POLITICO Pro’s Morning Energy: From Bonn to Paris - Gazprom’s squeeze

By Sara Stefanini | @SaraStefaninii | Send tips to sstefanini@politico.eu| Subscribe for this daily column http://politico.eu/registration | If you prefer to read this on your desktop click here Hello and welcome to POLITICO Pro’s Morning Energy. Iran locks up some LNG technology, Russia tightens its grip on Europe and turns up the Asian charm, and Miguel Arias Cañete lands in Papua New Guinea. — WHAT’S HAPPENING: BON BONN: The week-long climate negotiations in Bonn may have done little to pare down the 80-plus pages of text that will form the basis for a deal to reached at the COP21 summit in December, but leaders stressed they did make progress. The meeting’s two co-chairs said they will issue a slimmer draft of the agreement in the first week of October. The final negotiating session before the Paris climate summit is October 19-23. That’s the “crucial phase,” said Laurence Tubiana, France’s ambassador for climate negotiations. “We look at all the pieces of the puzzle, and now everybody knows everything. Now we have to assemble all the pieces of the puzzle.” However, that draft is unlikely to resolve the thorniest issues, including finance and the legal framework of the agreement. Those will be dealt with in Paris. Our POLITICO Pro colleagues in Washington report (paywall): http://politico.pro/1ioorVk and the draft agreement they’ll be taking to the session next month: http://bit.ly/1Ux6K1H — ‘WE’RE ALL FRUSTRATED:’ The pace of the negotiations is not as important as the direction, said Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change. And the good news is the COP21 talks are now underway on three levels: negotiators, ministers, and heads of state, and that’s “quite unique,” Figueres said. “We all want to see this baby born,” she added. “The proof is in the pudding, and the pudding is coming out of the oven in Paris.” — BRING THE COFFEE: NGOs agree that the ball is now rolling. But the talks are still focused on figuring out larger issues “rather than substance,” Greenpeace’s Jasper Inventor said in a press briefing Friday. On climate financing, the divide between rich and poor countries “remains unbridged.” Negotiators should be “ ready to drink lots of coffee and negotiate until the early hours of the morning” during the upcoming October sessions, Inventor said. DEVIL IN THE TEXT: That was the lesson learned from the COP15 summit in Copenhagen in 2009, said Connie Hedegaard, the EU climate commissioner between 2010 and 2014 and Denmark’s COP15 minister. Back in September 2009, “most people thought, as most people think today, that of course it would be possible to get an agreement,” she told us. “But we learned that many obstacles lie in the text.” One concern is that the issue of a so-called firewall — the division of burdens between developed and developing countries — remains a sticking point. “Time is short, and despite all the good will, we have seen how difficult it can be if there are too many square brackets when you get to Paris,” Hedegaard said. KEEP CHECKING BACK: There is increasing support among parties for putting a five-year review clause in the final COP21 deal, which would allow states to boost their ambitions over time, NGOs said. But it’s still unclear how such a mechanism would work in the EU’s case. The bloc’s 2030 energy and climate commitments were only agreed after months of divisive negotiations over numbers and processes. EU members would sit down in 2025, potentially the first review year, to review their ambitions. Asked about this, Elina Bardram, the EU’s chief negotiator, reiterated the bloc’s support for a review clause. She emphasized that it would be good for the world, but dodged the details of how it would work internally. Arias Cañete’s statement: http://bit.ly/1UyUXQo LIQUID IRAN: Germany’s Linde has secured a foothold in Iran’s (potential) future liquefied natural gas (LNG) exports, Argus Media reports. The company has reached a deal with state-run National Iranian Gas Export (NIGEC) to provide liquefaction technology for a plant with a capacity to export 10.8 millions tons per year of LNG. The licenses and some of the facilities needed for the Iranian LNG plant have already been purchased, but sanctions have kept them from being delivered, said NIGEC general manager Mostafa Sharif. Linde representatives joined German Economy Minister Sigmar Gabriel on a visit to Iran soon after July’s tentative agreement to block Iran from building a nuclear bomb. http://bit.ly/1PPKb7c — WHAT THE MAJORS THINK: Representatives from some of Europe’s biggest energy companies met with Arias Cañete on Friday and told him they expect Iranian gas exports Europe to mostly come in the form of LNG, rather than via pipeline, we hear. However, they said to expect oil exports first, and gas in the medium term. For now, companies are keen to get involved in energy saving and power generation projects in the country. GAZPROM SQUEEZES ITS FIST: The Russian major’s agreement with European peers to expand the Nord Stream gas pipeline to Germany, reached at the Eastern Economic Forum in Vladivostok Friday, sits awkwardly with the EU’s effort to diversify its gas away from Russia. It comes as Moscow pushes to bypass Ukraine as a gas transit route. “If completed, this might imply lower (or no) gas transit revenues for Ukraine, and possibly higher gas prices,” said Georg Zachmann from Bruegel Research. If Russia stops sending gas through Ukraine to Central and Eastern Europe, it could also make Ukraine more dependent on Russian gas. That’s because Ukraine currently receives so-called reverse flows — Russian gas that goes to neighbors like Slovakia, and then travels back to Ukraine. “Absent transits through Ukraine, Slovakia might not be in a position any more to provide cheap reverse flows back to Ukraine,” said Zachmann. — STILL NO TURKISH DELIGHT: The Nord Stream II project isn’t Russia’s only plan for diverting its European exports away from Ukraine; there’s also the planned Turkish Stream, which would land at the Turkish-Greek border. But the Russian and Turkish governments have yet to come to a final agreement to proceed. “Building both Nord Stream II and a full-blow 63 billion cubic meter per year TurkStream makes no