Month in brief

• Date: 01 May 2019
• DOI: http://doi.org/10.1111/oet.12682
• Published date: 01 May 2019

THE MONTH IN BRIEF

Month in brief

In late April, the Trump administration unexpectedly

announced it would cease Iranian oil export sanctions

exemptions granted to eight countries in November, which

sent crude prices close to a 6-month high of over $74/bbl for

front month Brent (23 April). The market widely expected

Washington to extend the waivers for five of the countries.

However, most observers don’t believe Iranian exports

will reach zero as China and possibly India/Turkey are likely

to resist a complete halt, although any company still

importing oil after 2 May will be subject to US sanctions. The

decision is likely to cut up to 1 mn bd from supply, although

this should be at least partially offset by additional volume

from Iran’s regional rivals Saudi Arabia and theUAE.

In Libya, increased fighting as General Haftar approaches

the capital of Tripoli is causing uncertainty over the coun-

try’s political future, threatening up to 1.1 mn bd in oil pro-

duction and leading oil companies to evacuate staff. While

oil and gas fields are not immediately at risk from the latest

fighting, the Zawiya terminal near Tripoli—which exports

about 300 000 bd—is considered vulnerable.

In M&A, there is a battle raging between Chevron and

Oxy over the purchase of US independent Anadarko. Chev-

ron offered $33 bn, but at $76 per share, Oxy’s subsequent

bid for Anadarko was 17% higher, along with a higher cash

component. However, the Anadarko board had already

accepted Chevron’s offer, and it is not clear that Oxy’s man-

agement has the full support of its shareholders for the bid.

If Oxy fails, it is expected that it will become a takeover tar-

get itself in what is becoming a major consolidation of US

shale sector (Anadarko also includes major LNG and US

Gulf assets). Oxy believes it can save $3.5 bn in costs from

the merger, while Chevron sees $2 bn in savings. There were

also mergers in the oilfield services sector due to contraction

in the US shale market and paper-thin margins.

Looking at demand, OPEC cut its outlook for growth this

year by 30 000 bd to 1.21 mn bd due to “slower-than-

expected economic activity.”The IEA said Q4 2018 demand

in OECD countries fell by 300 000 bd year on year, which is

the first such fall for any quarter since the end of 2014. It is

likely to have fallen again in Q1 2019 due to weakness in

some European economies.

Global supply dropped 340 000 bd in March due to the

OPEC-led production cut deal and a sharp drop in output at

sanctions-hit Venezuela. OPEC production in March fell

550 000 bd to just over 30 mn bd, the lowest level since

February 2015, according to OPEC. Saudi Arabia’s output fell to

its lowest level in 2 years, leaving compliance with supply cuts

at 153%. The IEA estimated Venezuelan output fell to 870 000

bd in March, from 1.14 mn bd in February, although OPEC put

the level higher. OECD crude stocks fell by 21.7 mn bbl month-

on-month in February to 2871 mn bbl (close to the 5-year aver-

age), according to the IEA, after 3 months of increases.

How to cite this article: Month in brief. Oil and

Energy Trends. 2019;44:6–6. https://doi.org/10.1111/

oet.12682

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