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Crude Falls on Demand Concerns from Shanghai Lockdowns, U.S. Interest Rate Hikes

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The energy sector is poised for a lower start pressured by weakness in the crude complex and the major market indices. U.S. stock index futures fell by around a half percent, as fears over China’s COVID-19 outbreaks spooked investors already concerned about aggressive U.S. interest rate hikes.

WTI and Brent crude oil futures are down this morning, to their lowest in almost two weeks as concern grew that prolonged COVID-19 lockdowns in Shanghai and an increasingly hawkish Federal Reserve would hurt global growth and oil demand. Authorities have erected fences outside residential buildings in Shanghai in order to curb the spread of COVID-19, sparking fresh outcry from the public. Additionally, Russia’s Rosneft failed to sell oil in a jumbo tender after demanding prepayment in roubles, five traders said on Monday, meaning the country’s top oil producer will need to find ways to divert more crude to buyers in Asia through private deals.

Natural gas futures are up in early trading as demand for U.S LNG exports continue to be high following Russia’s invasion of Ukraine.

BY SECTOR:

US INTEGRATEDS

Greenpeace activists sought to block a tanker from delivering Russian oil to Norway, chaining themselves to the vessel in a protest against the war in Ukraine, the advocacy group said. The Ust Luga product tanker is currently anchored outside Exxon Mobil’s Slagen oil terminal some 70 km (43 miles) south of the capital Oslo, according to vessel tracker Marine Traffic.

Guyana sold its first share of crude oil from the country’s newest offshore production facility to Exxon Mobil for about $106 million, the government said.

INTERNATIONAL INTEGRATEDS

The Petroleum Safety Authority Norway (PSA) has given Repsol consent to use Valaris Viking (formerly Rowan Viking) for production drilling on the Yme field.

Bloomberg reported that Sprng Energy Pvt is nearing a deal for Shell to acquire the Indian renewable power producer for about $1.8 billion including debt.

A group that won a victory over Shell last year with a Dutch court order that it deepen greenhouse gas cuts, has warned the company’s board of possible personal responsibility if it fails to implement the verdict.

A shipping unit of TotalEnergies has provisionally chartered a tanker to load Abu Dhabi crude in early May for Europe, the first such shipment in two years, according to traders and a shipping report.

CANADIAN INTEGRATEDS

No significant news.

U.S. E&PS

Susquehanna downgraded Coterra Energy to Neutral from Positive.

Kimbell Royalty Partners declares Q1 distribution of $0.47 per unit vs prior $0.37.

Susquehanna upgraded Marathon Oil to Positive from Neutral.

Matador Resources announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share of common stock payable on June 3, 2022 to shareholders of record as of May 18, 2022.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

Archrock Inc acquires minority stake in Ecotec International; terms undisclosed. Archrock has agreed to acquire for cash a minority equity stake in Ecotec International, a provider of methane emissions monitoring and management. In addition to the strategic investment, Archrock will also begin offering ECOTEC’s solutions to its customers in support of their sustainability goals.

Vulcan Materials provided an update with respect to its Mexican operations. In discussions between Vulcan and senior Mexican officials earlier this month, Vulcan once again indicated its openness to supply construction materials needed for the construction of the Mayan Train and other infrastructure projects and to make port capacity available for transfer of train-related construction materials. Vulcan also indicated an openness to adapt its mine plan to enable development and construction over time of a large-scale ecotourism project—suggested by the Government of Mexico—on land owned by the Company, as long as the Company can continue supplying its customers. Development could begin immediately on certain areas of the land owned by Vulcan from which reserves have already been depleted. Finally, Vulcan is also prepared to explore an expansion of the Punta Venado maritime terminal to receive passenger, freight and naval vessels in the coming years.

Tidewater Inc completes previously announced acquisition of Swire PacificOffshore – transaction was announced on 9-Mar.

DRILLERS

Seadrill announced a new contract has been secured by Sonadrill Holding Ltd, Seadrill’s 50:50 joint venture with an affiliate of Sonangol E.P. Sonadrill has secured a ten-well contract with options for up to eight additional wells in Angola for the West Gemini drillship. Total contract value for the firm portion of the contract is expected to be approximately $161 million (inclusive of mobilization revenue and additional services), with further meaningful revenue potential from a performance bonus. Commencement is expected in Q4 2022 with a firm-term of approximately 18 months, in direct continuation of the West Gemini’s existing contract.