sense for Gazprom,” said Zachmann. Instead, Moscow may choose to go with a smaller version that supplies Turkey and the Balkans, which currently receive gas delivered through Ukraine, he added. Kalina reports: http://politi.co/1Fnumz2 LET’S SWAP THIS: Besides making waves with its Nord Stream 2 announcement, Gazprom also made news for deciding to revive a multi-billion euro asset swap with German chemical group BASF, only months after the agreement was scrapped due to the conflict in Ukraine, the FT reports. Under the deal, Gazprom will take full control of a jointly-operated European gas trading and storage business, including the biggest underground gas storage facility in Western Europe. It will also receive a 50 percent stake in BASF subsidiary Wintershall’s North Sea operations. In return, Wintershall will receive stakes in two western Siberian gas fields. The article: http://on.ft.com/1JT3TdA, and the press release: http://on.basf.com/1OgHVFo ON THE BLOCK: In yet more Gazprom news, the company plans on holding three gas auctions this week to defend its European market share. It wants to boost exports to Europe and Turkey by 7 percent to make up for a 30 percent drop in prices. It’s a shift for Gazprom, which until now has relied on long-term take-or-pay contracts with its European customers. The auctions will be for 3.24 billion cubic meters, to be delivered over six months. Bloomberg has more:  http://bloom.bg/1O7wAcM CHARM OFFENSIVE: Amid strained with Europe, Russia used the Vladivostok forum to continue its pivot to Asia. In pursuit of new investment to help cope with big debts and low oil prices, Russia is giving Asian companies access to its prized oil and gas assets, the FT reports. State oil major Rosneft, for instance, gave India’s state-run ONGC a 15 percent share of its largest oil and gas field. http://on.ft.com/1JLKsXk — HEADLESS BODY: Russia signed some 30 cooperation agreements with China during President Vladimir Putin’s visit to Beijing on Friday, including several on energy. But most of those are non-binding, so don’t take them too seriously, Bloomberg reports. “Practice shows that out of 10 agreements, we get one or at most two contracts,” said Sergei Tsyplakov from Sberbank. Among those is an agreement for a possible third gas pipeline from the Sakhalin region in Russia’s Far East to China. However, the governments have tempered expectations for the second pipeline, from Siberia to western China, saying not to expect it until 2016. They agreed to the first, the Power of Siberia to eastern China, in May 2014. http://bloom.bg/1fZfaRJ NORTH SEA WORRIES: Big worries that parts of the North Sea may be abandoned if low prices force out some energy companies, leaving the crippling costs of running infrastructure to be shared among a smaller number of companies. Andy Samuel, the head of the new Oil and Gas Authority, told the FT that companies have to do a better job of working together, despite competitive pressures. A report to be released today warns that whole areas of the continental shelf could be shut down if companies can’t do a better job of burden sharing. The story: http://on.ft.com/1VI4fMy TRICKY POWER BALANCE: Meaning electricity, not control. The partial solar eclipse in March put the European electricity sector to the test: If it’s a sunny day, will a grid that is increasingly reliant on renewables (especially in Germany) withstand a solar blackout? Fortunately, cloudy skies in much of Europe limited the effects of the eclipse. But grid operators still had to ramp up their backup electricity supply, just in case, and then deal with a surge in sunshine once it passed. The Economist takes a look at the risk of relying on renewables, and options for storing energy for later. http://econ.st/1JTaaWP RENEWABLE SECURITY: Militaries around the world are turning to energy efficiency and sustainability as a way of bolstering their own security, reducing their reliance on fossil fuels as well as saving money. The U.S. Navy has made the biggest commitment so far, agreeing to build a 210 megawatt solar energy facility, which will supply 14 Navy installations. Construction of the Mesquite Solar 3 plant in California begins this month and should be completed by the end of 2016. Renewable Energy Focus: http://bit.ly/1PUkr9z FLYING LOW: Aircraft emissions are falling short of United Nations fuel efficiency goals by 12 years, according to the International Council on Clean Transportation. The efficiency of commercial jet fuel is improving by an average of 1.1 percent per year, but air traffic is expected to grow much faster — at 4.1 percent per year for 20 years. “When demand for your service grows four times quicker than the fuel efficiency of new planes, you clearly have a CO2 emissions gap,” said Andrew Murphy from the NGO Transport & Environment. Press release: http://bit.ly/1JE1J2l and study: http://bit.ly/1JTdJ3A — WHAT’S COMING: LONG HAUL: Miguel Arias Cañete, climate and energy commissioner, starts the week in Papua New Guinea for the Pacific Islands Forum. He’s there until Friday, where climate action will be on the table once again. The EU has been building a strong alliance with small island states since the COP17 summit in Durban, South Africa, said Hedegaard, who attended the 2013 forum in the Marshall Islands. “I know all the effort it takes the travel there, to prioritize it in a busy schedule, and the fact that Cañete is doing it emphasizes again how much Europe attaches to really understanding the Pacific Islands position and having a dialog with them.” BREAK’S OVER: Just because Bonn’s over doesn’t mean climate discussions are. They resumed yesterday and continue today at an informal ministerial in Paris, organized by the French government. The focus is on finance, technology, loss and damages from climate change, and adaptation, Tubiana said. BACK IN STRASBOURG: The European Parliament is back in session. The Industry, Research and Energy Committee meets tonight from 21:00 to 22:30 and will discuss studies on EU energy governance and the effects of the Transatlantic Trade and Investment Partnership on European energy markets, plus a briefing on energy price trends. Follow it here: http://bit.ly/1OnkzOB _Thanks to Kalina Oroschakoff, Anca Gurzu and Helena O’Rourke-Potocki. _

