Crude storage tanks that were brimming a year ago when the pandemic grounded flights and kept drivers at home are beginning to empty in the main U.S. distribution hub, the latest sign of strengthening demand in the world’s biggest oil-consuming country.

For the first time since before the pandemic, empty tanks are being offered for lease at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil futures. At least 1.4 million barrels of storage is up for rental starting in July, for roughly 12 cents per barrel a month, said Steven Barsamian, chief operating officer at storage brokerage Tank Tiger. That’s a stark contrast to at least 60 cents charged when there was little space left about a year ago.

Saudi Arabian oil giant Aramco locked in another $6bn yesterday to help fund a large dividend as it returned to the international debt markets with its first USdollar-denominated sukuk sale, a document showed.
The debt issuance, which will help fund a $75bn dividend commitment that will mostly go to the government, comprises tranches of three, five and 10 years, adocument from one of the banks arranging the deal and seen by Reuters showed.
Aramco sold $1bn in the three-year tranche at 65 basis points (bps) over US Treasuries (UST), $2bn in the five-year portion at 85 bps over UST and $3bn in 10-year paper at 120 bps over UST.
Initial price guidance was around 105 bps over UST for the three-year bonds, around 125 bps over UST for the five-year notes and around 160 bps over UST forthe 10-year tranche.
The spreads were tightened after the deal attracted combined orders of more than $60bn.
Aramco last year maintained its promised $75bn annual dividend to shareholders despite lower oil prices, and is expected to shoulder significant domesticinvestments in Saudi Arabia’s plans to transform the economy.
Fitch assigned Aramco’s sukuk issuance programme an A1 rating with a negative outlook, in line with the negative outlook on existing Aramco ratings andtracking a change in Saudi Arabia’s sovereign outlook to negative in May last year.
“The company has displayed a strong commitment to pay $75bn in annual dividends, which in Moody’s view is not sustainable should oil prices fall and remainsignificantly below $60/bbl,” Fitch said.
“Interlinkages between Saudi Arabia and the company imply that any change in rating outlook on the government of Saudi Arabia would be mirrored on SaudiAramco’s rating outlook.”
The company chose to issue Islamic bonds over conventional ones due to high demand for the instrument as a result of the low number of dollar sukuk sales inthe Gulf this year, a source told Reuters on Monday.
Aramco has been widely expected to become a regular bond issuer after its debut $12bn issuance in 2019 was followed by an $8bn, five-part transaction inNovember last year, also used to fund its dividend.
A source had told Reuters that Aramco was expected to raise up to $5bn with the deal, which had 29 active and passive bookrunners working on it.
Active bookrunners on the deal included Citi, HSBC, JPMorgan, NCB Capital and Standard Chartered Bank.

Parties to the 2015 nuclear deal, led by the European Union, are attempting to fully restore the landmark accord that all but collapsed after then-President Donald Trump withdrew three years ago. The negotiations in Vienna aim to ease US sanctions on the Islamic Republic’s economy and scale back a significant expansion of its atomic activities.
In Tehran, President Hassan Rouhani’s chief of staff, Mahmoud Vaezi, said that while there had been “great progress” on some economic issues, the fate of oil sanctions hadn’t yet been resolved, according to the semi-official Iranian Students’ News Agency.

The comments, and an industry report showing another fall in US crude inventories, saw crude extend its gains.

Iran’s national oil company, though, laid out plans to revive oil production in the event that US sanctions are removed, starting with an output hike to 3.3mn barrels a day within one month of the penalties being lifted, the official Shana news agency reported.

In a gesture to Iran’s leaders, Washington’s top diplomat to the International Atomic Energy Agency acknowledged late Tuesday that trust needs to be rebuilt after the damage caused by Trump’s policies and appealed to Iran to accept a “mutual return” to the agreement.
Iran’s lead negotiator in the talks, Abbas Araghchi, said yesterday that diplomats are set to reconvene in the Austrian capital at some point from Saturday, without giving further details.

“The negotiations are at a point where some key issues still remain outstanding and decisions need to be made regarding those,” Araghchi told reporters after briefing lawmakers in Tehran.

The talks coincide with Iran’s fast-approaching June 18 presidential election that is widely expected to replace President Hassan Rouhani – a champion of the nuclear deal – with a hardliner who’s been very critical of the accord.

