Gauging Wall Street's 'crude' mood

The Oilholic has just about rounded up a near week-long power markets trip to New York, including a visit to understand the energy supply dynamic of the City’s landmark Rockefeller Center courtesy of industry colleagues at ABB, and a weekend of Formula E racing. 

But when in New York City old habits die hard, and this blogger rarely misses opportunities to discuss the oil market direction with fellow analysts and crude traders. The latest visit was no exception. Even New York's weather of the past week chimed with what we've seen in the crude market. On Thursday (July 11) the Oilholic arrived to a rain drenched Wall Street (above left) full of soggy bears with both oil benchmarks on the rise and WTI futures even touching $60 per barrel at one point (Brent - $66.52/bbl & WTI $60.20/bbl). 

Yet by the time yours truly packed it in a week later, New York and its Wall Street oil market bears were again basking in the sunshine (Brent at $61.93/bbl & WTI $55.30/bbl) even if Iran's grab of a UK-flagged Swedish-owned oil tanker Stena Impero in the Strait of Hormuz added another dollar or two per barrel. And for all the kerfuffle, the inescapable truth is that both benchmarks have stayed range-bound. 

The Oilholic has assigned the reasons as - the abundance of US light crude (especially copious amounts being exported to Asia), deep concerns over global demand (and a possible negative quarter if not a full blown recession for the US economy on the horizon), and supply dynamic largely outweighing OPEC cuts over the near-term.

One has also said it on record that if the oil market bears are to be tamed, the key bullish factor on the horizon is not the Iranian shenanigans in the Persian Gulf (short of an unlikely all out war), but the easing of US-China trade tensions. 

Putting these thoughts to a select group of Wall Street analysts this blogger has known for over 10 years, came up with unsurprisingly similar conclusions. Ok, discussing market direction with a beer in the Fraunces Tavern in the company of seven industry acquaintances is hardly a scientific poll, and more of an indicative opinion – but whichever way you look at it, few put forward an obvious bullish breakout factor that would pull the oil price from its current range. 

Many see a $70 level as a near-term possibility for Brent, as does the Oilholic, but few reckon the level would be meaningfully capped given clouds on the 2020 horizon. 

More so, many agree that OPEC’s market credibility is now tied to how much and how far the Russians go along with its – or should we their own – agenda, as the Oilholic recently wrote for Rigzone. 

Away from the near-term, most expect the US production to provide a meaningful buffer for a minimum of five years. In that time, the supply-demand dynamic is bound to face profound changes and resulting scenarios could be materially different from where we currently are. To sum it up, the Oilholic has a $65-70 per barrel 2019 average price for Brent, and $55-60 per barrel for WTI; with both leaning towards the lower end of the range, bar a full-blown conflict in the Persian Gulf. 

As one wrote for Forbes, right after OPEC’s twice-delayed oil ministers’ summit; 2020 could get even more bearish. Many known contacts on Wall Street share that opinion, and the time they spared at such short notice this week is truly appreciated. And on that note, its time to say goodbye to NY Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo 1: New York Stock Exchange, NewYork, USA. Photo 2: Wall Street, Lower Manhattan, New York, USA © Gaurav Sharma, July 2019. 

Sustainable 'vroom' at NY Formula E circuit

The Oilholic has spent the last two days watching frantic motorsport action of a different kind here in the Big Apple accompanied by background vroom that's milder, greener, zero-emission and most certainly less audible compared to petrohead outings. 

Welcome to Formula E – the world's first fully electric global motor racing series – with several ex-Formula 1 converts both in and outside the drivers' cockpit. The 2.37km racetrack with 14 turns in Brooklyn's Red Hook neighbourhood, adjacent to the cruise ship terminal, saw twenty-two cars compete for 45 mins plus a final lap in the championship's concluding race in Sunday.

After all the racing, crashing, jostling and competing was done and dusted, Dutchman Robin Frijns claimed the race victory, while Briton Alexander Sims, and Swiss driver Sebastien Buemi finished in second and third respectively.

Of course, the day in the New York sunshine belonged to Frenchman Jean-Eric Vergne of Team DS Techeetah, who became the first double Formula E champion at the season's finale. 

Going into Sunday's (July 14) race, Mitch Evans and Lucas Di Grassi were championship contenders, and both needed at least a race win to claim the title. However, Di Grassi's attempt to overtake Evans ran them both into the wall, handing their rival the advantage. The action certainly delighted the competition's backers. 

Not least, Swiss electrification and robotics giant ABB; the headline sponsor of the Formula E circuit. The company feels the sport is a joy for motoring purists. Consider this - the 2019 championship had eight different winners in the first eight races, although Vergne ultimately surged ahead with a second victory of the season in Monaco.

From ABB's perspective, the obvious brand equity and exposure aside, the company is using its track connections and participation as a "fertile testing ground" for global mobility's inexorable march to a low carbon, zero-emission future. 

Frank Muehlon, Managing Director, EV Charging Infrastructure at ABB, told the Oilholic that the company's association with the sport is not just a routine sponsorship but a vital partnership. "From the circuit safety cars to all the teams, our charging infrastructure is at the heart of it all."

