Oil Market - January 8

[dan_s]

On 1/5/2018 Reuters reported OPEC deepened compliance with its oil supply agreement in December due to a further decline in Venezuelan output and extra cuts by Gulf exporters, a Reuters survey found, showing strong commitment to the deal despite higher prices. Adherence to the curbs rose to 128% from 125% in November, the survey found. The UAE, for the first time since the deal took effect in January 2017, pumped below its OPEC target, joining Saudi Arabia and Kuwait.

The survey shows no sign of producers boosting output to cash in on higher prices or to replace the decline in Venezuela, where output is dropping amid an economic crisis. Top exporter Saudi Arabia trimmed output by 60,000 b/d, below the kingdom's OPEC target. Production in Venezuela, where the oil industry is starved of funds due to a cash crunch, has fallen further below its OPEC target, the survey found. Both exports and refinery operations were lower in December. Output in northern Iraq is still down after falling in mid-October when Iraqi forces retook control of oilfields from Kurdish fighters who had been there since 2014. This has had the side-effect of boosting Iraqi compliance.

The U.S. energy industry braced for a major test to refineries and power plants as an intense winter storm roared up the Atlantic Coast, bringing heavy snowfall and high winds to a region already beset with several days of extreme cold. The extreme cold has stoked fears that a significant disruption could lead to a heating oil shortage, as inventories of distillate products, including heating oil, in the New England and Mid-Atlantic regions are at their lowest levels for this time of year since 2015. A number of tankers carrying diesel and heating oil from Europe are bound for the United States to address supply worries, reversing a traditional trade route. All reported by Reuters on 1/4/2018.

On 1/4/2018, Reuters reported that despite the strongest start for oil prices in four years, the world's top oil companies are hesitating to accelerate the search for new resources as a determination to retain capital discipline trumps the hope of making bonanza discoveries. Exxon Mobil (XOM-NC), Royal Dutch Shell (RDS-NC), Total (TOT-NC) and their peers are set to cut spending on oil and gas exploration for a fifth year in a row in 2018, according to consultancy Wood Mackenzie, despite a growing urgency to replenish reserves after years of reining back investment. Global investment in exploration, is estimated at $37 billion in 2018, down 7% from a year earlier and over 60% below the 2014 peak, according to WoodMac.

[dan_s]

John White at Roth Capital rates the following small-caps as BUY at current prices.

CHPE
CPE < Sweet 16
EPM
ESTE
FANG < Sweet 16
GDP
HK
LONE
MCF
PQ
REI
RSPP < Sweet 16
SRCI

The only one that I would rate not rate a BUY is HK.

[dan_s]

Iranians crash oil tanker into cargo ship off Chinese coast, cause massive spill. Reuters. Rescue crews wrestled to bring a blaze on an Iranian oil tanker off China’s east coast under control on Monday as fire raged for a second day following a collision with a grain ship, while the body of one of the 32 missing crew members was found onboard. Concerns were growing that the tanker, which hit a freight ship on Saturday night in the East China Sea and burst into flames, may explode and sink, the official China Central Television (CCTV) said on Monday, citing experts on the rescue team. Poor weather continued to hamper the rescue work, Lu Kang, a spokesman at China’s foreign ministry, told a regular news briefing. The size of the oil spill from the ship and the extent of the environmental harm were not known, but the disaster has the potential to be the worst since 1991 when 260,000 tonnes of oil leaked off the Angolan coast.


Iran Oil Ship at Risk of Sinking as Buyer Seeks Other Supply. Bloomberg. Hanwha Total Petrochemical Co. bought alternative supply after a fire on board an Iranian oil tanker that was destined for the South Korean company. The 32 crew members of the vessel were still missing following a collision in the East China Sea with another ship that’s left it in danger of sinking. The Sanchi is still ablaze and may explode after colliding on Saturday with the bulk carrier CF Crystal about 160 nautical miles off the coast of Shanghai, Chinese state media reported, with images showing the ship shrouded in thick black smoke. China, South Korea and the U.S. sent vessels and planes to search for Sanchi’s missing crew -- 30 Iranians and two Bangladeshis, the Associated Press reported.