Oil Extends Drop With OPEC+ Warning of Precarious Market Outlook


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These 3 Penny Stocks Have Massive Upside Potential, Says Cowen

It’s a mixed bag when it comes to opinions on penny stocks. These tickers trading for less than $5 per share divide Wall Street like no other; market watchers either love them or hate them.It’s easy to understand the appeal. First and foremost, you get more bang for your buck. On top of this, with shares changing hands for bargain prices, even what seems like miniscule share price appreciation can translate to monstruous percentage gains. For some, however, the risk poses too great a threat to ignore. When you look under the hood of these low-priced names, you might find very real problems like poor fundamentals or looming headwinds.So, how are investors supposed to spot the penny stocks poised to go from rags to riches? By turning to the pros.With this in mind, we wanted to take a closer look at three penny stocks getting love from the pros, namely the analysts at investment firm Cowen. According to the firm, all three could soar in the year ahead. Using TipRanks’ database, we learned why Cowen analysts are pounding the table despite the risk involved.Neos Therapeutics (NEOS)Developing and commercializing innovative products, Neos Therapeutics wants to make a significant difference in the lives of patients with Attention Deficit Hyperactivity Disorder (ADHD) and other central nervous system (CNS) conditions. Although this name has struggled in the past, Cowen thinks that at $0.47 apiece, now is the time to snap up shares.Writing for the firm, analyst Ken Cacciatore acknowledges the momentum that was being driven by Adzenys XR-ODT, the company’s amphetamine-based treatment for ADHD, and Cotempla, its methylphenidate-based CNS stimulant also designed for ADHD, has slowed due to the pandemic. However, based on recent prescription trends, the analyst is seeing “signs of recovery ahead of the back to school (via video/classroom) acceleration in Q4.”Expounding on this, Cacciatore stated, “We continue to believe that management is taking the rights steps with the strategic improvements which seem to be benefiting from the more targeted prescriber base focus and more rapid adoption of the newco-pay assistance/fulfillment program (Rx Connect), to improve the profitability per prescription. And given what appears to be its early success of Rx Connect alongside spending reduction plan and salesforce restructuring we believe Neos could reach profitability by early 2022.”As the net revenue per pack for Adzenys and Cotempla grew 6% year-over-year to reach $128, Cacciatore argues the company’s efforts are paying off. “Again, we believe these data points appear to reflect the improved commercial approach, and the effectiveness of the company’s Neos Rx Connect pharmacy program which simplifies the previously more complex prescription fulfillment and co-pay assistance,” he commented.By enabling this access with Rx Connect, physicians can write prescriptions for Cotempla and Adzenys without worrying about patient call-backs. According to management, 30% of prescriptions are currently fulfilled through this program, and after multiple large regional pharmacy chains were added, the total number of partnered pharmacies was almost 900 in June, compared to 800 at the end of Q1.What’s more, the fact that NEOS is the only company to have both a methylphenidate and amphetamine alternate dose formulation product for the treatment of ADHD is enough to make it a stand-out, in Cacciatore’s opinion. Calling Cotempla the “perfect complement to Adzenys,” he notes that each asset covers one half of the large stimulant market.The analyst added, “Adzenys XR-ODT has experienced impressive prescription growth over the course of the past year, and is now the preferred ADHD alternative dosage form taking over from Pfizer’s market-leading Quillivant XR as its new-to-brand market share reached the number 1 position.”Also promising, NEOS offers Adzenys ER, which is an extended-release liquid suspension stimulant product for ADHD. The product is amphetamine-based like Adzenys XR-ODT, but is an alternative dosage form for patients who don’t prefer tablets or capsules. Cacciatore points out that success with the liquid alternative dosage form has already been demonstrated as Pfizer’s Quillivant XR generated over $100 million in annual sales in 2017.To this end, Cacciatore rates NEOS an Outperform (i.e. Buy) along with an $8 price target. Should the target be met, a twelve-month gain in the shape of a whopping 1,604% could be in store. (To watch Cacciatore’s track record, click here)Turning now to the rest of the Street, 3 Buys and no Holds or Sells have been published in the last three months. Therefore, NEOS has a Strong Buy consensus rating. At $8.33, the average price target is even more aggressive than Cacciatore’s and implies 1674% upside potential. (See NEOS stock analysis on TipRanks)Dynavax Technologies (DVAX)Bringing extensive expertise in Toll-like Receptor (TLR) biology and cutting-edge adjuvant technology to the table, Dynavax