Oil markets are closely watching the talks as the removal of sanctions could trigger a flood of Iranian oil onto markets as the Opec founder-member seeks to reclaim the market share it had before the Trump era.

(Bloomberg) — Libya has cut crude production by nearly 20% due to maintenance at its largest oil field and leaks on pipelines linking other desert deposits to the Mediterranean coast.

The OPEC producer began reducing output at fields operated by the Waha Oil Co. over the last two days because of leaks, Mustafa Sanalla, chairman of the country’s National Oil Co., said in an online conference. Production has also dropped at its biggest field, Sharara, over the past two weeks, he said. The outages total more than 200,000 barrels a day, according to people with knowledge of the matter.

Libya holds Africa’s largest crude reserves, but it’s struggled to pump a fraction of the oil it produced under late dictator Moammar Qaddafi. Fighting between rival factions has put the country’s oil fields, ports and workers in the firing line, and faltering sales have starved the nation of the income needed to rebuild its infrastructure. Freeing up access to investment would help expand the country’s output beyond previous levels, Sanalla said.

“The NOC is facing tremendous challenges in the rehabilitation and restoration of oil installations,” Sanalla said. “The lack of funds needed for the projects” and the country’s fragile security situation hurt its ability to complete needed work and upgrades, he said.

That means the country is missing out on taking full advantage of oil prices that have surged by 40% this year. Production cuts by the Organization of Petroleum Exporting Countries and partners like Russia have pushed crude to about $70 a barrel as economies exit coronavirus-linked lockdowns and energy demand recovers.

Production Capacity

Libya pumped 1.14 million barrels a day in May, according to data compiled by Bloomberg. The country wants to boost production capacity to 2.1 million barrels a day over the next few years but faces enormous obstacles to that aim, Sanalla said. Analysts surveyed by Bloomberg estimate the country can pump at most 1.3 million barrels daily.

With the latest problems, production at Sharara is down by about 50,000 barrels a day, Sanalla said, without saying when output might be restored.

Fields operated by Waha Oil have cut production to about 140,000 barrels a day from normal output of 300,000 barrels, according to two people with knowledge of the situation who asked not to be identified discussing operational matters.

©2021 Bloomberg L.P.

NEW YORK: ExxonMobil has spent more than two decades sparring with activists over climate change, turning back virtually every shareholder challenge at its annual meeting each spring.

But late last month, the oil giant, which has shunned renewable energy investments embraced by some rivals, suffered a landmark defeat when upstart investment fund Engine No.1 successfully won election of three of its four board candidates, overcoming fierce campaigning from management.

A newly formed San Francisco-based investment group, Engine No.1 is a relative minnow in the world of finance, but now stands poised to steer the iconic US petroleum heavyweight in a new direction.

Its victory points to the increased vulnerability of incumbent energy players to insurgent investors as public concern mounts over climate change.

Engine No. 1’s stake in ExxonMobil amounts to 0.02 percent of total shares, a pittance that may have led the Texas company to underestimate the broader investor frustration it faces after it was kicked out of the prestigious Dow index last year.

“It’s ironic that an entity with such a small stake was able to effect such change,” said CFRA Research analyst Stewart Glickman, who noted that BlackRock and other funds with large stakes sided with Engine No.1 and played a critical role in its victory.

“They used institutional investors that are more climate change-focused to get this done,” Glickman added.

Andrew Logan, a veteran of shareholder campaigns at ExxonMobil as director of the oil and gas program at activist investor group Ceres, said Engine No.1 ‘s newness was an advantage.

“With Exxon, everyone has a history,” Logan said. “Having a new face without that baggage led them to open doors.”

Engine No. 1’s board nominees were not environmentalists, but longtime corporate executives with energy industry experience. The group was skillful in tying ExxonMobil’s carbon policy to a broader corporate strategy that struck investors as out-of-touch, Logan said.

Engine No. 1 “struck a powerful balance of nodding to climate change, but they focused on the core issue of Exxon’s capital plan and its strategy,” he said.

– Arguing for diversification –

Named for San Francisco’s first firehouse, Engine No. 1 was founded last year by Christopher James, a wealthy technology investor.

Another key player in the ExxonMobil campaign was Charlie Penner, a former partner with activist hedge fund Janus who is well known to key asset managers.

The firm currently has $240 million under management and just 22 employees, according to a securities filing.

