Oil majors strut into Houston for annual energy conference

Oil majors strut into Houston for annual energy conference

(Reuters) – The oil industry converges this week on Houston at CERAWeek, the largest gathering of top energy executives in the Americas, with oil majors showing a bigger presence as the United States has taken the crown as the largest crude producer in the world.

FILE PHOTO – A combination of file photos shows the logos of five of the largest publicly traded oil companies; BP, Chevron, Exxon Mobil, Royal Dutch Shell, and Total. REUTERS/File Photo

After a year that saw international crude oil prices surge to more than $87 a barrel in the fall then tumble, the market has been calmer of late, even with production limitations imposed by a combination of OPEC’s output cuts and large-scale sanctions placed on Iran and Venezuela by the United States.

U.S. crude output has rocketed to more than 12 million barrels a day, surpassing former leaders Russia and Saudi Arabia, but that success comes as independent U.S. shale companies are reducing drilling under pressure from investors demanding improved returns.

Even with prices at relatively stable levels, U.S. sanctions on Iran and Venezuela could disrupt the current calm. It remains unclear whether the United States will continue to offer some Iranian oil buyers purchase waivers, and whether Venezuela’s President Nicolas Maduro will face additional sanctions.

Both U.S. Secretary of State Mike Pompeo and Energy Secretary Rick Perry will speak at the conference.

The larger presence of the majors, including U.S. companies Exxon Mobil and Chevron, comes as those firms are shifting investments to shale in west Texas and New Mexico, and connecting those oil fields to their coastal refineries and chemical plants.

“It’s a little bit different than what’s been seen historically,” said Staale Gjervik, president of Exxon’s shale business. Its shale deliberations now including asking, “What does that mean for the folks downstream and on the Gulf Coast and vice versa?” Gjervik said.

Shale wells are cheaper to drill and faster to start production, offsetting the majors’ past focus on giant fields whose payoff can be decades into the future.

In addition to bringing new wells into production, Royal Dutch Shell PLC is building an inventory of shale wells it can tap on a flexible schedule, said Amir Gerges, head of Shell’s Permian operations. “If we find surplus cash at the end of the year, or if oil prices respond quickly in a certain year, we can easily reinvest that for near term cash flow,” Gerges said.

Shale has sent U.S. exports ballooning to more than 3 million barrels of crude a day, upending global supply.

“It reflects the rebalancing that has gone on in world oil,” said Daniel Yergin, vice chairman of organizer IHS Markit. “This is the first CERAWeek ever where the world’s largest producer is the country where we are holding the conference, which is the United States.”

Chevron CEO Michael Wirth is scheduled to speak, along with several Exxon executives and BP Plc Chief Executive Bob Dudley.

Saudi Arabia is notable for its diminished presence this year. Saudi Aramco, the state-run oil company, is holding its annual board meeting this week, and Saudi officials noted they were prominently featured at London’s recent International Petroleum Week conference.

However, CERAWeek also follow a period where the Kingdom has faced more U.S. pressure to keep oil prices low, threats of antitrust legislation currently moving through Congress, and anger at the killing of journalist Jamal Khashoggi last year.

Saudi Arabia is the leading producer among the Organization of the Petroleum Exporting Countries, whose Secretary General, Mohammad Barkindo, is attending the conference, along with representatives from the United Arab Emirates. In recent years OPEC representatives have held meetings with executives from U.S. shale companies, in an effort to better understand shale and as the rhetoric from state-run producers has shifted from its adversarial approach in the past.

However, shale execs in the past have shied away from publicity surrounding such get-togethers, including a dinner at one of Houston’s fanciest restaurants last year. Those execs are wary of being viewed in collaboration with OPEC, and this year’s conference features fewer presentations from shale companies as well. OPEC officials have said they do plan on meeting with shale executives at this year’s conference.

Both U.S. industry groups and OPEC nations oppose the ‘NOPEC’ legislation, which has passed committees in both U.S. houses of Congress, seeing it as a threat to production that could cause prices to rise.

“I don’t think they can work together,” Yergin said. “But without some stabilizing mechanisms in the oil market you’d have a lot more volatility, and if you had a lot more volatility you’d have a lot less investment.”

Reporting By Jennifer Hiller in Houston, Ron Bousso in London, Rania El Gamal in Dubai and David Gaffen in New York; Editing by Diane Craft

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Oil tumbles after Trump tells OPEC to ‘relax’

Oil tumbles after Trump tells OPEC to 'relax'

LONDON (Reuters) – Oil fell by more than 2 percent on Monday, reversing earlier gains after U.S. President Donald Trump told OPEC producers to “relax” as prices were too high.

Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. Picture taken December 7, 2018. REUTERS/Stringer

Brent crude oil futures were down $1.43 at $65.69 a barrel at 1403 GMT, having earlier risen to a 2019 high of $67.47. West Texas Intermediate (WTI) crude futures were down $1.38 at $55.88 a barrel.

“Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Trump tweeted.

(Graphic: Trump Tweet – tmsnrt.rs/2EuRPXQ)

Members of the Organization of the Petroleum Exporting Countries together with non-OPEC producers such as Russia have agreed to cut production by 1.2 million barrels per day this year to help balance the market and support prices.

The oil price has risen by around 20 percent this year, aided primarily by OPEC’s production cuts, as well as U.S. sanctions on exports of crude from Iran and Venezuela.

Trump has frequently blamed high oil prices on OPEC while the United States has become the world’s largest supplier thanks to shale output.

Monday’s comment, one of a series of tweets or comments he has made regarding oil prices since April 2018, follows a rally in crude prices in recent weeks supported by a tighter supply outlook although they are still significantly lower than the peak of more than $85 a barrel hit last October.

(Graphic: Trump Tweets on oil – tmsnrt.rs/2Evscq7)

Trump’s comment came a day after he said that there could be “very big news over the next week or two” in trade talks between the United States and China. Concerns of global trade wars weighed on oil prices earlier this year.

SUPPLY RISK

Adding to the uncertain supply picture are Libya, where production has been frequently undermined by political tensions and violence, and Nigeria, Africa’s largest oil exporter, where as many as 39 people were killed in election violence over the weekend.

“Supply risk is ever present with Venezuelan tensions brewing a notch higher … the National Oil Corporation in Libya refusing to start production at the El Sharara field,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

Goldman Sachs analysts said on Monday that “the near-term outlook for oil is modestly bullish over the next two to three months”, but added that the outlook for later in 2019 was weaker due to surging U.S. exports and an “an increasingly uncertain economic, policy and geopolitical backdrop”.

(Graphic: U.S. oil production & drilling levels – tmsnrt.rs/2Vj9SWv)

Reporting by Noah Browning; additional reporting by Henning Gloystein and Ron Bousso; editing by Jason Neely

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