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You think the stock market is crazy? Look at oil prices.

NEW YORK (AP) — Commodity markets are renowned for their booms and busts but the last four days in the crude oil market have even experienced traders wide-eyed. The price of oil plunged 8 percent on Tuesday, following a three-day ascent of 27 percent, the biggest such jump in 25 years. "It's wild!" said Phil Flynn, energy analyst at the Price Futures Group. "Buckle up." The stock market has been volatile too, but nothing like oil. The S&P 500 has moved up or down by 6 percent or more only once since 2008. Oil has moved by at least 6 percent each of the last four trading days. Big moves — mostly down — have been a hallmark of the oil market over the past year. Starting last summer oil began to fall, sliding from near $100 to under $45 in March. U.S. oil production was booming, OPEC nations kept oil flowing and even rising demand wasn't enough to absorb the flood of oil. Then oil's moves became more sudden in the spring and summer. Oil rose 25 percent in April. It fell 21 percent in July. It sunk to a low of $38.24 last Monday, the lowest price since the depths of the recession in 2009. The big decline in price was easy to explain. Against a backdrop of rising global supplies came mounting evidence from around the world that demand for oil would be far less than expected. The plummeting stock markets in China and the government's decision to devalue its currency led to fears that economic growth there was slowing sharply. Japan, the world's third largest oil consumer, revealed that its economy contracted in the second quarter. And economic growth in Europe appeared to be in peril as the Greek debt crisis worsened. At the same time, the U.S. and Iran reached an agreement that could lift sanctions against the OPEC nation, paving the way for more Iranian oil to return to the market, adding to already high supplies. But the market was clearly uncomfortable with oil under $40, traders say. And at any sign that perhaps supply and demand weren't quite so out of whack, they were ready to buy. China's stock market soared last week, a possible signal that the worst was over. On Monday the U.S. Energy Department changed how it estimates domestic oil production and revised its numbers significantly lower. A bulletin from OPEC suggested the cartel might be ready to work with other nations to restrict production. Traders bought, and bought, and bought, leading to the nearly 30 percent jump in prices over the span of a few days. Stiil, some traders weren't impressed. Citibank's Ed Morse wrote on Monday that the surge was a "false start" brought on by trading technicalities, a "gross misrepresentation" of OPEC's intentions and confusion about the Energy Department's new methodologies. He predicted oil would head lower. That call looked prescient Tuesday when oil plunged $3.79 a barrel, or 7.7 percent, to close at $45.41 as weak manufacturing data out of China raised concerns — again — about economic growth there. In other energy trading: — Brent Crude, a benchmark for international oil used by many U.S. refineries, fell $4.59 to close at $49.56. — Wholesale gasoline fell 10.3 cents to close at $1.396 a gallon. That will help push retail gasoline prices lower in the coming weeks. The national average retail price of gasoline has been sliding steadily since mid-June and fell a little more than a penny Tuesday to $2.46 a gallon, according to AAA. — Heating oil fell 12.3 cents to close at $1.578 a gallon. — Natural gas rose 1.3 cents to close at $2.702 per 1,000 cubic feet. Jonathan Fahey can be reached at http://twitter.com/JonathanFahey . Join the conversation about this story »

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STOCKS RISE: Here's what you need to know (SPY, DJI, IXIC, USO, WTI, OIL, VDE, LL, LOCO)

Stocks climbed in the final hour of trading after being relatively flat for much of Friday. The major indexes closed positive for the week, and gold had its best week in two months. First, the scoreboard: Dow: 17,469.65, +61.40, (0.35%) S&P 500: 2,090.77, +7.38, (0.35%) Nasdaq: 5,047.30, +13.74, (0.27%) And now, the top stories on Friday: The US oil rig count rose for a fourth straight period this week, according to driller Baker Hughes. The oil rig count rose by 2 to 672. The gas rig count fell 2 to 211, and the total rig count was unchanged from last week at 884.  Crude oil prices rose slightly on Friday after falling to fresh six-year lows. West Texas Intermediate crude oil futures climbed to as high as $42.92 per barrel in New York, after falling to $41.46 overnight. In a note to clients, Societe Generale's Kit Juckes wrote, "It’s now clear to financial markets that tackling oversupply in a world with more modest demand growth, requires a more protracted undershoot in oil prices." The Eurogroup approved an 86 billion euro-bailout for Greece. It was agreed to after a six-hour meeting that followed the stamp of approval from Greece's parliament. The University of Michigan's consumer sentiment index showed a preliminary reading of 92.9 for August, below expectations for 93.5 and compared to 93.1 in July. The nine month average of the reading is at its highest since 2004. "Fortunately, sentiment held up in early August, another sign that the consumer confidence drop in July may have been overdone," UBS' Maury Harris wrote in a client note. Industrial production rose to an eight-month high of 0.6% (0.3% estimated), boosted by auto output. Capacity utilization rose 78%. "The big July increase in industrial production is further proof that the U.S. economy is expanding at an above-trend pace in mid-2015, after a weak start to the year tied to bad weather and the West Coast ports labor dispute," wrote PNC chief economist Stuart Hoffman in a note. The producer price index for final demand rose 0.2% month-on-month (0.1% forecast). Excluding food and energy, prices rose 0.3% versus 0.1% expected. El Pollo Loco shares slumped 19% after the company reported quarterly revenues and same-store sales below forecasts. Second-quarter revenues totaled $89.5 million ($93 million estimated), and sales at stores open for at least one year grew 1.3% (3.2% forecast). The Mexican-style-chicken chain expects to open as many as 24 restaurants during the fiscal year 2015. Lumber Liquidators jumped by up to 10% after hedge fund Tiger Management disclosed in a 13F filing that it took a new position in the hardwood flooring retailer of 238,000 shares. The stock is down about 79% year-to-date following an episode of "60 Minutes" in March that showed the company's laminate flooring sourced in China contained excessive levels of formaldehyde. The story will be rerun this Sunday on CBS. DON'T MISS: Before you totally freak out about China's currency devaluation ... »Join the conversation about this story » NOW WATCH: Something strange is happening with US rainfall