Neither James nor Penner were available for an interview, but Engine No. 1 pointed AFP to earlier statements that criticized ExxonMobil’s investments on low-return petroleum projects and its lack of a plan in case government climate mitigation policies are accelerated.

ExxonMobil should “seriously explore opportunities to profitably diversify… with the assistance of new directors with notable track records of agile and adaptative innovation in energy,” Engine No. 1 said in its initial letter to the company.

The three nominees elected by ExxonMobil shareholders are Gregory Goff, the former chief executive of refiner Andeavor; Kaisa Hietala, a former Neste executive who oversaw the company’s expansion into renewable fuel; and Alexander Karsner, a strategist at Alphabet’s X innovation lab and a former US assistant energy secretary.

Anders Runevad, former chief executive of Vestas Wind Systems, was not elected.

ExxonMobil deemed that none of Engine No. 1’s nominees “meet the standards or needs of the company’s board,” according to a securities document. The board named two other candidates, who were elected last week by shareholders, along with the three Engine No. 1 candidates and seven other incumbents.

Engine No. 1 noted during the campaign that ExxonMobil did not meet with its nominees, and said the company’s picks lack a “diverse track record of success in the energy industry who can position the company for success in a changing world.”

– What will change? –

ExxonMobil has changed its tone since Engine No. 1’s victories, saying, “We welcome the new directors to the board and look forward to working with them constructively and collectively to benefit all shareholders.”

Only time will tell exactly how much the company shifts course and whether it will follow other oil majors into renewable energy, focus on executing long-discussed efforts at carbon capture, or go in a different direction.

The vote “means the status quo is no longer acceptable,” said Dan Pickering, founder of Pickering Energy Partners in Houston. “The net impact is more of their capital is directed at energy transition or carbon abatement of some sort and less goes to the oil and gas business.”

(Bloomberg) — OPEC+ seems in charge of crude costs as U.S. manufacturing is lagging pre-pandemic ranges, in line with a senior govt on the world’s greatest unbiased oil dealer, Vitol Group.

The decline in U.S. drilling and output leaves little competitors to efforts by the producers’ group to handle markets, Mike Muller, Vitol’s head of Asia, stated throughout an internet convention on Sunday. Brent crude closed above $70 a barrel final week for the primary time in two years, as patrons demand extra oil than producers are pumping.

U.S. oil producers are nonetheless using solely half the rigs they used earlier than the coronavirus struck. Meanwhile OPEC+, because the group led by Saudi Arabia and Russia is thought, is easing barrels again on to the market as demand recovers.

“There’s a perception in the market that control is with OPEC+,” Muller stated on the occasion hosted by the consultancy Gulf Intelligence. “It will take a long time for U.S. oil to come back” to manufacturing ranges seen earlier than the coronavirus outbreak, he stated.

The Organization of Petroleum Exporting Countries and companions agreed final week to proceed easing manufacturing restraints in July however left markets guessing about what it should do for the remainder of the yr. After reducing manufacturing by some 10 million barrels a day, or a tenth of every day international demand, the group nonetheless has about 6 million barrels a day of idle capability.

China’s economic system will proceed to develop, serving to bolster oil demand and bringing down crude stockpiles, Muller stated. Economic enlargement and regulatory adjustments there’ll doubtless trigger home refineries to course of extra crude, he stated. “It doesn’t pay to hold inventory at all,” Muller stated. “De-stocking must continue from a purely commercial perspective.”

More Iranian crude oil is more likely to hit markets this yr after an anticipated deal to restrict the nation’s nuclear program in return for the U.S. easing sanctions. Iran is restricted in how shortly it could actually carry oil again to the market since a variety of its saved barrels are condensate, a lightweight and sulfurous liquid which can be more durable to promote, he stated.

Given delays in negotiations final week, Muller stated it’s much less doubtless extra Iranian barrels will hit the market earlier than the fourth quarter.

More tales like this can be found on bloomberg.com

Pembina Pipeline Corporation agreed to acquire Inter Pipeline for about C$8.3 billion ($6.9bn) in an all-stock deal that will create one of the largest energy companies in Canada.

The proposal from Pembina trumps a hostile takeover offer for Inter made by Brookfield Infrastructure Partners earlier this year. Inter spurned that approach and began a review of its options, which included a sale.

