Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

3 Energy Market Developments To Watch As Oil Prices Rise

By Ellen WaldCommoditiesMar 14, 2019 11:30
3 Energy Market Developments To Watch As Oil Prices Rise
By Ellen Wald   |  Mar 14, 2019 11:30
Saved. See Saved Items.
This article has already been saved in your Saved Items

As geopolitics and transportation disasters impact the oil and fuels markets, some oil company CEOs seem most concerned with climate change and environmentalism. For oil and equities traders, the new corporate strategies are something to watch.

1. Oil Majors Divided Over Strategy

Oil majors are divided over strategies to attract investors. Low oil prices have put a dent in their profits over the past few years, while some oil majors, like BP (NYSE:BP), Equinor (NYSE:EQNR) and Royal Dutch Shell (NYSE:RDSa) believe that they have lost investor confidence because they are not adequately addressing climate change. BP and Equinor believe that engaging with potential investors on climate change issues and oil’s contribution to climate change will improve their image. It is questionable whether adopting a strategy of repeatedly questioning the morality of the entire hydrocarbons business will be good for investor confidence and stock prices.

Royal Dutch Shell is essentially re-envisioning itself as a power company instead of an oil company. It's seeking to become the “world’s largest power company” by the beginning of the 2030s. Shell has been selling off a great deal of its upstream oil assets, and it is buying renewable energy assets instead. In fact, Shell is in the process of bidding to build wind farms in the North Sea. Margins for electricity providers are typically much lower than for oil companies, so it's not certain if, as a power company, Shell will be able to achieve the 8%-12% returns it is looking for.

Other oil majors, such as Hess (NYSE:HES), Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) are focusing more on traditional aspects. Hess CEO John Hess recently talked about selling off upstream assets with high production costs. Chevron and Exxon are both expanding drilling in the Permian region where they have good access to pipelines and shipping.

2. Oil Production And Sanctions

Oil prices rose yesterday after reports that production growth in the Permian region was overestimated in December, January and February.

Oil 300 Minute Chart
Oil 300 Minute Chart

Oil production is still growing in the U.S., but not quite at the rates the EIA projected. Gasoline prices are also on the rise in the U.S., with some areas seeing increases of as much as 34 cents per gallon. Power outages in Venezuela are preventing oil from being loaded onto ships for export, which makes prices rise. Also, Saudi Arabia is planning to produce under 10 million barrels per day in April as well as March, which is more bullish news for oil prices.

This makes U.S. State Department policy on Significant Reduction Exemptions (SREs) even more crucial to oil markets in H2. SRE’s are used by the U.S. to permit certain countries to continue importing specified amount of oil from Iran during the sanctions. Secretary of State Pompeo recently reiterated that the U.S. is focused on pushing Iran’s oil exports down to zero, but he did not give a specific time frame for that to occur. Other State Department officials emphasized that EIA forecasts show that the oil market will remain oversupplied by about 400,000 bpd in 2019. They believe that a well-supplied market is crucial for the U.S. to maintain its sanctions on the Venezuelan oil industry at the same time as it sanctions Iran.

Iran’s oil exports currently average about 1.4 million bpd, so it seems unlikely that the U.S. will try to eliminate all of this oil from the market come May. Brian Hook, the State Department’s special representative for Iran, would not comment on specific exemptions, but did say recently that the President is concerned about making sure that the oil market is “well-supplied and stable.” State Department officials will likely be keeping a close eye on the oil market between now and the end of April, but it now seems increasingly likely the SREs to Iran’s biggest customers, China and India, will be maintained for the rest of 2019.

3. Jet Fuel Demand

Jet fuel demand in the U.S. remained strong in February, according to the American Petroleum Institute. This is generally a good indicator of economic growth in the United States. However, the recent crash of a Boeing (NYSE:BA) 737 Max 8 plane in Ethiopia is leading countries around the world to ground these jets. This will necessitate delays and cancellations of flights across the world. Now that the United States is halting the use of these planes as well, we should expect to see a drop in jet fuel demand in the United States in March.

3 Energy Market Developments To Watch As Oil Prices Rise

Related Articles

3 Energy Market Developments To Watch As Oil Prices Rise

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email