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STOCKS FALL, OIL GETS CRUSHED: Here's what you need to know (SPY, DJI, IXIC, USO, WTI, OIL, VDE, USO, BNO, TWTR, ANR, GREK, EUR)

Stocks closed the session in the red but above the worst levels of the day, with the energy sector leading losses on the S&P 500. Crude oil prices fell to fresh lows. First, the scoreboard: Dow: 17,598.20, -91.66, (-0.52%) S&P 500: 2,098.04, -5.80, (-0.28%) Nasdaq: 5,115.38, -12.90, (-0.25%) And now, the top stories on Monday: Oil fell to new lows on oversupply and weak demand concerns. West Texas Intermediate crude oil tumbled 4% below $45 per barrel for the first time since mid-March. Brent crude, the global benchmark, fell by about 5%, and below $50 for the first time since January. Iranian state media reported that the country could start increasing oil production as soon as one week after economic sanctions are lifted. And, China's official PMI gauge of manufacturing fell to a two-year low of 50.0. That adds to concern that demand from the world's second-largest oil consumer may slow. US manufacturing numbers kicked off a crucial month for economic data. The Institute of Supply Management's manufacturing report leaked, and came in at 52.7 for July, below the estimate of 53.5, which was also the reading for June and a year-to-date high. "Looking ahead, the manufacturing sector will probably continue to struggle as the dollar has appreciated further recently and overseas demand has remained muted," Capital Economics' Adam Collins wrote in a note to clients. Markit Economics' purchasing manager's index (PMI) came in at 53.8 for July, in line with estimates. The manufacturing report was strong overall, with production volumes rising at the fastest pace in three months, and incoming new work growing at the fastest pace since March. But taking a step back, Markit chief economist Chris Williamson said in the release, "the sector continues to endure one of the slowest growth phases seen over the past year and a half." Greek stocks got slammed after opening for the first time in five weeks. The Athens Stock Exchange (ASE) index fell by up to 23%. In a stunning data development, Greece's PMI fell to 30.2, the lowest on record, and employment fell to the weakest since Markit started tracking the numbers. Twitter shares fell to an all-time low. The stock fell 5.45% to close at a record low of $29.33. The stock has been sliding since the disappointing earnings call last Tuesday night in which interim CEO Jack Dorsey put out a tepid outlook for user base growth. Coal company Alpha Natural Resources filed for Chapter 11 bankruptcy. The filing gives the company time to reorganize its finances. The coal industry is in turmoil, as natural gas use surges and government regulation pushes demand away from the fuel. "The change and challenges the U.S. coal industry has experienced over the last several years are greater than any in the past three decades," said CEO Kevin Crutchfield in a statement.  DON'T MISS: RANKED: The economies of all 50 US states and DC from worst to best »Join the conversation about this story » NOW WATCH: There is a secret US government airline that flies out of commercial airports

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OIL DROPS, STOCKS FALL: Here's what you need to know (DIA, SPX, SPY, QQQ, IWM, TLT, CVX, XOM, USO, OIL, WTI)

Friday was another tough day for oil as stocks finished in the red. Both Chevron and Exxon Mobil reported earnings sharply down from the prior year as crude oil fell below $47 a barrel.  First, the scoreboard:  Dow: 17,691.5, -54.5, (-0.3%) S&P 500: 2,104.1, -4.5, (-0.2%) Nasdaq: 5,128.3, -0.5, (-0.01%) And now, the top stories on Friday: Wage growth hit a record low in Q2. The Bureau of Labor Statistics announced this morning that wages grew by only 0.2% — the smallest quarterly gain since the series began in 1982. The employment cost index rose 2% year-over-year following a 2.6% gain in Q1. Wall Street was expecting the year-over-year gain to be 2.4%. This is the final ECI report before the September Fed meeting, and could play a significant role in whether or not the central bank decides to raise interest rates for the first time in nine years. The Athens Stock Exchange will finally open again on Monday after being shuttered for five weeks, according to the AFP. The AFP quoted a source from the Greek finance ministry who said the decision has already been signed. Greece's main stock exchange was closed on June 26 amid capital controls that stemmed from the Greek debt crisis. Oil ended its worst month since October 2008, falling about 21% in July. On Thursday, oil hit a new low, falling below $47 a barrel. Meanwhile, supply keeps growing as the Baker Hughes US oil rig count rose by 5 this week to 664. This marks the 4th increase in the past five weeks. Chevron reported a 90% drop in profits year-over-year as oil continues to crash. Net income was down to $571 million from $5.67 billion during the same quarter last year. Meanwhile, Exxon Mobil reported a 52% drop in profits year-over-year, with net income down to $4.2 billion. The company earned $8.8 billion during the same quarter last year. A report from the Wall Street Journal said that Uber is now valued at more than $50 billion, following its latest round of funding. According to the Journal, the company raised nearly $1 billion from investors such as Microsoft and Indian media company Bennett Coleman & Co. Uber is the second company, after Facebook, to ever have a valuation this large before going public. Don't Miss: A $600 million coal mine just sold for less than $1 »Join the conversation about this story »

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More job losses are coming for the US shale industry

