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Oil Prices Soar On Waning Trade War Fears

By Tom Kool - Apr 10, 2018, 3:00 PM CDT
China’s President Xi Jinping calmed trade war fears Tuesday morning, promising to open China's economy and lower tariffs on imported goods.

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- U.S. oil production growth has mostly come in the form of light, sweet crude, with API gravity of 35 or higher, and sulfur content of 0.3 percent or less.
- The EIA estimates that 90 percent of the 3.1 million barrels per day of supply growth since 2010 has come from light sweet sources, such as in the Bakken, Permian and Eagle Ford.
- Medium-gravity (API between 27 and 35) come mostly from Alaska and offshore Gulf of Mexico.
- Light sweet crude will also dominate future growth, and its share of the pie will expand from 56 percent in 2017 to 70 percent by 2050.
Market Movers
• FirstEnergy (NYSE: FE) declared bankruptcy on some of its nuclear and coal power plants, and has sought a bailout from the Department of Energy. But, despite expectations, Sec. of Energy Rick Perry seemed cool to the idea, saying Monday that it “may not be the way that we decide is the most appropriate, the most efficient way to address this.”
• Schlumberger (NYSE: SLB) is the most vulnerable oilfield services firm to new U.S. sanctions on Russia, although its business there still amounts to less than 10 percent of sales, according to Barclays.

• BP (NYSE: BP) announced its first final investment decision of the year, greenlighting the second phase of the giant Khazzan tight gas field in Oman.
Tuesday April 10, 2018
Brent oil prices surged above $70 per barrel on Tuesday as concerns of a trade war once again receded. Brent has gained 4.5 percent over two trading days. China’s President helped allay fears by promising to open China’s economy and lower import tariffs. The see-sawing on trade has pushed oil benchmarks all over the place. “It’s not so much ‘risk on/risk off’, as it is ‘trade war on/trade war off’ and, at the moment, we’re ‘trade-war off’,” London Capital Group’s Jasper Lawler told Reuters.
Kinder Morgan suspends work on Trans Mountain Expansion. In a major blow to Canada’s oil sands industry, Kinder Morgan Canada (TSE: KML) announced that it would suspend all non-essential work on the Trans Mountain Expansion, and would ultimately scrap the project entirely if regulatory concerns could not be addressed by May 31. KML’s share price fell by as much as 19 percent on Monday. The expansion would add 590,000 bpd of takeaway capacity from Alberta’s oil sands and remains the most important midstream project for the entire industry right now. However, despite the backing from the federal government and the provincial government of Alberta, British Columbia has held up the project. Alberta’s Premier floated the idea of taking a direct stake in the project in order to push it forward. If the project fails, the midstream bottlenecks for Alberta’s oil industry will likely persist for years.
Related: Oil Prices Poised To Rise As Cycle Comes To An End
Net-length in oil futures reaches extraordinary heights. Hedge funds and other money managers have amassed bullish positions in oil futures since the end of 2017. However, while long bets have remained elevated, the shorts have liquidated more recently, pushing net-length even higher. The buildup is mostly occurring in Brent, as opposed to WTI. The bullishness is a sign of optimism regarding the trajectory of oil prices, but it also represents a significant risk, exposing the oil market to a price correction if sentiment sours.

https://oilprice.com/Energy/Energy-General/Oil-Prices-Soar-On-Waning-Trade-War-Fears.html