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CERAWeek: Despite murmurs of problems, oil reigns in Houston

  • Author
  • Brian Scheid    Starr Spencer    Jeff Mower
  • Editor
  • Jennifer Pedrick
  • Commodity
  • Oil
  • Topic
  • OPEC+ Oil Output Cuts Iran Sanctions US Sanctions on Venezuela's PDVSA

There were some murmurs spotlighted this week that the oil industry may be on borrowed time, at CERAWeek by IHS Markit, the energy megaconference in Houston.

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There was more talk of renewables, more calls to curb methane emissions and some CEOs, including BP's Bob Dudley and Equinor's Eldar Saetre, pushed for focused efforts to combat climate change.

Perhaps it was the absence of most of OPEC, or the fact that global oil prices were roughly the same as they were at last year's conference, but talk of oil at CERAWeek felt a bit more lackluster this time around, several attendees said.

But the oil narrative out of CERAWeek may just have been broader, and, without a keynote address from Saudi Arabia's oil minister, may have been a bit more difficult to pin down. There were substantive discussions about record-breaking oil production, looming maritime fuel rules and, of course, the path forward on US sanctions on Iran and Venezuelan crude flows, which are expected to take a combined 1.76 million b/d off the global market, the International Energy Agency said this week.

Here's a look at the biggest oil news out of CERAWeek:


Talk of the widespread impacts of US sanctions on PDVSA, Venezuela's state-owned oil company, was prominent throughout the week.

Citgo's new chairwoman Luisa Palacios called the sanctions "a shock, but it's one that we are very well placed to weather," as Citgo continues to break ties with PDVSA, its parent company.

On Monday, M.M. Kutty, India's petroleum secretary, told reporters that the Indian government was pushing for a reduction of Venezuelan crude imports in coordination with US sanctions on PDVSA.

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On Thursday, trade sources told S&P Global Platts that India's largest private refiner Reliance Industries Ltd. has cut crude imports from Venezuela.

Currently, Reliance Industries imports around 225,000 b/d from the sanctions-hit nation, down from usual imports of around 300,000 b/d, the sources said.

Ricardo Hausmann, an adviser to Venezuela's opposition government which aims to replace the Maduro regime, said Tuesday that the transition will include the creation of a new hydrocarbons law, which will allow private companies to both partner with PDVSA and to directly invest in oil and gas production projects needed to rebuild the country's oil industry.

In an interview with Platts on the sidelines of the conference, Francis Fannon, assistant secretary for the US State Department's Bureau of Energy Resources, said the sanctions were designed to prevent further damage to Venezuela's oil industry.


On Wednesday, Brian Hook, the US State Department's special representative for Iran, offered some rare insight into the Trump administration's plan for waivers from sanctions on Iranian crude and product purchases, set to expire in May. Hook told the conference that the US could extend the waivers if ongoing sanctions on Venezuela impacts world oil supply and prices, the first public indication that the US was open to extending those waivers and an apparent softening of Hook's previous statements that there were no plans to extend the waivers in order to drive imports of Iranian crude to zero.

"[Trump] has made it very clear that we need to have a campaign of maximum economic pressure ... but he also doesn't want to shock oil markets," Hook said. "He wants to ensure a well-supplied and stable oil market."


The International Maritime Organization's fuel rules to be imposed in 2020 came up during several panels.

The Mexican government is planning to build new catalytic units at Pemex's refineries to overcome changes in the international marine fuel market next year, Energy Secretary Rocio Nahle said Wednesday.

The rules, which will cut emissions limits in bunker fuel to 0.5% from 3.5%, will be problematic for Pemex, which produces high volumes of high sulfur fuel oil.

US refiners are increasingly looking to move away from gasoline and into export markets, as distillate demand from approaching global bunker fuel rules grows, Keith Chiasson, vice president with Cenovus, said Tuesday.

"Gasoline is almost becoming a bit of a byproduct of the refinery business," Chiasson said.

The International Maritime Organization's 2020 fuel specifications are expected to boost demand for distillates, vacuum gasoil and other residuals from light crudes. Heavy crude runs are expected to increase gasoline supply without significant increase in demand


The historic growth in US oil production was again in focus, as the IEA said US output will climb by more than 2.76 million b/d to 13.72 million b/d by 2024 as the US is forecast to export more oil than Russia and nearly as much as Saudi Arabia within five years.

The Port of Corpus Christi should be able to load Aframaxes, Suezmaxes and partially loaded VLCCs to export US crude to international markets by October 2020, an executive with The Carlyle Group, an investor in the port's expansion, said Tuesday.

Research and development is likely to become much more prominent in coming years in North American shale plays, now that majors have jumped into those arenas in a significant way, Mark Papa, CEO of midsized upstream producer Centennial Resources Development, said Tuesday.

That could help in boosting recoveries from those unconventional resource plays, which are now typically about 8%-10%, as the shale patch matures, Papa said during a conference panel.

In its report, released at the conference Monday, IEA said that major oil companies are accounting for a growing percentage of US shale output, a trend the agency believe could blunt the impact of price volatility on US supply.

Compared with smaller independents, the majors are less responsive to prices and have longer-term strategic plans and balance sheets that can allow them to continue to invest despite volatile prices, said Toril Bosoni, a senior oil market analyst with IEA, told reporters Monday.


While most high-profile members of OPEC were noticeably absent from the conference, Mohammad Barkindo, OPEC's secretary general, again met with US shale producers and told reporters that his members were increasingly concerned about the passage of anti-OPEC legislation in the US.

Barkindo said OPEC members have repeatedly raised concerns about the No Oil Producing and Exporting Cartels, or NOPEC, Act, which was passed by the House Judiciary Committee earlier this year. He said he was watching progress on the bill with "keen interest."

Versions of the bill, which would allow the US Department of Justice to sue OPEC for antitrust violations, have been introduced in every Congress over the past 20 years, but Trump's previous support for the legislation has increased the odds for it to become law.

During a panel Tuesday, Adam Sieminski, the former head of the US Energy Information Administration, said the NOPEC bill could subject any country, including potentially Canada, to an antitrust case.

"Do tweets qualify as market manipulation?" Sieminski asked, referencing Trump's tweets calling on OPEC to lower oil prices.

-- Brian Scheid,

-- Starr Spencer,

-- Jeff Mower,

-- Edited by Jennifer Pedrick,