Gas Inventory at Deficit Heading Toward Summer Season

Gas Inventory at Deficit Heading Toward Summer Season

Natural gas storage inventories decreased 47 Bcf for the week ending March 15, according to the EIA’s weekly report. This draw meets the market expectation, which was an inventory decrease of 48 Bcf. This week’s report did come with revisions to the March 8 draws in the South Central region, reducing the draw from 204 Bcf to 200 Bcf for the week ending March 8.

Working gas storage inventories now sit at 1.143 Tcf, which is 315 Bcf below inventories at the same time last year and 556 Bcf below the five-year average.

At the time of this writing, the April 2019 contract was trading at $2.812/MMBtu, $0.008 below yesterday’s close of $2.820/MMBtu.

Winter is coming to an end, along with the withdrawal season, and inventories will need to play catch-up during summer 2019. All regions are at a deficit compared to the 2010 through 2018 average inventory for the same week as we enter the summer season. The recovery from this deficit will largely be determined by summer weather and the amount of gas needed for power burn. Another factor in recovering the deficit is additional LNG capacity coming to market, as Corpus Christi, Cameron, Elba Island, Sabine, and Freeport are expected to have trains come to market during summer 2019. The chart below shows inventory by region for the same week.

See the chart below for projections of the end-of-season storage inventories as of April 1, the end of the withdrawal season.

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending March 21, 2019.

Supply:

  • Dry gas production increased 0.06 Bcf/d on the week. A decrease was observed in the South Central/Gulf region of ~0.23 Bcf/d. This drop was offset by gains in the East (+0.15 Bcf/d) and the Mountain (+0.14 Bcf/d) regions.
  • Canadian net imports increased 0.29 Bcf/d on the week.

Demand:

  • Domestic natural gas demand decreased 0.33 Bcf/d week over week. Res/Com demand decreased 1.10 Bcf/d week over week, while Power and Industrial demand increased 0.33 Bcf/d and 0.44 Bcf/d, respectively.
  • LNG exports increased 0.30 Bcf/d, while Mexican exports fell 0.11 Bcf/d on the week.

Total supply is up 0.35 Bcf/d, while total demand decreased 0.14 Bcf/d week over week. With the gain in supply and the drop in demand, expect the EIA to report a weaker draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 39 Bcf for next week. Last year, the same week saw a draw of 63 Bcf; the five-year average is 41 Bcf.

Large Crude Oil and Total Products Draws Push Prices Higher

Large Crude Oil and Total Products Draws Push Prices Higher

US crude oil stocks posted a sizeable decrease of 9.6 MMBbl from last week. Gasoline and distillate inventories decreased 4.6 MMBbl and 4.1 MMBbl, respectively. Yesterday afternoon, API reported a crude oil draw of 2.1 MMBbl alongside gasoline and distillate draws of 2.8 MMBbl and 1.6 MMBbl, respectively. To the contrary, analysts were expecting a crude oil build of 0.3 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large decrease of 12.6 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.

US crude oil production increased 100 MBbl/d last week, per the EIA. Crude oil imports were up 0.19 MMBbl/d last week, to an average of 6.9 MMBbl/d. Refinery inputs averaged 16.2 MMBbl/d (178 MBbl/d more than last week), leading to a utilization rate of 88.9%. The large and higher than expected crude oil draw as well as total petroleum stocks inventory draw are pushing prices near the $60/Bbl level. Prices are also supported by expectations of deeper supply cuts by Saudi Arabia and Russia, however, increasing US production and ongoing US-China trade disputes are keeping a lid on price gains. Prompt-month WTI was trading up $0.31/Bbl, at $59.34/Bbl, at the time of writing.

Prices have been on an upward trend and traded in the $58/Bbl to $59/Bbl range last week as bullish news weighed in on the trade. On Monday, prices reached their highest levels since November on expectations that OPEC and non-OPEC producers would increase compliance levels and possibly extend the supply cuts beyond the June expiration date.

Oil prices have recovered from their slump at the end of the year, increasing more than 20 percent after OPEC and non-OPEC countries announced and started executing on supply cuts of about 1.2 MMBbl/d. The bulk of the reduction so far came from Saudi Arabia, and the declining production levels from Iran and Venezuela due to sanctions and political crisis. The supply cuts and lower OPEC output had already increased the bullish sentiment, but prices got further support on Monday following the Joint Ministerial Monitoring Committee (JMMC) meeting in Azerbaijan. During the short meeting, the committee stated that compliance levels have increased to 90% in February. Also during the meeting, the JMMC decided to cancel the upcoming meeting in April, as current market fundamentals still point to an oversupplied market. The decision regarding whether to extend or halt the supply cuts for the second half of the year will be made during the OPEC meeting June 25-26 in Vienna. Comments from Saudi Arabia and Russia over the weekend also supported prices, as both parties made promises to continue and possibly deepen the production cuts beyond the 1.2 MMBbl/d level until June to bring a balance to the market.

