Call (424) 392-3090 or email firstname.lastname@example.org
Becky Quick @BECKYQUICK
up from 8% currently.
Under the deal, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission and 50% of Iroquois Gas Transmission System. Berkshire will also acquire 25% of Cove Point LNG, an export-import and storage facility for liquefied natural gas, one of just six in the U.S.
Berkshire Energy will pay $4 billion in cash for the assets, and assume $5.7 billion in debt. Dominion plans to use about $3 billion of the after-tax proceeds to buy back its shares later this year.
The deal is subject to regulatory approval and is expected to close in the fourth quarter.
One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (over half) is used to make things like:
Dresses Motorcycle Helmet Curtains Dashboards Percolators
Tool Racks Umbrellas Denture Adhesive Tennis Rackets Water Pipes Guitar Strings Clothes Vaporizers Enamel
Dentures Fan Belts
Diesel fuel Sweaters
Food Preservatives Cortisone
Car Battery Cases Yarn
Rubber Cement Hand Lotion Luggage Toothbrushes Balloons
Golf Bags Petroleum Jelly Basketballs Deodorant Rubbing Alcohol Epoxy
Ice Cube Trays Fishing Boots Roller Skates Aspirin
Sun Glasses Dishes
Folding Doors Shaving Cream
Bearing Grease Insecticides Perfumes Transparent Tape Soap
Shoelace Aglets Linings
Hair Coloring Synthetic Rubber Dice
Surf Boards Safety Glasses Footballs Tents Cameras
Hair Curlers Ammonia
Sports Car Bodies
CD’s & DVD’s
Soft Contact lenses
Americans consume petroleum products at a rate of three-and-a-half gallons of oil and more than 250 cubic feet of natural gas per day each. However, as shown here petroleum is not just used for fuel.
Published: April 28, 2020 at 4:14 p.m. ET
+2.54% 6.00% +0.34%
The collapse in world crude oil prices since February is taking a toll on U.S. inflation expectations which are now at their lowest levels since the 2007-2009 recession.
But some strategists think there’s scope for price
pressures to build up again once the COVID-19 pandemic passes and the deflationary impact of the oil-market slump disappears, creating an opportunity to
invest in inflation protected bonds.
“With market-based inflation expectations now at such beaten-up levels, and with the disinflationary effect of falling energy prices set to fade, we see an opportunity to play for a cyclical rebound in inflation breakevens across the developed markets,” said analysts at BCA Research, in a Tuesday note.
BCA analysts expect Brent crude oil, the global benchmark, to rise to $42 a barrel by the end of this year, and $78 by the end of 2021.
Brent futures for June delivery BRNM20, +2.54% settled at $20.46 a barrel on Tuesday, and $12.34 a barrel for U.S. crude CLM20, 6.00%, FactSet data show.
Oil is a crucial input for a broad basket of consumer goods and some industrial products like plastics.
A recovery in crude oil prices could thus have a knock-on impact for consumer price inflation, especially as the muted inflation backdrop even before the COVID-19 pandemic led swings in energy prices to become “the marginal driver of both realized and expected inflation,” said the BCA analysts.
Based on current trading in U.S. Treasury inflation-protected securities, or TIPs, price levels were expected to average 1.14% over the next decade.
Investors buying up inflation insurance may be making a bet that prices are unlikely to undershoot the U.S. historical average of around 2% for an extended stretch of time, said market participants.
Last week, an auction for $17 billion of 5-year Treasury inflation-protected securities saw the strongest take-up since 2009.
The iShares TIPS Bond exchange-traded
fund TIP, +0.34% is up nearly 5% this year, reflecting the gains in government bond prices as cash has flowed into safe haven investments after
March’s stock-market crash.But traders in the TIPs market say it’s difficult to sometimes tell if U.S. Treasury auctions are an accurate reflection of demand for inflation insurance, given that trading in such securities remains thin even after the Federal Reserve’s purchases of hundreds of billions of government bonds over the past few weeks.
“There’s a lack of liquidity in the secondary market,” said Tim Magnusson, senior portfolio manager at Garda Capital Partners, in an interview.