develops vaccines to protect the population. Thanks to its promising pipeline and $4.30 share price, Cowen believes investors should get in on the action.Representing the firm, 5-star analyst Phil Nadeau cites Heplisav as a key component of his bullish thesis. The product is an HBV vaccine that has been shown to be more effective than the other currently marketed HBV vaccines in a number of Phase 3 trials. Based on commentary from the firm’s consultants, he argues the asset could capture a significant portion of the $500 million-plus worldwide market for adult HBV vaccines.Also contributing to Nadeau’s optimistic stance, DVAX has agreed to several partnerships to further explore if CpG 1018, the adjuvant in Heplisav, can improve the efficacy of other vaccines.In September, DVAX announced its supply agreement with Valneva to produce up to 190 million doses over five years of Valneva’s COVID-19 vaccine candidate, VLA2001. This vaccine is an inactivated whole virus vaccine against the SARS-CoV-2 virus, and will incorporate DVAX’s CpG 1018 adjuvant. Clinical trials are expected to kick off by YE, with approval potentially coming in 2H21. In addition, the UK government has secured a supply of 60 million doses for €470 million, and there is an option for another 130 million doses for approximately €900 million.DVAX has already conveyed that it wants to make CpG 1018 a broadly used adjuvant, and has been making “rapid progress in implementing it,” says Nadeau. He notes that this deal is consistent with this strategy, and “in some ways represents a next step.” He added, “The supply agreement is notable as it helps demonstrate the economics that successful development of partnered vaccines could bring.”According to the company’s guidance, CpG 1018 could capture 15-30% of the economics when used in partnered vaccines. “Though management has not disclosed the exact economics in the Valneva collaboration, we believe they are consistent with DVAX’s guidance and suspect they are toward the middle of the range,” Nadeau commented.“In our opinion DVAX is significantly undervalued for the potential of Heplisav and the CpG 1018 adjuvant,” Nadeau concluded.It should come as no surprise, then, that Nadeau sides with the bulls. Along with an Outperform (i.e. Buy) rating, he puts a $20 price target on the stock, indicating 370% upside potential. (To watch Nadeau’s track record, click here)Other analysts echo Nadeau’s sentiment. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. With an average price target of $16, the upside potential comes in at 276%. (See DVAX stock analysis on TipRanks)La Jolla Pharmaceutical (LJPC)Last but not least we have La Jolla Pharmaceutical, which develops innovative therapies for life-threatening diseases with significant unmet need. Given its impressive technology, Cowen sees its $4 share price as presenting an attractive entry point.Analyst Phil Nadeau, who also covers DVAX for the firm, highlights LJPC’s first commercial product, Giapreza, a patented formulation of the naturally occurring hormone peptide, angiotensin II, as a point of strength. Angiotensin II is a potent vasoconstrictor and a key regulator of blood pressure.The launch has been rocky, with the pandemic hitting the acute care in-hospital segment hard. That said, Nadeau remains optimistic. “…our consultants think there is a need for new vasopressors in CRH, and therefore we remain hopeful that Giapreza can ramp to become a meaningful product over time,” he explained.On top of this, in July, LJPC acquired Tetraphase, giving it the rights to Xerava, a novel fluorocycline antibacterial designed for the treatment of complicated intra-abdominal infections. Even though the therapy’s utilization was most likely impacted by COVID-19, Nadeau has high hopes for the product.Nadeau argues LJPC will be able to leverage its existing infrastructure to market and promote Xerava, with only minimal additional spend expected.“Though Xerava has many competitors, the market for antibiotics used to treat intra-abdominal infections is large — patients with appendicitis alone contribute to over 1 million hospital days each year in the U.S. Thus, with promotion, Xerava should continue to grow,” the analyst said. To this end, Nadeau projects $15 million in Xerava revenue in 2021, with this figure ramping to $60 million in 2024.Summing it all up, Nadeau stated, “Trading with a modest enterprise value, La Jolla is undervalued should Giapreza and Xerava be successfully commercialized.”Taking the above into consideration, Nadeau rates LJPC an Outperform (i.e. Buy) rating along with a $20 price target. This target conveys his confidence in LJPC’s ability to climb 402% higher in the next year.What does the rest of the Street have to say? When it comes to other analyst activity, it has been relatively quiet. 2 Buys and no Holds or Sells have been issued in the last three months. Therefore, LJPC gets a Moderate Buy consensus rating. Based on the $14 average price target, shares could skyrocket 251% in the next year. (See LJPC stock analysis on TipRanks)To find good ideas for penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.



