In what is shaping up to be a very impressive earnings season, almost all major oil companies are exceeding expectations and rewarding shareholders with higher dividends and share buybacks, much to the chagrin of the White House.
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on Friday 28 October 2022
Strong corporate earnings have breathed new life into the oil market, and most major oil companies have stuck to their stated policies of raising dividends and increasing share buybacks. This may not sit well with the White House ahead of the midterm elections, as optimism has supported oil prices well, with ICE Brent within touching distance of the psychological barrier of $100 a barrel. The troubles that emerged earlier this week — the massive dumping of Chinese assets in the wake of Xi Jinping’s re-election, the ECB’s grim rate hike and more — seem to have been forgotten for now.
The IEA casts a long shadow over fossil fuels. In its 2022 World Energy Outlook, the International Energy Agency (IEA) announced that global demand for all fossil fuels will peak around 2030, which is particularly surprising for natural gas, previously seen as a bridge fuel to a greener future.
The price of energy for World Bank projects is going down. The World Bank said it expects global energy prices to fall 11% in 2023 after a huge rise this year, with Brent prices at $92 a barrel, and expects both natural gas and coal prices to fall amid weaker growth next year.
The odds of a US rail strike are rising again. After another railroad union rejected a national tentative agreement reached in mid-September, the likelihood of a December rail strike in the U.S. is growing again, potentially jeopardizing about 30% of U.S. freight deliveries.
US diesel is at the top of the shortage agenda. With U.S. distillate inventories at 106 million barrels this time of year, the lowest since the EIA began collecting weekly data in 1982, diesel prices will see a huge increase in the winter months unless diesel consumption declines.
UN: We may not be able to stop global warming. Ahead of next month’s COP27 conference, the UN said it saw no “credible way” to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels, and that on current rates it was expected to rise to 2.8 degrees.
High LNG prices are bringing back dual-fuel tankers. Due to unreasonably high natural gas prices, with LNG JKM reaching $70/mmBtu this year, shipping companies have greatly increased their interest in dual-fuel tankers that can run on LNG or diesel to offset their fueling costs.
TotalEnergies doubled the offshore tournament in Lebanon. Russia’s Novatek divests 20 percent stake in Lebanon’s offshore Block 09 French oil major TotalEnergies (NYSE:TTE) has gained temporary majority control of the project, possibly also farming in Qatar Energy at a later stage.
The Germans don’t appreciate the Chinese input in Key Port. The German government has allowed Chinese state-owned shipowner and operator Cosco to buy a 24.9 percent stake in a Hamburg port terminal, triggering widespread government dissent as the move is believed to strengthen Beijing’s influence in Germany.
The US government wants to mine its own uranium. With US nuclear companies still dependent on Russian and Kazakh uranium, the Biden administration is building its own uranium strategy with the goal of mining more domestically — the IRA has already committed $700 million to the production of high-grade, low-enriched uranium.
The Guyanese gift that keeps on giving. US oil major ExxonMobil (NYSE:XOM) recorded two new discoveries in Guyana’s Stabroek block of Sailfin-1 and Yarrow-1 wildcats, which despite both encountering moderate net oil payments (23m) are tied to larger projects.
Namibia is considering OPEC membership. After news of at least two major discoveries offshore Namibia TotalEnergies (NYSE:TTE) Venus and Shell’s (LON:SHEL) Graff is a potentially multi-billion barrel find, so Namibia could consider joining OPEC in the coming years.
Venezuela opens the gate for JV partners. Venezuela allows partners of its state oil company PDVSA to exit joint ventures if they waive past debts and unpaid dividends — so far the only majors left in the country are Chevron (NYSE:CVX), ENI (BIT:ENI), and Repsol (BME:REP).
President Biden Singles Shell. US President Joe Biden singled out the UK-based energy chief Shell (LON:SHEL) of directing profits to shareholders rather than lowering the price of gasoline, a reaction to the oil company’s 15% dividend hike and continued share buyback program.
French nuclear power production has hope for 2023. The French government needs a state-owned facility EDF (EPA:EDF)which will soon be fully nationalized, to sell less of its nuclear power at a price below the authorized market price (100 TWh instead of this year’s 120 TWh), raising hopes that this could improve the company’s balance sheet.
Michael Kern, Oilprice.com
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