Oil Prices Rise on Drawdown in U.S. Crude Inventory

By Jessica Jaganathan

Brent crude oil futures rose by 17 cents, or 0.3%, to $69.13 a barrel by 0643 GMT, and U.S. West Texas Intermediate (WTI) crude futures gained by 9 cents, or 0.1%, to $65.72 a barrel.

Both benchmarks hit their highest since mid-March on Wednesday, before retreating to end little changed following two days of gains.

Easing coronavirus restrictions in Europe have led to a pick-up in fuel demand, analysts from Citi said in a note.

“As the roll-out of vaccines continues and a pent-up summer driving season continues to manifest, this trend should accelerate, keeping demand for motor fuels robust and boosting market confidence in the recovery story,” they said.

U.S. crude stocks fell more than expected last week as refining output rose and exports surged, the Energy Information Administration said on Wednesday. [S/EIA]

Crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with expectations in a Reuters poll for a 2.3 million-barrel drop.

U.S. gasoline stocks rose by 737,000 barrels in the week, the EIA said, against a forecast for a 652,000-barrel draw.

“We think U.S. demand is strong,” said analysts from Commonwealth Bank of Australia. “The U.S. refinery utilisation rate is now above the five-year average.”

U.S. jet fuel demand is expected to surge by 30% in the second quarter compared with the first quarter on increased domestic travel, they added.

Pandemic-related restrictions in the United States and parts of Europe are easing, but infections are still on the rise in major crude oil importers India and Japan, capping price gains.

Meanwhile, militants using bombs attacked two oil wells at an oilfield close to the northern Iraqi city of Kirkuk on Wednesday, killing at least one policeman and setting off fires, the country’s oil ministry said.

Industry sources said the attack had not affected output. An oil ministry statement did not comment on production.

(Reporting by Jessica Jaganathan; Editing by Tom Hogue and Richard Pullin)

World Shares Resilient, Drugmakers Hit by Biden’s Move on Vaccines

By Hideyuki Sano

MSCI’s broadest gauge of world stocks, ACWI, was up slightly and European stocks are expected to open flat with both Euro Stoxx futures and Britain’s FTSE futures little changed.

Japan’s Nikkei jumped 1.8% as it reopened after a five-day holiday.

But MSCI’s index of Asia-Pacific shares outside Japan lost 0.15% as Chinese shares, also resuming trade for the first time since last week, wobbled. The CSI300 fell 1.3%, led by falls in biotech firms.

China’s healthcare share index dropped more than 4% after U.S. President Joe Biden threw his support behind waiving intellectual property rights for COVID-19 vaccines.

Biden’s move hit U.S. vaccine makers, too, including Moderna, but Wall Street was supported overall by gains in energy and other cyclical shares.

Dow hit a record high overnight, having risen 0.29%, while the S&P 500 added 0.07%.

“This year, both the U.S. and Chinese economy could grow 6% or more. If the world’s two biggest economies are growing that much, clearly that’s positive,” said Norihiro Fujito, chief investment strategist, Mitsubishi UFJ Morgan Stanley Securities.

Against this backdrop, commodity prices are riding high, with copper flirting with 10-year peaks.

Oil prices extended gains to edge near their March tops as crude stockpiles in the United States, the world’s largest oil consumer, fell more sharply than expected.

U.S. crude futures stood at $65.65 per barrel, little changed on the day but just below Wednesday’s two-month high of $66.76. [O/R]

As agricultural products such as corn, soybeans and wheat, have gained sharply in recent weeks, Thomson Reuters CRB index has risen to its highest level since 2015, having gained more than 21% so far this year.

BONDS AND CURRENCIES

Higher commodity prices are fuelling inflation expectations in the bond market.

The U.S. breakeven inflation rate, or inflation expectations calculated from the yield gap between inflation-linked bonds and conventional bonds, rose to as high as 2.48% overnight.

But the U.S. nominal bond yields held relatively stable, with the 10-year U.S. Treasuries yield little changed at 1.584%.

“Bonds were supported partly because the pace of vaccinations has slowed in the States and as real-money investors are starting to buy,” said Naokazu Koshimizu, economist at Nomura Securities.

“The rise in inflation is also driven more by supply constraints than demand, which is why we are seeing rising inflation expectations and a fall in nominal yields,” he added.

In currencies, the Australian dollar briefly dropped as much as 0.6% after China said it was indefinitely suspending all activity under a China-Australia Strategic Economic Dialogue, the latest setback for their strained relations.

It last stood down 0.15% at $0.7734

The British pound was flat at $1.3910 ahead of a central bank policy review.

The Bank of England could slow the pace of its bond buying to allow its quantitative easing programme to last until the end of the year, as it could reach the cap by September at the current pace of buying.

Investors also looked to Scotland’s election that could trigger a showdown with British Prime Minister Boris Johnson over a new independence referendum.

Other currencies were little moved, with the focus on Friday’s U.S. monthly jobs report which is expected to show that nonfarm payrolls increased by 978,000 jobs last month.

The euro stood flat at $1.2004 while the yen changed hands at 109.35 per dollar.

(Editing by Himani Sarkar and Kim Coghill)

IPO Fever Heating up Arab Gulf National Oil Companies

After the world’s largest IPO ever by Saudi national oil company Aramco, others have been putting up part of their assets also up for sale. Saudi Arabia and the UAE have been leading the flock. Now a new star could emerge, Bahrain’s national oil company NOGA is considering options to access private-equity funding for some infrastructure assets.