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Squeezing Synthetic Oil From A Stone



AsianScientist (Oct. 19, 2020) – Researchers in Japan have developed a way to create synthetic oils without the use of heavy metals. Their findings have been published in the Journal of the American Chemical Society.

When it comes to high performance applications like engine lubricants or jet fuels, synthetic oils are preferred over products made from refined crude oil. For the last hundred years, synthetic oils have been made via the Fischer-Tropsch process, which uses hydrogen and either carbon monoxide or carbon dioxide. However, this process uses heavy metals such as iron and cobalt to mediate the reaction, and requires high-pressure environments and temperatures in excess of 200 degrees Celsius to work, which consumes a great deal of energy.

“We found a reaction similar to that of the Fischer-Tropsch process, but that proceeds without using any heavy metals,” said Professor Kyoko Nozaki of the University of Tokyo, Japan. “Instead we use reagent containing boron, which is a component of certain ores; this can work at ordinary room temperature.”

The reaction works by combining carbon molecules from either carbon monoxide or carbon dioxide into chains. This can only happen when the oxygen molecules are removed by a substance called a reducing agent. In the Fischer-Tropsch process ordinary hydrogen is used, but this boron system requires a more powerful substance based on lithium and hydrogen.

“Although we need a further breakthrough in order to make use of ordinary hydrogen, we hope to see research in this area accelerate since our reagent provides a completely new direction for reaction design,” said Nozaki. “If applied in industrial settings, we expect it could greatly reduce energy use.”

The article can be found at: Phanopoulos et al. (2020) Heavy-Metal-Free Fischer–Tropsch Type Reaction: Sequential Homologation of Alkylborane Using a Combination of CO and Hydrides as Methylene Source.

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Source: University of Tokyo; Photo: Rodion Kutsaev/Unsplash.
Disclaimer: This article does not necessarily reflect the views of AsianScientist or its staff.


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Alberta to resume oil land sales, but critics warn against ‘giving away’ assets in severe downturn


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In six lease and licence auctions between Jan. 8 and April 8, 2020, the province raised just shy of $26 million in revenues, the least amount raised at an auction in the province since data was first collected in 1977. If the numbers were adjusted to reflect the full year, it would fall short of the previous record low of $119 million set last year.

Since 1977, the province has generated an average of $775 million per year in land sales to oil and natural gas companies and set a record in 2011 of $3.5 billion, auctioning off lease and mineral rights.

Alberta Energy Minister Sonya Savage. Photo by Darren Makowichuk/Postmedia files

To prevent selling land rights at a heavy discount into a depressed market, the province is planning to implement a higher minimum bid to ensure land isn’t sold too cheaply.

Interest in oil and gas leases and licences rise and fall with oil prices, so minimum bids are a “prudent move” in the current pandemic to ensure that Albertans get value from the land they are selling to oil and gas producers, said Dan McFadyen, an executive fellow at the University of Calgary School of Public Policy and former deputy minister of energy in Alberta.

“They don’t want to end up with minimal bids where you’re just giving those lands away,” McFadyen said.

However, he said there was more value to the province to selling the land than just the bid amount because oil companies commit to spending money exploring and developing those lands or they lose their leases.

The current minimum bid for a hectare of oil and gas rights in Alberta is $2.50 per hectare, a price that was set in 1977.



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Oil steady as rising coronavirus cases stokes demand concerns



FILE PHOTO: A pedestrian wearing a protective mask walks past an oil derrick in Huntington Beach during the outbreak of the coronavirus disease (COVID-19) in Huntington Beach, California, U.S., April 25, 2020. REUTERS/Kyle Grillot

October 14, 2020

By Jessica Jaganathan

SINGAPORE (Reuters) – Oil prices were steady on Wednesday on concerns that fuel demand will continue to falter as rising coronavirus cases across Europe and in the United States, the world’s biggest oil consumer, could impede economic growth.

The Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report on Tuesday that oil demand in 2021 will rise by 6.54 million barrels per day (bpd) to 96.84 million bpd, 80,000 bpd less than its forecast a month ago, as a result of the economic dislocations caused by the coronavirus pandemic.