Although global supply levels have tightened since OPEC-led supply cuts and bullish news continued to pile on, significant price gains are still being limited by continuously increasing US production and the fears of a slowdown in global economic and demand growth as US-China trade disputes continue to dampen the economic outlook. US production is showing no signs of slowing down and will increase further in 2019, as many of the operators are beginning to hedge production at higher prices and are projecting double-digit growth rates for 2019, which could potentially offset the supply cuts by OPEC and non-OPEC producers. The ongoing US-China trade negotiations are another risk for prices, as trade talks continue between the world’s two largest economies but seem to get nowhere. Failure to reach an agreement could mean a huge threat to already concerning global economic and energy demand growth, which could potentially pressure prices further.

The trade had a positive bias all week, with most of the gains occurring with the inventory release. While maintaining a positive bias, market internals confirm the unsettled commitment, as open interest declined week over week and volumes declined after the breakout on Wednesday, as there was little follow-through to the gains. Prices gained more momentum and extended their gains due to bullish headlines over the weekend and on Monday. Moving forward, Drillinginfo expects that the market will continue to trade on the news around the trade talks, the potential for an extension of the supply cuts, and any news surrounding the US sanctions on Iran and waivers that were granted as we approach the deadline for Iranian sanction waivers. Should prices take a consolidation pause to the gains, a retracement and a range development could be expected between $55.00/Bbl as the low and the levels from this week as the high side.

Petroleum Stocks Chart

Ronda XII Intracampos 2018 – Seven Companies Present Offers

Ronda XII Intracampos 2018 – Seven Companies Present Offers

On March 12, 2019, the Ecuadorian Ministry of Energy and Non-Renewable Natural Resources accepted bids from qualified companies participating in XII Ronda Petrolera Intracampos. The ministry televised the reception and public opening of the offers for the eight Oriente-Maranon Basin blocks that will operate under a Production Sharing Contract (PSC).

 

While winners have yet to be announced, a roster of preliminary victors has emerged based on proposed shares of gross production and minimum exploration programs.

 

Ecuador’s Vice Minister of Hydrocarbon, Patricio Larrea said, “On April 2, 2019, the Evaluation Committee will present results from the bidding to the Hydrocarbons Licensing Committee. Following that, a decision will be announced with final contracts scheduled to be signed on May 9.” The government is hoping that Quito – on average – will walk away with a 60 percent share in future production.

 

Colombia-focused Gran Tierra and the Frontera Energy and GeoPark consortium were the most aggressive bidders at the event. Block 88 (Perico) saw some of the hottest bidding, but the Frontera-GeoPark consortium emerged as the preliminary winner for Block 88 (Perico), as well as for Block 92 (Espejo).

Figure 1 – Ronda XII Intracampos 2018 Preliminary Awards

“This successful Ecuador bid extends and consolidates Frontera’s position in the North Andean region of South America. We are pleased to be partnered with GeoPark, which has significant oil and gas experience and operations throughout South America,” said Frontera CEO Richard Herbert. The Block 88 (Perico) exploration work commitments include the drilling of four wells, 72 sq km of 3D seismic reprocessing and 72 km sq of magnetometry and gravimetry, as well as a surface geochemical program.

 

As for Block 92 (Espejo), the other Frontera and GeoPark block, the exploration work commitments include the drilling of four wells, a 3D seismic acquisition program covering 55 sq km, and 74 sq km of 3D seismic reprocessing. The program also includes 63 sq km of magnetometry and gravimetry work and a surface geochemical program.

 

Block 50 (Charapa), had the Frontera and GeoPark consortium squared off against Gran Tierra, which saw the latter scooping up the block. After the round, Gran Tierra touted the fact that it has added three Ecuadorean blocks – Block 50 (Charapa), Block 51 (Chanangue), and Block 89 (Iguana) – to its portfolio. “Based on preliminary results, the company has made a new-country entry into Ecuador through the submission of winning bids for a total of three blocks,” a Gran Tierra spokesperson said.

