Oil Rebounds After Economic Data Dampens Recession Fears

Tom Kool

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Recession worries have dominated markets this week, but new data from the U.S. has helped quell the fear. 

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Oil rebounded in early trading on Friday after data showed that retail sales in the U.S. remain strong, but fears of a global slowdown have not been fully allayed. “The rebound has a corrective look about it on thin volumes, rather than a beachhead for an impending rebound,” Jeffrey Halley, senior market analyst at OANDA, told Reuters. “Overall, U.S. data continues to be a bright spot in a dark economic universe.”

Economic recession fears. The inverted yield curve spread concerns about a looming economic recession. Crude oil was not spared the global selloff this week. Data from China and Germany this week raised more red flags. The one bright spot has been U.S. consumer spending, which picked up in July.

WTO: Trade is slowing. WTO said that trade volumes could contract in the third quarter.

Related: Trump, OPEC Jawbone Oil In Opposite Directions

EPA to end methane limits. The Trump administration is hoping to end regulation on methane emissions, something that the industry has said that it does not want. The proposal would prevent the federal government from regulating methane from oil wells and infrastructure.

Harold Hamm wants shale output cuts. Continental Resources (NYSE: CLR) CEO Harold Hamm said that both OPEC+ and U.S. shale should cut production in order to balance the market. U.S. shale producers “need to row our own boat,” he said this week at an industry conference. “We need to make sure we don’t oversupply the market.”

Oil and gas bankruptcies on the rise. Through August, the number of bankruptcies in the U.S. oil and gas industry this year has nearly reached the 2018 total. The total volume of debt affected so far ($20 billion) has surpassed last year’s figure ($17 billion), according to Haynes & Boone.

North Dakota oil production hits record. Oil output in North Dakota rose to 1.42 mb/d in June, a new record high.

Saudis and Trump battle on oil prices. A Reuters analysis posits that Saudi Arabia and Donald Trump tend to both jawbone the oil market when prices get too far away from their preferred range. Just as soon as Brent neared $60 per barrel recently, rumors surfaced that Saudi Arabia was considering deeper action to rescue prices. The rumor alone sent oil prices up. But in the past few years, whenever Brent rises into the $70s, Trump has lambasted OPEC, demanding lower prices. The result is Brent trapped between $60 and $75.

Saudi Arabia ramps up oil exports to China. Saudi oil exports to China have doubled over the past year as U.S. sanctions curtail Iranian exports.

NuStar receives first shipment to Corpus Christi. NuStar Energy (NYSE: NS) received its first shipment of Permian oil for its Corpus Christi export terminal. “We continue to believe that the biggest impact from the growth in the Permian Basin on the horizon is the growth in Gulf Coast crude exports,” NuStar CEO Brad Barron said in a statement.

Ethanol prices hit 5-year low. Ethanol futures prices for September delivery fell to $1.27 per gallon, a five-year low. The U.S. EPA issued a series of waivers a week ago to 31 oil refineries, causing havoc in the market for ethanol and blending credits. “The Trump administration has totally annihilated the margins for ethanol producers,” Charlie Sernatinger, head of global grains futures with ED&F Man Capital Markets, said, according to the Wall Street Journal.

Rosneft shifts to euros. Rosneft asked buyers of a naptha cargo to use euros, the first time it has done so, according to Reuters.

Related: OPEC Needs Another 1 Million Bpd Cut To Boost Oil Prices

Two Permian pipelines start up. EPIC Midstream Holdings Inc. began shipping crude on Thursday on its 400,000-bpd pipeline from the Permian to the Gulf Coast, helping to push up Midland crude prices, according to Reuters. A second pipeline, the Cactus II pipeline from Plains All American (NYSE: PAA), also began operations this week. That line has a capacity of 670,000 bpd. Midland crude trades at a slight premium to WTI, after suffering steep discounts last year because of a lack of pipelines.

EQT among world’s fastest-growing gas producers. Russia’s Gazprom, PetroChina and Pittsburgh-based EQT (NYSE: EQT) are ranked as the world’s fastest-growing natural gas companies over the last five years, according to Rystad Energy. However, EQT has announced an abrupt slowdown in its expansion plans as its finances have proved to be disappointing.

Equinor produces first oil at North Sea project. Equinor (NYSE: EQNR) said it started up production at its Mariner heavy oil field in the UK’s North Sea.

Exxon leases LNG-fueled tanker. ExxonMobil (NYSE: XOM) signed a two-year agreement to use Singapore’s first LNG-fueled bunker tanker. Meanwhile, shipowners are increasing removing tankers from operation in order to install scrubbers ahead of the 2020 IMO regulations.

By Tom Kool for Oilprice.com 

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