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CHINA TAKES CONTROL OF NORTH SEA OIL DRILLING
China has become the largest crude oil operator in the North Sea despite boasting that it uses deep-water oil rigs as strategic weapons, according to a report by Alexi Mostrous in The Times of London.
The scale of Chinese growth in the region meant that the U.K. handed about £2 billion ($2.6 billion) in tax breaks to one state-run oil company last year, analysis has shown. China National Offshore Oil Corporation (Cnooc), which is controlled by the Communist Party in Beijing, runs two of the North Sea’s biggest oilfields. Nexen, a Cnooc-owned company, is responsible for extracting almost 200,000 barrels a day in the area, more than 10% of output.
China has moved to dominate British oil production in what one expert described as an exercise in “soft power” as Beijing expands its global role. The strategy has been pursued despite a slump in the price of crude oil from about $115 a barrel in 2014 to $50 today.
Staying with China, Bloomberg reports that officials in the country have ordered hundreds of factories to curb activity ahead of the Group of 20 summit in Hangzhou in early September, in a bid to ensure blue skies when the red carpet is rolled out. The curtailments, along with flooding earlier this summer, may cut petroleum demand in the world’s second-biggest oil consumer by 250,000 barrels a day in the third quarter.
BNP PARIBAS CUTS OIL FORECASTS IN FACE OF RALLY
Josie Cox in The Wall Street Journal reports that that French bank BNP Paribas has warned that there are still plenty of reasons to be cautious.
Strategists at the French lender wrote that the oil market remains vulnerable to more weakness going forward, especially as a function of persistent excess supply. They cut their price forecasts for both West Texas Intermediate and Brent crude for the next three quarters and warned that investors shouldn’t read too much into talk of producer cooperation and the prospect of coordinated supply cuts.
The strategists said that they now see the price of WTI, the U.S. benchmark, averaging $42 a barrel in 2016 and $49 in 2017, down from a previous forecast of $50 a barrel for next year.
The Wall Street Journal reports that Marathon Oil Corp. of the U.S. has said chief financial officer J. R. Sult has left his role, citing personal reasons, as it also announced several other managerial changes.
MARKETS
Oil was down again Tuesday as the fundamental factors underpinning the market continue to only support crude in the $42-$52 a barrel price bracket. On the ICE Futures exchange, the October contract for global benchmark Brent was down 0.31% at $49.39 a barrel while U.S. counterpart West Texas Intermediate fell 0.65% to $47.09.
According to Olivier Jakob, an analyst at Switzerland-based Petromatrix, the dynamics of the market are being controlled by short selling and short covering, market terms for selling a crude contract and then buying it back later for a lower price. Read our latest market report at wsj.com