With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran’s crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC’s high production levels and China’s market turmoil have created more pressure on oil prices, making a price rebound look highly unlikely in the near future. So, with the prices of both Brent and WTI moving towards $50 per barrel, the short to medium-term outlook for oil remains mostly bearish. This is bad news for the U.S. shale sector which is already dealing with rising debt and the ever-increasing risk of default. A recent Bloomberg report stated that U.S. driller’s debts stood at $235 billion at the end of first quarter of 2015, which is quite worrying. Does this mean that the U.S. oil sector is likely to witness a lot more layoffs than we have seen so far? Surprisingly, a recent IHS study had revealed that the U.S. shale sector has been boosting job creation in addition to supporting around 1.7 million jobs in U.S. All this as the overall unemployment rate in U.S. has been declining since previous years. But with rising negative sentiment pertaining to oil prices, is U.S. the shale sector prepared to face one of its biggest tests yet? Will the industry be able to sustain another long period of low oil prices or will it once again resort to trimming its workforce? Low oil prices will most likely result in more job losses Since the oil price collapse of last year, we have seen how oil field services and drilling companies have slashed thousands of jobs in order to reduce costs and cut their operational spending. Some of the major oilfield companies like Schlumberger, Halliburton and Weatherford have already announced close to 20,000 layoffs as of February 2015.   However, the markets turned bullish when oil prices were hovering in the range of $60 per barrel during the last two months, raising hopes that oil companies would be sending close to 150 drilling rigs back into operation. Now that oil prices are again moving towards the $50 per barrel mark, high drilling costs make almost a third shale oil in the U.S. too expensive to produce. Even Goldman Sachs has admitted that the $50 per barrel oil price level would deter any kind of a drilling recovery in U.S. this year, as there would only be around 20 to 50 rigs returning to work by end of this December. In fact, analysts from Goldman predict WTI will fall to $45 a barrel by October this year. “Oil rebalancing remains in its early stages with the current cash flow and funding mix stalling it, we believe that as fundamentals reassert themselves and we move past the seasonal peak in demand, oil prices will continue to sequentially decline,” said analysts from Goldman Sachs. U.S. shale sector faces another challenge as hedges expire The U.S. shale industry had been somewhat insulated from the effects of low oil prices in the past as companies had hedged their production. This meant that companies had fixed their future selling price in order to temporarily circumvent the ongoing volatility in the oil markets. Since most of the companies had hedged their production before the last oil price crash, they were well protected from the erratic oil price movements. However, the situation is quite different now as most of these hedges are about to expire. For small and medium shale companies that had hedged their production at $85 or $90 per barrel previously, having more of their production exposed to $50 per barrel prices will be painful. What to expect over the coming months The coming few months will prove challenging for the sector, and some small and medium U.S. producers may start missing their debt repayments or even file for bankruptcy. Quicksilver Resources and American Eagle Energy are two of the six U.S. based companies that have filed for bankruptcy in 2015 so far. Sabine Oil and Gas Corp. is the latest, and the biggest, U.S. producer to file for bankruptcy so far. Even mergers and acquisitions have slowed down considerably for the U.S. oil and gas industry in 2015. If the present trend persists, companies will have no choice but to cut their workforces even further to remain competitive and reduce their rising overheads. If oil prices remain in the range of $50 per barrel for longer than expected, even big operators such as Exxon Mobil, Chevron and ConocoPhillips (who have so far not made any major layoffs) could start downsizing their workforce.  Join the conversation about this story » NOW WATCH: Scientists just discovered 11,000-foot ice mountains, geysers, and volcanoes on Pluto

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Greece looks to offshore oil and gas

Greece is in an economic depression. Whether or not it agrees to the ruinous terms imposed upon it by its creditors in order to obtain a bailout, or if ...

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Iran will be 'competing in Europe head-on with Russia'

An Iran nuclear deal could mean bad news for the Russian oil business. The most obvious source of pain is that the introduction of Iranian oil on the market after sanctions are lifted could push oil prices down again. But that's not the only sore spot. In the last few years, Russia encroached on Iran's primary markets, Asia and Europe, and that trend could reverse following the deal. “Iran is going to be competing in Europe head-on with Russia,” Ed Morse, head of commodities research at Citigroup Inc. previously told Bloomberg. Before the Western sanctions, Iran's crude exports "were a regular fixture for European refineries." But since 2012, Iran has been banned from selling oil to Europe, and additional US sanctions made it harder to buy Iranian oil with US dollars.  So, "Russia, whose benchmark export grade is similar to Iran’s flagship blend, has been the main beneficiary of that decline," Bloomberg reported recently. "Exports into Iran’s main markets in Asia and Europe have more than doubled, growing by 420,000 barrels a day from 2011 to 2014." Citi's Edward L. Morse included a chart (to the right) in a June 30, 2015 report to clients, showing Iranian crude exports by destination, where the loss of the European market is clear. However, things could be change up now: many Mediterranean refiners are ready and excited for the return of Iranian oil. "Iran has been a long standing valued partner ... We are looking forward to Iran coming back to the market," a spokesman for Greece's biggest refiner Hellenic Petroleum told Reuters. "The volumes of crude oil that will re-enter the Mediterranean market will ease prices and give more options for refiners in the region," he added. He stated, however, that they will not buy any crude before sanctions are officially lifted. Additionally, a spokeswoman for Spain's Compania Espanola de Petroleos (CEPSA) reportedly said that "Iranian crude has largely been part of our supply and we maintained a long commercial relationship with them." "If sanctions are lifted, as it seems, Iranian crudes will definitively be again another alternative to consider," she added in a statement to Reuters. Analysts expect the deal could see Iran increase its oil exports by up to 60 percent within a year, according to Reuters. "It would mean cheaper crude for Mediterranean refineries, especially smaller countries that have been impacted by economic problems – like Greece," Eshan Ul-Haq said, a senior market consultant with KBC told Reuters.SEE ALSO: This map shows what $100 is actually worth in your state Join the conversation about this story » NOW WATCH: 6 compelling correlations that make absolutely no sense