Brent crude futures <LCOc1> for December fell by 8 cents, or 0.2%, to $42.37 a barrel by 0142 GMT while U.S. West Texas Intermediate <CLc1> futures were down 9 cents, or 0.2%, to $40.11.

The heads of two of the world’s biggest oil producers, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, discussed the current situation in the energy markets during a telephone call, the Kremlin said on Tuesday.

OPEC and producer allies such as Russia, a group known as OPEC+, will stick to their plans to taper oil production cuts from January, Suhail al-Mazrouei, the energy minister of the United Arab Emirates said on Tuesday.

“Oil prices are steady in Asia as the dollar rally takes a break and as the Russian and Saudis show a united front in making OPEC+ oil producers live up to their pledged output cut promises,” said Edward Moya, a senior market analyst at OANDA.

“Crude prices are looking very vulnerable as the coronavirus continues to spread like wildfire across Europe and trending higher in the U.S.,” Moya added.

On the supply side, crude oil production in the U.S. Gulf of Mexico continued to recover four days after Hurricane Delta made landfall with the amount shut falling to 44% on Tuesday from 69% on Monday.

U.S. crude oil inventories were seen falling last week, while distillate stockpiles likely declined for a fourth week, a preliminary Reuters poll showed on Tuesday.

The poll was conducted ahead of reports from American Petroleum Institute and the Energy Information Administration. Both the reports were delayed by a day because of the Columbus day holiday on Monday in the United States.

(Reporting by Jessica Jaganathan; Editing by Christian Schmollinger)





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Oil prices steady amid return of supply, while COVID-19 lockdowns tighten


October 13, 2020

By Sonali Paul

MELBOURNE (Reuters) – Oil prices were steady in early trade on Tuesday, sitting on losses of nearly 3% from the previous session after supplies began to resume in Norway and the U.S. Gulf of Mexico and Libya resumed production at its largest oilfield.

The return of supply comes as resurgent COVID-19 infections in the U.S. Midwest and Europe raise worries about fuel demand growth, posing a challenge for the Organization of Petroleum Exporting Countries and its allies, together called OPEC+.

OPEC+ has curbed supply to help shore up oil prices amid coronavirus pandemic, with cuts of 7.7 million barrels per day due to hold through December. The producers’ market monitoring panel is due to meet next Monday.

“It won’t be a huge surprise if finally the alliance decides to address the worsening situation and amend its action,” Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said in a note.

U.S. West Texas Intermediate (WTI) crude <CLc1> futures inched up 1 cent to $39.44 a barrel at 0117 GMT, while Brent crude <LCOc1> futures rose 2 cents to $41.74 a barrel.

With workers returning to U.S. Gulf of Mexico platforms after Hurricane Delta and Norwegian workers returning to rigs after ending a strike, all eyes were on Libya, a member of the Organization of the Petroleum Exporting Countries (OPEC), which on Sunday lifted force majeure at the Sharara oilfield.

The country’s total output on Monday was at 355,000 bpd and will double if the Sharara field gets back to pumping at the 300,000 bpd it was producing before the Libyan National Army blockaded energy exports in January.

“That would effectively add 0.3% of global oil supply in a very short time frame,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

Stoking worries about fuel demand, curbs were being tightened in Britain and the Czech Republic to battle rising cases of COVID-19, while French Prime Minister Jean Castex said he could not rule out local lockdowns.

(Reporting by Sonali Paul; editing by Richard Pullin)





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Libya Lifts Force Majeure on Biggest Oil Field of Sharara


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(Bloomberg) — Libya’s state energy company, the National Oil Corp., said in a statement Sunday that it’s lifted force majeure from the country’s biggest field, Sharara.

The move comes following a truce in Libya’s long-running civil war that’s already led to many oil fields and ports in the east restarting after an almost total shutdown since January.

Force majeure is a legal status protecting a party that can’t fulfill a contract for reasons beyond its control. Sharara, a western field, can pump around 300,000 barrels a day of crude at full capacity.

©2020 Bloomberg L.P.

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Norway oil strike ends after wage agreement



A general view of the drilling platform, the first out of four oil platforms to be installed at Norway’s giant offshore Johan Sverdrup field during the 1st phase development, near Stord, western Norway September 4, 2017. REUTERS/Nerijus Adomaitis

October 9, 2020

By Nerijus Adomaitis

OSLO (Reuters) – Norwegian oil firms struck a wage bargain with labour union officials on Friday, ending a 10-day strike that had threatened to cut the country’s oil and gas output by close to 25% next week, negotiators for each side told Reuters.