Bahrain’s minister of oil Mohammed bin Khalifa Al Khalifa stated to Bloomberg Television that they are considering selling energy assets. The minister indicated that “we have got a lot of infrastructure assets that can easily be” structured for private-equity funding. First target could be to open up Bahrain’s pipeline to Saudi Arabia for a private equity deal. Other options could be an LNG import vessel and several upstream assets. Manama seems to be jumping on the train set in motion by Saudi Arabia, UAE, Qatar and others, to sell energy assets or issue bonds based on these assets.

No specific details yet have come forward, but a potential offering of a stake in the Saudi-Bahraini crude oil pipeline, which is supplied by Aramco, as an another outlet for Saudi oil, but also is used to supply Bahraini petrochemical and refinery projects, could be a major source of income. The so-called AB-4 pipeline was inaugurated, to replace an older one, in 2018. The new 112-km long AB-4 oil pipeline has a capacity of over 350,000 barrels of crude oil per day, which will replace the existing 73-year-old pipeline system. The new oil pipeline starts from Saudi Aramco’s Abqaiq Plants and finish at the Bahrain Petroleum Company (Bapco) Refinery in Bahrain.

The remarks that potentially upstream assets could also be in the offering is opening up a new discussion. Even that Bahrain is a very small oil producer, slated to produce around 50,000 bpd from its own fields, and shares production of a Saudi-Bahraini field of 150,000 bpd, the potential could however be much bigger. As indicated last month, NOGA, the National Oil and Gas Authority or national oil, is discussing at present a major tender round for its offshore shale Al Khaleej field.

The potential of that field is still unclear, but inside information links it to a major production expansion potential of the tiny island state. The Gulf Arab state in 2018 announced the discovery of the Khaleej al-Bahrain field, its largest oil and gas find since 1932, situated off Bahrain’s west coast and estimated to contain at least 80 billion barrels of tight (shale) oil and the country has been looking for foreign investment to help to develop it. Bringing in additional financial backup to start up production in 2022 is possibly a main driver for the current private-equity discussion. Bahrain is also rumored to be talking to major oil and gas companies, such as ENI, but also Gazprom and others, to start up the world’s first shale oil and gas field very soon.

Production comes from just one field – the onshore Bahrain Field (also known as Awali) – which was discovered and brought onstream in 1932. Bahrain also receives a 50% share of production from the Abu Sa’fah field in Saudi Arabia.

At the same time, IPO fever is growing. Abu Dhabi’s national oil company ADNOC is slated to be close to hire First Abu Dhabi Bank and JPMorgan as primary arranger for the drilling unit IPO. The Abu Dhabi giant is expected to sell a minority stake in the drilling unit, valued at around $10 billion. ADNOC Drilling already has a minority shareholder, as BakerHughes acquired in 2018 a 5% stake, in a deal putting up the value to $11 billion.

ADNOC is considering an IPO for its drilling unit but also for a fertilizer joint venture called Fertiglobe, The deals could raise more than $1 billion each. If the deal goes ahead, it would be the oil company’s second listing of a unit on the Abu Dhabi stock exchange after it listed ADNOC Distribution in late 2017, raising 3.1 billion dirhams ($844 million).

ADNOC Drilling owns and operates a large fleet of rigs, including 75 onshore rigs, 20 offshore jackup rigs, and 11 well water rigs, according to its website. Emirati sources have indicated that no formal mandates yet have been awarded, but JPMorgan and FAB are front runners. The ADNOC Drilling IPO will be listed on the Abu Dhabi Securities Exchange. The Emirate is trying to revamp its dormant stock market.

Oil and Gas Investor EnCap Raises $1.2 Billion Energy Transition Fund

By David French

The Houston-based firm is a prolific investor in hydrocarbons, and has raised more than $38 billion since its founding in 1988, with its latest flagship vehicle amassing $7 billion in 2017.

With investors more focused on environmental considerations, capital has been pouring into clean energy production.

“There’s definitely a movement among institutional investors into ESG of all kinds, including in the energy space,” Jason DeLorenzo, EnCap Investments’ managing partner, told Reuters.

EnCap had talked over a long period of time with its investor base about pursuing opportunities in energy transition, he said. Previous EnCap investors contributed around 75% of the new fund’s cash.

EnCap Energy Transition Fund I will invest in wind and solar power and energy storage, according to a statement. It will be run by Jim Hughes, a former chief executive of First Solar Inc, who was part of a quartet EnCap recruited in September 2019 to invest in renewable energy.

The fund has already invested in five companies, with Hughes saying in the same interview that around half the proceeds have been deployed.

Hughes declined to give a specific figure about return targets, but said it would be lower than EnCap’s upstream fund and above what infrastructure funds traditionally generate.

Private-equity firms normally pitch returns in the high-teens percentile, with the expectation for infrastructure funds in the high single digits.

EnCap is not abandoning oil and gas altogether though, with DeLorenzo seeing “robust opportunities” available for deploying the remaining $4 billion of its 11th flagship fund.

Portfolio companies within the energy transition fund could also help EnCap’s existing hydrocarbon-producing and pipeline investments with their own decarbonization efforts, Hughes said.

