ENERGY RECAP: All about Permian, not politics

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

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


Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
Updated 21 min 35 sec ago

Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
  • Carrefour has more than 12,300 stores in more than 30 countries and employs 320,000 people worldwide
  • Canada's Couche-Tard has offered to take over the French supermarket giant for 16 billion euro ($19.5 billion)

PARIS: Canadian convenience store chain Couche-Tard has reportedly pulled out of a multi-billion euro takeover of supermarket giant Carrefour after the French government said it would veto the deal.
Negotiations over the 16 billion euro ($19.5 billion) deal ended after a meeting between the French Minister of the Economy Bruno Le Maire and the founder of Couche-Tard Alain Bouchard, Bloomberg news agency said, citing sources.
French ministers had insisted Friday they would not agree to the takeover because it could jeopardize food security, an even more important consideration given the coronavirus pandemic.
In an attempt to reassure ministers, Bouchard had promised to invest billions in Carrefour, said he would maintain employment for two years and that the group would be listed on the Paris Stock Exchange in parallel with Canada, Bloomberg reported.
Contacted by AFP, neither Couche-Tard nor Carrefour had confirmed the information on Friday evening.
Although talks had stopped, anonymous sources cited by Bloomberg said negotiations could resume if the French government changes its position.
But on Friday, France’s Economy Minister made his choice public, telling BMTV and RMC: “My position is a polite, but clear and definitive ‘No’.”
“Food security is a strategic consideration for our country and one does not just hand over one of the large French distributors like that,” Le Maire said.
“Carrefour is the biggest private sector employer in France with nearly 100,000 employees,” he noted, and the group accounts for 20 percent of the food distribution market in the country.
The French statements have not convinced the Canadian government.
A Canadian federal source said while they could understand concerns over allowing a foreign firm to take over such a large national employer, concerns over food security were unsubstantiated.
“But we cannot accuse a leading Canadian company like Couche-Tard of endangering the food sovereignty of an entire country,” the source, who requested anonymity, told AFP.

'Food sovereignty'
On Wednesday, Couche-Tard submitted a non-binding offer for Carrefour, valuing the group at more than 16 billion euros ($19.5 billion).
Le Maire made clear immediately that he was not in favor of a deal involving “an essential link in food security for the French, of food sovereignty.”
The government’s reaction had caused “surprise” at Carrefour itself, according to sources who said the comments were “premature” given that merger discussions had barely begun.
“We haven’t decided yet whether the interest shown is attractive for us,” one company official said on condition of anonymity earlier in the week.
Carrefour has more than 12,300 stores of various formats in more than 30 countries and in 2019 generated a net profit of 1.3 billion euros ($1.5 billion) on revenue of 80.7 billion euros ($97.4 billion).
It employs 320,000 people worldwide.
Couche-Tard has a worldwide network of more than 14,200 stores and earned a net profit of $2.4 billion on sales of $54 billion in its last complete year.
In the United States and several European countries, as well as in Latin America and southeast Asia, it operates under Circle K and other brands.