As headline sponsor, the company partners with all racing teams and offers bespoke high power charging equipment to sister races such as Jaguar Land Rover's I-Pace e-trophy, which runs teams of its I-Pace electric SUV model before most, if not all, of the Formula E races. 

"Advanced data gathered at this very race, and others over the course of the season, feed into our research and development efforts run from three global labs (two in Europe and one in China)."

Muehlon added that ABB is automaker "agnostic."

"We are an equal partner to all, and by that I don't imply just the teams you see on track, but anyone in the global automaking world who is getting serous about electric vehicles. Let's face it, that's pretty much every global automaker these days."

At the heart of it all is promoting e-mobility, bringing down charging times and enhancing battery performance. On the latter point at least, Formula E offers a case in point. Not that long ago the drivers needed to change cars midway through the race as the battery could not cope with the rapid drain on it. 

However, with an enhanced battery life and back up charging technology, the current Generation 2 Formula E cars last the length of a 45 minute race plus an additional lap.

Looks like we are in for an 'electrifying' progression ahead when it comes to electric mobility, both on and off-track, ABB is certainly counting on it. That's all from the Brooklyn racetrack folks with no petroheads around.   

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© Gaurav Sharma 2019. Photos 1 & 2: Action from ABB Formula E 2019 race in Red Hook, Brooklyn, New York, USA on July 14, 2019. Photo 3: Race winners address the media. Photos 4: Jaguar I-Pace safety car © Gaurav Sharma, July 14, 2019. 

A Peek at ‘Ice Banks’ under 30 Rock

The Oilholic finds himself back in New York, US for the finale of the ABB Formula E 2019 season. But before watching the FIA-backed electric-mobility powered thrill ride, this blogger paid a visit to the Big Apple's iconic 30 Rockefeller Plaza building known to most locals as 30 Rock, rather than its relatively new christening as the Comcast Building.

Most visitors head to the "Top of the Rock", i.e. the building's observation deck to soak in views of the City's amazing urban sprawl and spectacular skyline. But unlike most, yours truly headed to the bottom to get a glimpse of a fascinating endeavour in energy efficiency.

You won't need to be an engineer to work out that the 30 Rock, and by extension the wider Rockefeller Center – a large complex of 19 buildings covering 22 acres between 48th and 51st Streets – consume copious amounts of power, more so in the summer months with air conditioning on full blast. For a city that consumes close to 11,000MW to 15,000 MW of power per day, keeping things in check is a matter of priority starting right with its Skyscrapers.

It is with this objective that the good folks at 30 Rock set about it using ice! The concept is simple yet brilliant in equal measure – a solution to the summer's searing heat by freezing water at night (when power is cheaper, produced efficiently and loads are lighter) and then using it to cool the building as it melts the next day during peak load periods.

Much of that infrastructure is housed below 30 Rock glanced at by the Oilholic, courtesy of ABB, with the electrification and robotics giant inheriting a legacy service and maintenance contract for 30 Rock from General Electric, following the Swiss company's takeover of its American counterpart's industrial solutions unit GEIS in 2018.

Dubbed "IceBank(s)" by their manufacturer Calmac, the ice freezing and melting units now form the centrepiece of innovation at the heart of 30 Rock's legacy power systems dating back to the 1930s. According to ABB's Senior Manager in-charge of the contract James Payne, the system's thermal energy storage premise lessens stress on the power infrastructure since consumption during the critical peak hours (which for 30 Rock would be between 11-1pm and 4pm-5pm), and shifts the demand dynamic to the night-time.

Away from prying eyes, legacy systems intertwined with state-of-the-art digital systems and a maze of pipes, pumps, tanks, wires and fuses get to work day in / day out for a building that has some pretty demanding tenants – not least broadcaster NBC. 

The ICE system has seen constant improvements since 2012 has proved itself to be pretty reliable. As for the sheer numbers, according to a spokesperson, the Rockefeller Center as a whole is served from its 30 Rock hub by a central chilled water plant containing 14,500 tonnes of steam and electric driven chillers.

The water is distributed around the entire building campus through a "main water loop" which travels around the perimeter of the site. Six primary pumps are located in the main plant, four having 6,000 GPM capacity at 125hp and two having 2,000 GPM capacity at 50hp.  Each individual building has pumps which then draw off of the primary loop and send the main plant's chilled water to heat exchangers located within each building.

There are seventeen "primary chilled water riser pumps" which range in size from 1000 GPM at 40hp up to 3500 GPM at 200hp. The secondary side of the heat exchangers have pumps which serve the air handlers and fan coils which serve the tenant spaces, and individual building pumps draw chilled water to heat exchanges located within each building.

If all that sounds a bit heavy, then simply consider this – power costs have come down by as much as 30% on annualised basis using such thermal storage techniques. The concept is not new and has been around for nearly 15 years, but New York is getting seriously serious about it these days.

Beyond the Rockefeller Center, Goldman Sachs, Morgan Stanley and Bank of America towers have all gone down the thermal storage route, with rising take-up in the last five years. ABB, which has been growing its footprint in New York state, says advanced digitisation can work alongside legacy power systems to create an efficient, serviceable power ecosystem incorporating thermal storage, as more and more buildings opt for sustainable solutions and work towards lowering their carbon footprint.