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Oil prices fall as Iran nuclear deal seems likely

By Henning GloysteinSINGAPORE (Reuters) - Oil prices opened up lower on Monday as Iran and six world powers were close to nailing down a nuclear deal, while Greece and its creditors failed to find a bailout agreement over the weekend.The potential of Iran soon adding to global oil oversupply and the demand side weakening over China and Europe led several analysts to say that crude would fall further.Iran and six world powers were on the brink of finding a nuclear deal that would bring sanctions relief in exchange for curbs on Tehran's nuclear program.In Europe, the Greek debt crisis continued as political leaders argued late into the night at an emergency summit, so far without result.And in Asia, investors will watch whether China's stock markets can stabilize after a barrage of government support sparked a bounce in its key CSI300 stock index.Front-month U.S. crude futures were trading at $52.13 per barrel at 0025 GMT, down 61 cents from their last settlement. Front-month Brent crude was down 69 cents at $58.04 a barrel.With oversupply ongoing and abundant economic risk, several banks said they had lowered their oil price forecasts."The oil market has faced persistently weak supply/demand balances for months. Now macro risks from Greece, Iran, and China are adding to the poor micro," Bank of America Merrill Lynch said, adding that U.S. crude prices "could soon drop well below our $50 per barrel target in 3Q15".Deutsche Bank said "oil market fundamentals remain weak and, in the absence of OPEC production cuts or material supply disruption, this is unlikely to change."Commerzbank said that a potential return of Iranian supplies could add to current oversupply of 1.5 to 2 million barrels per day put additional pressure on prices from the supply side while there were also downside risks on the demand side."The China Association of Automobile Manufacturers has just lowered its growth forecast for vehicle sales this year sharply from 7 percent to 3 percent, which will no doubt have a dampening effect on gasoline demand," the bank said and added that "a fall below $55 per barrel in Brent and below $50 per barrel in WTI (U.S. crude) is therefore conceivable".China's sentiment this week will be tested by trade flows data to be published later on Monday, as well as its gross domestic product report on Wednesday.(Editing by Michael Perry)Join the conversation about this story »

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Iran nuclear deal prospects put pressure on oil price

Possible easing of sanctions would increase Iranian exports into a market already awash with oilOil prices fell sharply on Monday on the possibility of Iran adding to the global oil surplus and continued worries over Greece. A comprehensive agreement on the future of Iran’s nuclear programme is likely to be unveiled on Monday. Iran is expected to accept curbs on its nuclear plans in return for significant easing of sanctions that would allow it to increase oil exports. Continue reading...

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Oil under $60 beyond 2016 suggests market rethinking shale

By Jonathan Leff and Jessica Resnick-AultNEW YORK (Reuters) - The almost 10 percent nosedive in headline oil prices this week has many hallmarks of a shocking but short-lived slump, triggered by a confluence of external events and exacerbated by safety-seeking investors and momentum-chasing traders.By Tuesday afternoon, the crowded race to the exit was winding down, with prices recovering from three-month lows as traders reassessed the factors they blamed for the worst slide in four months: Greece's debt woes; China's stock market meltdown; talks with Iran over its nuclear program; a stronger dollar; a rise in the number of U.S. oil rigs; a breach of key technical triggers.Yet a deeper look at the market suggests an important and more lasting rethink may now be afoot: longer-term oil prices, normally less volatile and reactive than immediate delivery, have suffered an almost equally violent collapse, pushing crude prices for 2017 to below $60 a barrel for the first time ever.If U.S. shale drillers - the world's new 'swing' producers - can still turn a profit at below $60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year."If you take the curve at face value, it appears to be saying that U.S. shale can grow ... if WTI stays below $60 for three years. That doesn’t seem very likely," Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude."One would guess that all those companies that had been holding back from cutting projects and jobs over the past few months are not going to hold on much longer, and another shakeout will start. And it probably won’t be long before U.S. rig counts start to dive again."Link to chart: http://link.reuters.com/tef25wU.S. oil futures for December 2017 delivery have dropped by as much as $5 a barrel, or 8 percent, in the past two days, an even deeper retreat than last November when OPEC's surprise decision to maintain oil output despite a global glut sent markets into a deepening tailspin.The more liquid frontline prices for delivery in August this year have fallen only slightly further this week and are still several dollars above their trough from March. Longer-dated futures are plumbing contract lows, testing the break-even economics for U.S. shale oil drillers.The cause of this unusual tumble is still a topic of debate.Some link it to a future shift in fundamentals such as the expected boost in Iran's oil exports next year. Others say it may reflect the realization that oil industry costs are falling faster than expected as activity slumps. A few wonder if it is an unusually large producer hedge, or a big macro-economy fund trade unwinding.IRAN, RIGS OR...Longer-term oil futures are normally insulated from the speculative, short-term fluctuations and factors that afflict immediate prices. Too illiquid to attract fast money, they tend to trade on more strategic themes, whether a long-term bet on prices or a corporation seeking to hedge its price risks.Front-month oil futures have posted a daily change of more than $1 a barrel on 62 occasions this year, trading in a range of over $20; December 2017 has moved by that magnitude only 18 times, trading between $61 and $67 a barrel.The fact that this week's activity has affected both ends of the futures curve in nearly equal measure is unusual, says Credit Suisse analyst Jan Stuart."This isn’t a simple front-month correlation trade or a dip in demand," he says. "This is investors who invest all along the curve picking up the ball and going home. That's what this looks like."Some fundamental factors are also in play.Negotiations over Iran's nuclear program, which may conclude this week in Vienna, have increased the likelihood that a country that was once OPEC's second-largest producer will ramp up exports as sanctions are eased - likely adding more supply to the market next year at the earliest.Others pointed to the latest U.S. rig count data released last Thursday, showing the first increase in oil drilling since December. The addition 14 rigs was a bigger rise than expected.The rise suggests that at $60 a barrel, "producers can ramp up activity given improved returns with costs down nearly 30 percent and producers increasingly comfortable at the current costs/revenue/funding mix," Goldman Sachs, which is predicting a deeper and prolonged oil slump, said in a note on Monday.A HEDGE TOO FAR?Some suggested that the selloff, which began last week ahead of the U.S. Independence Day holiday, may have provoked reticent oil producers to hedge, locking in far-forward prices for fear they may fall much further.Oil option volatility fell last month to its lowest level in seven months, making hedging relatively cheaper for drillers who had locked in only 15 percent of their 2016 prices, according analysts at Tudor, Pickering, Holt & Co.The oil VIX index, a proxy for options pricing in the main oil ETF, has surged alongside oil prices in recent days, rising from 33.8 to over 42, its highest since mid-April, in a possible sign of increased demand to buy options protection.Yet market sources saw little immediate evidence of a big hedge that could explain the price move.Trading volumes in the December 2016 and 2017 WTI contracts, which were the fourth and fifth most-active in the market on Monday, was elevated, but not unusually so. The 2016 contract traded just over 35,000 lots, double the 30-day average but a hair less than on July 1, data show."We have not seen a lot of activity in the last 24-48 hours," said John Saucer, vice president of research and analytics at Mobius Risk Group, which advises companies on hedging. "We saw a lot last month."(Reporting by Jonathan Leff; Editing by Alan Crosby)Join the conversation about this story »