(Reporting by David French in New York, Editing by Sherry Jacob-Phillips)

Saudi Aramco Beats Q1 Profit Forecast, Keeps Dividend as Oil Rebounds

By Hadeel Al Sayegh, Saeed Azhar and Alexander Cornwell

Earnings by global energy companies such as Exxon Mobil have increased on the back of crude oil prices, which have risen by about a third this year, as a global oil surplus caused by the pandemic dwindles and fuel demand recovers.

“Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming,” Aramco CEO Amin Nasser said in a statement.

“And while some headwinds still remain, we are well-positioned to meet the world’s growing energy needs as economies start to recover.”

Net income rose to $21.7 billion for the quarter to March 31 from $16.7 billion a year earlier.

Analysts had expected a net profit of $19.48 billion, according to the mean estimate from five analysts.

Aramco said the profit was primarily driven by a stronger oil market and higher refining and chemicals margins, partly offset by lower production.

The OPEC+ group, the alliance of the Organization of the Petroleum Exporting Countries and other leading oil producers including Russia, decided last month to stick to its previously approved action plan to ease output curbs further from May.

Aramco declared a dividend of $18.8 billion for the first quarter, to be paid in the second quarter, in line with company guidance of a $75 billion dividend for this year.

Aramco average total hydrocarbon production came in at 11.5 million barrels per day of oil equivalent in the first quarter of 2021, including 8.6 million barrels per day of crude oil.

(Reporting by Hadeel Al Sayegh, Alexander Cornwell, Saeed Azhar; editing by Jason Neely and Richard Pullin)

Oil Prices Slip as Pandemic Takes Toll on India’s Fuel Sales

By Florence Tan

Brent crude futures for July fell 48 cents, or 0.7%, to $66.28 a barrel by 0620 GMT while U.S. West Texas Intermediate for June was at $63.11 a barrel, down 47 cents, or 0.7%.

State-level restrictions aimed at stemming infections in India have led to a drop fuel sales in the world’s third largest consumer in April, preliminary data shows.

“Overall fuel demand is down by about 7% from pre-COVID level of April 2019,” A.K. Singh, head of marketing at refiner Bharat Petroleum Corp said, adding that India’s demand was close to pre-COVID levels in March.

India’s COVID-19 total cases are nudging close to 20 million and analysts are expecting a sharper slump in the country’s demand for transportation fuels in May due to more restrictions. [nL1N2MQ04B]

“Given that it still appears as though COVID-19 in India has not peaked, we expect to see further downside to fuel demand over May,” ING analysts said in a note.

On Sunday, a leading Indian industry body urged authorities to curtail economic activity, as the nation’s healthcare system was overwhelmed by the spiralling infections.

Globally, however, the rollout of vaccination campaigns is expected to lift oil demand, especially during peak travel season in the third quarter, prompting analysts to increase their forecasts for Brent prices for a fifth straight month, a Reuters poll showed.

The survey of 49 participants forecast that Brent would average $64.17 a barrel in 2021, up from last month’s consensus of $63.12 and the $62.30 average for the benchmark so far this year.

On the supply side, the Organization of the Petroleum Exporting Countries pumped 25.17 million bpd in April, up 100,000 barrels from March, as Iran and other producers increased output. OPEC’s production has risen every month since June 2020 with the exception of February.

Iran and the United States are in talks to revive a nuclear deal which could lead to a lifting of U.S. sanctions that would allow Iran to ramp up oil exports.

Washington on Sunday denied a report by Iran’s state television that the arch-foes had reached a prisoner swap deal in exchange for the release of $7 billion of Iranian oil earnings frozen by U.S. sanctions in other countries.

In the United States, energy firms added oil and natural gas rigs last week, leading to a ninth straight monthly rig count increase, as a recovery in prices lured some drillers back to the wellpad, according to Baker Hughes.

However, U.S. crude oil production dropped by over a million barrels per day in February, to the lowest levels since October, 2017, according to a monthly government report on Friday.

(Reporting by Florence Tan; Editing by Simon Cameron-Moore & Shri Navaratnam)

BP Seeking to Build Wind Farms Off Scotland

BP Chief Executive Officer Bernard Looney told The Times the firm was looking at bidding in the forthcoming Crown Estate Scotland auction to lease the seabed off Scotland for offshore wind projects.

Bids for the ScotWind process, offering 17 areas spanning 8,600 square km (3,320 square miles) of seabed, are yet to be finalised with a deadline of July 16, The Times reported.

BP is working on bidding jointly for the Scottish leases with EnBW Energie Baden Wuerttemberg AG, the German regional utility it partnered with on its first move into Britain’s offshore wind market in February in the Irish Sea, The Times report said.

In February, BP won two sites representing a total of 3 gigawatts (GW) jointly with EnBW, in what Bernstein analysts called a “highly contested race”.

It aims to ramp up renewable power generation from 3.3 GW at present to 50 GW by 2030, while slashing oil output to reduce greenhouse gas emissions.

(Reporting by Anirudh Saligrama in Bengaluru; Editing by Kim Coghill and Karishma Singh)

Global Reversal of Covid-Related Curbs Driving Demand for Commodities

The outlook for commodity prices remain bullish, given the current weakness in the U.S. Dollar, shortages due to the reopening of the global economy and expectations that the Federal Reserve will allow U.S. inflation to exceed mandated levels.

