It was a week when oil prices stabilized below $80 for the first time in months, while natural gas futures hit their lowest point since July.
On the news side, the Norwegian energy giant Equine EQNR has signed a 10-year gas supply agreement with Poland, while the oil refiner Marathon Oil MPC has finalized its joint venture agreement for the Martinez renewable fuels project in California with Finland’s Neste. Developments associated with Eni E, Energy Cheniere LNG and Schlumberger SLB also made headlines.
All in all, it was a dismal seven days for the sector. West Texas Intermediate (WTI) crude futures fell 7.1% to close at $78.74 a barrel, while natural gas prices fell about 12% to end at $6.828 per million of British Thermal Units (MMBtu). In particular, oil and gas markets have continued their rapid decline in recent weeks.
US oil prices have crashed following the Federal Reserve’s recent decision to raise interest rates further, in line with many other central banks around the world, to step up the fight against the surge in the ‘inflation. The tightening of monetary policies has raised concerns about a possible recession and, consequently, a slowdown in demand for rough. A stronger greenback, which can weaken dollar-denominated commodities like crude, also contributed to the decline.
Natural gas posted a larger weekly loss, mainly due to a bearish inventory report. Adverse weather forecasts and increased production were also blamed for pushing prices lower.
Recap of the most important stories of the week
1. Stavanger, Major integrated headquartered in Norway Equine signed an agreement to sell natural gas to the Polish state company PGNiG for 10 years. The pact is expected to improve the country’s energy security after Russia cut its natural gas exports to European countries this year.
PGNiG is one of the leaders in the Polish natural gas market. The Company’s principal activity includes the exploration and production of natural gas and crude oil. The agreement, which runs from January 1, 2023 to January 1, 2033, involves the supply of 2.4 billion cubic meters (bcm) of gas per year through the Baltic Pipe. The volumes are equivalent to 15% of annual gas consumption in Poland.
The Baltic Pipe pipeline will transport gas from Norway to markets in Denmark and Poland. Baltic Pipe is a gas infrastructure project aimed at creating a gas supply corridor to the European market. The pipeline is scheduled for partial commissioning in October. It is expected to be fully commissioned on January 1, 2023, with an annual capacity of up to 10 billion m3. (Equinor signs agreement to supply natural gas to Poland)
2. US Downstream Operator Marathon Oil said it has finalized the previously proposed joint venture with Finnish oil refining and marketing company — Neste. The two companies will now hold equal shares in the joint venture, Martinez Renewables, to convert the Martinez refinery to produce renewable fuels.
All necessary permits and regulatory approvals have been received for the project. Neste will invest a sum of $1 billion, including half of the project’s estimated total development cost of approximately $1.2 billion, until the project is completed. During this time, Zacks Rank #1 (Strong Buy) MPC will be responsible for managing the completion of the conversion project as well as operating the facility once completed.
You can see the full list of today’s Zacks #1 Rank stocks here.
Currently, the first phase of Martinez’s installation is expected to be mechanically completed by the end of this year. Initial production capacity is estimated at 260 million gallons per year of renewable fuels. Later, it will reach its full rated production capacity of 730 million gallons per year by the end of 2023. (Marathon, Neste Form Joint Venture for Renewable Project)
3. Rome-based Energy Biggie Enithrough its Plénitude retail and renewable energy business, entered into a partnership with Infrastrutture SpA to develop solar and wind projects in Italy and Spain.
Under the agreement, Plénitude will acquire a 65% stake in Hergo Renewables, a subsidiary of energy developer and investor Infrastrutture. The infrastructure will hold the rest. Hergo Renewables has a portfolio of projects in the two Mediterranean countries, with a total capacity of 1.5 gigawatts (GW).
The first project concerns a photovoltaic installation in Montalto di Castro in Italy, with a capacity of 37 megawatts. Work on the project will begin in the coming weeks. The facility will likely be operational in the second half of 2023. The partnership will strengthen the skills of Infrastructure and its portfolio of projects built during its 30 years of experience in the industry in Italy and Spain. It will contribute to the deployment of renewable projects to combat climate change. (Eni will develop renewable energy projects in Italy and Spain)
4 Natural Gas Exporter Energy Cheniere and Whistler Pipeline have agreed to form a joint venture (JV) for the construction of the ADCC pipeline. It is a 42-inch intrastate pipeline that is expected to stretch 43 miles from the Whistler Pipeline terminus in Agua Dulce, TX to the Corpus Christi LNG terminal in Texas.
The pipeline project, subject to customary regulatory and other approvals, is expected to be in service in 2024. It is expected to transport up to 1.7 billion cubic feet per day (Bcf/d) of natural gas and can be expanded at 2.5 Bcf/d. of natural gas. In addition, the project provides for the installation of three new compressor stations. Their commissioning is scheduled for September 2023.
The development comes at a time when demand for US liquefied natural gas (LNG Quick QuoteLNG – Research Report) from Europe has soared due to Europe’s scramble for alternatives to Russian gas. (Chenière, Whistler JV to build a gas pipeline in Texas)
5 Schlumbergera leading provider of technical products and services to oil and gas well drillers, has collaborated with Gulf energy giant Saudi Aramco to develop a digital platform to deliver sustainable solutions to industrial sectors , which are among the most difficult to decarbonize.
The platform will enable industrial companies such as oil and gas, chemicals, utilities, cement and steel to collect, measure, report and validate their emissions. It will also allow them to assess different decarbonization pathways.
Companies will be able to measure and report baselines, targets, emissions, offsets and credits to effectively manage their carbon footprint by increasing the availability and visibility of relevant data in a transparent and flexible solution. (Schlumberger, Aramco to develop low carbon solutions)
Price performance
The following chart shows the price movement of some major oil and gas players over the past week and over the past six months.
Company Last week Last 6 months
XOM -8% +0.7%
CLC -7.5% -14.5%
COP -11.1% -6.4%
OXY -8.8% 0.0%
SLB -8.8% -19.9%
GREE -22.1% -49.3%
VLO -3.7% +3.4%
CPM -4.4% +11.2%
With oil deep in the red during the week, stocks also plunged. The SPDR for the Energy Select sector – a popular way to track energy companies – fell 9.2% last week. Over the past six months, the sector tracker has declined 10.7%.
What’s next in the world of energy?
After last week’s slippery fortunes for oil and gas, market participants will be watching the regular releases closely for further indications of price direction. Against this backdrop, US government statistics on oil and natural gas – one of the few solid indicators that come out regularly – will be on the radar of energy traders.
Rig count data from oil services company Baker Hughes, which indicates trends in U.S. crude/natural gas production, is also closely watched. News related to the ongoing geopolitical conflict between Russia and Ukraine and the potential loss of demand due to prolonged coronavirus lockdowns in China will be the other factors that will dictate the movement of near-term commodity prices.
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