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Crude oil futures saw a slight dip in Tuesday’s choppy trading, following a period of settlement at the highest levels of the year. This minor decline came amidst no new developments in the Red Sea and the reopening of Libya’s largest oil field.
Libya Lifts Force Majeure
After being shut down for several weeks due to protests, Libya’s National Oil Corporation announced the lifting of force majeure on its 300K bbl/day Sharara oilfield.
Resumption of North Dakota Production
In North Dakota, the third-largest oil-producing U.S. state, a gradual return of production took place following extreme cold-induced shutdowns. Output, which had reached as high as 700K bbl/day in outages last week, still remained down by as much as 300K bbl/day as of Tuesday.
Sevens Report Research co-editor Tyler Richey cautioned that several weeks, or even months, might pass before production operations fully recover due to potential damage that has not yet been fully assessed.
Richey added that the complexity of bringing operations back online is further compounded by the fact that over 90% of North Dakota’s oil and gas is extracted through fracking and horizontal drilling practices.
Impact of Weak Gasoline Demand
Analysts noted that persistent weakness in U.S. gasoline demand has negatively impacted oil prices. While U.S. crude inventories fell by 6.67 million barrels last week, gasoline inventories surged by 7.2 million barrels, based on American Petroleum Institute figures.
Front-month Nymex crude (CL1:COM) for March delivery ended 0.5% lower at $74.37/bbl, while front-month March Brent crude (CO1:COM) closed 0.6% down at $79.55/bbl.
ETFs: (NYSEARCA:XLE), (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Record Mergers and Acquisitions in Oil and Gas Sector
Data analytics firm Enverus reported that mergers and acquisitions among U.S. oil and gas producers hit a record $144B during Q4, propelling the total deal value for the full year to over $190B, also a record.
Enverus highlighted Exxon Mobil’s (XOM) $65B deal for Pioneer as the third-largest oil and gas acquisition ever by enterprise value. Chevron’s (CVX) $60B purchase of Hess was recognized as the fourth largest in this sector.
Enverus Senior VP Andrew Dittmar emphasized that with the main shale plays already defined, “M&A has become the preferred tool to replace declining reserves.”