ABB's viewpoint is shared by real estate firm Tishman Speyer, ventilating and cooling systems maker Trane and of course IceBank manufacturer Calmac – all of whom are drivers of thermal storage adoption at 30 Rock. Let's see where the market goes, but the next five years should be interesting. That's all from 30 Rock folks, its time for the Formula E racetrack now! 

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© Gaurav Sharma 2019. Photo 1: 30 Rockefeller Plaza, New York, USA. Photos 2,3,4: 30 Rock Plant control systems incorporating thermal storage © Gaurav Sharma, July 2019. 

A rollover and a poem for OPEC

As widely anticipated, OPEC did indeed rollover its ongoing oil production cuts of 1.2 million barrels per day (bpd), set in place with 10 other non-OPEC producers for another nine months to March 2020.

The announcement was accompanied by a "charter of co-operation", even a poem about that charter (see left, click to enlarge), in-house conjecture that US shale production would eventually decline like the North Sea but not much by way of how the cartel intends to exit from its current output cuts strategy. 

Here is the Oilholic's analysis via Forbes. More to follow via other forums and publications. In a nutshell, one's price outlook for crude remains bearish and 2020 could get even more ugly. There is also little on the horizon to ditch $65-70 per barrel average price range for Brent, and $55-60 per barrel price range for WTI, with both likely to be at the lower range rather than the upper range. That's all for the moment folks! Keep reading, keep it 'crude'! 

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© Gaurav Sharma 2019. Photo: Poem released on OPEC's new charter © OPEC, July 2019.

Giving OPEC 176 a miss, but not Vienna

As far as OPEC meetings go, the Oilholic hasn't missed a single one since 2008. Alas, the run had to come to an end at some point and the 176th OPEC Ministers Meeting on July 1-2 will be that point. 

However, it is not for lack of trying. In farcical circumstances, OPEC postponed the meeting twice, from April to June to finally the stated July date. Other business, family and personal commitments, as well as business meetings already penned in Vienna around OPEC's June dates (of June 25-26) could not be rearranged for a second time running. 

Hence, the Oilholic found himself in the Austrian capital the week before with the rare luxury of not having to spend most of his time camped at OPEC's hub of Helferstorferstrasse 17. Instead, a stroll past Katholische Kirche St. Peter (St. Peter's Catholic Church) nearby admiring its entrance in 35 C sunshine was a nice short distraction from 'crude' matters this week. 

Nevertheless, and not to digress, this blogger does not believe he will be missing anything too dramatic. A rollover of OPEC's ongoing 1.2 million barrels per day (bpd) cuts along with 10 Russia-led non-OPEC producers is more or less guaranteed. Not least because the organization lacks a clear exit strategy for the cuts, as one opined on Rigzone. 

If OPEC ditches the cuts, the result would be bearish for the oil market. If it expands the cuts, the result would be bullish over the short-term, only to boost further non-OPEC production accompanied by a subsequent bearish drag further down the line. 

Fellow industry analysts, academics and researchers the Oilholic interacted with here in Vienna are of a similar mindset; and inventory rebalancing – the official line for instituting the cuts – remains as rocky as ever while OPEC continues to bleed market share as it produces fewer barrels.

Data aggregators say OPEC production is at its lowest since in quite a while. According to a Reuters survey, OPEC pumped 30.17 million bpd in May, down 60,000 bpd from April and the lowest output total on record since 2015. 

The Oilholic expects at least a six-month rollover at the stated cuts level of 1.2 million bpd with Saudi Arabia, as usual, carrying most of the burden. At some point, something has got to give. However, the July 1-2 summit will not be that point.

Away from OPEC chatter, the Oilholic also visited Austrian giant OMV's imposing headquarters in Vienna to discuss market permutations, the evolving global fuel mix and the company's take on the energy landscape.

More on that to follow shortly but in the meantime, here is a conversation on Forbes’ behalf with David Gilmour, boss of BP Ventures, the oil giant's venture capital funding arm that's looking to future proof the FTSE 100 company.

That's all from Vienna folks. Some post-OPEC analysis to follow from London next week! Keep reading, keep it 'crude'!

Addendum I (30.06.19): Upon his arrival in Vienna, well before the OPEC meeting has even begun Saudi Oil Minister Khalid Al-Falih has already said he is in favour of a “6 to 9 month” rollover of the output cut, and preferably "9 months."

Addendum II (30.06.19): Remember that bit about risking market share, well here’s some analysis by Bloomberg, ahead of the ministers’ meeting suggesting that OPEC’s output is on track to slide below 30% of the global market share for the first time in three decades. Q.E.D. 

Addendum III (30.06.19): OPEC members’ compliance rate with oil production cuts stood at 163% in May, according to S&P Global Platts. 

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© Gaurav Sharma 2019. Photo 1: Katholische Kirche St. Peter. Photo 2: Headquarters of OMV, Vienna, Austria © Gaurav Sharma, June 2019.

A calmer view on oil market volatility

The Oilholic is just about to end his latest visit to Oslo, Norway following a two-day energy technology event but decided to stop en route to the airport to admire the calm waterfront off the Fornebu business district. Here's a view of the Fornebukta. Its serenity is as far removed from the ongoing kerfuffle in oil market as can be.