Brent oil prices fell by more than 1% on the news to $42.67.

Six offshore fields shut on Monday and a further seven had been scheduled to follow in the coming days, with the oil and gas outage set to grow to 966,000 barrels of oil equivalent (boed) by Oct. 14, the industry had said.

“We have a deal, there will be no (more) strike (action),” negotiator Jan Hodneland of the Norwegian Oil and Gas Association (NOG) said after the talks ended.

The Lederne trade union confirmed the news.

“The strike is over,” union chief Audun Ingvartsen said.

Oil firms and union officials met on Friday with a state-appointed mediator to try to end the strike in western Europe’s biggest oil and gas producing nation.

Friday’s meeting was the first with the state mediator since the strike was announced on Sept. 30, although informal talks had been taking place.

Under the wage deal for offshore workers, Aker BP <AKERBP.OL> and Equinor <EQNR.OL> both agreed to include provisions for land-based staff at their onshore control rooms, the NOG said, a key demand of Lederne.

The settlement also included a commitment from oil firms to sign a broader, long-term agreement by April 1, 2021, the NOG added.

Wages will also increase, according to Lederne, although this was in line with what other workers in the industry had obtained, the union said.

The strike’s first production outage began on Oct. 5, amounting to 330,000 boed, with an additional shutdowns due this weekend at six fields operated by Equinor, ConocoPhillips <COP.N> and Wintershall Dea.

Equinor’s Johan Sverdrup oilfield, the North Sea’s largest with an output capacity of up to 470,000 barrels per day, had been scheduled to close on Oct. 14 as a result of the strike.

Norwegian oil workers are among the highest paid in Europe but earn less than those in Australia or North America, a review of the latest available data shows. (Graphic: Norway’s gas exports 2019, https://graphics.reuters.com/NORWAY-OIL/nmopawaaapa/chart.png)

(Additional reporting by Nora Buli, writing by Gwladys Fouche and Terje Solsvik; editing by Kirsten Donovan and Susan Fenton)





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Oil prices rise as Hurricane Delta approaches U.S. Gulf of Mexico



FILE PHOTO: the sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. Picture taken November 24, 2019.REUTERS/Angus Mordant

October 8, 2020

By Sonali Paul

MELBOURNE (Reuters) – Oil prices rose on Thursday as oil workers evacuated rigs in the U.S. Gulf of Mexico ahead of Hurricane Delta, though fuel demand concerns persisted on fading chances for an economic stimulus deal in the United States, the world’s biggest oil consumer.

U.S. West Texas Intermediate (WTI) crude futures rose 13 cents, or 0.3%, to $40.08 a barrel at 0215 GMT, after falling 1.8% on Wednesday.

Brent crude futures rose 20 cents, or 0.5%, to $42.19 a barrel, after falling 1.6% on Wednesday.

With Hurricane Delta forecast to intensify into a Category 3 storm with winds of up to 120 miles per hour (193 km per hour), oil producers have evacuated 183 offshore facilities and halted nearly 1.5 million barrels per day (bpd) of oil output.

The Gulf of Mexico produced 1.65 million bpd in July, according to the U.S. government. The region, which accounts for 17% of U.S. crude output, has been hit by several storms over the past few months, each of which only briefly dented oil output.

Hopes for a further pick-up in U.S. fuel demand faded as White House officials reiterated on Wednesday that “stimulus negotiations are off” a day after President Donald Trump halted talks on a broad relief package.

The possibility that there will be no upcoming economic support measures comes as government data on Wednesday showed demand for oil at U.S. refineries is 13.2% lower than a year earlier, underscoring the plunge in fuel demand from the disruptions caused by the coronavirus pandemic. [EIA/S]

“A piecemeal approach to U.S. fiscal stimulus is unlikely to alter a deteriorating demand outlook for oil,” ANZ commodities analyst Vivek Dhar said in a note.

The Energy Information Administration data on Wednesday did show U.S. gasoline stocks fell more than expected last week to their lowest since November, and distillate stockpiles also declined. However, crude oil supplies rose by 501,000 barrels, as production and imports climbed.

“As global oil demand falters, there is increasing pressure on global oil supply to adjust lower to keep prices supported,” Dhar said, forecasting Brent would average $41 a barrel in the current quarter.