 

The three blocks encompass 140,000 acres in total area, creating a contiguous acreage position extending from Gran Tierra’s existing assets in the Putumayo Basin in Colombia. These Colombian blocks include PUT-7 and Suroriente. Final award of these blocks is contingent upon regulatory approvals and the execution of the participation contracts.

 

The work program includes the drilling of 14 exploration wells over a four-year period. Gran Tierra’s share of revenues is tied to the Oriente Blend Oil Price and to production volumes. The contracts are on a sliding scale, with the company take ranging from 87.5 percent at US$ 30 per barrel to 40 percent at US$ 120 per barrel.

 

Meanwhile, U.S. based Flamingo Operating has the preliminary win for Block 90 (Sahino) while Petrosud’s Ecuadorian subsidiary Petrolamerec edged in for Block 91 (Arazá Este). No bids were submitted for Block 93 (Panayacu Norte). Russian Zarubezhneft and Uruguayan Petrobell are thought to have been unsuccessful with their bids.

 

Only seven companies participated in the bidding. In all, 19 companies had qualified, 13 of which qualified as operators, and six as participants. Minister of Energy and Natural Resources Non-Renewable, Carlos Perez, said the minimum work commitments on the block entail up to US$ 700 million. It was hoped that investments would reach up to US$ 1 billion.

 

An official announcement, released by the Ecuadorian Ministry of Energy and Non-Renewable Natural Resources on February 15, 2019, listed the qualified companies to take part in XII Ronda Petrolera Intracampos. The 13 qualified operators were:

  • GeoPark Peru S.A.C.
  • Gran Tierra Energy Colombia LLC
  • Frontera Energy Colombia Corp
  • Amerisur Exploracion Colombia Limited
  • Zarubezhneft JSC
  • Andes Petroleum Ecuador Ltd
  • Tecpecuador S.A.
  • Orionoil ER S.A.
  • Petroleos Sud Americanos Del Ecuador Petrolamerec S.A.
  • Petrobell S.A.
  • Madalena Energy Arg.entina S.R.L.
  • Repsol Ecuador S.A.
  • Flamingo Operating LLC

 

The 6 qualified participants were:

  • Cobra Instalaciones Y Servicios S.A.
  • Hupecol Operating Co LLC
  • Sertecpet S.A.
  • Madalena Ennergy Inc
  • Kempton Invest S.L.
  • Amerisurexplor S.A.

 

While a number of these companies already operate within Ecuador, such as Repsol, Petrobell, Petrosud, and Andes Petroleum, for most companies in the list, this is their first foray into the Andean nation. Traditionally Colombian-focused companies, such as Gran Tierra, Frontera Energy, and Amerisur, have taken some interest in Ecuador, as well as GeoPark, which already operates in five other South American countries.

 

Preparation and delivery of tenders were due on March 12, 2019, having been extended from  February 22, 2019. Contracts will be signed between April 9 and May 9 of this year. For more information on XII Ronda Petrolera Intracampos see the website set up for the round http://www.rondaspetrolerasecuador.gob.ec/.

 

The Roadshow presentations and data rooms kicked off at the St. Regis Hotel in Houston   September 25-27, 2018, with the Ecuadorian Ministry of Hydrocarbons revealing that 33 international companies, 17 of which are operators, showed an interest. Ecuador is hoping the round will help revitalize the country’s E&P sector. The eight blocks are all low-risk exploratory blocks located close to established fields and have 15 exploration opportunities or prospects and two existing fields, according to the Ministry of Energy and Non-Renewable Natural Resources. The blocks are offered under a new contract model to attract investment in the country. The eight blocks that are offered are:

  • Block 50 – Charapa (243.52 sq km)
  • Block 51 – Chanangue (202.76 sq km)
  • Block 88 – Perico (71.7 sq km)
  • Block 89 – Iguana (149.24 sq km)
  • Block 90 – Sahino (98.97 sq km)
  • Block 91 – Arazá Este (55.07 sq km)
  • Block 92 – Espejo (63.34 sq km)
  • Block 93 – Panayacu Norte (92.28 sq km)

 

The blocks on offer are carved out of state-owned Petroamazonas acreage. The government expected around US$ 1 billion in additional investments. The Hydrocarbons Secretariat estimates original oil in place for the blocks to be 854 MMbo and recoverable resources of 170 MMbo assuming a recovery factor of 20 percent (validated by Ryder Scott).