Both Brent and WTI ended the month of May some 11% lower, with the market just not buying the geopolitical risk angle following attacks on tankers off the Port Of Fujairah. 

Now it seems two more tankers have been attacked in the region, but apart from a brief uptick, the bears are still in control. The WTI is well below $60 per barrel, and Brent is struggling to hold the floor at $60. That's because regardless of the market discourse over geopolitical risks in the Middle East and US-Iran tensions; what's actually weighing on the market is the trade tension between US and China. 

Were that to be resolved, it would in the Oilholic's opinion be a much bigger bullish factor than skirmishes in the Middle East. Another factor is what is OPEC going to, or rather isn't going to, do next? Its ministers' meeting for April was postponed to June 25-26, and now it seems that going to postponed again to July. All of that at a time when the market remains cognisant of the fact that the cartel does not have an exit strategy for the cuts drive. 

Here is this blogger's latest take on the subject for Rigzone published overnight. OPEC is doing a balancing act of compromising its market share in a bid to support the price; but its a temporary stance that can be prolonged, but one that cannot become a default position give US production is tipped to rise over the short-term.

Additionally, should the Russians call off participation in the ongoing OPEC and non-OPEC cuts of 1.2 million barrels per day (bpd); the desired effect of any standalone cuts made by the cartel of the sort it made in the past, would not be quite the same given the ongoing cooperation in itself is extraordinary in nature, and has held firm since December 2016, for the market to price it in as such. 

Many fellow analysts here in Oslo share the same viewpoint. OPEC's production came in at a record low of 30.9 million bpd in May, according to the latest S&P Global Platts survey. That's the lowest level since February 2015, before Gabon, Equatorial Guinea and Congo joined, and when Qatar was still a member.

How the cartel reasserts its credibility is anyone's guess but all things considered, it remains difficult to see crude oil benchmarks escape the $50 to $70 price bracket anytime soon. That's all from Oslo folks! But before this blogger take your leave here's another view of the scenic, albeit rain-soaked Oslofjord (above right). It was a pleasure visiting Norway again, reconnecting with old friends and contacts and making yet newer ones. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo 1: Fornebukta, Fornebu, Norway. Photo 2: Oslofjord, Oslo Norway © Gaurav Sharma June, 2019.

Two tech-heavy 'crude' days at Ignite 2019

The Oilholic has spent the last two days in Oslo, Norway attending energy software firm Cognite's annual Ignite 2019 conference at the City's H3 Arena. 

Founded by entrepreneur John Markus Lervik, this energy software start-up majority-owned by Norwegian investment firm Aker, has been making waves in the oil and gas industry as a provider of advanced data and digitization services. 

The firm's industry solutions and analytics bank on operations and equipment sensors that help boost efficiency, throughput and reduce costs by several multiples – something oil and gas players can easily relate to especially in the current volatile oil price climate and pressure for lower breakevens. 

Within just over three years (and counting) of its founding, Cognite has bagged nearly 30 customers including big names such as OMV, Aker BP and Lundin Petroleum. Ignite 2019 was the company's attempt at showcasing what it can offer and trigger debates and dialogues about process efficiencies and optimisation.

Inevitably, in the age of advanced analytics and artificial intelligence, much of the discourse centred on 'Big Data for 'Big Oil'. The conference was supported by companies such as Cognizant, Google, Framo, Siemens, National Instruments and Aker BP to name a few. Nikolai Astrup, Minister of Digitalization of Norway, started proceedings declaring "data is gold."

The minister went on to note: "If we refine, manage and share data appropriately it will lay the foundation for better and more effective public services, new industry successes and create jobs. 

"The Norwegian government has just launched an ambitious digitalization strategy, making us a pioneer in creating good public services for citizens, businesses and the voluntary sector."

A packed agenda saw several speakers outline the kind of efficiencies their digitisation efforts are bringing about and the results they have yielded. For instance, here is the Oilholic's report for Forbes on how Austria's OMV has managed to lower its production costs from $15 per barrel down to $7 per barrel.

While the job of impressing the sector and bagging clients is well underway, and Cognite's product suite is helping the company to grow profitably, further capital for expansion will be needed. To that end, this blogger sat down with Lervik to discuss his future plans, including those for a possible initial public offering. Here's this blogger's full interview for Forbes in which Lervik also discusses Cognite’s expansion to Asia and North America. 

Following an evening of networking over some fun music and drinks on day one, day two brought more efficiencies discussions to the fore, not necessarily digressing from the oil and gas industry theme but including renewables and low carbon as vital topics.

As were the subjects of advanced data analytics and cloud computing, with Darryl Willis, VP Oil, Gas & Energy at Google Cloud, telling Ignite 2019 delegates that every industry, including energy, will be grappling with data as the new common denominator. "Data science to real time monitoring aided by cloud computing and data analytics would only be to the industry advantage."

Plenty more articles coming up from the deliberations for Forbes, Rigzone and Energy Post over the next few weeks, but that's all from Ignite 2019 on that note. After a few more meetings in Oslo, it'll be time for the big bus home. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo 1: Oslofjord Ferry Pier, Oslo, Norway. Photo 2: Nikolai Astrup, Minister of Digitalization of Norway speaks at Ignite 2019 at the H3 Arena in Oslo, Norway. Photos 3&4: Glimpses of networking floor at Ignite 2019 © Gaurav Sharma, June 2019.