The Pembina-Inter combination is the largest Canadian energy transaction in four years. It continues a trend of consolidation in the sector in the face of low oil prices and regulatory uncertainty, highlighted by US President Joe Biden’s cancellation of TC Energy’s Keystone XL oil export pipeline in January.

Adding Inter will give Pembina additional pipeline infrastructure across Western Canada, connecting the region’s oil sands and natural gas producers with domestic and foreign customers. Pembina, a major processor of natural gas liquids, will increase its ability to deliver condensate on Inter’s system to the oil sands, where the product is used to dilute the thick bitumen that’s dug out of the ground so that it can be transported by pipeline or rail.

The two Calgary-based pipeline companies said on Tuesday the takeover will lead to annual cost savings of as much as C$200 million and create an operator with capacity to transport 6.2 million barrels a day of gas, oil and natural gas liquids throughout the region. The merged company will run by Pembina’s senior executive team.

Pembina said its offer values Inter at C$19.45 per share prior to the start of trading, while Brookfield’s offer was C$16.50. Brookfield declined to comment on Tuesday’s merger announcement.

“Brookfield could easily come back at a $19.50 to $20 cash offer and probably still make the numbers work,” Ryan Bushell, a portfolio manager at Newhaven Asset Management, said. “We’ll find out pretty shortly how badly Brookfield wanted this in the first place. But if I had to guess, I’d say they’d probably want to wash their hands of it.”

Inter shares rose 8.8 per cent to C$19.09 while Pembina fell 1.9 per cent to C$38.15 at 12.26 pm in Toronto.

The Inter acquisition follows Pembina’s purchase of a Canadian unit and pipeline assets from Kinder Morgan for about $4.5bn in 2019 and its takeover of British Columbia pipeline operator Veresen for C$5.8bn two years earlier. Pembina chief executive Michael Dilger said his company has tried to buy Inter on two previous occasions.

“Third time is lucky,” he said on a conference call. “This is just the right time.”

Pembina will also take on Inter’s Heartland Petrochemical Complex, which is under construction in Alberta. Inter has been looking for a partner to help fund the C$4.2bn construction cost while also trying to sign long-term sales contracts for 70 per cent of the plant’s capacity.

Pembina previously suspended work on the petrochemical plant it was planning to build in Alberta in a venture with Kuwait’s Petrochemical Industries. The odds of reviving that project “go up a lot now,” Mr Dilger said. “If you can add another plant, you are amortising those costs by half.”

Buying Inter gives Pembina energy terminals in Sweden and Denmark. Inter chief executive Christian Bayle had plans to sell the European assets, Mr Dilger said. “It looks like a good business,” he added. “Is is strategic. We will see.”

Scotia Capital is Pembina’s financial adviser, while TD Securities advised Inter. JPMorgan Chase & Co. is the financial adviser to the special committee of Inter’s board and gave a fairness opinion.

LONDON (BLOOMBERG) – The Opec group of oil producers and its allies, or Opec+, stuck to its plan to hike oil output next month, as Saudi Arabia’s energy minister struck a bullish tone about the global recovery.

The group will press ahead with an increase of 841,000 barrels a day next month, following hikes in May and June, according to delegates.

As the market tightens, a more difficult decision looms for the group as it tackles the deficit that is set to emerge later this year.

“The demand picture has shown clear signs of improvement,” Saudi Energy Minister Abdulaziz bin Salman said as the meeting started.

Russian Energy Minister Alexander Novak also spoke of the “gradual economic recovery”.

The Organisation of Petroleum Exporting Countries (Opec) and its allies have spent more than a year rescuing prices from historic lows and only cautiously adding supply.

Now the story is shifting: Oil prices above US$71 are fuelling inflation concerns and if Opec does not add more oil, there is a risk the market becomes too tight, undermining the global recovery.

But the cartel is also embracing caution. Prince Abdulaziz echoed the concerns of his fellow delegates when he said there are still “clouds” on the horizon. Iran’s potential return to international markets is one factor weighing on ministers’ decision-making. The impact of new variants of Covid-19 is another.

And while there is a wide deficit in the market to fill in the second half of the year, those two considerations could see some producers argue for a pause before further hikes.

“Covid-19 is a persistent and unpredictable foe and vicious mutations remain a threat,” Opec secretary-general Mohammad Barkindo said.

After next month, Opec+ is scheduled to hold supply until April 2022, according to the deal signed a year ago to rescue producers from a bitter price war.

