WEEKLY ENERGY RECAP: 2019 - Shocks didn’t shake prices

A view shows Saudi Aramco's Abqaiq oil facility in eastern Saudi Arabia in this undated handout photo. (REUTERS)
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Updated 29 December 2019

WEEKLY ENERGY RECAP: 2019 - Shocks didn’t shake prices

  • Despite geopolitical factors, Brent crude moved in a narrow range of between $60 and $64 per barrel

From Abqaiq to the Straits of Hormuz, the attacks on oil infrastructure this year were unprecedented. But more remarkable than the attacks themselves was the market reaction, or rather lack of it. Instead of skyrocketing oil prices, the energy year was defined by sustainable and relatively steady prices.
The international Brent crude benchmark started the year at about $55 per barrel and reached a high for the year of $74 per barrel at the end of April.
It never reached that level again, even in the aftermath of the mid-September attacks on the world’s biggest oil processing plant in Saudi Arabia when there was a one-day spike to $71 per barrel. That surge was short lived as the price fell back to the mid-60s when traders realized production was only briefly interrupted.
For most of the year and despite the geopolitical factors that could have influenced it, Brent crude moved in a fairly narrow range of between $60 and $64 per barrel.
This stability was in large part due to the success of the OPEC+ group of oil exporters, now heading for its fourth year of coordinated production cuts.
Other energy milestones of the year included the success of the Saudi Aramco IPO and the agreement to resume the oil production from the Neutral Zone oil facilities between Saudi Arabia and Kuwait after a five-year suspension.
In 2018, Brent crude averaged $71. In 2019 that had fallen to $64 a barrel. Most of that downward pressure arose not from attacks on oil facilities but from the perceived impact on global energy demand of the US-China trade war.
Despite this, China crude oil imports hit a record 11.18 million bpd in November 2019, surpassing the US record mark of 10.77 million bpd set in June 2005.
Upstream investment has been lackluster globally, with the exception of Saudi Arabia, the only swing producer and the largest oil exporter, largely because of its investment in infrastructure.
The steepest single-day fluctuation in oil history took place when Brent crude price rose by 19 percent to $71.95 per barrel after the attacks on the world’s largest crude oil processing facility in Saudi Arabia. On May 12, four commercial ships were sabotaged in the Gulf of Oman — two Saudi Arabian oil tankers, a Norwegian tanker and a UAE bunkering ship.
Two days later, drone attacks hit two pipeline segments along the major Saudi East-West oil pipeline, but did not cause supply disruption. On Aug. 17 there was a drone attack on Saudi Arabia’s remote Shaybah oil field in the heart of the Empty Quarter. The attack caused a “limited” fire at a gas plant and had no impact on oil production.
In early September, the Kingdom appointed Prince Abdulaziz bin Salman bin Abdulaziz as
energy minister. He quickly made his mark from progressing production from the Neutral Zone to overseeing Saudi Aramco’s IPO, the
biggest on record.


Big oil feels the heat on climate as industry leader promises: ‘We will be different’

Updated 22 January 2020

Big oil feels the heat on climate as industry leader promises: ‘We will be different’

  • Trump singles out ‘prophets of doom’ for attack
  • Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal

LONDON: Teenage environmental activist Greta Thunberg slammed inaction over climate change as the global oil industry found itself under intense scrutiny on the opening day of the World Economic Forum in Davos.

The teenage campaigner went head to head with US President Donald Trump, who dismissed climate “prophets of doom” in his speech.
She in turn shrugged off the US president’s pledge to join the economic forum’s initiative to plant 1 trillion trees to help capture carbon dioxide.
“Planting trees is good, of course, but it’s nowhere near enough,” Thunberg said. “It cannot replace mitigation. We need to start listening to the science and treat this crisis with the importance it deserves,” the 17-year-old said.
The 50th meeting of the World Economic Forum was dominated by the global threat posed by climate change and the carbon economy.
The environmental focus of Davos 2020 caps a year when carbon emissions from fossil fuels hit a record high, and the devastating effects of bushfires in Australia and other climate disasters dominated the news.
Oil company executives from the Gulf and elsewhere are in the spotlight at this year’s Davos meeting as they come under increased pressure to demonstrate how they are reducing their carbon footprint.
“We are not only fighting for our industry’s life but fighting for people to understand the things that we are doing,” said Vicki Hollub, CEO of Occidental, the US-based oil giant with extensive oil operations in the Gulf. “As an industry when we could be different — we will be different.”

‘Planting trees is good, but nowhere near enough,’ activist Greta Thunberg told Davos. (Shutterstock)

She said the company was getting close to being able to sequester significant volumes of CO2 in the US Permian Basin, the heartland of the American shale oil industry which is increasingly in competition with the conventional oil producers of the Arabian Gulf.
“The Permian Basin has the capacity to store 150 gigatons of CO2. That would be 28 years of emissions in the US. That’s the prize for us and that’s the opportunity. People say if you’re sequestering in an oil reservoir then you are producing more oil, but the reality is that it takes more CO2 to inject into a reservoir than the barrel of oil that it makes come out,” Hollub said.
The challenge Occidental and other oil companies face is to make investors understand what is happening in this area of carbon sequesteration, she added.
The investment community at Davos is also looking hard at the oil industry in the face of mounting investor concerns.
Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal. It accused some of these groups of failing to live up to the World Economic Forum goal of “improving the state of the world.”