That US oil production chart by the EIA

Market chatter over US oil production appears to be all the rage these days, with many forecasters predicting 2019 to be another record year for the Americans. Some are even predicting US production to be as high as 13.4 million barrels per day (bpd) in 2019. 

At the moment, its lurking around 12.3 million bpd according to the EIA. However, the chart below sums it up, and kinda explains why some commentators are so upbeat, given the trajectory of official data and related projections. Please click to enlarge chart. That's all for the moment folks, as the Oilholic is in Oslo, Norway for a conference. More from here shortly! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: US oil production and projection © US EIA, May 2019

US crude output & Russia’s fossil fuel abundance

Another week, another upbeat projection for US oil production. The latest one has been put forward by Oslo, Norway-headquartered research and analysis firm Rystad Energy, which projects US production to hit 13.4 million barrels per day (bpd) by December 2019. That's well above 12.3 million bpd total that's emerged from the US Energy Information Administration's latest publication. 

Moving on from the US, abundant and cheap fossil fuels in Russia are likely to slow the country's shift to renewable, according to Moody's, with the rating agency opining that Moscow will struggle to meet its 2024 targets for renewable capacity.

"The future looks brighter for the Russian renewable energy sector from the mid-2020s, however, as old generation fossil fuel-fired capacity retires and controls on emissions tighten," says Julia Pribytkova, Senior Analyst at the agency.

Russia's Energy Strategy aims to tighten controls on CO2 emissions starting from mid-2020s, in part by increasing the share of clean energy, such as nuclear and renewables, improving energy efficiency and introducing caps on greenhouse gas emissions.

Away from supply-side chatter, looks like oil benchmarks registered an uptick as the end of the week approached, after having taken a hammering for much of May. Brent still ended the week down 1.86% compared to last Friday (May 31), but WTI futures made a better recovery ending up 0.92%. That’s all for the moment for folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo: Oil extraction site in Russia © Lukoil.

That over 10% slump in oil price

As the crazy month of May comes to a close, commentators using the supply constriction and geopolitical risk premium pretexts to big up prices have been left scratching their heads. Using Middle Eastern tension and murmurs of OPEC rolling over production cuts as the backdrop for predicting $80+ Brent prices didn't get anywhere fast. 

Instead prices went into reverse as the US-China trade spat, Brexit, Chinese and German slowdown fears weighed on demand sentiment. Here is yours truly's take via Forbes:

Trump’s trade war rhetoric is a factor in oil demand, but other concerns over the global economy are rightfully cancelling supply constriction arguments https://t.co/7zBKGmM5Fn pic.twitter.com/GWtEMAPROW

— Forbes (@Forbes) May 31, 2019

For what it is worth, at the time of writing this blog post both oil benchmarks are posting a May decline of +10% in what can only be described as a crude market rout. 

Away from the oil price, it seems rating agency Moody's has withdrawn all the ratings of Venezuela's beleaguered oil firm PDVSA including the senior unsecured and senior secured ratings due to "insufficient information." At the time of withdrawal, the ratings were 'C' and the outlook was 'stable'.

With Venezuela in free-fall and its oil production well below 1 million barrels per day (at 768,000 bpd in April) - not much remains to be said. In any case, the US will be importing less and less crude from Latin America not what happens in Caracas, given uptick in its shale-driven output. 

Away from 'crude' matters, the Oilholic also touched on LNG markets. Here is yours truly's take for Forbes on how the US-China trade spat will serve to dampen offtake for US LNG Projects; and here is a missive for Rigzone on the disconnect between US President Donald Trump's rhetoric on American LNG exports to the Baltics versus the ground reality. 

That's all for the moment for mad May folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. 

Webcasting for ReachX & Trump's OPEC call

It's been quite a week in the oil market with Brent touching $75 per barrel for the first time in 2019, amid exaggerated long calls reminiscent of Q4 2018, and we all know how that ended. In this backdrop, the Oilholic did his first oil market webcast for independent financial platform ReachX.

The company is working to shake-up traditional financial market research and investment banking services via its technology platform. The idea was born out of creating an unbiased research, information and services hub fit for a post-MiFID II investment and operating environment, and the Oilholic has been involved in its progress since the summer of last year with co-founders Rafael S. Lajeunesse and Olivier Beau de Loménie.

The topic of the webcast was what's in store for the oil market in H2 2019, especially as the Oilholic believes the current set of market fundamentals suggest there's not much further for Brent to go than beyond $75 per barrel, and in fact it is likely to average towards the lower range of $70-75 per barrel this year.

Here's a recording of the webcast on YouTube, which has been converted into a podcast by the good folks at ReachX:

And should you wish to listen to it on SoundCloud; here's a link to that as well.

Away from the webcast, just as Brent hit $75, US President Donald Trump hit it. Ahead of a political rally, the President said he'd "called OPEC" and that oil prices were coming down. Cue a slide on that pretext in this Goldilocks Economy, where crude has little room to go further up. Here are the Oilholic's thoughts in more detail via a Forbes post. That's all for the moment folks, keep reading, keep it 'crude'!