The Oslo Stock Exchange has passed the following resolution: “The Oslo Stock Exchange considers that the shares of Seadrill are no longer suitable for listing on the Oslo Stock Exchange, and has resolved to delist the shares from trading, cf. Oslo Rule Book II section 2.11.2. The shares of Seadrill Limited with ISIN BMG7998G1069 will therefore be delisted from Oslo Børs as of 27 April 2022. Last day of trading will be 26 April 2022.”

REFINERS

Reuters reported that a fire on Saturday at the crude distillation unit (CDU) may delay the restart of Valero Energy’s Meraux, Louisiana, oil refinery planned for mid-May, sources familiar with plant operations said on Sunday. Six of eight people injured in the CDU fire have been released from a hospital, the sources said. Two people remain in a hospital on Sunday.

MLPS & PIPELINES

As per SEC filing, on April 22, 2022, EQM Midstream Partners, LP, a wholly owned subsidiary of Equitrans Midstream, entered into an amendment to that certain Third Amended and Restated Credit Agreement, dated as of October 31,2018 (as amended, supplemented or otherwise modified on or prior to the Amendment Date, the EQM Credit Facility, and as amended by the Amendment, the Amended EQM Credit Facility), by and among EQM, Wells Fargo Bank, National Association, as administrative agent, and the other lenders and other parties from time to time party thereto. The Amendment, among other things: Replaced LIBOR with SOFR as the benchmark rate for borrowings, including a credit spread adjustment of 0.10% for all applicable interest periods as well as for daily swing line borrowings; Extended the stated maturity date, with such extension only applicable for the lenders approving the Amendment, from October 31, 2023 (the Earlier Maturity Date) to April 30, 2025 (the Later Maturity Date); Reduced the aggregate commitments available under the Amended EQM Credit Facility on a non-pro rata basis to $2,160,375,000, with$1,549,125,000 in aggregate commitments available under the Amended EQM Credit Facility on and after the Earlier Maturity Date and prior to the Later Maturity Date.

As per SEC filing, on April 19, 2022, Targa Resources Partners LP, a subsidiary of Targa Resources, and Targa Receivables LLC, a bankruptcy-remote special purpose entity that is an indirect wholly-owned subsidiary of the Partnership, entered into a Twelfth Amendment to the Receivables Purchase Agreement among the SPV, as seller, the Partnership, as servicer, the conduit purchasers, the committed purchasers, the purchaser agents and the letter of credit participants party thereto and PNC Bank, National Association, as administrator and issuer of letters of credit, which amends the Receivables Purchase Agreement, dated as of January 10, 2013, as amended, governing the $400 million accounts receivable securitization facility by, among other things, (i) extending the Facility Termination Date (as defined in the Purchase Agreement Amendment) of the Facility to April 19, 2023 and (ii) replacing the LIBOR-based interest rate option with SOFR-based interest rate options, including term SOFR and daily simple SOFR. As of April 19, 2022, after giving effect to the Purchase Agreement Amendment, there were approximately $320 million of trade receivable purchases outstanding under the Facility.

TC Energy and GreenGasUSA, an owner and operator of renewable natural gas (RNG) value chain critical assets, have announced a strategic collaboration to explore development of a network of natural gas transportation hubs, including RNG. These transportation hubs would provide centralized access to existing energy transportation infrastructure for renewable natural gas sources, such as farms, wastewater treatment facilities and landfills.

MARKET COMMENTARY

Wall Street’s major index futures fell as worries about an economic slowdown in China and impact of rapid U.S. interest rate hikes weighed on sentiment. Major European stock indexes fell more than 2%, overshadowing relief from French President Emmanuel Macron’s election victory over the weekend. China stocks plunged in their biggest slump since the pandemic-led panic-selling in February 2020. The dollar strengthened, while gold prices slipped. Oil prices tumbled as lockdowns in Shanghai raised demand concerns.


Nasdaq Advisory Services Energy Team is part of Nasdaq’s Advisory Services – the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner


This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, “Nasdaq”), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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