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Oil Prices Hit Six-Month Low on Concerns of Global Recession

The energy sector is set for a lower open, tracking declining broader index futures (S&P 500 futures -0.8% as of 8:40 AM ET) and a slight pullback in front-end oil prices after futures touched a 6-month low yesterday. Target reported a 90% drop in quarterly earnings as excess inventory built during the heart of the pandemic and inflation pressures weighed on results, while the 10-year Treasury yield rose to a fresh 4-week high over 2.9%. Natural gas producers may be the lone group to open in positive territory as Henry Hub futures rise another 2% to ~$9.60. News flow across the sector is light.

Oil hit a six-month low on Wednesday after a brief rally as concerns about the prospect of a global recession that would weaken demand overshadowed a report showing lower U.S. crude and gasoline stocks. Figures on Wednesday did little to improve the economic backdrop, showing British consumer price inflation jumped to 10.1% in July, its highest since February 1982, intensifying a squeeze on households. “The oil market is struggling to shake off recession fears, and there is little to suggest that this will change any time soon,” said Stephen Brennock of oil broker PVM. Earlier, prices gained support from a report showing lower U.S. crude and fuel stocks. Crude stocks fell about 448,000 barrels and gasoline by about 4.5 million barrels, said sources citing American Petroleum Institute figures on Tuesday.

Natural gas futures are trading around a decade-and-a-half high as forecasts for near-term dry gas production move lower, while record temperatures and the energy crisis in Europe underpin prices.

BY SECTOR:

US INTEGRATEDS

Indian oil explorer and producer Oil and Natural Gas Corp said it signed a Heads of Agreement (HoA) with ExxonMobil for deepwater exploration in the country’s East and West coasts.

INTERNATIONAL INTEGRATEDS

Petrobras said it has started the process of looking for bidders for a 40% stake in two exploration oil concessions located in the Potiguar basin’s deepwaters.

Petrobras informed that it received from shareholders who jointly hold more than 5% (five percent) of its common shares, the request to adopt the cumulative vote system in the election of members of Board of Directors (CA) at the Extraordinary General Meeting (EGM) to be held on August 19, 2022, exclusively digital.

Santos Ltd said it will move ahead in developing a $2.6 billion Alaskan oil project, a surprise decision for the market that drove its shares down despite the Australian energy producer posting a record first-half profit. The company also said it was in advanced talks with shortlisted parties to sell a 5% stake in its prized asset, PNG LNG in Papua New Guinea, and reap an estimated $1.5 billion, which analysts expect will be used to fund the Pikka project in Alaska. Santos Chief Executive Kevin Gallagher said Pikka, co-owned by Repsol, was “the right project at the right time in the right location”, forecasting a strong 19% internal rate of return based on an oil price of $60 a barrel.

Shell said it plans to shut for two weeks in September a key crude oil pipeline in Gulf of Mexico that supplies oil to Louisiana refineries. The Odyssey and Delta crude pipelines in September will be shut for planned maintenance early-to-mid September, Shell said in a statement.

Technip Energies, in consortium with Subsea 7 and Samkang M&T has been selected by Corio Generation and TotalEnergies to perform a Front-End Engineering Design (FEED) for their Ulsan Gray Whale 3 Offshore Windfarm project, located offshore the East Coast of South Korea. The FEED contract covers engineering for floater, mooring, and inter-array cable (IAC) in collaboration with a wind turbine supplier.

CANADIAN INTEGRATEDS

No significant news.

U.S. E&PS

Laredo Petroleum announced the signing of a purchase and sale agreement to divest certain non-operated properties in Howard County for $110 million, subject to customary closing price adjustments. The transaction is expected to close in October 2022, with an effective date of August 1, 2022. The non-operated assets comprise ~1,650 net acres and have expected full-year 2023 average net production of ~1,800 BOEPD (~72% oil). The Company plans to adjust production guidance post the closing of the transaction. The sale does not reduce the Company’s eight-year inventory of operated, high-quality drilling locations.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

KBR announced it was awarded a $20 million contract by the United States Geological Survey (USGS) Albuquerque Seismological Laboratory (ASL) for sustained support of more than 330 operational or proposed stations in 69 countries, including approximately 230 stations in the continental U.S.

NOV announced that its Board of Directors declared the regular quarterly cash dividend of $0.05 per share of common stock, payable on September 30, 2022 to each stockholder of record on September 16, 2022.

DRILLERS

No significant news.

REFINERS

No significant news.

MLPS & PIPELINES

Ardmore Shipping has announced that it is expanding its presence in Singapore this year. Due to its global business and operations, Ardmore is formulating a more geographically balanced senior management team to serve the needs of its customers and partners. As part of this change, Mark Cameron, Ardmore’s Chief Operating Officer (COO), is relocating from Ireland to Singapore where, in addition to his ongoing responsibilities as COO he will also assume the role of Managing Director of Ardmore Shipping Asia and one of his key areas of focus will be further business development opportunities in Singapore and the Far East. Mark will also be working closely with Gerald Tan, General Manager of Ardmore’s Singapore office to strengthen our local brand across a wide range of diverse interests.

EnLink Midstream, LLC announced the pricing of its upsized offering of $700.0 million aggregate principal amount of 6.500% senior notes due September 2030 at a price of 100% of their face value. The Senior Notes will be fully and unconditionally guaranteed on a senior basis by EnLink Midstream Partners, LP, a subsidiary of EnLink. The sale of the Senior Notes is expected to close on August 31, 2022, subject to customary conditions. The offering size was increased from the previously announced offering size of $500.0 million aggregate principal amount of the Senior Notes.

Plains Midstream Canada, a subsidiary of Plains All American, announced it is exploring the expansion of its Fort Saskatchewan facility with strategic partners. The expansion would leverage existing infrastructure and add 50,000 barrels per day of C3+ fractionation capacity, while maintaining the flexibility to deliver a propane/butane mix to Plains’ fractionation facility in Sarnia, Ont.

SFL announced its preliminary financial results for the quarter ended June 30, 2022. Net profit was $57.4 million, or $0.45 per share in the second quarter. The Board of Directors has declared a quarterly cash dividend of $0.23 per share. The dividend will be paid on or around September 29, to shareholders on record as of September 15, and the ex-dividend date on the New York Stock Exchange will be September 14, 2022.

SFL announced that it has agreed to acquire four modern Suezmax tankers in combination with long term time charters to a subsidiary of Koch Industries, a world-leading industrial conglomerate. The vessels are built in 2015 and 2020, respectively, and all four have modern eco-design features including exhaust gas cleaning systems. The aggregate purchase price of the vessels is $222.5 million and the Company expects to take delivery between August and October.

MARKET COMMENTARY

Wall Street’s stock index futures were in the red, ahead of the release of minutes of the U.S. Federal Reserve’s July meeting that could give further clues about the pace of interest rate hikes. The dollar held onto gains, while gold prices weakened. Recession fears pulled European shares down, with focus set on inflation and GDP data due for release later this week. Japan’s Nikkei ended above 29,000 for first time in seven months, taking cues from overnight Wall Street rally. Oil prices fell on concerns about the prospect of a global recession that would weaken demand.
Source: MarketInsite

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