS 

Par Pacific Holdings announced its Washington and Wyoming refineries have earned the U.S. Environmental Protection Agency’s (EPA’s) ENERGY STAR certification. The certification indicates these industrial plants perform in the top 25% of similar facilities nationwide for energy efficiency and meet strict energy efficiency performance levels set by the EPA. This is the first ENERGY STAR certification for both facilities.

MLPS & PIPELINES

TC Energy announced that it will continue to advance the Ontario Pumped Storage Project (Project) with its prospective partner Saugeen Ojibway Nation, and begin work with the Ministry of Energy (Ministry) and the Ontario Energy Board (OEB), to establish a potential long-term revenue framework for the Project. Further, TC Energy and Saugeen Ojibway Nation will assist with the Ministry’s evaluation of the Project’s broader societal and economic benefits.

MARKET COMMENTARY

U.S. stock index futures slipped on concerns over lackluster earnings from major banks. Meanwhile, investors eagerly awaited data on U.S. producer prices, due later in the day. Separately, oil prices advanced more than 3% after the U.S. and Britain carried out airstrikes in Yemen, aiming to protect Red Sea shipping routes. The ongoing geopolitical conflict in the Middle East also lifted the appeal of gold, despite stronger U.S. inflation data that pushed the dollar and Treasury yields higher. In other equity markets, European shares climbed as investors cheered the prospects of an interest rate cut from the ECB. Japan’s Nikkei continued its ascent from the previous days, as bets on an end to the BOJ’s negative rate policy diminished. With the Taiwan election scheduled for Saturday, China's stock markets remained in a somber mood, even as a key policy rate cut was expected on Monday.

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