Crude prices weakened on Iran nuke deal, while natural gas
rocketed higher on weather forecasts.
Crude Oil:
Crude prices declined last week, responding to the landmark Iran
nuclear deal that seeks to arrest the West Asian country’s alleged
march towards nuclear power, while possibly bringing more of its
oil to global markets.
On Nov 24, Iran reached a temporary accord with six world powers
– the U.S., Great Britain, France, Russia, China and Germany – to
restrict its nuclear activities in return for Tehran’s relief from
international sanctions on oil, auto parts, gold and precious
metals. Though Iranian oil export is not expected to rise
significantly and flood international markets, the groundbreaking
agreement will surely go a long way in make it easier for the
country to sell oil.
Sentiments were further dampened by the Energy Information
Administration (EIA) report that showed another big jump in
inventories, which remains well above the upper limit of the
average for this time of the year.
As per the EIA’s weekly ‘Petroleum Status Report,’ crude
inventories climbed by an unexpected 2.95 million barrels for the
week ending Nov 22 to 391.42 million barrels. A surge in production
– now at their highest level in almost 25 years – led to the
stockpile pile-up with the U.S. What’s more, storage at the Cushing
terminal in Oklahoma, the key delivery hub for U.S. crude futures
traded on the New York Mercantile Exchange, was also up 676,000
barrels, the seventh straight weekly gain.
Concerns that the Fed may taper its $85 billion bond repurchase
plan in coming months also held back crude prices. Traders have
voiced concerns that Fed’s shift away from the bond buying policy
may lead to dollar-denominated oil prices to increase in
local-currency terms in emerging markets, thus slowing growth.
As a result of these factors, by close of trade on Friday, West
Texas Intermediate (WTI) oil was firmly in the red and settled at
$92.72 per barrel, losing 1.9% for the week.
Natural Gas:
Investors continue to focus on temperature patterns to
understand the fuel’s economic dynamics. As it is, natural gas
fundamentals look uninspiring with supplies remaining ample in the
face of underwhelming demand. In fact, it is expected to take many
years for the commodity’s demand to match supply in the face of
newer projects.
Despite these issues, natural gas rallied last week on the back
of a larger-than-expected decrease in natural gas supplies and
forecasts of cold weather conditions.
The EIA's weekly inventory release showed that natural gas
stockpiles held in underground storage in the lower 48 states fell
by 13 billion cubic feet (Bcf) for the week ended Nov 22, higher
than the guided range (of 7–11 Bcf drawdown). Chilly weather
forecasts – in the key U.S. consuming regions over the next
fortnight – are likely to further spur the commodity’s demand for
heating.
Influenced by these factors, natural gas spot prices ended
Friday at $3.95 per million Btu (MMBtu), up 4.5% over the week.
Energy Week That Was:
The week’s energy coverage was dominated by the following
news:
PetroChina Buys Exxon Stake in Iraq
Chinese energy giant PetroChina Co. Ltd. (PTR)
has acquired a 25% interest in the West Qurna-1 oilfields in Iraq
from U.S. oil major Exxon Mobil (XOM). The deal –
whose financial details were not disclosed – should help PetroChina
to set a stronger foothold in Iraq and synergize with its other
projects in the nation. This should also aid the Chinese government
which has become a significant importer of Iraqi crude. With a
slowdown in domestic oil output, China is looking at other
international oil fields to meet its energy demands.
Weather Hurts Pioneer Texas Biz
Pioneer Natural Resources Company’s (PXD)
output and drilling operations in the Spraberry, Wolfcamp, Eagle
Ford Shale and Barnett Shale Combo plays were hurt by a severe cold
spell in Texas. Shares of the company felt the chill as the price
dropped 2.5% and 0.6% in the two trading sessions to touch $177.75
on Friday.
Spraberry and Wolfcamp were the worst hit areas. Intense icing
and low temperatures resulted in widespread power outages, facility
hindrances, loading curtailment, and restricted access to
production and drilling facilities in these plays. A lengthy
recovery period is expected and the full impact of the weather
condition will be known in a couple of weeks. Pioneer had not
accounted for this unforeseen severe weather in its production and
financial guidance for the fourth quarter of 2013, which was
released along with the company’s third quarter earnings.
