New York letter, week beginning Feb. 29
What happened last week in Houston CERAWeek?
Dubbed as the Davos or the Super Bowl of the energy industry, IHS CERAWeek 2016 energy conference in Houston saw some of the most prominent actors in the sector, including OPEC Secretary General, Saudi oil minister, International Energy Administration (EIA) executive director, energy ministers from the U.S., Canada, Mexico, Australia, Israel, Norway, Colombia and Oman, in addition to global energy companies; BP, Total, Saudi Aramco and Chevron.
OPEC Secretary General Abdalla Salem El-Badri said last Monday at the conference that the oil cartel wants to establish a dialogue with U.S. oil producers on low prices and the current situation in the global oil market.
Saudi Arabia's Minister of Petroleum and Mineral Resources said last Tuesday that the kingdom would not cut its oil production, which gave a chilling effect through the conference room filled over 500 oil executives. After the announcement, oil prices dived by around four percent.
However, Oman's Minister of Oil and Gas, Mohammed Hamed Saif Al-Rumhy, said the same day that OPEC should take responsibility and act on low oil prices under the current market environment.
On Wednesday, the U.S. energy company Cheniere exported its first liquefied natural gas (LNG), marking a new era in the country's energy exports. Meg Gentle, president of Marketing at Cheniere, referred to the LNG cargo as "the vessel that will change the global gas market."
Again on Wednesday, Yuval Steinitz, Israel's minister of national infrastructure, energy and water resources spoke about Israeli natural gas sales to Europe via Turkey. "The Turkish market is promising. Its domestic demand will increase. Prospects of selling gas via Turkey to Europe are very promising," Steinitz said, in response to Anadolu Agency. However, he added that diplomatic relations between the two countries should first be normalized.
Weekly U.S. oil production fell for the fifth week in a row to average 9.1 million barrels per day (bpd) for the week ending Feb. 19. This is 500,000 bpd lower than U.S. oil output in April 2015 when domestic production peaked at 9.6 million bpd. U.S. oil producers are intensely feeling the negative effect of oil prices, as the number of oil rigs in the country has also declined for the tenth week in a row to 400 last week.
Turkish Petroleum (TP) told Anadolu Agency during CERAWeek that it is preparing to explore natural gas in Turkey's northwestern Thrace region with the world's biggest oil services company Halliburton.
Last Thursday, Venezuela’s oil minister said there would be an extensive meeting between his country and Saudi Arabia, Qatar and Russia in mid-March to take additional steps to trim output, after the four countries met in Doha earlier this month and agreed to freeze individual outputs at Jan. 11 levels. The announcement had both Brent and WTI benchmarks gain 3.9 percent that day.
Steve Bolze, president and CEO of GE Power, said last Thursday at CERAWeek that approximately $38 trillion in investment is needed to meet the additional electricity demand around the globe in the next two decades.
Hirohide Hirai, director-general of the agency for natural resources and energy of Japan's Ministry of Economy, Trade and Industry announced last Thursday that Japan is set to restart its fourth nuclear reactor on Friday, after the Fukushima disaster in 2011.
Two U.S. senators, Sen. John Cornyn of Texas and Sen. Lisa Murkowski of Alaska, who is also the chairwoman of the Senate Energy and Resources Committee, called for enhancing energy security of their country's allies in Europe and Asia last Friday through a more active U.S. role in the global energy world. Murkowski told Anadolu Agency on the sidelines that new energy legislation that is being worked on will put a timeframe on the period of the U.S.' LNG applications to trim the approval wait time of projects to 45 days, from 115 days. Cornyn pointed to Turkey's high dependency on Russian gas, and told Anadolu Agency, "well, that's the perfect example of the reason why Turkey and other allies would benefit from the diversification of their energy supplies. Part of this current legislation, that is pending, would expedite the permitting process for LNG export terminals."
Fitch Ratings, the global credit rating agency, said last Friday it affirmed Turkey's long-term foreign and local currency issuer ratings at 'BBB-' and 'BBB', respectively, with a stable outlook. While the central government deficit narrowed to 1.2 percent of GDP, from 1.3 percent in 2014; general government debt ratio to GDP fell to 32.6 percent at the end of 2015. But Fitch warned that the central government deficit could widen to 2 percent of GDP this year.
- This week
This Friday, unemployment rate, nonfarm payrolls and participation rate in the U.S. economy for the month of February will be announced. Unemployment rate fell to 4.9 percent last month, and is expected to remain the same for February. Nonform payrolls are anticipated to rise from 151,000 in January to 193,000 in February. In addition, January’s trade balance will be announced on Friday.
On Monday, Pending Home Sales for January will be announced, and on Tuesday, the Manufacturing Purchasing Managers' Index (PMI) for February will be revealed. The market expects the index to remain unchanged at 51 percent from the previous month.
The ADP National Employment Report, based on 400,000 U.S. clients, will be revealed on Wednesday, and the weekly crude oil, distillate, gasoline inventories in the U.S. will be announced.