WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. (REUTERS)
Updated 14 July 2019

WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

  • It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020

OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
After holding stable below $65 and $60 for nearly two months respectively, Brent crude’s price jumped to $66.72 and WTI’s to $60.21 per barrel. Oil prices are higher over sharpening US crude inventories and concerns over US Gulf of Mexico production ahead of Tropical Storm Barry, as well as tensions in the Arabian Gulf after Iran’s alleged attempt to block a British-owned tanker in the Strait of Hormuz.
The Atlantic hurricane season threatened offshore oil production and began soaking Louisiana with heavy rains, leading to 15 production platforms and four rigs being evacuated in the Gulf of Mexico. So far, oil companies operating in the area have halted about 1 million barrels per day (bpd) of offshore oil output, or 53 percent of the region’s total production.
The Gulf of Mexico and the Texas coast produce about 5 percent of US natural gas and 17 percent of crude oil. Onshore facilities account for about 45 percent of US refining capacity and 51 percent of its gas processing. The Louisiana Offshore Oil Port will be closely monitoring Atlantic storm activity.
The weather has added to the headaches caused by the increasing demand for refined products while US inventories continued to recede more than expected for the fourth consecutive week. As US oil producers in the gulf cut more than half their output, commercial crude stocks fell 9.5 million barrels to 459 million barrels, a 12-week low.
Meanwhile, the Organization of the Petroleum Exporting Countries’ (OPEC) monthly oil market report MOMR concluded that OPEC+ output cuts will not change the fundamental outlook of an already oversupplied market. OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
The International Energy Agency’s (IEA) also suggested an oversupply forecast for 2020, with a 2.1 million bpd expansion from non-OPEC supply led by US shale producers. The IEA still sees weak oil demand growth and surging US shale oil output, estimating 2019 oil demand growth at 1.2 million bpd and 1.4 million bpd for 2020.
The EIA, in its short-term energy outlook, sees crude oil demand growing more slowly than previously expected. It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020.

Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


Gulf Marine CEO quits after review sparks profit warning

Updated 22 August 2019

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.