While the agreement can be renegotiated – and there will be pressure to do so as demand continues to recover – it provides a fallback position for the group.

Tuesday’s meeting did not tackle the period after next month, according to two delegates.

If the alliance does not boost output later this year, prices will face further upward pressure, International Energy Agency executive director Fatih Birol told Bloomberg Television earlier on Tuesday.

“One thing is clear: In the absence of changing the policies, with the strong growth coming from the United States, China, Europe, we will see a widening gap” between demand and supply, Mr Birol said.

(Bloomberg) — “This time is different” may be the most dangerous words in business: billions of dollars have been lost betting that history won’t repeat itself. And yet now, in the oil world, it looks like this time really will be.

For the first time in decades, oil companies aren’t rushing to increase production to chase rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale basin at the center of the U.S. energy boom, drillers are resisting their traditional boom-and-bust cycle of spending.

The oil industry is on the ropes, constrained by Wall Street investors demanding that companies spend less on drilling and instead return more money to shareholders, and climate change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the trend, after its humiliating defeat at the hands of a tiny activist elbowing itself onto the board.

The dramatic events in the industry last week only add to what is emerging as an opportunity for the producers of OPEC+, giving the coalition led by Saudi Arabia and Russia more room for maneuver to bring back their own production. As non-OPEC output fails to rebound as fast as many expected — or feared based on past experience — the cartel is likely to continue adding more supply when it meets on June 1.

‘Criminalization’

Shareholders are asking Exxon to drill less and focus on returning money to investors. “They have been throwing money down the drill hole like crazy,” Christopher Ailman, chief investment officer for CalSTRS. “We really saw that company just heading down the hole, not surviving into the future, unless they change and adapt. And now they have to.”

Exxon is unlikely to be alone. Royal Dutch Shell Plc lost a landmark legal battle last week when a Dutch court told it to cut emissions significantly by 2030 — something that would require less oil production. Many in the industry fear a wave of lawsuits elsewhere, with western oil majors more immediate targets than the state-owned oil companies that make up much of OPEC production.

“We see a shift from stigmatization toward criminalization of investing in higher oil production,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official.

While it’s true that non-OPEC+ output is creeping back from the crash of 2020 — and the ultra-depressed levels of April and May last year — it’s far from a full recovery. Overall, non-OPEC+ output will grow this year by 620,000 barrels a day, less than half the 1.3 million barrels a day it fell in 2020. The supply growth forecast through the rest of this year “comes nowhere close to matching” the expected increase in demand, according to the International Energy Agency.

Beyond 2021, oil output is likely to rise in a handful of nations, including the U.S., Brazil, Canada and new oil-producer Guyana. But production will decline elsewhere, from the U.K. to Colombia, Malaysia and Argentina.

As non-OPEC+ production increases less than global oil demand, the cartel will be in control of the market, executives and traders said. It’s a major break with the past, when oil companies responded to higher prices by rushing to invest again, boosting non-OPEC output and leaving the ministers led by Saudi Arabia’s Abdulaziz bin Salman with a much more difficult balancing act.

Drilling Down

So far, the lack of non-OPEC+ oil production growth isn’t registering much in the market. After all, the coronavirus pandemic continues to constrain global oil demand. It may be more noticeable later this year and into 2022. By then, vaccination campaigns against Covid-19 are likely to be bearing fruit, and the world will need more oil. The expected return of Iran into the market will provide some of that, but there will likely be a need for more.

When that happens, it will be largely up to OPEC to plug the gap. One signal of how the recovery will be different this time is the U.S. drilling count: It is gradually increasing, but the recovery is slower than it was after the last big oil price crash in 2008-09. Shale companies are sticking to their commitment to return more money to shareholders via dividends. While before the pandemic shale companies re-used 70-90% of their cash flow into further drilling, they are now keeping that metric at around 50%.

The result is that U.S. crude production has flat-lined at around 11 million barrels a day since July 2020. Outside the U.S. and Canada, the outlook is even more somber: at the end of April, the ex-North America oil rig count stood at 523, lower than it was a year ago, and nearly 40% below the same month two years earlier, according to data from Baker Hughes Co.

When Saudi Energy Minister Prince Abdulaziz predicted earlier this year that “‘drill, baby, drill’ is gone for ever,” it sounded like a bold call. As ministers meet this week, they may dare to hope he’s right.