Headlamp – Of Presidents and Prices: Trump ahead of Obama’s last day. Big Oil Beauty Contest.

After a year of Trump, most energy prices now ahead of Obama’s last day: It took nearly 12 months for several key commodity prices during President Donald Trump’s first year to surpass their levels on President Barack Obama’s final day in office. Commodity prices had bumped along mostly sideways until a late rally in fourth-quarter 2017. Some are now up sharply in recent weeks, lending support to the broader economic debate around inflation. The US Federal Reserve’s mid-range inflation forecast is at 1.9% for this year and 2% for 2019; however, many material and feedstock prices are up 2%-12% compared with this time a year ago. S&P Global‘s latest US economic outlook forecasts the Consumer Price Index to rise 2.2% this year. High wages and low unemployment are generally viewed as the key drivers of higher inflation, but the pass-through impact of basic commodity prices to consumers is also a factor. For example, increases in the prices of steel and aluminum generally get passed along to consumers in the form of higher prices for cars and appliances. Seven of the 11 benchmark commodity prices being tracked by S&P Global Platts since Trump took office are now an average of 5% higher compared with when Obama left.

Honoring veterans and improving ANCSA. A proposed bill would give 100,000 acres of federal land in total to Native groups in five Southeast Alaska towns, according to Alaska Republican Sen. Lisa Murkowski. Murkowski discussed the proposed legislation Wednesday during a hearing of the Senate Subcommittee on Public Lands, Forests and Mining, saying a major component of the legislation involves the formation of Native corporations in Ketchikan, Wrangell, Petersburg, Tenakee and Haines. The proposed legislation — also called the “Alaska Native Claims Improvement Act of 2017” — looks to mitigate issues with the original Alaska Native Claims Settlement Act that was passed almost a half century ago, the Ketchikan Daily News reported. The five Alaska communities were never granted village or urban corporations, Murkowski said upon incorporation, each of the five new corporations would receive “one township of land (23,040 acres),” according to the text of the bill, which is co-sponsored by fellow Alaska Republican Sen. Dan Sullivan. According to the bill’s text, the revised act: “Shall give preference to land with commercial purposes; may include subsistence and cultural sites, aquaculture sites, hydroelectric sites, tideland, surplus federal property, and ecotourism sites; and shall not include land within a conservation system unit.” Another component of Murkowski’s bill would give land to Alaska Natives who fought in the Vietnam War but didn’t receive land allotments under a federal measure passed in 1998.

Florida loves offshore drilling. Industry supporters in Florida kicked back against opposition to offshore drilling, saying the state has emerging opportunities to capitalize on U.S. momentum. The U.S. Bureau of Ocean Energy Management, a division of the Interior Department, is holding state hearings on a proposed five-year lease plan that would open nearly all of the U.S. territorial waters to oil and gas drillers. Florida Petroleum Council Executive Director David Mica said putting Florida on the map could bring in new sources of revenue and create a new economic segment. “The Atlantic Outer Continental Shelf has not been surveyed in more than thirty years, and with rapid advancements in safety and assessment technologies in the past decade, we can safely and accurately determine what energy potential exists off our coasts,” he added in a statement. The proposed program, opened for public comment, called for 19 lease sales offshore Alaska, seven in the Pacific Region, 12 in the Gulf of Mexico and 9 in the Atlantic.

Cheniere to send Texas LNG to China thru 2040. The largest natural gas exporter in the U.S. announced two major deals with China on Friday to sell U.S. natural gas through the 2040s. Cheniere Energy agreed to supply China’s state-owned energy company with 1.2 million tons of liquefied natural gas, or LNG, per year. The long-term supply and purchase agreements were built on a Memorandum of Understanding the company signed with China’s energy authority in November. Cheniere will begin shipping a portion of the fuel from its LNG export facility at Sabine Pass, La., later this year. The rest of the fuel will be made from its second facility being built in Corpus Christi, Texas, beginning in 2023. The supply and purchase agreements extend through 2043. The company is in the middle of completing its Corpus Christi facility, which now will include a third natural gas export station as an addition to its original design. Each export station is able to serve one LNG shipping vessel.

Big Oil Beauty Contest. With years of austerity in their rear-view mirrors, the world’s biggest oil companies are locked in a beauty contest to lure investors with promises of growth and greater rewards. Royal Dutch Shell and Total are emerging as frontrunners after a three-year slump thanks to strong growth projections. Exxon Mobil, the biggest publicly traded oil company, has largely disappointed with a weaker outlook. Major oil companies slashed spending and cut costs after oil prices collapsed in 2014 and can now generate as much cash with crude at $50-$55 a barrel as they did when the price was around $100 earlier in the decade. Cash flow at oil companies in 2017 rose to its highest since before the slump, helped by the drastic cost cutting plans and a recovery in oil prices, and executives are once again turning their attention to growth. With crude expected to hold above $60 a barrel into the end of the decade, major oil companies are confident they can boost already attractive payouts to shareholders. Total sent the strongest signal, announcing plans to increase dividends by 10 percent, buy back $5 billion of shares by 2020 and abolish its so-called scrip policy introduced in the lean years of offering shares instead of cash dividends. Analysts at Bernstein hailed the French company, which reported a 28 percent rise in fourth-quarter profit on Thursday, as “the new benchmark in shareholder returns” and upgraded their share recommendation to “outperform”. “Clearly the U.S companies disappointed more whereas Total cheered everyone up together with Shell, even if it had a small miss,” said Alasdair McKinnon, portfolio manager at The Scottish Investment Trust.

OPEC’s Oil Price Nightmare Coming True. The latest surge in U.S. oil output will probably hasten the country’s rise to the top of the producer pile. More important, it’s starting to look as though at least half of OPEC’s nightmare scenario for 2018 — a surge in shale output and slowdown in demand growth — is coming true. Last week’s avalanche of releases from the U.S. Department of Energy showed daily oil production above 10 million barrels a day for the first time since 1970. A massive week-on-week jump of 332,000 barrels a day must be treated with caution, though. U.S. drillers didn’t have a sudden rush of enthusiasm as WTI prices broke through a psychological $65 ceiling. Rather, the weekly data, which aren’t revised retrospectively, are catching up with monthly estimates that give a more accurate picture of output. For much of last summer, the weekly data were heavily criticized for over-estimating U.S. output growth. Now, the reverse is true. Assessments of the output in October and November based on the weekly data were about 370,000 barrels a day lower than the monthly figures, which are published with a two-month lag. There was probably a discrepancy too in December and January. The production surge shown in the monthly data is unprecedented. Output rose by almost 850,000 barrels a day between August and November. It makes the first shale boom of 2014-15 look sluggish.

 

First Reads:

After a year of Trump, most energy prices now ahead of Obama’s last day: Of Presidents and Prices
S&P Global Platts, Joseph Innace, February 12, 2018

Murkowski: Bill would create new Native corporations
AP News, February 11, 2018

Industry talks up Florida oil and gas potential
UPI, Daniel J. Graeber, February 9, 2018

US’ largest natural gas exporter announces huge deal with China
Washington Examiner, John Siciliano, February 9, 2018

Big Oil takes stage for post-austerity beauty contest
Reuters, Ron Bousso, February 11, 2018

OPEC’s Oil Price Nightmare Is Coming True
Bloomberg, Julian Lee, February 10, 2018