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April Energy Update

May 16th, 2019

Monthly Energy Letter

April 2019

 

The Month’s Market Highlights

Last month oil prices rose, reaching a six-month-high. Brent North Sea quality opened the listings at $69.22/bbl and closed at $71.68/bbl, while West Texas Intermediate crude started the quotations at $61.74/bbl, closing at $63.56/bbl.

On April 24th, the European and Asian benchmark gained its maximum at $74.59/bbl, whereas the day before the American grade topped its record at $66.09/bbl. Oil prices increased because U.S. President, Donald Trump did not roll over Iran sanction waivers before they expired on May 2nd, 2019. The waivers were granted on November 5th, 2018 to eight countries: China, India, South Korea, Japan, Taiwan, Italy, Turkey and Greece.

Moreover, the oil market was characterized by other bullish factors such as:

  1. The escalation of the Libyan war;
  2. The OPEC+ cuts established at the end of 2018 (-1,200,000 bbl/d);
  3. The U.S. sanctions imposed on Venezuela;
  4. The temporary reduction of the U.S. tight oil output by 100,000 bbl/d in mid-April.

The slight fall in oil prices occurred at the end of the month was due to the surge in U.S. commercial stocks from 455,154,000 barrels to 460,633,000 barrels.

 

 

 

 

Looking Forward

Major oil & Gas Bidding War Chevron vs. Warren Buffet

 

Chevron sent ripples through the oil industry last month by agreeing to buy Anadarko in the sixth-largest oil and gas deal in history.

Chevron agreed to pay $65 per share of Anadarko, which was a 39% premium to Anadarko’s last closing price prior to the deal’s announcement. Chevron’s outlay will be $33 billion plus assumption of Anadarko’s $17 billion debt for a total cost to Chevron of $50 billion.

Anadarko has an attractive global portfolio, but there were several synergies that made it especially attractive for Chevron. The key to this deal is the promise of the Permian Basin, which is now the world’s top oil-producing region.

A week later Occidental Petroleum Corp., backed by a $10 billion commitment from Warren Buffet, offered to buy Anadarko Petroleum Corp. for $38 billion, launching a potential bidding war for a company that was already spoken for by Chevron Corp.

Bill Gates Funds Hunt for Cobalt

Breakthrough energy Ventures, the $1 billion innovation fund spearheaded by Microsoft’s Bill Gates, has invested in KoBold Metals which is hunting for new sources of cobalt, a key ingredient in the lithium-ion batteries. Bloomberg forecasts demand for cobalt to outstrip supply beginning in 2023, with the shortage increasing severity through at least 2025. Today more than 60 percent of the world’s cobalt supply comes from the Democratic Republic of the Congo.