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© Gaurav Sharma 2019.

Discussing Algeria’s 2019 oil & gas potential

In the wider context of the global oil and gas industry and that of the continent of Africa, OPEC member Algeria is right up there. In volume terms, it is the number one producer of natural gas in Africa, and among the top three when it comes to crude oil.

The oil and gas sector accounts for 20% of the country's GDP and bulk of its exports. But of late Algeria has faced production challenges, including a double-digit decline in oil production last year; something the government is looking to change. 

The need for investment is pressing, and courting foreign direct investment (FDI) in the current climate of a fairly high oil price range [~$65-75 per barrel] could be timely. To further FDI, the government is drafting a new hydrocarbon exploration law that is expected to be released in July 2019.

The idea is a simple one - make Algeria more competitive in terms of royalties and taxation, simplify licensing and bidding procedures, and most importantly reduce red-tape. How this all pans out would matter because from an outside-in perspective the country is still relatively underexplored with less than 25 wells per 10.000 square metres. 

This for a nation which has the tenth-largest proven reserves of natural gas and the third largest proven reserves of shale gas in the world. Not to mention the fact that it is also the sixth-largest natural gas exporter in the world.

With an objective of reconciling thoughts over global market permutations and ongoing developments in the Algerian oil and gas sector, the Oilholic is delighted to be speaking at the Algeria Oil & Gas Summit in Algiers, November 19-21, 2019, being organised by IN-VR Oil & Gas. 

Arbiters of the country’s potential are the National Agency for Hydrocarbon Resources Valorization (ALNAFT) and Hydrocarbons Regulatory Authority (ARH). The domestic exploration project partner, as mandated by law, is state-owned national oil company Sonatrach, which holds around 80% of total hydrocarbon production in Algeria, with International Oil Companies (IOCs) tapping the remainder. 

BP, Equinor, Eni and Total, are among the many IOCs looking to expand within Algeria. So at this fitting time there should be no shortage of talking points, and this blogger keenly awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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Being careful of what Hedge Funds wish for

So it is that OPEC has moved its ministers meeting, and the OPEC/non-OPEC from April 17/18 to June 25/26, but the Oilholic decided to come to the Austrian capital anyway given that other 'crude' meetings could not be moved, and because Vienna is lovely in the spring anyway!

While spring might be in the air in Vienna, a bit of craziness has surfaced in the Oil market trading sphere. Yet again, no sooner has Brent crossed $70, chatter of three-figure crude prices is again rearing its head. Here's the Oilholic warning from very recent history (via Forbes); and why caution is merited.

There is nothing on the horizon to be overtly bullish about the oil market – bearish variables (i.e. China, President Donald Trump's trade salvos, Brexit, German slowdown and changing consumption patterns haven't materially moved yet) and bullish quips based on geopolitics (i.e. Libya, Venezuela and Nigeria) matter but are being countered partially, if not wholly, with sentiment around rising US production.

Replicating a favourite pastime of the inimitable former Saudi Oil Minister Ali Al-Naimi, on this sunny day in Vienna - I could think of nothing better than a brisk walk down the city's Ring Road from the Intercontinental to Rathaus, before the flight home : ) pic.twitter.com/xyEn9IQd9F

— Gaurav Sharma (@The_Oilholic) April 19, 2019

Few in Vienna, think an oil price spike is on the cards, having had three days of deliberations over, let's face it more than three friendly beers. That sentiment is echoed by both heavy sour and light sweet physical traders the Oilholic has spoken to in Shanghai and Rotterdam. 

Not many believe OPEC wants three-figure prices; and even if they do, more light sweet American crude is hitting the market heading to Asia. Yours truly has long maintained that we are stuck in a boring oscillation between $60-80 per barrel prices; a predictability that hedge funds find boring for very different monetary reasons. Let's leave it at that!

As for OPEC, it is not going to move until Trump decides on if and what kind/level of waivers he is going to grant importers of Iranian crude or not. That and balancing Russia’s concerns are probably the primary reasons behind postponing its ministers' meeting. That's that from Vienna until June.

Interspersed between crude meetings, the Oilholic also found time for a mooch about Vienna's Ring Road on a sunny afternoon, starting from the Intercontinental Hotel to the Rathaus up to Karlskirche; partially replicating the past-time of Ali Al-Naimi, the inimitable former Saudi Oil Minister. Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2019. Photo © Gaurav Sharma, 2019

Meeting & greeting Emerson's inimitable boss

Before the Oilholic called time on CERAWeek 2019, this blogger had the absolute pleasure of meeting and greeting David Farr, the inimitable Chief Executive and Chairman of energy industry vendor Emerson Electric (NYSE:EMR) on the sidelines of the event on March 13. 

Farr, who has been Emerson's boss since 2000, has overseen the company's market valuation double under his stewardship. In a wide-ranging discussion, the industry captain touched on Emerson's performance, the Industry 4.0 challenge, change management, and more. 

No conversation would have been complete without touching on the portfolio shake-up that Farr has brought about at Emerson, and the unsuccessful bid for Rockwell Automation that did not turn out to be so bad in the end!