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This week's collapse in oil prices has been months in the making (USO, WTI, OIL, VDE)

The flop in oil prices this week has been several months in the making. On Monday, West Texas Intermediate crude oil fell nearly 8% as part of a global sell off in virtually all assets after the Greece referendum results Sunday. And then on Tuesday, oil prices fell another 4% before regaining some ground in late morning trade. But even with the reversal, oil is now near a three-month low. Quickly. For the last couple months, oil had been relatively stable near $60 per barrel, and it seemed like the worst of the oil crash was over.  Then last week, the oil rig count turned positive for the first time this year, hinting that perhaps it oil producers were ready to ramp up production with prices seemingly stabilized. But then on Monday, oil suddenly had its worst day in three months. This tumble, however, was not just about what happened in Greece over the weekend. It had been coming for months. The Energy Information Administration put out its latest short-term outlook on Tuesday, just in time for an assessment of what's prompted the most violent move in oil prices that we've seen in months.  Here's the EIA's analysis of what's moved crude oil this week, which covers the main catalysts (emphasis added): "Crude oil prices fell by about $4/[barrel] on July 6 in the aftermath of the 'no' vote in Greece on the economic program, as well as lingering concerns about lower economic growth in China, higher oil exports from Iran, and continuing growth in global petroleum and other liquids inventories." The key theme there is oversupply, and the warning signals have been flashing for some time now. Oil inventories remain near the highest levels for this time of year in about 80 years, even though they had recently declined for eight straight weeks, a streak that was only broken last week. In a note last month, Morgan Stanley's Adam Longson noted that even with peak summer demand, there were still oil tankers sitting on the Atlantic, waiting to be bought.  Longson's concern was that when seasonal demand dies down, it would be even harder to get rid of all the stockpiles that should have been sold. And then there's Iran. Iran is in negotiations with the US and other countries over its nuclear program. If sanctions that have been imposed since 2012 are lifted, Iran could pump up to 400,000 extra barrels per day. It's not a game changer to the 90 million-barrel-per-day oil market, as PIMCO points out. But it's not nothing, either. Another anecdote of the oil glut came through the surge in the cost of oil tankers. Back in May we highlighted a Bloomberg report showing that the daily rate of oil supertankers surged to the highest level in seven years on a sudden rise in demand from producers. But the US is not the only one doing all the pumping. It's an open secret in the industry that the 12-member oil cartel OPEC is pumping more oil than its official target of 30 million barrels per day; in fact, it has for the past year. One sign of a drawdown in production has come in the EIA's short-term forecast, which projects that US production peaked in May and will decline sequentially through 2016. Still, this remains a forecast. And so even though this week's crash came suddenly, and while it coincided with a global selloff on concerns about Greece, it was long overdue. SEE ALSO: Here's a brief, somewhat disturbing stock market history lesson Join the conversation about this story » NOW WATCH: We snuck a camera inside a Cuban supermarket

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The next Greek crisis: gas shortages

The fiscal standoff threatens to limit the supply of oil and gas into the country.

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Oil prices stabilize after massive sell-off

By Henning GloysteinSINGAPORE (Reuters) - Crude oil prices stabilized on Tuesday morning after posting one of their biggest selloffs this year the previous day over Greece's rejection of debt bailout terms and China's stock market woes.Front-month U.S. crude futures were trading at $52.91 per barrel at 0011 GMT, up 38 cents from their last settlement. The slight gain followed an almost 8 percent fall on Monday that pulled the contract down to levels last seen in April.Front-month Brent crude was stronger, rising over half a dollar to $57.07 a barrel following a more than 6 percent fall the previous session."Crude oil prices hit a two month low amid mounting concerns over economic stability in Europe and Asia. On the supply side, an increase in Iranian supply is expected to compete with Russian sales when the new supply hits the market," ANZ bank said on Tuesday.Major global powers and Iran are negotiating a nuclear compromise that could end sanctions against Tehran and open up oil exports into an already oversupplied market, although diplomatic sources told Reuters on Monday that important issues remain unresolved.And not all analysts are bearish in their oil price outlook.U.S. PIRA Energy Group said in a note published on Tuesday that "the worst of oil market imbalance is over with inventory overhang being much less than generally expected" and that "longer-term supply/demand fundamentals are bullish."(Editing by Michael Perry)Join the conversation about this story »

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Greek bailout vote prompts big drop in oil, loonie

The August contract for crude oil futures was down $2.70 to $54.23 in morning trading — a drop of 4.7 per cent. That's a three-month low for oil. Brent crude slipped below $60 US for the first time since April. Oil was being pressured by a broadly ...

