ENERGY RECAP: All about Permian, not politics

A Port Authority officer points at the Bavand, one of two stranded Iranian vessels, anchored at the port in Paranagua, Brazil, Thursday, July 25, 2019. (AP)
Updated 28 July 2019

ENERGY RECAP: All about Permian, not politics

  • The EIA sees US oil production continuing to set records through 2027

Oil prices remain relatively stable and ended on Friday with slight losses, taking them close to where they started the week. Brent crude fell to $63.46 and WTI fell to $56.20 per barrel.
Continuing threats to supply from the Arabian Gulf and huge drawdowns in US crude oil inventories could not dampen doubts over future demand and fears about sluggish growth.
US oil inventories fell by a massive 10.8 million barrels to the lowest level in four months, according to the EIA. This decline was mostly attributed to the impact of Hurricane Barry on the Gulf of Mexico offshore oil fields.
The EIA reported that US oil production fell to its lowest level since October 2018. US oil output fell sharply by the most in almost two years to 11.3 million bpd.
But the market shrugged off that news and prices did not react. Traders continued to focus on the global oversupply situation rather than the latest OPEC+ cuts aimed at providing support to the oil price.
How can the surge in US oil production cause downward prices in oil while a sudden sharp decline in production keeps prices stable?
The growth in US oil production was always thought to outpace the growth in global oil demand since 2018. This was one of the main reasons for keeping  OPEC+ supply cuts for the third year in a row.
The EIA sees US oil production continuing to set records through 2027. But demand growth will swiftly absorb any additional barrels from shale producers in the medium term, and indeed that requires much more than 2.5 million bpd of incremental pipeline capacity that is expected to come into service from the Permian Basin between now and the end of 2020.
Until now, the limited US pipeline capacity to move crude oil out of the shale plays in the Permian has been the biggest challenge facing shale producers.
Though some shale producers raised capital expenditure during high oil prices in October 2018, oil prices subsequently fell and the pace of that spending slowed. That has raised questions over expanding export capacity in the near term.

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.