Global Oil Market - March 6

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The IEA published its annual Oil 2018 report on Monday, which detailed two broad conclusions: U.S. shale would dominate the supply picture for the next few years, leaving little room for OPEC to boost production. However, by the 2020s, the dearth of upstream investment over the past few years will finally start to bite, and with little spare capacity, the oil market could suffer from a supply crunch.

Genscape Inc. reported a drop in inventories at Cushing, OK last week, with storage levels already at the lowest level in four years. The bullish report stands in sharp contrast to expectations of a new wave of shale supply. “The trend in global inventories shows that the market is fundamentally under-supplied and that emphatically remains the case,” Pavel Molchanov, an energy research analyst at Raymond James, told Bloomberg. Still, overall crude inventories are expected to have increased last week.

Libya oil field restarts. Oil prices jumped on Monday because of the outage of Libya’s largest oil field, the Sharara. However, by Monday, output resumed at the 340,000-bpd field. Libya has been producing about 1.0 to 1.1 million barrels per day recently, before the outage, although a separate field was shuttered last week, temporarily knocking 90,000 bpd offline.

Jeffries: Oil M&A to fall.
Jeffries analysts say that financial discipline in the oil patch could lead to another decline in M&A activity this year. In 2017, the industry only closed on $74 billion worth of deals, a drop of 23 percent from 2016. Jeffries sees that figure falling further in 2018 as shareholders pressure shale companies to focus on profits. Jeffries says that 8 out of 10 deals outside North America failed in the past two years. “Investors are really saying to these companies, ‘Hey you guys have been buying assets and accumulating acreage and stuff for the last decade; where are the returns?”’ Ralph Eads, chairman of energy investment banking at Jefferies Group LLC, told Bloomberg.