Goldman Sachs Updates Commodities Outlook

Last week, U.S. bank Goldman Sachs said it expects commodities to rally another 13.5% over the next six months on a worldwide reversal of coronavirus curbs, lower interest rates and a weaker dollar.

“We expect the biggest jump in oil demand eve, a 5.2 million barrels per day (bpd) rise over the next six months,” Goldman said, citing accelerations of vaccinations in Europe and an unleashing of pent-up travel demand.

The easing of international travel restrictions in May will lead global jet demand to recover by 1.5 million bpd, it said.

The bank see gold prices at $2,000 an ounce over the next six months and said it is too early for Bitcoin to compete with gold for safe haven demand, adding that the two can co-exist, Reuters reported.

Goldman also upgraded its copper price forecast, setting a 12-month target of $11,000 per tonne, citing an under-invested supply side.

“The only way this record-sized and fast approaching supply crunch can be solved is via a surge in price to new record highs,” the bank said.

While China will maintain its major role in commodity demand, the bank added, it is not expected to be the only major source of growth in the coming decade.

Soaring Lumber Prices Reverberate Through U.S. Housing Market

Skyrocketing lumber prices threaten to thwart the momentum of the U.S. housing market, which for months has been one of the brightest stars of the recovery from the pandemic recession.

Surging demand pushed housing inventories to record lows. Homebuilding got to work, and lumber producers have struggled to catch up, which might take some time. Meanwhile, lumber prices have jumped more than 300% year-on-year to record highs.

With lumber prices sky high and a slim supply of housing stock, median home prices of existing homes jumped by a record-breaking 17.2% last month.

Palladium Tops $3,000 for First Time Amid Undersupply

Palladium rose above $3,000 an ounce for the first time on Friday as the market worried about a shortage of the metal embedded by automakers in exhaust pipes to neutralize emissions.

Demand from the auto industry is rising and expected to climb further as a semiconductor chip shortage that has curtailed production eases later this year.

“Palladium has been in a structural deficit for 10 years. We have seen above ground inventories falling to very low levels,” said UBS analyst Giovanni Staunovo.

For a look at all of today’s economic events, check out our economic calendar.

Merck Sees Bigger 2021 Sales Hit After First Quarter Feels Pandemic Pain

Shares fell nearly 2% to $75.70 before the opening bell as the health crisis also led to a roughly $600 million drop in first-quarter sales.

Merck has said two-thirds of its treatments and vaccines need to be administered by a doctor, leading to a larger impact from the pandemic-induced restrictions. Full-year sales are now expected to take a hit of 3%, from 2% previously.

The company is also struggling with a decline in the use of vaccines to treat other diseases besides COVID-19, echoing an impact disclosed by Britain’s GlaxoSmithKline on its vaccines business on Wednesday.

Sales of Merck’s Gardasil, a vaccine to prevent cancers caused by the human papillomavirus virus, tumbled 16.4% to $917 million in the first quarter, hurt by lower demand in the United States and Europe.

The company expects the impact to vaccine sales to persist during the first half of 2021, and will allocate doses of Gardasil to markets outside the United States to soften the blow.

Merck reiterated its 2021 adjusted earnings per share expectation of $6.48 to $6.68, and did not assume any benefit from a potential launch of molnupiravir, an antiviral drug for COVID-19 it is developing with Ridgeback Biotherapeutics.

Sales of blockbuster cancer drug Keytruda rose 18.7% to $3.90 billion, but missed Wall Street estimates of $3.98 billion.

Merck’s net earnings fell about 1% to $3.18 billion, or $1.25 per share, in the quarter ended March 31.

Excluding items, the company earned $1.40 per share, missing the average analyst estimate of $1.63, according to IBES data from Refinitiv.

(Reporting by Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila)

Europe’s Oil Majors Leave Pandemic Blues Behind

By Shadia Nasralla

Last year’s demand collapse forced BP, Royal Dutch Shell and Equinor to slash their dividends and preserve cash as they to try to transform themselves into companies that can thrive in a low-carbon world.

With benchmark oil prices recovering from an April 2020 low of $16 a barrel to about $67 a barrel this month, most of the companies managed to drive profits back above levels seen before the coronavirus pandemic first struck.

BP’s first-quarter headline profit figure of $2.6 billion exceeded its first-quarter profit of $2.4 billion in 2019 and was more than 200% higher than in 2020.

France’s Total reported headline profits of $3 billion in the first three months of 2021, up 69% from last year and 9% above the first quarter of 2019.

Norway’s Equinor, meanwhile, came in with a first-quarter profit of $5.5 billion on Thursday, also exceeding its pre-pandemic profit of $4.2 billion.

Shell’s first-quarter profit climbed 13% from last year to $3.2 billion though that was still below 2019’s $5.3 billion.

But despite recovering profits, payouts were still below pre-pandemic levels with the exception of Total, which had kept its dividend steady throughout the pandemic.

“(Total’s) dividends are held flat but the buyback question will now arise given the sub 20% gearing (debt-to-equity ratio),” Bernstein analysts said.

While Shell has increased its dividend twice in the past six months, the 17.35 cents it paid per share in the first quarter was below the 47 cents it paid out before the pandemic.

Shell, which is set to increase its dividend by 4% next year, has flagged share buybacks once its debt falls to $65 billion which Barclays and Bernstein say is possible this year.

Equinor also raised its payout to 15 cents per share, but again this was short of 2019’s 26 cents per share.