ConocoPhillips Divests Algerian Arm
U.S. energy giant ConocoPhillips (COP) has
completed the sale of its Algeria business unit to Indonesia’s
state owned oil company – PT Pertamina. The sales consideration
totaled $1.75 billion. ConocoPhillips’ divestment of its Algerian
unit will be value accretive for its shareholders as well as raise
funds to concentrate on higher return assets. It will facilitate
the company to focus on capital investments that will benefit
production and cash margins and enhance returns on capital.
NOV Hives Off Distribution Biz
Global large-cap energy equipment maker National Oilwell
Varco Inc. (NOV) is on track with the previously announced
spin-off of its Distribution business segment. For this purpose, a
new corporation christened NOW Inc. based in Delaware has been
formed. This new entity will, in time, operate as an independent,
publicly traded company under the proposed name of
DistributionNOW.
Weatherford Gains on Settlement News
Shares of oilfield service biggie Weatherford
International Ltd. (WFT) rose 1.5% on Tuesday, Nov 26,
after it agreed to shell out around $253 million to settle various
bribery-related cases with the Department of Justice, the
Securities and Exchange Commission, and the Departments of Treasury
and Commerce.
Other Headline News on Energy:
SeadrillFallsAfter
Profit Misses Estimates
Norwegian oilfield service firm Seadrill Ltd
(SDRL) fell to nearly 4-month low following weaker-than-expected
third-quarter results. Earnings per share came in at 60 cents,
failing to beat the Zacks Consensus Estimate of 67 cents. The miss
can be attributed to significant increase in operating costs.
Jones Energy Rallies on Asset Buy Deal
Oil and gas explorer Jones Energy Inc. has agreed to acquire
certain producing and undeveloped properties in the Anadarko Basin
from an undisclosed private seller for $195 million. The market
reacted positively to the news, which was announced after market
hours on Monday, Nov 25. Shares of the exploration and production
company opened at $14.31 on Nov 26 – up 3% from the previous close.
The stock price rose further, settling at $14.66, when the market
closed yesterday.
Statoil to Keep '14 Spending Flat Y/Y
Norwegian oil major Statoil ASA’s share prices surprised with a
respective 1.4% and 0.3% drop in the two trading sessions after it
announced its intent to keep exploration spending for 2014 close to
the 2013 record level. The company also intends to be more
selective in choosing exploration targets to lessen risk and
control spending. Statoil’s focus will be directed toward areas
where it has made recent discoveries. These include Norway, the
Gulf of Mexico, Brazil, Canada, Angola and Tanzania.
Lime Energy Drops on Chief Executive
Departure
Energy services provider Lime Energy Co. terminated the
employment of Chief Executive John O’Rourke and promoted Adam
Procell – President and Chief Operating Officer – as his
replacement. The sudden management shakeup spooked investor
sentiment, pulling down the company’s shares by 5.7%.
Performance Chart of Some Major
Companies:
The following table shows the price movement of the major oil
and gas players over the past week and during the last 6
months.
Ticker
|
Last Week’s Performance
|
6 month performance
|
XOM
|
-1.61%
|
+2.21%
|
CVX
|
-1.28%
|
-1.33%
|
COP
|
-1.65%
|
+17.25%
|
OXY
|
-4.44%
|
+0.73%
|
SLB
|
-4.65%
|
+20.71%
|
RIG
|
-3.28%
|
-0.90%
|
VLO
|
+4.19%
|
+13.59%
|
TSO
|
+2.55%
|
-3.11%
|
This Week’s Outlook
Apart from the usual suspects – the U.S. government data on oil
and natural gas – market participants will be closely tracking
Friday’s non-farm payroll report for Nov that will shed further
light on the economy’s wellness and the need for the bond buying
policy. Energy traders will also be focusing on the OPEC meeting in
Vienna on Wednesday.
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CONOCOPHILLIPS (COP): Free Stock Analysis Report
NATL OILWELL VR (NOV): Free Stock Analysis Report
PETROCHINA ADR (PTR): Free Stock Analysis Report
PIONEER NAT RES (PXD): Free Stock Analysis Report
SEADRILL LTD (SDRL): Free Stock Analysis Report
WEATHERFORD INT (WFT): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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