Archive for category: Industry News

It’s been a tough year for energy pipelines that carry oil and gas from source points to distribution and export terminals. In recent weeks, along with a general rally in energy-related stocks, the worst seems to have passed for the key pipeline companies upon which we rely for energy distribution in this country. Energy Transfer, (NYSE: ET), and Enbridge, NYSE: ENB) – two of the biggest pipeline operators – have seen 25% gains in the last 6-weeks.

In recent times, with the travails that have beset the pipeline business, I’ve been wondering about the intrinsic value of this crucial distribution network. As we will discuss later in this article, growth in this business has been stunted in recent times by court actions in the case of Energy Transfer and regulatory setbacks in the case of Enbridge. There has also been a perception that this business could be impaired by the decline in produced oil and gas volumes this year, which could reduce demand for their services. And, to put a finer point on the depressed valuations, what was their relationship to a realistic value on existing infrastructure?

What is the value of a pipeline that’s been built and installed? And, to add another aspect, one that’s is not under threat of being arbitrarily shut down by some judicial or regulatory agency? Are these companies, with huge installed bases carrying the energy we all need, being given proper credit in their valuations for the worth of their infrastructure? Recent events have left me thinking there is unrealized value in these companies. We will discuss a relative basis for valuing this hardware that was set recently by none other than Warren Buffett with his purchase of the pipeline assets of Dominion Energy, (NYSE: D).

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Source: Oil Price

Image Credit: DonkeyHotey/Flickr

Oil prices were little changed on Wednesday afternoon despite a massive inventory build reported earlier in the day by the Energy Information Administration.

The EIA had reported a crude oil build of 15.189 million barrels for the week, sending U.S. oil inventories to 503.2 million barrels, or 11% above the five-week average for this time of year.

It was the second-largest crude inventory build on record, after a 19+ million barrel build earlier this year, in April, according to EIA data.

Oil prices often react violently to major crude builds, especially when inventories are already high. But, armed with positive vaccine news, oil prices leveled off in the afternoon.

WTI was only trading 0.18% down on the day at 6pm EDT at $45.52, and Brent crude was actually trading up 0.29% on the day at $48.98, as the market is still full of vaccine candidate optimism, notably out of the UK, which started mass vaccinations on Tuesday.

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Source: Oil Price

Crude oil prices hesitated today after the Energy Information Administration reported an oil inventory draw of 700,000 barrels for the week to November 27 but a sizeable build in gasoline inventories.

At 488 million barrels, crude oil inventories are still above the five-year average for the season, by about 7 percent.

A day before the EIA released its latest weekly inventory numbers, the American petroleum Institute caused an oil price rally arrest by reporting an inventory build of over 4 million barrels for last week.

This added to pressure coming from OPEC+ which unexpectedly delayed a meeting that should have ended with a decision on whether or not to extend current production cuts of 7.7 million bpd until at least the end of the first quarter of 2021.

In gasoline, the EIA reported an inventory build of 3.5 million barrels for last week, with production averaging 8.6 million bpd. This compared with a build of 2.2 million bpd a week earlier in inventories, and average production of 8.9 million bpd.

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Source: Oil Price

In late April this year, Wet Texas Intermediate nosedived below zero, sending the market into a frenzy. The frenzy ended a day later when WTI rebounded to positive territory. Now, the Commodity Futures Trading Commission has issued a report on the unprecedented event. Still, it has failed to answer many questions. The report identified three fundamental factors and five technical factors that contributed to the slump in the U.S. oil benchmark. Among the fundamental ones, the CFTC identified the excess supply on global oil markets, which fused with the unprecedented demand loss resulting from the pandemic-prompted lockdowns and worries about a lack of oil storage space.

Among the technical factors, the CFTC noted the much higher-than-usual open interest in WTI near the expiry date for the May contract and a decline in the liquidity of this contract. The authority noted that on April 20, the day when WTI fell below zero, exchange-based control mechanisms had been triggered, but even they had not been enough to stymie the drop.

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Source: Oil Price

In a move that came as a surprise to some, today’s oil and gas lease round in the U.S. Gulf of Mexico generated substantial interest on Wednesday.

The sum of the high bids clocked in at $120 million, according to the Bureau of Ocean Energy Management.

Of the 14,900 blocks offered in Sale 256, 93 received bids, for a total 517,732 acres that received bids. Twenty-three companies submitted bids.

The deepest blocks generated the most interest, with 36 of the 93 bids coming in for the blocks at 1600 or more meters, and nearly all of the interest was in water deeper than 800 feet.

The block generating the most interest was block NH16-10 Mississippi Canyon. The block that attracted the highest bid was the ultradeepwater block NG15-06 Walker Ridge, which went for almost $12 million to Repsol/Equinor. It was also the block that attracted the highest bid per acre, at $2,083 per acre.

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Source: Oil Price