Energy Prospectus

"Unplanned Supply Outages" will have a BIG impact on oil prices as supply & demand tighten. Below are just two examples of the many "Hot Spots" in nations that supply oil to the global market. The U.S. still depends on over 7,000,000 barrels per day of oil imports to run our economy. - Dan
--------------------------------------
On 12/7/2017, Reuters reported one of Nigeria's two main oil unions threatened to launch a nationwide strike on 12/18/2017 over what it said was a "mass sacking of workers that joined the union." If the government fails to force the management of domestic oil and gas companies and marginal field operators to recall laid off union members, its workers will go on strike, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) said.

PENGASSAN did not say how many workers were laid off and union officials did not respond to calls and messages. The oil ministry and labor ministry, often involved in resolving oil union disputes, did not immediately respond to requests for comment. Nigeria's state oil company this week tried to reassure motorists there was no shortage of petrol after panic buying led to long queues at filling stations as the busy Christmas holiday period approaches.


On 12/7/2017, Reuters reported Sinopec USA, a subsidiary of Chinese oil and gas conglomerate Sinopec (600028.SS-NC), has sued Venezuela's state oil company PDVSA in a U.S. court, claiming it never received full payment for an order of steel rebar. The lawsuit asks for $23.7 million for breach of contract and conspiracy to defraud. The legal action signals a split with another of Venezuela's biggest backers as the cash-strapped country seeks to restructure some $60 billion in debt in a landscape of low oil prices and production. The complaint suggests "patience is getting really thin at this point," said Mark Weidemaier, law professor at the University of North Carolina at Chapel Hill and an expert on international debt disputes. "This is a further sign of frostiness in the Chinese-Venezuelan relations." PDVSA declined to comment.


On 12/3/2017 Reuters reported Venezuela's President Nicolas Maduro gained more powers over the OPEC member's oil contracts, as a deepening purge looks set to strengthen the leftist leader's control of the key energy sector amid a debilitating recession. A months-long crackdown on alleged graft in Venezuela's oil industry has led to the arrest of some 65 former executives, including two prominent officials who used to lead both the oil ministry and state oil company PDVSA.

Corruption has long plagued Venezuela, home to the world's biggest crude reserves, but the socialist government usually said "smear campaigns" were behind accusations of widespread graft. Maduro has recently changed his tack, blaming "thieves" and "traitors" for the country's imploding economy.

Oil and Industrial Metals Could Lead in 2018 -- Barrons.com

By Myra P. Saefong

DJ Commodity Index

After an unimpressive year, the 2018 outlook for commodities looks more promising, particularly for crude oil and industrial metals.

This year, through December 7, the S&P GSCI Index Total Return (ticker: SPGSCITR), an investible index that tracks 24 commodities, was down 0.5%, after climbing more than 11% in 2016. "Commodities have been in hibernation," says Adam Koos, president of Libertas Wealth Management Group, who expects the market to end the year "in a sleepy, lifeless state of boredom."

But 2018, predicts Naeem Aslam, chief market analyst at brokerage ThinkMarkets, will be "a great year for commodities, and the common denominator would be the global growth. Fiscal policies should stimulate [economies in many countries] and provide the bedrock for the growth to accelerate."

The demand outlook for commodities is positive, particularly from emerging markets and China, says Rob Young, a portfolio manager for the ICON Natural Resources fund. Indeed, Young's colleague, Derek Rollingson, who runs the ICON Energy fund, says the emerging markets could provide a nice boost for oil, which now has risen for two consecutive years.

Through Friday, Brent crude futures had climbed more than 11% in 2017, to $63.40 a barrel. In part, that gain reflects the mainly successful efforts of the Organization of Petroleum Exporting Countries and its allies to keep their pledge to reduce oil output. And, Aslam observes, "Moving into 2018, the cartel is still determined to do whatever it takes to balance the supply-and-demand equation." He expects oil to trade in the $65 to $75 range next year. Koos is more bullish. He says it wouldn't be surprising if Brent fetches prices in the mid-$70s to mid-$80s by the end of 2018.

That could boost energy exploration-and-production stocks, which Rollingson terms a "neglected sector." The S&P Oil & Gas Exploration & Production Select Industry Index (SPSIOP) was down roughly 15% this year, as of Friday. That oil prices have remained around the $50-plus level over the course of 2017 is "very positive for exploration-and-production space, and that hasn't been reflected in the stocks," he adds. Example: Devon Energy (DVN), an oil and natural gas exploration outfit, has lost nearly 17% this year. The "lack of participation in the exploration-and-production industry kind of illustrates the disconnect between commodity pricing and some of the underlying securities," Rollingson says.

Despite the gains in the petro sector, the S&P GSCI Energy Index Total Return (SPGSENTR) was down 1% this year, through Thursday. In part, that reflects weak pricing for natural gas. Futures for that fuel settled at $2.763 per million British thermal units Thursday, a six-week low. Natural gas prices have fallen about 25% this year, and analysts say record U.S. output could cap them this winter.

THE COMING YEAR should also continue a rally in industrial metals, particularly zinc, copper, aluminum, and palladium, which has fueled a more than 18% jump in the S&P GSCI Industrial Metals Spot Index (SPGSIN) this year, through Thursday. "Global growth would help commodities in 2018, and zinc could be a top performer again," says Aslam, who also favors aluminum and copper. "Thanks to the improving global economic growth, which has been the driver behind this, we expect them to continue to perform well into 2018." This year, to Thursday, futures prices are up nearly 20% for zinc, 25% for aluminum, and more than 18% for copper.

An expert on industrial metals will be speaking at The Energy Prospectus Group luncheons in Houston on January 15 and in Dallas on January 16.

Palladium has had the top percentage gain among the major commodities this year, with futures up roughly 46% through Friday. Tight supplies and rising demand from the automotive industry -- the metal is used in catalytic converters -- sent prices above $1,020 an ounce in late November, their highest settlement in more than 16 years. "Palladium had a great year, largely due to the world's vehicles being converted from diesel to unleaded gasoline and hybrid electric vehicles," Aslam says.

Koos thinks even better days are ahead for palladium. He also sees oil heading higher in 2018, building on the momentum of the gains in 2016 and 2017.

MYRA P. SAEFONG writes about commodities for MarketWatch.