“The suggestion is that capital is being preserved to allow for an acceleration of new energy investment,” Citi said.

BP’s 3.8 pence per share first-quarter dividend was about half of what it paid in 2019. However, it is starting share buybacks which analysts expect to increase in the third quarter.

“BP should be able to buy back at least $10 billion between 2021 and 2025,” said analysts at Jefferies.

Spain’s Repsol reported a 5.4% rise in first-quarter adjusted net profit to 471 million euros, though this was 24% below earnings in the first three months of 2019.

It decided in November to cut its 2021 and 2022 cash payouts to 0.60 euro from 1 euro per share, but said share buybacks could push returns above 1 euro per share by 2025.

(Reporting by Shadia Nasralla; Additional reporting by Nerijus Adomaitis, Isla Binnie and Benjamin Mallet; Editing by David Clarke and Elaine Hardcastle)

Oil Prices Rise, Bullish Demand Outlook Offsets India Concerns

By Bozorgmehr Sharafedin

Brent rose 89 cents, or 1.3%, to $68.16 a barrel by 1115 GMT, and U.S. West Texas Intermediate crude was up 83 cents, or 1.3%, at $64.69 a barrel.

This is the third consecutive day that both contracts have climbed.

“The performance of the past few days demonstrates the unbroken faith of the market in healthy economic and demand recovery,” Tamas Varga, analyst at PVM Oil associates said.

“It also implies that the perilous and devastating COVID nightmare engulfing in India, Japan and Turkey, amongst others, is not expected to have a long-lasting impact on economic expansion.”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, stuck to its plans this week for a gradual easing of oil production curbs from May to July.

OPEC+ expects global stocks to reach 2.95 billion barrels in July, taking them below the 2015-2019 average.

“A closer look at the state of global oil inventories suggests that the market may be closer to the point of rebalancing than what OPEC+ may think,” Citi analysts said, adding that the market has absorbed most of the crude inventory overhang, although refined products inventories are still relatively high.

The bank expects vaccination campaigns in North America and Europe to boost oil demand to a record high of 101.5 million barrels per day (bpd) over the northern hemisphere summer months, but said rising COVID-19 cases in Brazil and India could hit local demand if stricter lockdowns are reimposed.

“The outbreak in India is holding back oil’s rally,” Howie Lee, an economist at Singapore’s OCBC bank, said.

Europe’s major energy companies profited from a rise in oil prices to report big increases in first-quarter earnings, putting the worst of a pandemic-linked slump in fuel demand behind them.

BP < BP.L>, Total and Equinor reported first-quarter profits above pre-pandemic levels.

A weak dollar also lent some support to oil. The dollar was pinned near nine-week lows as a dovish outlook from the U.S. Federal Reserve and bold spending plans from the White House gave a green light for the global reflation trade.

Investors also focused on a ramp-up in U.S. refinery operating rates and a drawdown in distillates stocks last week, in data released by the Energy Information Administration on Wednesday.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Florence Tan and Roslan Khasawneh in Singapore; Editing by Barbara Lewis and Bernadette Baum)

Shell Raises Its Dividend as Profits Surge

By Ron Bousso and Shadia Nasralla

LONDON (Reuters) -Royal Dutch Shell’s profits leapt to $3.23 billion in the first three months of the year and the energy company raised its dividend as planned but warned that the outlook remained uncertain due to the coronavirus pandemic.

Shell’s adjusted earnings were above an average analyst forecast of $3.125 billion and also ahead of earnings of $2.9 billion last year, boosted by assets sales as well as higher oil and liquefied natural gas (LNG) prices, it said on Thursday.

Sales of oil and gas assets in countries including Nigeria, Canada and Egypt added $1.4 billion to first-quarter profits.

Shell’s London-listed shares were up 1.2% at 0736 GMT, outperforming a 1% gain for the broader European energy index.

“The quarter proves without doubt that Shell’s earnings power is intact,” Bernstein analyst Oswald Clint said in a note.

Shell said its fuel sales fell 13% in the first quarter due to further lockdown measures and the impact of a Texas storm in February, saying there was still “significant uncertainty” over the outlook for demand in the second quarter.

The Anglo-Dutch company raised its dividend by 4% as planned, the second increase since its slashed its payout by two-thirds at the start of last year due to the coronavirus pandemic.

Shell’s cash flow from operations, a key performance metric, rose to $8.3 billion from $6.3 billion, helping to reduce its debt to $71.3 billion.

Shell wants to get its net debt below $65 billion before starting to repurchase shares, part of its strategy to shift to low-carbon energy in the coming decades.

Norway’s Equinor also raised its dividend and posted a rise in first-quarter profits on Thursday.

Shell’s oil and gas trading operations, the world’s largest, did not boost revenue significantly in the quarter, unlike rival BP which reported “exceptional” revenue on Tuesday from its natural gas trading business.

Shell said its LNG trading was significantly below average in the quarter as a result of credit provisions following the storm in Texas, which triggered a massive state power failure and left millions of people without light, heat and water.

Shell’s fuel sales fell in the first quarter to 4.16 million barrels per day (bpd) but were expected to rise to an average of 4.5 million bpd in the second quarter.

Oil and gas production at Shell’s upstream operations fell 9% from a year ago to 2.46 million barrels of oil equivalent per day (boed) due to maintenance and disposals.

