ENERGY: Oil report for December 27th, 2019
A Bullish End To The Year For Oil Markets
Oil finishes the year on a bullish streak, U.S. shale begins to struggle
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LNG bubble to force shake out. There is a growing consensus that the window for major independent LNG export projects is closing, which means that 2020 could be a shakeout year for the sector. “It’s getting late. It’s getting dark. It’s much tougher,” Michael Webber, an independent LNG analyst and managing partner of Webber Research & Advisory, told S&P Global Platts. “Liquidity issues are going to have real teeth to them next year. The rubber will meet the road for a lot of these projects.” Chinese tariffs on U.S. LNG could also delay project sanctioning.
Nigeria moves forward on LNG. Nigeria and partners Royal Dutch Shell (NYSE: RDS.A), Eni (NYSE: E) and Total SA (NYSE: TOT) gave a final investment decision on Train 7 at its facility in Abuja.
Goldman Sachs: Buy Chevron and ConocoPhillips. Goldman Sachs issued an investment note describing why they have a Buy rating for Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP). Chevron offers positive cash flow and exposure to the Neutral Zone oil fields along the Saudi/Kuwait border, which may soon restart. Conoco has oil producing assets in Alaska, which offers strong margins for Pacific refineries. Meanwhile, Goldman gave ExxonMobil (NYSE: XOM) a Neutral rating, noting the positive development in Guyana, but the headwinds for its downstream and natural gas assets.
Electric buses and trucks in California threaten CNG market. The 2018 mandate for electric buses in California could be followed by another one for trucks. The development “has not yet received much investor attention,” according to Raymond James. For suppliers of CNG, such as Clean Energy Fuels Corp. (NASDAQ: CLNE), “fleet electrification represents a structural, long-term headwind,” the bank said.
2020: Strong non-OPEC supply growth. While the U.S. has accounted for virtually all of non-OPEC supply growth in recent years, there is “some kind of awakening” occurring now that will likely see increases from elsewhere in 2020, according to JBC Energy. Norway, Brazil and Guyana will ramp up new projects in 2020. Non-OPEC countries outside of the U.S. have 820,000 bpd in the pipeline. 2020 is expected to be the strongest year-on-year growth outside of OPEC in 15 years.
Big investors swallow up unwanted natural gas assets. The U.S. shale gas industry is in the doldrums, but investors with deep pockets are buying up assets on the cheap. Dallas Cowboys owner Jerry Jones invested more than $1 billion in Comstock Resources (NYSE: CRK), which is targeting the Haynesville shale. There are a handful of other similar examples, which amount to bets that some companies will survive the shake out. “Having deep pockets willing to step into the fourth quarter of a gas bloodbath creates unique opportunities that appear late cycle when traditional capital is exhausted,” SunTrust Robinson Humphrey analysts wrote in a recent note. Tudor Pickering summed it up: “The punch line is simple,” the analysts wrote, “survive in 2020 to thrive in 2023.”
—— AUTO – GENERATED; Published (Halifax Canada Time AST) on: December 27, 2019 at 10:53PM