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Oil spills into U.S.-China trade war, prices slump

Devika Krishna Kumar

NEW YORK (Reuters) - China said on Friday it would impose tariffs on U.S. crude oil imports for the first time, sending prices down nearly 4% to two-week lows as the escalating bilateral trade war fed worries over a slowdown in global oil demand.

 

Beijing said crude would be among the U.S. products hit by tariffs of 5% as of Sept. 1. U.S. President Donald Trump responded later in the day saying starting on Oct. 1, the 25-percent tariffs on $250 billion worth of Chinese goods will rise to 30%. Tariffs on remaining $300 billion due to begin on Sept. 1 will now be set at 15%, versus 10%.

 

U.S. West Texas Intermediate (WTI) crude futures CLc1 slumped as much as 3.8% to $53.24 a barrel on Friday, the lowest since Aug. 9, before ending the session at $54.17. The rising trade war is likely to weigh on U.S. crude more than international benchmark Brent LCOc1, market sources said.

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Chinese buyers will (now) be looking to purchase Brent and Dubai-based crude oil and I would expect that to result in a widening of the Brent-to-WTI spread,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ said Andy Lipow, president of Lipow Oil Associates in Houston.

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“In essence what youâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ve done is created new demand for Brent-based crude oil at the expense of U.S.-origin crude.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ÂÂ

https://www.reuters.com/article/us-usa-trad...p-idUSKCN1VD22D

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" As we look ahead to 2020, we expect U.S. production to grow and non-OPEC, non-U.S. production to also grow, driven by several large international projects scheduled to come on line."

Lorenzo Simonelli, CEO, Baker-Hughes Corp

"On the demand side, global crude oil demand growth appears to be slowing due to a number of factors including trade tensions."

Lorenzo Simonelli, CEO, Baker-Hughes Corp (- worldâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s largest oil field services company)

- excluding other factors, no price pressure for a while? Lower for longer?

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Saudi Arabia says drone attacks at two massive oil processing facilities have knocked out half of the country's total oil production.

 

Key points:

- The attacks have slashed the refineries' total production

- Iranian-backed Houthi rebels claimed responsibility for the attack

- Online videos showed huge flames engulfing the Abqaiq facility, with both blazes now under control

https://mobile.abc.net.au/news/2019-09-14/d...-fires/11513728

!!

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ExxonMobil will sell its Gippsland Basin oil and gas assets off Victoriaâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s southeast coast in a deal which could top $US2.5 billion ($3.65bn) sparking speculation whether BHP, its joint venture partner, may follow suit and cash out of its interest in the Bass Strait.

 

Exxon confirmed a report in The Australianâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s DataRoom column that it would place its 50 per cent stake, owned through Esso, on the market after years of speculation the US energy major was looking to quit its holdings. The announcement was made to hundreds of workers by Exxonâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s new Australian chairman Nathan Fay on Wednesday.

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“ExxonMobil will be testing market interest for a number of assets worldwide, including its operated producing assets in Australia, as part of an ongoing evaluation of its assets. No agreements have been reached and no buyer has been identified,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Exxon said in a statement.

been good for the country. Thanks Lewis George Weekes, and what leverage BHP got :

In 1958 Weekes retired as the Standard Oil's chief geologist and set up as an independent consultant. One of his first clients, Broken Hill Proprietary Co. Ltd, sought his services as the 'best petroleum geologist in America' to assist its efforts to find oil in Australia.

 

Visiting Australia in 1960, he asked for (and was granted) a 2.5 per cent royalty on any commercial discovery. He then recommended that B.H.P. begin exploration off the south-eastern coast of Victoria. It was critical timing, as the technology for drilling in rough seas was then being developed in California.

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One fund manager's thinking about oil and gas investment:

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Stocks are already priced for certain outcomes and in some cases they are priced for a terrible outcome. For us to do well the outcome only has to be bad, not terrible,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ [Allan Gray analyst] Suhus Nayak said.

 

The investment case for energy is based around three pillars of thought. First, growth in electric vehicles is overstated and petrol cars will be with us for a long time. Second, the economics of swing producers such as shale are more marginal than most think.

 

And third, estimates of stranded resources are overblown. Most major energy companies do not have assets that will last longer than 12 years, according to Allan Gray. They will produce solid cash flow right up until then, enabling them to return your investment over that period.

 

Mr Nayak used the weighting of the energy sector in the S&P 500 to prove his point, saying it was at a 30-year low despite the oil price running at roughly double the level it was at in 2016.

https://www.afr.com/companies/financial-ser...20191030-p535og

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Energy stocks were a standout in the local session after OPEC+ members agreed to further production cuts into the first quarter of next year. That pushed global oil prices higher by 3 per cent

 

It spurred a 1.6 per cent lift in Woodside to $34.41. Santos added 1.7 per cent to $8.23, Beach Energy lifted by 5.2 per cent to $2.62 and Origin put on 1.5 per cent to $8.70.

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Shaleâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s new reality: Almost all wells drilled now lose money.

 

that is the reality for USA

they said most of these small and medium size driller all rely on credit from banks

the crash of oil price might triggering a credit event.......... sound bit like scar mongering to me. as we all know banks have really good level of tie1 capitals these day..

who knows what happens.

 

 

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