Output was forecast to decline again to 2.25 million boed in the second quarter due to lower seasonal gas demand and further asset sales.

(Reporting by Ron Bousso; Editing by David Clarke)

Oil Prices Extend Gains, Bullish Demand Outlook Outweighs India Concerns

By Florence Tan

Brent crude for June rose 42 cents, or 0.6%, to $67.69 a barrel by 0622 GMT, while U.S. West Texas Intermediate crude for June was at $64.22 a barrel, up 36 cents, or 0.6%.

The Organization of the Petroleum Exporting Countries (OPEC), together with Russia and their allies, a group known as OPEC+, stuck to their plans for a gradual easing of oil production restrictions from May to July, after OPEC slightly raised its 2021 demand growth forecast to 6 million barrels per day. The group also expects global stocks to reach 2.95 billion barrels in July, taking them below the 2015-2019 average.

“A closer look at the state of global oil inventories suggests that the market may be closer to the point of rebalancing than what OPEC+ may think,” Citi analysts said, adding that most of the crude inventory overhang has been absorbed by the market although refined products inventories still need to be worked off.

The bank also expects vaccination campaigns in North America and Europe to boost oil demand to a record high of 101.5 million bpd this summer, while cautioning that rising COVID-19 cases in India and Brazil could hit local demand if deeper lockdowns are re-imposed.

“The outbreak in India is holding back oil’s rally,” Howie Lee, an economist at Singapore’s OCBC bank said.

“But if India can sort it out and hopefully avert a full lockdown in the process, the market should likely continue its rally.”

Investors focused on a ramp-up in U.S. refinery operating rates and drawdown in distillates stocks last week, in data released by the Energy Information Administration on Wednesday.

U.S. crude inventories rose by 90,000 barrels last week, much smaller than analysts’ forecasts for a 659,000-barrel build.

In the UK, loadings of the Brent crude oil stream in the British North Sea, which underpin the Brent futures contract, would stop in mid-May if no deal is reached between the Unite union and the Shetland Islands Council employing them.

(Reporting by Florence Tan and Roslan Khasawneh; Editing by Jacqueline Wong, Lincoln Feast and Kim Coghill)

Oil Prices Rise as Demand Outlook Offsets COVID Worries

By Julia Payne

Brent crude futures were up 58 cents, or 0.87%, to $67.00 a barrel at 1152 GMT, after rising 1.2% on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures rose 67 cents, or 1.06%, to $63.61 a barrel, after gaining 1.7% in the previous session.

An OPEC+ decision to stick to plans for a phased easing of oil production restrictions from May to July underscored the group’s confidence in a recovery in global demand.

“The market is supported by the general belief that the COVID endgame is in sight. Yesterday’s decision from OPEC+ to leave the agreed gradual output increase in place between May and July was greeted with a strong performance,” Tamas Varga, analyst at PVM Oil associates, said.

“The market clearly thinks that these extra barrels will be easily accommodated as global consumption picks up in 2H 2021.”

U.S. bank Goldman Sachs said on Wednesday it expected “the biggest jump in oil demand ever, a 5.2 million barrels per day (bpd) rise over the next six months” as vaccination campaigns accelerate in Europe and demand for travel climbs.

Goldman said the easing of international travel restrictions in May would hike jet fuel demand by 1.5 million bpd.

In a report by OPEC+ experts, the group forecast global oil demand in 2021 would grow by 6 million bpd, after demand plunged by 9.5 million bpd last year.

“The oil cartel remains confident about the demand outlook as the economies of the U.S. and China rebound strongly. This helped to offset concerns about growing coronavirus cases in India, Japan and Brazil,” DailyFX strategist Margaret Yang said.

In India, the world’s third-largest oil consumer, the COVID-19 death toll surged past 200,000 and infections have climbed by more than 300,000 cases a day for a week.

The American Petroleum Institute reported crude stocks rose by 4.319 million barrels in the most recent week, sources said, a bigger build than expected.

U.S. Energy Information Administration (EIA) data is due at 1430 GMT on Wednesday.

“There is still an awful lot of surplus oil that OPEC+ is managing right now and there’s still a lot of uncertainty in the environment with the pandemic,” BP Chief Financial Officer Murray Auchincloss told a results call with analysts.

(Reporting by Julia Payne in London, Shu Zhang and Sonali Paul; editing by Richard Pullin, Michael Perry and Barbara Lewis)

Oil Rises to $66 Ahead of OPEC+ Meeting, India Weighs

By Alex Lawler

OPEC and allies hold a monitoring meeting on Tuesday instead of Wednesday as had been planned. A technical meeting on Monday had voiced concern about surging COVID-19 cases but kept its 2021 oil demand forecast unchanged.

Brent crude was up 36 cents, or 0.6%, at $66.01 a barrel by 1210 GMT, after dropping 0.7% on Monday. U.S. oil gained 40 cents, or 0.7%, to $62.31.

“Traders do not want to miss out on a potential bullish OPEC+ meeting so a limited optimism is reflected in prices,” said Bjornar Tonhaugen of Rystad Energy. “Should OPEC+ turn a blind eye to India though, the gains may quickly evaporate.”

The group known as OPEC+ is set to slightly ease oil output cuts from May 1 under a plan agreed before the coronavirus surge in India, the world’s third-largest crude importer which has recorded a daily rise of more than 300,000 cases for several days. It has also reported a total of almost 200,000 deaths.

