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Oil closed lower but still scored its best January gain on record, after a month in which OPEC’s emergency supply cuts started to take root and panic eased about the global economy.
Futures in New York dived 0.8% late Thursday, after a government report that U.S. production had swelled to an all-time high in November. Nonetheless, benchmark West Texas Intermediate crude prices ended the month 18% higher, recouping about a third of the losses from a tailspin late last year amid fears of a global glut.
New data Thursday showed OPEC started the month in full compliance of a plan to slash output.
That came on the heels of the Fed’s signal Wednesday that it’s done raising interest rates for now and a U.S. report showing robust gasoline demand and smaller-than-expected growth for crude supplies.
“Yesterday’s report was a big event,†said Bob Yawger, director of the futures division at Mizuho Securities USA. “The crude oil number was smaller than most people were looking for and the gasoline draw was huge. That was a sector that was really starting to weigh on the whole energy patch.â€
West Texas Intermediate crude for March delivery fell 44 cents to close at $53.79/bbl on the New York Mercantile Exchange. Its monthly gain was the biggest for any January in records going back to 1983.
Brent for March settlement, which expires Thursday, was up 24 cents at $61.89/bbl on the London-based ICE Futures Europe exchange. Futures increased 15% this month, on course for the biggest gain since April 2016. The more-active April contract declined 70 cents to $60.84. The global benchmark crude was at an $8.10 premium to WTI.
Oil has rebounded this year after plunging almost 40% in the final quarter of 2018. Those declines prompted the Organization of Petroleum Exporting Countries and its allies to pledge output curbs to help offset growing American production. The crisis in Venezuela has threatened to limit supplies further, while the question of whether the U.S. and China can resolve their trade differences remains pivotal for demand.
“Venezuela is giving us confidence in our bullish crude view,†Bank of China International analyst Xiao Fu wrote in a report. “The disruption will hit in particular high-transparency stocks on the U.S. Gulf, which are already the target of Saudi action.â€
Output cuts
U.S. data released Wednesday showed Saudi Arabia shipped the least amount of oil to the U.S. on a weekly basis in about 15 months, the latest evidence that the OPEC+ coalition cuts are impacting the market. Under a plan agreed in December, the producer group and its allies will reduce their output by a combined 1.2 MMbopd from October levels.
OPEC crude production fell to 30.85 MMbpd in January, led by cuts from Saudi Arabia, according to a report Thursday from Vienna-based consultant JBC Energy. The 11 members covered by the pact started the year “strongly,†with compliance at 109%, JBC said.
Meanwhile, high-level trade talks between the U.S. and China continued for a second day in Washington on Thursday. Although a breakthrough is seen as unlikely from this round of negotiations, the White House has said a concluding statement will be released on the progress they’ve made on core issues.
This file is licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license. Attribution: Peter Facey
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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