 

Blocks are offered in Ronda Intracampos under a ‘Participation’ contract, which is a Production Sharing Contract (PSC) type model, rather than the service contract model previously employed in Ecuador. Bids in Ronda Intracampos will be evaluated primarily on the production sharing commitment offered to the government (government share of production before taxes), but also on the total exploration investment committed (annual work commitment plans).

The Week Ahead For Crude Oil, Gas and NGLs Markets – Mar 18, 2019

The Week Ahead For Crude Oil, Gas and NGLs Markets – Mar 18, 2019

DI is enhancing its Week Ahead market commentary with our views on waterborne movements of crude and petroleum products.  These insights are developed through our analysis of data obtained from US Customs and US Census Bureau.  Future enhancements will include real time vessel tracking.  For more information please contact us at marketintelligence@drillinginfo.com

CRUDE OIL

  • US crude oil inventories posted a decrease of 3.9 MMBbl last week, according to the weekly EIA report. Gasoline inventories decreased 4.6 MMBbl and distillate inventories increased 0.4 MMBbl. Total petroleum inventories showed a significant decline of 10.2 MMBbl. US crude oil production was down 100 MBbl/d compared to the previous week (per EIA). Crude oil imports were down 0.26 MMBbl/d to an average of 6.7 MMBbl/d versus the week prior.
  • WTI had a bullish week with a breakout above the previous level of resistance that had surrounded the November ’18 highs at $57.96/Bbl. Much of the news fed the optimism early in the week, with Saudi Arabia confirming its voluntary plans to cut supplies further. The Kingdom announced that oil exports will be cut below 7.0 MMBbl/d while output will be kept below 10.0 MMBbl/d to alleviate the supply imbalance. The Joint Ministerial Monitoring Committee, which monitors compliance levels of OPEC and non-OPEC countries, will be meeting on March 18. However, it is doubtful that any adjustments to output will be announced at this meeting, but rather create the background for discussions at the upcoming meeting in June.
  • Bullish news continues with exports from Venezuela continuing to decline with the power outages and the shutdown of the main crude export terminal and processing complex. These declines may be short-lived, but the current turmoil in Venezuela makes it difficult to assess whether the country can fully resume operations.
  • The bullish inventory release, especially the estimated declines in US production, garnered the support necessary to break through the long-held resistance and reach $58.95/Bbl on Friday. Prices will continue to have imposed limits to the gains as the trade discussions between the US and China drag on without any settlement in sight. Without a confirming agreement in place, the market is subject to the potential of continuing global economic weakness, which will put a lid on global demand and gains in crude prices.
  • The CFTC report showing positions as of March 12 continues the recent trend, with the managed money short sector reducing exposure by covering 5,287 contracts while the long sector marginally increased length by 2,454 contracts. With the breakout above $58.00/Bbl last week, expect additional reduction of the speculative short sector this week. The speculative long sector has not fully embraced the long-term potential gains, and this hesitancy is largely due to the uncertainty in the tariff negotiations and the declining global economic growth.
  • The trade had a positive bias all week, with most of the gains occurring with the inventory release. While maintaining a positive bias, market internals confirm the unsettled commitment as open interest declined week over week and volumes declined after the breakout on Wednesday, as there was little follow-through to the gains. Momentum indicators are still positive for the coming week, and extension to the Friday highs should be expected early this week. Gains should take aim at $60.00/Bbl, and will likely hit significant selling over $59.00/Bbl. Should prices take a consolidation pause to the gains, a retracement and a range development could be expected between $55.00/Bbl as the low and the highs from last week, or what is achieved on a gain extension this week being the high end.