Even now, he had a hard time buying and selling TIPs in significant size, as primary dealers to deal with the Federal Reserve are still unwilling to free up space on their trading books to act as middlemen for some government bond securities.
The strong auction demand could thus reflect the way in which the sale of inflation protected U.S. Treasury debt offers the main option for money managers to top up on TIPs, said Magnusson.
night, analysts at Goldman
Sachs listed five reasons
investors should add exposure
to energy stocks following
oil's historic plunge into
• Goldman said it thinks that
energy fundamentals have bottomed and that there is potential for a lasting recovery depending on the pace of the demand rebound.
• The risk behind the call, the analysts noted, is a much slower oil-demand recovery, which would likely happen if the coronavirus pandemic lingers longer than expected
Goldman Sachs thinks now is the time for investors to add exposure
to energy stocks following oil's historic plunge into negative territory
The investment bank gave five reasons in a note published Monday
Goldman thinks energy fundamentals have bottomed and sees potential for a lasting recovery in energy stocks depending on the pace of the rebound in demand for oil.
The main risk related to the call, according to the analysts, is a much slower oil-demand recovery, which could be exacerbated if the coronavirus pandemic lingers longer than investors expect.
Here are the five reasons Goldman Sachs is bullish on energy stocks.
1. "Oil prices are at/below cash costs."
West Texas Intermediate oil is below the $20- to $25-per-barrel prices often seen as "typical cash cost floors." Goldman thinks the current
low prices and even the negative oil prices seen last week are warranted because of the level of oversupply in oil markets. At the same time, these ultra-low prices should force a reduction in production, thus reducing supply and helping put a floor in oil prices.
2. "Shut-in announcements are becoming material."
"The combination of OPEC+ supply cut and US/Canada shut-ins should reduce the need for prolonged low shale activity needed to rebalance oil prices," Goldman said.
3. "Demand appears to be at a trough."
Goldman expects global demand in oil to improve off trough levels before the end of the quarter and "gradually recover over the next two years." Goldman's commodities-research team sees a transition from building oil inventories to drawing on oil inventories by June.
4. "Valuation near 25-year lows on EV/gross cash invested basis."
"E&P stocks are trading near $0.50 cents on the dollar per dollar invested adjusted for longer-term degradation in corporate returns — this is slightly above troughs seen since 1995," Goldman said.
5. "Stocks on average have stopped falling on recent bad micro news."
Between dividend cuts, production shut-ins, and lower front-month oil prices, oil stocks no longer appear to be harmed by the poor headlines coming out of the oil industry. Goldman said that "as producer announcements shift from capex/dividend cuts to shut-ins, we expect equity response to inflect more positively."
WTI oil traded down more than 3% on Tuesday morning, to $12.34 per barrel. Energy stocks, as measured by the XLE ETF, were down 40% year-to-date.
Here's a potential timeline for oil's recovery, according to the bank:
Goldman Sachs Research
ExxonMobil is expanding its research efforts with the stated goal of producing more — but cleaner — energy in the face of climate change.
Driving the news: The world’s biggest publicly traded oil company has been creating new partnerships with American and foreign universities in recent years totaling at least $75 million, and it just inked another, unprecedented $100 million deal with the U.S. Energy Department.
The big picture: Oil and gas companies have been funding energy and climate research at universities and other entities for years. Exxon’s recent moves are an expansion of this trend at a time of heightened scrutiny facing oil companies and their role fueling climate change.
money. Exxon-employed scientists spend significant time at the universities. Many have offices, give guest lectures and co-author peer-reviewed research.
Since 2014, Exxon has helped establish 5 energy centers with 6 universities, including:
• Most of Exxon’s collaborations appear to be touting cleaner-energy technologies as opposed to, say, extracting oil and gas more efficiently. But none of the actual contracts specify that the research should go toward any one type of technology.
“The vast majority of our agreements have an element in them that is addressing the dual challenge: How to scale energy and how to scale energy with lower emissions,” Swarup says.
The other side: Environmentalists and some academic experts view these collaborations with deep skepticism. They point to decades of oil companies resisting
climate policy and claims by environmentalists that companies, especially Exxon, tried to muddle climate science for decades. Exxon denies such allegations.