Ultimately, it all bottles down to corporate agility, and Farr said Emerson's two broad business streams - Automation and Commercial and Residential solutions - encompassing a diverse range of brands and businesses is working out pretty well. 

Interested in more? Read the Oilholic's full interview with Farr for Forbes here.

That's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2019. Photo: David Farr (left) with Gaurav Sharma on March 13, 2019 at CERAWeek in Houston, Texas, USA. 

Crude 'smart' tech & 'Silicon Bayou'

Days IV and V of CERAWeek 2019 have zipped by with an emphasis on power markets and technology. Since it was all about electricity and technology; here's a photo of ABB's Formula E car on display here in Houston, and yes the Swiss automation and robotics giant's YuMi robot was here too.

Day IV of #CERAWeek2019 is pretty #power & #electricity heavy, so here's a glimpse of an electric Formula E car courtesy @ABBgroupnews pic.twitter.com/a53wu9FV4h

— Gaurav Sharma (@The_Oilholic) March 14, 2019

And here is the Oilholic's full report for Forbes on how technology is making rigs 'smarter'. Its not just the greenfield sites we see this at play in, as a number of brownfield sites are being retrofitted as well to optimise performance and efficiencies. 

Finally, as is customary at CERAWeek, the Mayor of Houston Sylvester Turner turned up, and this year he reminded delegates that H-Town has sufficiently diversified to have the spheres of education, medicine and information technology sit happily alongside the City's energy sector.

In fact, the IT industry here is growing at such a rapid place that you can call it 'Silicon Bayou' and promote #SiliconBayou, he added. The Oilholic promptly did so. And that's all from CERAWeek 2019 and Houston. Keep reading, keep it crude!

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© Gaurav Sharma 2019. 

Another two 'crude' days at CERAWeek '19

Day II or Tuesday (March 12) of CERAWeek zipped by, Wednesday is about to come to a close here in Houston and there have been several discussion points. Where to start when penning thoughts on the last 48 hours - a lot of plaudits were won by BP boss Bob Dudley's dinner speech overnight on the evolving oil landscape. 

"Oil and gas majors need to recognise the world's low carbon future. They need to be progressive for society and pragmatic for investors," he noted to considerable applause.

Earlier on Tuesday, OPEC Secretary General Mohammed Barkindo took to briefing journalists and analysts. Key points made included being 'apolitical' on the Venezuelan situation and launching a polite but firm attack on efforts by US lawmakers to hit OPEC with antitrust action - dubbed the No Oil Producing and Exporting Cartels (NOPEC) Act. Here's yours truly's full report for Forbes. 

The UAE government envoys were also in town promoting their catchy 'Oil and Gas 4.0' drive ranging from investing in digital assets to upskilling and hiring, from AI to robotics. William Clay Ford Jr was around too telling CERAWeek when Ford's F-150 truck's electric version is available it'll be a "completely different animal" and also admitted he had a soft sport for the Mustang. 

On Wednesday (March 13), Centrica Group CEO Iain Conn said societal pressures, e.g. UK government's energy price cap, are eating into utilities sector's operating margins, and that (yes) natural gas will serve as a bridging fuel for decades. 

Away from Brexit chaos back home, he also noted: "While the energy market will not be materially disrupted by Brexit; UK energy consumers would be left worse off if a declining GBP contributes to higher domestic energy bills linked to global markets."

US Energy Secretary Rick Perry also turned up for his second successive CERAWeek making a wide range of points from sanctions on Venezuela to President Donald Trump's opposition to NordStream 2. 

.@SecretaryPerry at #CERAWeek: What is afoot in #Venezuela is 'inhumane' & 'unconscionable' and the US will use every economic tool available against the Maduro regime in support of the Venezuelan people #OOTT #oilandgas #CERAWeek2019 pic.twitter.com/g2bKzUBv5t

— Gaurav Sharma (@The_Oilholic) March 13, 2019

Finally, here is the Oilholic's take on what ExxonMobil's Marine Fuels business makes of the approaching IMO 2020 rule. Well that's all for the moment, more from Houston soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: BP CEO Bob Dudley addresses CERAWeek 2019 © Gaurav Sharma 2019.

IEA's take sets tone for CERAWeek 2019

The Oilholic is back in Houston Town for CERAWeek 2019 with talk of Saudi Arabia extending its oil export cuts to April, an OPEC summit due on April 17, and of course oil benchmarks still remaining largely range-bound.

The tone of the first day for IHS Markit's industry jamboree was set by the International Energy Agency's annual five-year market assessment. The agency's Executive Director Dr Fatih Birol, said here in Houston that there should be no doubt that a second wave of the US shale revolution was coming, with American production tipped to cap that of the Russians and the Saudis by 2024.

Later, speaking to the Oilholic, Birol said the agency's take does factor in rates of decline. Here's a full report for Forbes. There were loads of other catchy soundbites yours truly tweeted regularly from Day I of CERAWeek (welcome to follow here), but really Birol's words set the tone.

As for oil benchmarks; both Brent and WTI were down last week, and are up this week but haven't spiked in the strictest sense. For the Oilholic, Brent futures sentiment still isn't decisively bullish.