(Reporting by Sonali Paul; Editing by Christian Schmollinger)





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Sole survivor? Saudi Aramco doubles down on oil to outlast rivals


The slump in demand for crude during the coronavirus pandemic has forced oil companies to contemplate the possibility that the fossil fuel market has peaked and the time for a global energy transition has come.

But Saudi Aramco plans to boost its production capacity so it can pump as much of Saudi Arabia’s vast oil reserves when demand picks up – before a shift to cleaner energy makes crude all but worthless, industry sources and analysts told Reuters.

With almost 20% of the world’s proven reserves and production costs of just $4 a barrel, Aramco believes it can undercut competitors and carry on making money even when lower oil prices make it unprofitable for rivals, the sources said.

Riyadh now plans to follow through on its apparent threat in March during an oil price war with Russia to raise its capacity to 13 million barrels a day (bpd) from 12 million bpd, officials and sources have said.

Aramco’s approach is in stark contrast to Western rivals such as BP and Shell which plan to curb spending on oil production so they can invest in renewable and green energy as they prepare for a low-carbon world.

With a renewed focus on oil, the state-run oil giant is also revising ambitious downstream expansion plans and now aims to grab assets in established projects in key markets such as India and China, rather than building expensive mega plants from scratch, the sources said.

“We expect oil demand growth to continue in the long term, driven by rising populations and economic growth. Fuels and petrochemicals will support demand growth … speculation about an imminent peak in oil demand is simply not consistent with the realities of oil consumption,” Aramco said in a statement to Reuters.

‘TAKE THE MONEY’

The possibility that demand for crude has peaked makes it more pressing for the world’s top oil exporter to exploit its reserves while it can to generate cash to fund Saudi Arabia’s economic reforms, sources familiar with Saudi policymaking say.

Saudi Crown Prince Mohammed bin Salman is trying to develop new industries to reduce the kingdom’s dependency on oil under his ambitious Vision 2030 plan to diversify the economy.

But for the plan to succeed, Prince Mohammed needs lots of cash – and Aramco’s oil sales are his main source of revenue.

“The crown prince said he will diversify but he didn’t say he will kill the oil industry. As long as it can make more money why not? Take the money and invest it somewhere else,” one of the sources told Reuters.

“Let’s agree that given the global economic situation, full diversification won’t happen by 2030,” he said. “To completely wean a giant economy like Saudi off oil, it will require at least 50 years more. So as long as oil is with us, make more money out of it if you can.”

Aramco is also focused on how to pump more, cleaner fuel while cutting greenhouse gas emissions to give it a better chance to compete as governments tighten carbon regulations, analysts and sources briefed on the company’s plans said.

Aramco’s oil production already has a so-called carbon intensity of 10.1 kg of carbon dioxide (CO2) for each barrel produced (CO2e/boe) – the lowest among its rivals – and it wants to push that down even further by the end of this year.

“Our priorities are to sustain our low carbon intensity and low cost of production, while delivering the energy supplies the world needs,” Aramco told Reuters.

“(Aramco) is researching ways to reduce emissions through technology, such as making engines more efficient, better fuel formulations, carbon capture and sequestration, and turning CO2 and hydrocarbons into useful products,” the company said.

One example of the potential for hydrocarbon in hydrogen supply was a recent shipment of blue ammonia to Japan for use in zero-emissions power generation, Aramco said, saying it was the first in the world.

“In this example, 50 tonnes of CO2 captured during the process was reused in methanol production and enhanced oil recovery,” the company said.

Aramco will also continue to develop its gas resources due to both rising domestic needs and the kingdom’s ambitions to become a gas exporter, and plans to sell stakes in some of its assets such as its domestic pipeline business, the sources said.

“There is always going to be space for oil and the lowest carbon emitter will win,” said Amrita Sen, co-founder of the think-tank, Energy Aspects. “OPEC market power will return, especially for those who can produce oil in the cleanest way possible, and Saudi Aramco fits that bill.”

LOWEST COST

Aramco’s plan to boost its capacity to 13 million barrels a day is central to its strategy as it wants to be ready to grab a bigger market share when demand recovers, sources briefed on Saudi Arabia’s oil thinking said.

Saudi Arabia, also needs to be ready for the uncertainty in oil prices expected post COVID-19 to ensure it can keep spending plans and economic reforms largely unaffected with crude priced at $40 a barrel, or $60, sources and analysts said.