Others expect OPEC+ to stick to its easing policy.

“We still expect that the group will announce no changes to its plan,” ING Economics analysts said in a note.

In another development that could eventually add supply to the market, talks in Vienna aimed at reviving the 2015 Iran nuclear accord were set to resume on Tuesday.

Record OPEC+ supply cuts last year have helped drive a recovery in prices from historic lows. Most of the curbs are still in place.

Also in focus this week will be the latest U.S. oil inventory reports, which analysts expect will show a rise in crude stocks. The first report, from the American Petroleum Institute, is out at 2030 GMT. [EIA/S]

(Additional reporting by Aaron Sheldrick; Editing by Jason Neely, Edmund Blair and Louise Heavens)

BP Profit Soars on Strong Oil, Gas Trading as Share Buybacks Start

By Ron Bousso and Shadia Nasralla

The jump in profits from a year earlier comes as BP says it expects oil demand to recover in 2021 due to strong growth in the United States and China as COVID-19 vaccination programmes accelerate.

In a sign of growing confidence in the economic recovery and its operations following a year of cutting costs, headcount and its dividend, BP said it will buy back $500 million of shares in the second quarter to offset the dilution from an employee share distribution programme.

Net debt dropped $5.6 billion from the end of December to $33.3 billion at the end of March, chiefly due to around $4.8 billion worth of disposals and stronger oil prices.

That pushed debt below the company’s $35 billion target sooner than expected, allowing it to deliver on its promise of buying back shares.

The company said it would provide an update on the third quarter buyback programme later this year.

As part of Chief Executive Bernard Looney’s plan to shift the focus of the oil major to low carbon energy investments, BP aims to sell $25 billion of assets by 2025.

BP’s shares were 3% higher in early trading, adding to a more than 15% gain so far this year on the back of stronger oil prices.

However, it is the weakest performer among the oil majors, with shares still around a third lower than their pre-pandemic level as investors fret over the company’s energy transition strategy.

BP's net profit

BP’s first-quarter underlying replacement cost profit, the company’s definition of net income, rose to $2.6 billion, far exceeding forecasts of $1.64 billion in a company-provided survey of analysts.

That compared with a $110 million profit in the fourth quarter of 2020 and a profit of $790 million a year earlier.

“This result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins.”

Benchmark Brent oil prices rose to an average of $61 a barrel in the first quarter from $44 in the previous quarter and $50 a barrel in the first quarter of 2020.

BP expects global oil inventories, which swelled as the coronavirus pandemic hit fuel demand, to fall to historic levels by the end of 2021.

(Reporting by Ron Bousso, editing by Louise Heavens, Kirsten Donovan)

Tamar Offshore Gas Deal Abu Dhabi SWF Mubadala Israel’s Delek

The move is a major step forward in the already growing Israeli-Emirati cooperation after that leading GCC countries and Israel signed the Abraham’s Agreement. The deal is still a major surprise, as if agreed and put into action will deliver a major stake in Israel’s energy resources to the Emiratis, a move not imaginable a year ago. Since last year, a wide-range of military-security and energy related contracts and agreements have been signed between Abu Dhabi parties and Israeli companies.

As stated in an official press release, Delek and Mubadala have agreed to an US$1 billion deal, that will bring the 22% stake of Delek into the hands of the SWF. Delek Drilling, in a notification to the Tel Aviv Stock Exchange and the Israel Securities Authority, indicated that the deal also entails an additional $100 million conditioned on certain terms and goals being met. The expected deal should be finalized by May 31.

Yossi Abu, Delek Drilling’s CEO, stated that “this transaction has the potential to be another major development in our ongoing vision for Natural Gas commercial strategic alignment in the Middle East, whereby Natural Gas becomes a source of collaboration in the region”. The move is already seen as a major support for new upcoming deals in the East Med region. The Delek stake sale was expected, as the company which is owned by Israeli tycoon Yitzhak Tshuva, is forced by the Israeli government’s 2015 gas framework terms to sell its non-operating stake in Tamar before the end of 2021, to open up Israel’s gas market for other parties.

The Tamar offshore gas field was discovered in 2009, currently operated and owned by Noble Energy Mediterranean Ltd. (25%), Isramco Negev-2 Limited Partnership (28.75%), Tamar Petroleum Ltd. (16.75%), Dor Gas Exploration Limited Partnership (4%), and Everest Infrastructures Limited Partnership (3.5%). The field holds an estimated 369 bcm of recoverable reserves. At present, the field’s six wells are producing 11 billion bcm per year. Some of the gas is already being exported to Jordan and Egypt.

Since October 2020 a possible UAE deal with Israeli energy partners was already in the offing. At a meeting between the UAE and Israel after the Abraham Agreement, discussions already included energy and gas cooperation. As stated by both leaders at that time, major multibillion deals would be expected to follow soon, not only in energy but also security, high tech and other sectors.

In the next months it will be very interesting to watch the region even better, as the UAE, as already Qatar did before, is having an eye on the vast East Med gas reserve potential. Possible renewed investment deals could also include potential tripartite deals, including Egypt’s LNG or a further investment in Israel (Leviathan) or Cypriot developments.