NATURAL GAS

  • Dry gas production increased 0.42 Bcf/d, with most of the gain coming from Texas and Oklahoma recovering from freeze-offs. Canadian imports decreased 0.81 Bcf/d.
  • Res/Com demand fell 19.72 Bcf/d week over week, while Power and Industrial demand fell 3.75 and 2.13 Bcf/d, respectively. LNG exports gained 0.22 Bcf/d on the week, while Mexican exports increased 0.04 Bcf/d. Total supply dropped 0.39 Bcf/d, while total demand decreased 26.14 Bcf/d for the week.
  • The storage report last week came in with a draw of 204 Bcf. Total inventories are now 359 Bcf below last year and 569 Bcf below the five-year average.
  • Prices started the week down as it became more apparent that additional forecasts for colder temperatures would have limited impact on prices. The early week was spent trying to close the gap from weeks prior, but the declines fell short as traders rallied on the expectation of the bullish storage report. The trade seems to be similar to the 2018 trade action that spent the months of March, April and May consolidating between $2.53 and $2.869, before a slow rally took prices up just over $3.00 in the middle of June. However, last year’s end-of-winter low inventory was expected to be offset by additional production coming to market with new infrastructure. This year, storage will have even lower inventories, and additional production will be limited, with few infrastructure projects expected to come to market near term.
  • The CFTC report (as of March 12) showed the managed money long sector increasing positions by 12,974 contracts; the short position also increased by 2,337 contracts last week. The speculative elements in the market are not unanimous in establishing near-term direction regardless of current production levels, likely setting a struggle for prices to extend very far in either direction for the near term.
  • Prices spent the week consolidating in a range of $0.062, narrower than the previous week’s range of $0.084. Momentum indicators are neutral to slightly bearish for the coming week. Market internals had volume well below the previous week’s averages, with open interest showing a slight increase on the week.
  • Expect the weakness on Friday to extend, creating a challenge to the gap between $2.732 and $2.726. Closure of that gap may take prices down to test the $2.64 area. For prices to test the lows established on February 7 of $2.549, and on February 15 of $2.543, the speculative short sector will have to become more active than it is currently showing. The area between $2.56 and $2.52 has held all declines since 2016.
  • The weather forecasts, which have been driving the market gains of late, will now have a more diminutive effect on prices in the coming weeks. Should prices garner some support, the first area of selling will be found at the recent highs between $2.857 and $2.908.

NGLs

  • Prices were mainly up last week. Propane was up $0.002 to $0.684, normal butane was up $0.002 to $0.796, isobutane was up $0.031 to $0.854, and natural gasoline was up $0.019 to $1.241. Ethane was the only decrease week-over-week, falling $0.005 to $0.288.
  • US propane stocks decreased ~1.2 MMBbl for the week ending March 8. Stocks now sit at 50.2 MMBbl, roughly 11.3 MMBbl and 5.7 MMBbl higher than the same week for March 2018 and March 2017, respectively.

SHIPPING

  • US waterborne crude imports remained low for the week ending March 15. Once again, PADD 3 imports were low, coming in just short of 1.6 MMBbl/d, and have remained well below 2.0 MMBbl/d since mid-February. PADD 1 imports dropped to 525 MBbl/d, while PADD 5 imports rose to 1.375 MMBbl/d. Prior to 2019, the EIA reported PADD 3 crude oil imports below the 2.0 MMBbl/d mark only five times since 1990.
  • PADD 3 crude imports from Saudi Arabia have risen compared to the prior two months, and are currently near 275 MBbl/d. That’s far higher than the sub-100 MBbl/d level that we saw in January and February.
Production Recovers from Freeze-Offs, Gas Draw Meets Expectation

Production Recovers from Freeze-Offs, Gas Draw Meets Expectation

Natural gas storage inventories decreased 204 Bcf for the week ending March 8, according to the EIA’s weekly report. This draw meets the market expectation, which was an inventory decrease of 205 Bcf.

Working gas storage inventories now sit at 1.186 Tcf, which is 359 Bcf below inventories at the same time last year and 569 Bcf below the five-year average.

At the time of this writing, the April 2019 contract was trading at $2.845/MMBtu, $0.025 above yesterday’s close of $2.820/MMBtu. However, these gains came before the storage release.

See the chart below for projections of the end-of-season storage inventories as of April 1, the end of the withdrawal season.

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending March 14, 2019.

Supply:

  • Dry gas production increased 0.58 Bcf/d on the week, driven by gains in the South Central/Gulf region (+0.90 Bcf/d). Slight offsets were found in the East (-0.16 Bcf/d) and the Mountain (-0.17 Bcf/d) regions. In the South Central, Texas (+0.50 Bcf/d) and Oklahoma (+0.54 Bcf/d) bounced back from freeze-offs, offsetting the drop from the week prior.
  • Canadian net imports decreased 0.77 Bcf/d on the week. The decrease is caused by warmer weather in the US.

Demand:

  • Domestic natural gas demand decreased 23.89 Bcf/d week over week. Res/Com decreased on the warmer weather, falling 17.77 Bcf/d week over week. Power and Industrial demand fell 3.96 Bcf/d and 2.16 Bcf/d, respectively.
  • LNG exports increased 0.20 Bcf/d, while Mexican exports increased 0.05 Bcf/d on the week.

