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
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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


Huawei in public test as it unveils sanction-hit phone

Updated 23 min ago

Huawei in public test as it unveils sanction-hit phone

  • Hit by US sanctions, Huawei's Mate 30 will not be allowed to use Google’s Play Store
  • Household-name services like WhatsApp, Instagram and Google Maps will be unavailable.
BERLIN: Chinese tech giant Huawei launches its latest high-end smartphone in Munich on Thursday, the first that could be void of popular Google apps because of US sanctions.
Observers are asking whether a phone without the Silicon Valley software that users have come to depend on can succeed, or whether Huawei will have found a way for buyers to install popular apps despite the constraints.
The company has maintained a veil of secrecy over its plans, set to be dropped at a 1200 GMT press conference revealing the Mate 30 and Mate 30 Pro models.
Huawei, targeted directly by the United States as part of a broader trade conflict with Beijing, was added to a “blacklist” in Washington in May.
Since then, it has been illegal for American firms to do business with the Chinese firm, suspected of espionage by President Donald Trump and his administration.
As a result, the new Mate will run on a freely available version of Android, the world’s most-used phone operating system that is owned by the search engine heavyweight.
While Mate 30 owners will experience little difference in the use of the system, the lack of Google’s Play Store — which provides access to hundreds of thousands of third-party apps and games as well as films, books and music — could hobble them.
Household-name services like WhatsApp, Instagram and Google Maps will be unavailable.
The tech press reports that this yawning gap in functionality has left some sellers reluctant to stock the new phones, fearing a wave of rapid-fire returns from dissatisfied customers.
Huawei president Richard Yu said at Berlin’s IFA electronics fair this month that his engineers found a “very simple” way to install the hottest apps without going via the Play Store.
Huawei could offer its own app store in a preliminary version, setting itself up as a competitor to the dominant Apple and Google offerings, observers speculate.
Over the longer term, the company could build out a similar “ecosystem” of devices, apps and services as the Silicon Valley companies that would bind users more closely to it.
The world’s second-largest smartphone maker after Samsung, Huawei earlier this month presented its proprietary operating system HarmonyOS, a potential replacement for Android.
The Mate 30 will not yet have HarmonyOS installed.
But it could make for a new round in the decades-old “OS wars” between Microsoft’s Windows and Apple’s Mac OS, then Android versus Apple’s iOS.
Meanwhile, Eric Xu, current holder of Huawei’s rotating chief executive chair, has urged Europe to foster an alternative to Google and Apple.
That could provide an opening for Huawei to build up Europe’s market of 500 million well-off consumers as a stronghold against American rivals.
“If Europe had its own ecosystem for smart devices, Huawei would use it... that would resolve the problem of European digital dependency” on the United States, Xu told German business daily Handelsblatt.
He added that his company would be prepared to invest in developing such joint European-Chinese projects.