Benjamin Franta, a J.D.-Ph.D. student researching this topic at Stanford University, said he wasn’t aware of certain aspects of the collaborations, including Exxon scientists co-authoring papers.
“It’s not a good idea for the fossil-fuel industry to be funding work that is supposed to ultimately put the fossil-fuel industry out of business. The case is made even stronger when you realize just how much disinformation and denial the industry has put out there for so many decades.”
— Benjamin Franta, Stanford University
What I’m watching: To what degree Exxon increases its funding and seeks to commercialize a particular low-carbon technology. Princeton's Loo says she pushes the company to spend more on research, pointing out that the amount is tiny compared to Exxon’s profits: $21 billion in 2018.
“We’re not just taking their money and are happy with what they’re telling us,” Loo said. “We’re good partners because we challenge each other.”
The recent selling of OIL has largely been due to fears regarding the coronavirus – fears which are decoupled from the underlying fundamentals.
Crude market fundamentals continue to become more bullish which means that the recent selloff provides an excellent buying opportunity.
Roll yield for OIL is currently negative but with an uptrend in price emerging, we are likely to see this flip once again.
Over the last few weeks, the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) has taken a bit of a hit as global fears regarding the coronavirus have impacted the prices of commodities. In this piece, I will hone in on the fundamentals of crude oil to make the case that the recent drop in price is decoupled from economic realities and that crude will likely rally from here.
When it comes to understanding the battle between supply and demand in the crude markets, a very helpful tool is the 5-year range of inventories.
As you can see in the above chart, we are currently under both the 5-year average as well as 2019’s figures in overall stocks. The reason why this matters is that it indicates that at present, the balance is indicating that demand is surpassing available supply.
If you’ve listened to any headlines regarding the oil markets, then this last statement probably comes as a shock. And for good reason: the actual level of refining demand has been fairly poor for some time now with much of last year’s utilization under the 5-year average.
However, what is important to realize about balancing the crude market is that demand in isolation is meaningless. To generate a comprehensive view, we need to look at all 4 components of supply and demand to get an idea of what is driving market fundamentals.
For example, even though refining demand is poor, exports (another form of demand) remain robust and have grown consistently since legalization in late 2015.
So when we examine total demand, we can generally say that it’s neutral since weakness in refining is offset by growing exports (more than offset in my opinion, but I’ll give the bears the benefit of the doubt here).
But when we flip over to supply, we rapidly see
very bullish elements entering the picture. First off, it is true that production continues to grow,
which is another of the bear’s arguments.
However, what is overlooked in a chart like the one above is that the rate of growth is actually slowing.
And when you dig further into the data, you’ll find that this slowdown in production growth is broad-based in basically every region.
This is where things start becoming quite bullish. You see, the reason why slowing production growth is a big deal is that demand
itself continues to grow. In other words, you must have growing supply or demand will almost certainly outpace it and crude prices will rise while inventories fall.
The issue becomes even more bullish when you look at the data to understand exactly what’s happening. Essentially, we are seeing drilling activity slow.
And the reason why this activity is slowing has to do with capital discipline as well as bankruptcies of several operators.
Situations like this are really only resolved by
higher crude prices in the long run since higher prices equate directly to
higher revenues for those in E&P. In other words, this downwards trend of production grow and drilling activity is almost certainly going to continue until the price of crude rises. And as long as the trend continues, the greater the chances of crude rallying due to tighter balances.
And the second supply variable remains quite bullish: imports. Imports have been decimated due to ongoing OPEC cuts.
I have a lot of charts that make the case that overall imports into the United States are very poor right now due to OPEC’s actions, but the above chart conveys it
with a good degree of clarity.
The basic problem here
is that frankly, OPEC wants higher prices. And OPEC has demonstrated through several different cuts over the past few years that it has the will and resolve to get higher prices. At present, we are trading around the level of OPEC’s cuts which went into effect at the beginning
of 2019 and have been deepened and extended through today. Given that we’re still around these levels, I believe that OPEC will act to prop up the market once again at is meeting in early March. When OPEC acts, the market tightens due to less supply and the price of crude generally will trend higher as a result.