One reckons $64.50 per barrel support level is key over the coming weeks. If breached meaningfully, a drop to $60-62 likely; if held decisively an uptick to $70 might be on the horizon. But for all the kerfuffle oil futures are largely where they were 12 months ago stuck in a range-bound market. Here is one's pre-CERAWeek analysis in an interview with Victoria Scholar of IG Markets TV:

More from Houston soon! Keep reading, keep it crude!

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© Gaurav Sharma 2019. Photo: Dr Fatih Birol, Executive Director of International Energy Agency speaks at IHS Markit's CERAWeek 2019 conference.© Gaurav Sharma 2019. 

On IPWeek 2019 & BP Boss' US shale take

A fascinating few days of debates and deliberations at the Energy Institute's International Petroleum Week 2019 came to a close in London earlier today.

For yet another year, the Oilholic was delighted to have spoken and moderated at the event as part of the Gulf Intelligence Middle East Energy Summit. Industry 4.0, investment climate, US shale and OPEC were all under the radar. Delegates were fairly evenly split on the direction of the oil price; but yours truly maintains that the phase of range-bound crude prices is here to stay. 

From where this blogger sits, it is appearing hard for Brent to escape the $65-75 per barrel range, and for the WTI to escape the $55-65 range this year. 

There were interesting soundbites aplenty, but BP Boss Bob Dudley's quip that US shale is a price responsive "brainless" market stood out among them all. Here's the Oilholic's full report and analysis on it for Forbes. That's all for the moment folks! Next stop - Houston, Texas for IHS CERAWeek 2019. Keep reading, keep it crude!

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© Gaurav Sharma 2019. Photo: Gaurav Sharma at IPWeek 2019; with Chris Midgley, Global Director of Analytics for S&P Global Platts © Gulf Intelligence. 

New avenues for 'crude' analysis

The Oilholic has had a hectic start to 2019 for sure, even though the crude market has behaved pretty predictably in January, having recovered ground it lost towards the end of 2019.

That's because yours truly has started providing insight on a regular basis to three more avenues alongside Forbes. These include The Energy Post and Energy Post Weekly, industry recruitment and insight portal Rigzone, and London-based financial start-up ReachX.

Here are a few snippets:

• Energy Post: Commentary on energy sector investment in blockchain - January 23, 2019 (Behind Paywall / Subscribers' login)
• Rigzone: Commentary on direction of the oil price in 2019 - January 28, 2019
• ReachX: Podcast with Paul Welch, CEO of North Africa focussed independent upstart SDX Energy - January 22, 2019

Plenty more to follow. But that's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2019. 

Moroccan perspective on natural gas market

The current situation in the natural gas market has several variables as we enter the first quarter of 2019. But before anything else, what price levels we are at would be a good conversation starter. Using the US Henry Hub as a benchmark, it remains stuck around $3/mmbtu. For Europe, adding an average $2+ mmbtu would be about par.

After a late December collapse, natural gas prices were seemingly being held down by higher than normal winter temperatures, before a big freeze hits several parts of Europe and North America. As for the market itself, most of the chatter these days is about how US LNG - both small and large scale - will add to the global supply pool with the country's capacity tipped to cap 40 million tonnes per annum (tpa) in 2019. 

As the Americans increasingly tussle with other major LNG exporters such as Qatar, Malaysia and Australia for a slice of the global market, Morocco - a net energy importer, albeit with substantial natural gas reserves - is in a reasonably positive position. 

The country has proven reserves of some 1.44 billion cubic meters (bcf) of natural gas, according to the CIA World Factbook, but domestic production is not even a tenth of that volume. Rabat is attempting to alter that dynamic via several independent upstarts led by SDX Energy, and accompanied by the likes of Sound Energy (which recently said it would focus exclusively on Morocco) and Chariot Oil & Gas. 

Seeing potential, the government is offering attractive terms to exploration and production companies (refer to the Oilholic's previous post on the subject). But until Morocco meaningfully discovers its domestic production mojo, the US shale gas bonanza couldn't have come at a more opportune time, as Rabat looks ensure security of supply over the medium-term. In October 2018, Energy Minister Aziz Rabbah confirmed that Morocco is preparing to invite bids for a LNG project in Jorf Lasfar worth $4.5 billion.

It includes construction of a jetty, terminal, pipelines and gas-fired power plants, ultimately leading to the import of up to 7 billion cubic metres of gas by 2025, in a very competitive global gas buyers' market. 

The announcement follows state-owned power utility ONEE announcement in 2017 that it had picked HSBC Middle East as a financial adviser for its plan to boost imports of LNG. The scenario provides plenty of talking points, which is why the Oilholic is heading to Morocco in February to speak and deliberate at the 2nd Morocco Oil & Gas Summit in Marrakesh, February 6-7, 2019, being organised by IN-VR Oil & Gas. 

It's all set up nicely, and this blogger early awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photos: Cairn Energy / IN-VR Oil & Gas

Year-end benchmark Friday closing levels chart

Here's how the 2018 oil market shaped up (click to enlarge chart below), and some thoughts on what OPEC's shale dilemma means for this crude world via Forbes (click here).

That's all for 2018 folks, lets see what 2019 brings. Keep reading, keep it 'crude'!

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Chart: 2018 Friday closing levels of oil benchmarks © Gaurav Sharma 2018.