Total supply is down 0.20 Bcf/d, while total demand decreased 24.80 Bcf/d week over week. With the drop in demand outpacing the drop in supply, expect the EIA to report a weaker draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 48 Bcf for next week. Last year, the same week saw a draw of 86 Bcf, while the five-year average is 52 Bcf.

Bullish Inventory Report Push Prices Higher

Bullish Inventory Report Push Prices Higher

US crude oil stocks posted a decrease of 3.9 MMBbl from last week. Gasoline inventories decreased 4.6 MMBbl while distillate inventories increased 0.4 MMBbl. Yesterday afternoon, API reported a crude oil draw of 2.6 MMBbl alongside a gasoline draw of 5.8 MMBbl and a distillate build of 0.19 MMBbl. Analysts were instead were expecting a crude oil build of 2.7 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large decrease of 10.2 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.

US crude oil production decreased 100 MBbl/d last week, per the EIA. Crude oil imports were down 0.26 MMBbl/d last week, to an average of 6.7 MMBbl/d. Refinery inputs averaged 16.0 MMBbl/d (30 MBbl/d more than last week), leading to a utilization rate of 87.6%. The sizeable crude oil and total petroleum stocks inventory draws triggered the price increase this morning. In addition to bullish report by EIA, prices are also supported by declines in Venezuelan crude exports and expectation of deeper supply cuts by Saudi Arabia. Prompt-month WTI was trading up $1.07/Bbl, at $57.94/Bbl, at the time of writing.

Prices have been steadily increasing after their brief fall on Friday as a result of weakness in job creation in the US during February, reports showing the lowest Chinese factory activity in three years, and Chinese exports in February falling nearly 21% from last year, all of which increased worries of a slowdown in global economic and energy demand growth. The news that Libya’s El Sharara oil field is restarting operations to bring back 300 MBbl/d also supported the bearish sentiment and kept the pressure on prices heading in to the weekend.

Monday brought some bullish news as Saudi Arabia announced their voluntary plans to cut supply further to bring an end to the global supply glut in order to bring a balance to the market to support higher prices. Saudi Arabia’s oil minister stated that the Kingdom is planning to cut its oil exports to below 7 MMBbl/d while keeping its output below 10 MMBbl/d to diminish and alleviate the supply glut. The Joint Ministerial Monitoring Committee, which monitors compliance levels of OPEC and non-OPEC countries, is scheduled to meet in Azerbaijan on March 18. Saudi Energy Minister Khalid al-Falih said it may be too early to change the production curb agreement during this meeting, but it will be discussed during the group’s next meeting in June. From the statements to date by al-Falih, the market seems optimistic that supply cuts could be extended further, which will potentially be led by Saudi Arabia. In addition to Saudi Arabia’s stance and willingness to eliminate the supply glut, the recent situation in Venezuela also gave support to prices. Exports from Venezuela were cut due to a country-wide power outage, which resulted in the shutdown of the main crude export terminal and processing complex. Although this is a temporary shutdown, the current turmoil in Venezuela makes it hard to assess when the country can fully resume operations again.

As the market takes a more bullish stance with the ongoing OPEC-led supply cuts, the worsening situation in Venezuela, and Saudi Arabia’s comments on possibly extending the supply cuts, any significant price gain will be limited due to continuously increasing US production and the uncertainty around US China trade negotiations. The US production is showing no signs of slowing down and will increase further in 2019 as many of the operators are projecting double-digit growth rates for 2019, which could potentially offset the supply cuts by OPEC and non-OPEC producers. The ongoing US China trade negotiations are another risk for prices, as trade talks continue between the world’s two largest economies but seem to get nowhere. Failure in reaching an agreement could mean a huge threat to already concerning global economic and energy demand growth, which could potentially pressure prices further.

The negative news on Friday sent prices down over $2.00 and challenged the commonly watched 20-week moving average at $54.16/Bbl before finding solid support and rallying. Despite the bearish global economic data, prices closed last week higher than the previous week’s $55.86/Bbl, at $56.07/Bbl. The major area for selling remains high from last November, $57.96/Bbl, with a break above likely to find $60.00/Bbl. Moving forward, Drillinginfo expects that the market will continue to trade on the news around the trade talks and the potential for an extension of the supply cuts. Further indications of weakness in global demand will likely send prices back to the 20-week moving average ($54.16/Bbl currently). A breakdown through this area will lead prices to the commonly traded 50-day moving average at $51.84/Bbl.

Petroleum Stocks Chart