It’s a great time to buy the OIL ETN because the underlying fundamentals beyond strictly refining demand are uniformly bullish. This underlying fundamental picture is what I believe the recent wave of sellers in crude oil have missed. As these fundamentals continue to play out, I believe that OIL will trade higher.
Let’s take a quick pause to understand what exactly the OIL ETN is. Put simply, it is an exchange traded note which tracks the GSCI crude index. I’ve said this before in other places, but my basic qualms with the GSCI crude index is that it bills itself as a global crude benchmark when it’s really just holding two highly correlated instruments. But on the flip side, it does benefit on the roll yield front in that by having holdings across two futures curves, market structure exposure is diversified. Let’s break this down a bit more.
There’s a basic tendency in futures markets for prices along a forward curve to move towards the spot price of the commodity. This means that when futures are in contango (front cheaper than back), futures will generally be falling towards the front of the curve. Conversely, a curve in backwardation (front over back) will see prices along the curve move up in value towards the front of the curve.
In general, WTI futures typically see contango in most time periods in the front two contracts. Conversely, Brent has seen healthy backwardation in recent quarters due to its direct-competitive nature with OPEC barrels since it also is a waterborne barrel. What this means for holdings in OIL is that roll yield of the overall instrument has (over the past few quarters) been generally to strongly positive which means that investors in the note have benefited from this effect.
At present, roll yield is negative due to moderate contango in Brent and WTI, but I believe that as the market continues to tighten and prices rise, we will see roll yield become positive once again, further benefiting holdings.
The recent selling of OIL has largely been due to fears regarding the coronavirus – fears which are decoupled from the underlying fundamentals. Crude market fundamentals continue to become more bullish which means that the recent selloff provides an excellent buying opportunity. Roll yield for OIL is currently negative but with an uptrend in price emerging, we
are likely to see this flip once again.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
OIL PRICES ARE SET TO RECOVER WITH THE OPEC+ PRODUCTION CUTS AND GRADUAL LIFTING OF LOCKDOWNS AROUND THE WORLD IN THE SECOND HALF OF 2020, WHEN OIL PRICES “WILL BE $40 STARTING FROM THE THIRD QUARTER,” MOHAMED ARKAB, ENERGY MINISTER OF OPEC’S ROTATING PRESIDENTALGERIA, SAID ON SUNDAY.
THE GLOBAL ECONOMY WILL NOT STAY PARALYZED FOR TOO LONG, AND TOGETHER WITH THE 9.7 MILLION BPD CUTS THAT OPEC AND ITS ALLIES PLEDGED FOR MAY AND JUNE, THESE FACTORS ARE SET TO LIFT THE PRICE OF OIL IN H2 2020, ARKAB TOLD ALGERIA’S NATIONAL RADIO, AS QUOTED BY TURKEY’S ANADOLU AGENCY.
IN CHINA, WHICH WAS HIT FIRST BY THE CORONAVIRUS, AND WHICH EXITED THE LOCKDOWN FIRST, THE RETURN TO NORMALIZATION IN THE TRANSPORTATION SECTOR “IS DRIVING UP GLOBAL DEMAND,” ACCORDING TO ALGERIA’S ENERGY MINISTER.
JUST A FEW DAYS BEFORE THE OPEC+ DEAL ENTERS INTO FORCE, OIL PRICES CRASHED AGAIN EARLY ON MONDAY, AS THE MARKET CONTINUES TO SEE THE IMMINENT STORAGE SHORTAGE PROBLEM AS A BIGGER FACTOR FOR PRICES THAN THE POTENTIAL EFFECT OF THE OPEC+ CUTS AND THE POTENTIAL EASING OF THE LOCKDOWN MEASURES.
AT 8.30 A.M. EDT ON MONDAY, BRENT CRUDE WAS DOWN BY NEARLY 5 PERCENT AT $20 A BARREL, AND WTI CRUDE WAS CRASHING BY MORE THAN 20 PERCENT TO BELOW $14 PER BARREL.