Some discussions seem also to be focusing on the revamp of the existing Israeli oil pipeline, which connects Eilat to the Mediterranean Coast. The former Israeli-Iranian pipeline has been idle for decades, but could be a very functional alternative to a Suez Canal blockade or other regional turmoil. The UAE, or maybe even Saudi Arabia, would be potential interested in revamping the second oil transport option.

Renewed GCC-Arab interest in the East Med is very important to make future developments possible. Looking at the immense costs still expected to set up a regional pipeline and LNG infrastructure, Arab investments could be making decisions easier. It also could increase the already strong Egyptian-Israeli gas connection, as the UAE and others will support a regional energy based stability. Potential others deals should not be blocked, even if there is still some potential historical fear in Israel or nationalism in Egypt to be wary of GCC involvements.

For a look at all of today’s economic events, check out our economic calendar.

Oil Falls as India’s COVID-19 Surge Dents Demand Outlook

By Bozorgmehr Sharafedin

Brent crude was 89 cents, or 1.4%, lower at $65.22 a barrel by 0846 GMT. U.S. West Texas Intermediate (WTI) crude was down 87 cents, or 1.4%, at $61.27 a barrel.

Both benchmarks fell about 1% last week.

“The market is tending to focus more on the bad news from India and Japan at present, where the number of new coronavirus cases has risen sharply, prompting increased mobility restrictions to be imposed,” said Commerzbank analyst Eugen Weinberg.

India and Japan are world’s third and fourth biggest crude oil importers.

India’s new coronavirus infections hit a record peak for a fifth day on Monday as countries including Britain, Germany and the United States pledged to send urgent medical aid to help battle the crisis overwhelming its hospitals.

Consultancy FGE expects gasoline demand in India to slip by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May. India’s total gasoline sales came to nearly 747,000 bpd in March.

Diesel demand, which at about 1.75 million bpd accounts for about 40% of refined fuel sales in India, may slump by 220,000 bpd in April and by another 400,000 bpd in May, FGE says.

In Japan, a third state of emergency in Tokyo, Osaka and two other prefectures began on Sunday, affecting nearly a quarter of the population as the country attempts to combat a surge in cases.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, will discuss output policy at a meeting this week, but most analysts believe it will go ahead with its decision to ease output restrictions from May.

The group in a meeting at the start of April agreed to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.

“The looming wave of fresh OPEC+ supply coupled with renewed demand concerns has dented hopes for a meaningful summer price pounce,” said Stephen Brennock of oil broker PVM.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Yuka Obayashi in Tokyo; Editing by Kirsten Donovan)

Abu Dhabi Ports raises $1 Billion Loan

By Yousef Saba

Nine banks provided the facility, with Citi and First Abu Dhabi Bank having lead roles in the transaction, the first source said on condition of anonymity.

The source added that HSBC and Standard Chartered were also involved in the loan for the company, which is owned by Abu Dhabi state holding company ADQ.

Abu Dhabi Ports, FAB, HSBC and Standard Chartered did not immediately respond to Reuters requests for comment. Citi declined to comment.

Issuers in the Gulf have been raising debt, seeking to benefit from low rates as the region emerges from an economic downturn caused by the COVID-19 pandemic and last year’s oil price plunge.

Abu Dhabi Ports was also likely to issue bonds soon, the second said. Fitch Ratings and S&P Global Ratings both assigned the company an A+ credit rating on Thursday.

ADQ, which sovereign wealth fund tracker Global SWF said last month was worth $110 billion, has gained prominence in the past year as Abu Dhabi consolidated several government assets under its banner.

Another ADQ subsidiary, power utility TAQA, raised $1.5 billion in a bond deal last week. Food and beverages group Agthia, also owned by ADQ, mainly used bank debt to finance its acquisition of three quarters of Egypt’s Ismailia Agricultural and Industrial Investment.

(Reporting by Yousef Saba; Editing by Edmund Blair)

Exclusive – Qatar Petroleum Plans Debut Dollar Public Bond Sale

By Yousef Saba and Davide Barbuscia

The world’s top liquefied natural gas (LNG) supplier sent banks a request for proposals for the planned debt sale in the last few weeks, the sources said, with one of them adding it will likely raise billions of dollars.

“It will be a big deal,” the source said.

QP, which did not immediately respond to a request for comment, plans to vastly expand its capacity in coming years.

The company said last month it would take full ownership of its Qatargas 1 LNG plant, the country’s first, when its 25-year contract with international investors including Exxon Mobil Corp and Total SE expires next year.

The planned debt sale comes as energy companies in the region seek different means to raise cash after they were pummelled last year by the double shock of the COVID-19 pandemic and oil prices collapsing.

QP last year was looking at job and cost cuts to cope with the slump in oil and gas demand caused by the new coronavirus.

Sources told Reuters last week Saudi Arabia’s oil giant Aramco is planning to refinance a $10 billion revolving credit facility. It is also working on a $12.4 billion deal to monetise its oil pipelines network.

Abu Dhabi National Oil Company (ADNOC) has done similar infrastructure deals that lease ownership of assets, raising billions of dollars in the past two years.

It is also planning initial public offerings of its drilling business and its joint venture with chemical producer OCI.

QP, wholly owned by the Qatari government, has sold bonds through private placements in the past, including in dollars and in Japanese yen. It has more than $3.25 billion in outstanding loans and bonds, according to Refinitiv data.

(Reporting by Yousef Saba and Davide Barbuscia; editing by David Evans)