The thinking within Saudi Arabia is that as oil prices are expected to stay depressed – and may hover around $50-$60 for several years – shutdowns in places such as the United States, where shale oil is costly to produce, should support prices.

“Saudi Arabia, being the lowest cost producer, could see an increase in volumes and market share in the years to come even if global oil demand and prices do not recover as a lack of investment naturally leads to production declines elsewhere,” said Krisjanis Krustins, a director in the Middle East and Africa team at Fitch Ratings.

The passing of peak oil demand may also lead to a new price war and an end to efforts by the Organisation of Petroleum Exporting countries (OPEC) and its allies to curb supply – so Riyadh wants to be armed and ready for battle, sources said.

All oil producers will face a similar need to monetise their reserves and energy assets before they lose value. Besides Saudi Arabia, the economies of OPEC members such as Russia, Venezuela, Iraq and Iran all depend heavily on oil and gas.

“If peak oil demand surprises consensus by occurring much later, Aramco will benefit from higher market share and more spare capacity to mitigate another unwelcome price boom,” said Bob McNally, founder of Rapidan Energy Group.

“Even if peak demand happens fast, the call on Saudi crude is still likely to grow as output in higher cost, non-OPEC+ countries will fall faster, while the kingdom’s interest in managing supply to stabilise prices will continue,” he said.

DOWNSTREAM REVIEW

Another central part of Aramco’s strategy is a review by the corporate development organisation the company set up in August of its costly acquisition plans for downstream assets.

Aramco has made big bets on petrochemicals and oil refining as a way to mitigate against a slowdown in oil demand growth.

But in an industry that may be on the cusp of a long-term decline, Aramco is now looking to buy assets investors want to offload, rather than building them from scratch, sources said.

For example, Aramco has deferred plans to build a $10 billion refining and petrochemicals complex with Chinese defence conglomerate Norinco in China, the sources told Reuters, confirming earlier reports.

The Saudi company is, however, interested in investing in another project in China, where it would buy a stake in the Zhejiang refinery and petrochemicals complex south of Shanghai and get its hands on an oil storage facility, the sources said.

Officials at Zhejiang Petroleum & Chemical Co Ltd could not immediately be reached for comment.

Aramco is also keen to invest in India and is in talks with Reliance Industries to buy a 20% stake in its oil-to-chemical business although negotiations have been dragging the sale price.





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Oil prices slide as Trump cancels aid talks, U.S. crude stocks expand



FILE PHOTO: An oil pumpjack is seen at Lake Maracaibo in Lagunillas, Venezuela May 24, 2018. REUTERS/Isaac Urrutia

October 7, 2020

By Jessica Jaganathan

SINGAPORE (Reuters) – Oil prices slipped on Wednesday after U.S. President Donald Trump dashed hopes for a fourth stimulus package to boost the coronavirus-hit economy and on a larger-than-expected build-up in U.S. crude stocks.

U.S. West Texas Intermediate (WTI) crude <CLc1> oil futures fell 87 cents, or 2.1%, to $39.80 a barrel by 0104 GMT while Brent crude <LCOc1> futures fell by 74 cents, or 1.7%, to $41.91 a barrel.

President Trump, still being treated for COVID-19, ended talks on Tuesday with Democrats on an economic aid package for his pandemic-hit country with the U.S. presidential election only weeks away.

Price were also pressured by data from the American Petroleum Institute showing U.S. crude oil stocks rose by 951,000 barrels last week – more than expected. <API/S>

“(This was) not exactly what the recovery doctor ordered as the oil market was already tanking from a two-week high after President Trump quashed hope for a pre-election stimulus deal,” said Stephen Innes, chief market strategist, at online brokerage AxiCorp.

But losses were limited by restrictions on the supply side.

Energy companies were busy securing offshore production platforms and evacuating workers on Tuesday, some for the sixth time this year, as Hurricane Delta took aim at U.S. oil production in the Gulf of Mexico, which accounts for 17% of total U.S. crude oil output.

In Norway, meanwhile, the Lederne labour union said on Tuesday it will expand its ongoing oil strike from Oct. 10 unless a wage deal can be reached in the meantime. Six offshore oil and gas fields shut down on Monday as Lederne ramped up its strike, cutting the country’s output capacity by 8%.

(Reporting by Jessica Jaganathan; Editing by Kenneth Maxwell)





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