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Oil slips 6% on Greek & Chinese crises, ahead of Iran deadline

US crude has fallen 10% in all over three straight sessions and Brent crude oil over 7% in two consecutive days

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Oil prices fall on Greek debt, oversupply concerns

Greek Prime Minister Alexis Tsipras offered a new reforms package to foreign creditors on Sunday in an effort to avoid default later this month on 1.6 ...

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STOCKS FALL: Here's what you need to know (SPY, DJI, IXIC, USO, WTI, OIL, VDE, FOGO, FIT, TLT, RHT)

Stocks lost ground through the trading day after a record-setting session for the Nasdaq on Thursday, but managed to close in positive territory for the week. First, the scoreboard: Dow: 18,022.62, -93.22, (-0.51%) S&P 500: 2,111.44, -9.80, (-0.46%) Nasdaq: 5,118.42, -14.53, (-0.28%) And now, the top stories on Friday: The US oil rig count fell for a 28th straight week. The latest data from driller Baker Hughes showed that the number of oil rigs in operation fell by four to 631, the lowest level since August 6, 2010. The combined count of oil and gas rigs fell by two to 857, the lowest since January 17, 2003. US oil supply is still robust, although the Energy Information Administration forecasts that production will fall from this month through early 2016. Crude oil prices had slumped ahead of the rig count data and remained weak through the trading day. West Texas Intermediate crude oil fell more than 2% to as low as $59.25 per barrel. Brent crude slumped to as low as $62.35, roughly one year since the international benchmark topped near $107 per barrel.  Shares of Brazilian steakhouse chain Fogo de Chão surged 30% on the first day of trading. The company had priced its IPO at $20, and shares climbed as high as $26.55. That price values the company at about $719 million. The restaurant features an all-you-can-eat selection of slow-cooked meats. It earned $262 million in revenues last year, according to a regulatory filing. Fitbit shares rallied as much as 14% one day after a stellar IPO. On Thursday, the stock opened 52% higher than the IPO price of $20 a share. It climbed to as high as $33.95 today, and is now up about  60% from the IPO price. Shale oil drillers are spending a record amount of their revenues on bond interest payments, according to Bloomberg. The US shale boom was funded mostly with debt, not cash or equity. As interest payments to creditors loom and revenues shrink, a growing number of companies face the possibility of defaults, or even bankruptcy.  This week saw the most outflows on record from government bonds, according to Bank of America Merril Lynch. In a note Friday, strategists wrote that $2.7 billion was pulled out from the securities. They noted that concerns about Greece, higher interest rates, and the spike in German bund yields, have driven the flight from fixed income. Meanwhile, $1.8 billion flowed into European equities – the most in four weeks.  Red Hat surged to a 15-year high. The open-source software provider reported first-quarter earnings after the close on Thursday, beating on the top and bottom lines. It posted earnings per share of $0.44 (versus $0.41 expected) and sales of $481 million (versus $473 million expected.) The stock rallied to as high as $81.49; it hasn't traded near $80 since the peak of the internet bubble in 2000. DON'T MISS: 'Capital controls imminent' as money floods out of Greece's banks and default looms »Join the conversation about this story » NOW WATCH: Two models in Russia just posed with a 1,400-pound bear

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Oil falls toward $63, ample supplies and Greece weigh

LONDON (Reuters) - Oil fell toward $63 a barrel on Friday as concern over Greece and a forecast that U.S. shale oil output would keep growing this year countered signs of a pickup in demand.

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Russia is extending a gas pipeline to Germany that bypasses Ukraine

Russia is reportedly planning to build a gas pipeline to Germany. Gazprom announced on Thursday that it plans to build a pipeline with a capacity of 55 billion cubic meters per year from Russia to Germany via the Baltic Sea with E.ON, Shell, and OMV, according to Kommersant. The planned pipeline's route will be an extension to the Nord Stream, Gazprom's representative Sergey Kupriyanov told journalists, adding to the direct route that supplies Russian gas directly to Western Europe. Russia, which supplies Europe with about one-third of its gas, actively seeks new ways to bring gas to Europe by circumventing Ukraine. Meanwhile, the EU keeps insisting that it wants to cut its dependence on Russian gas. Russia and the EU aren't on the best terms right now. The conflict in Ukraine has led to a gas dispute between Kiev and Moscow, which threatens supplies to the EU. Gazprom CEO Alexei Miller said that the new pipeline would help "contribute to enhancement of safety and reliability of gas supplies" to European markets after the agreement was signed on the sidelines of Russia's showcase investment forum in Saint Petersburg. In 2014, "Gazprom" has exported 191.5 billion cubic meters of gas, 12% less than in 2013, according to Lenta.Ru. In other Russian gas news, the Turkish Stream's construction through the Black Sea is set to begin in June-July 2015, according to TASS. "It is expected that the Turkish-Greek border will create a gas hub and EU countries will build their own infrastructure for receiving fuel on its territory," according to Lenta.Ru. The project is designed to bypass Ukraine, which would allow Russia to both maintain its gas leverage over the EU and hurt Kiev. SEE ALSO: Europe went after a 'pipe dream' to counter Russia — and it might work Join the conversation about this story » NOW WATCH: This is the Excel trick that will change everything about how you work with data

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