LAST WEEK, OPEC’S FOURTH-LARGEST PRODUCER, KUWAIT, SAID IT HAD ALREADY STARTED TO REDUCE CRUDE OIL SUPPLY TO INTERNATIONAL MARKETS AHEAD OF MAY 1, “SENSING A RESPONSIBILITY RESPONDING TO MARKET CONDITIONS.” SAUDI ARABIA, OPEC’S TOP PRODUCER AND THE WORLD’S TOP OIL EXPORTER, HAS ALSO BEGUN TO REDUCE PRODUCTION EARLIER, A SAUDI INDUSTRY OFFICIAL WITH KNOWLEDGE OF THE ISSUE TOLD BLOOMBERG OVER THE WEEKEND.
OTHERS, HOWEVER, INCLUDING NIGERIA AND THE LEADER OF THE NON-OPEC PRODUCERS, RUSSIA, HAVEN’T RUSHED TO CUT PRODUCTION AHEAD OF SCHEDULE.
DESPITE SOLEMN COMMITMENTS FROM OPEC+ PRODUCERS AND TENTATIVE SCHEDULES FORREOPENING ECONOMIES AND EASING THE LOCKDOWNS, INCLUDING IN ITALY, OIL MARKET PARTICIPANTS CONTINUE TO FOCUS ON THE IMMINENT THREAT OF GLOBAL STORAGE OVERFLOWING RATHER THAN ON THE EFFECT OF THE CUTS AND EASED LOCKDOWNS TWO TO THREE MONTHS DOWN THE ROAD.
BY TSVETANA PARASKOVA FOR OILPRICE.COM
UBS: Oil prices will spike 115% by the end of 2020 in a dramatic reversal of the current crisis (UBS)
Apr. 28, 2020, 07:21 AM Thomson Reuters
• UBS' wealth management arm forecast that Brent crude oil prices could rise by
115% by the end of 2020.• Mark Haefele, chief investment officer
at UBS Global Wealth Management said he expects the oil market to "become under- supplied in 4Q," pushing prices up to $43
Oil prices have tanked in recent days as traders scramble to find places to store oil, but
UBS expects the reverse situation to happen in the fourth quarter of the year.
The Swiss bank expects Brent prices to climb back to $43 a barrel in the second half of the year once economies are expected to be back in running and have exited lockdowns.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: "While the oil market is heavily oversupplied this quarter, we expect it to move toward balance
next quarter and become under-supplied in 4Q this year as lockdown restrictions are eased and oil demand picks up."
He added: "We forecast Brent to recover to $43 a barrel by year-end."
An increase to $43 per barrel for Brent would represent a gain of around 115% from its currently price, with the international benchmark trading at around $20 per barrel on Tuesday.
Oil prices have been volatile in recent days as traders are fearing the world is running out of global oil storage.
On Monday oil prices plummeted 30% after United States Oil Fund, one of the biggest exchange traded funds in oil announced it would sell all futures contracts for delivery in June over a four day period.
US oil prices had turned negative for the first time in history last week as the May contract expired, meaning traders had to pay people to take the oil off their hands as storage facilities were limited, particularly at a key storage facility in Cushing,
Coronavirus has battered demand for the fuel, with every major economy into lockdown, and economic activity remains subdued.
Some US states, including Oklahoma, have started reopening their economies this week, and several others are doing the same and lifting stay-at-home orders by Thursday, likely boosting economic activity and oil consumption in the coming weeks.
Naeem Aslam, chief market analyst at Avatrade, said: "Overall, I do contemplate that fundamentals are improving to a small extent because the US shale oil rig count has dropped vividly over the last week, and it is bound to have a positive influence on supply."
He added: "As for the demand side, I reason we have hit the bottom. This is because, with the easing global lockdown measures, it is only a matter of time when we will start witnessing the demand equation showing more signs of life."
Meanwhile, oil giant BP reported a 66% drop in first quarter profits on Tuesday as the
impact of coronavirus bites companies across the globe, particularly the energy sector.
"Our industry has been hit by supply and demand shocks on a scale never seen before," Bernard Looney, BP's CEO said in a statement.