Iran Nuclear Deal Updates
The week following the announcement of the U.S. withdrawing from the Iran nuclear deal, the energy and shipping industry reacted. Many shipping companies are hesitant to provide services in or out of Iran. Maersk Tankers and Torm stated they would not commit to any new business to Iran. They confirmed they will honor contracts that were in place before May 8th.
On the other hand, European countries reassured Iran of commitment to the nuclear deal, without the United States. This message was delivered when Miguel Arias Canete visited Tehran. He also states that the entre EU hopes to strengthen trade with Iran. The EU was once the largest importer of crude oil from Iran. Despite the visit, Iran believes the EU is not doing enough to protect the benefits for Iran. Iran wants the EU to make payments for crude oil in Euros, bypassing the U.S financial system. Currently the Brent crude oil benchmark is traded in U.S. dollars.
Bottleneck in Permian Basin
The Permian Basin is the main driver of the U.S. shale boom in recent years. As drilling for oil becomes larger, so does the bottleneck of moving that oil out of the Permian Basin. Oil prices are continuously rising and the WTI has been over $70/barrel since early May. When oil prices go up, it is expected oil profit margins would also increase. In reality, U.S. shale drillers are seeing higher expenses than profits due to the bottleneck. There is a surplus of crude oil being transported out of the Permian Basin and there is not enough capacity in the pipeline, on the rail, or via truck. To account for the tight transportation market, crude oil is being sold at a discount weakening profit margins for drillers. There are plans in place to increase pipeline capacity, but it will be years before the projects are complete. Some drilling companies are starting to look outside the Permian Basin for better opportunities. Most are looking in Colorado, North Dakota, Oklahoma, and Wyoming.
In Other News
Shale drillers are ramping up production in the U.S. as oil prices rise, moving beyond the West Texas oil field that became the country’s drilling center. From Oklahoma to North Dakota, companies are increasing investment in oil fields that fell out of favor several years ago, as $70-a-barrel crude prices make fracking and horizontal drilling economical in more places again.
International port operator DP World and Virgin Hyperloop One recently announced that they are collaborating to launch a hyperloop for cargo, in what could revolutionize both the speed and cost of commerce. The project will be powered with Virgin Hyperloop One’s technology to “enable ultra-fast, on-demand deliveries of high-priority goods and can revolutionize logistics, support economic zones, and create thriving economic megaregions”.
As the countdown begins for the restoration of US sanctions on Iran, many shipping companies such as Maersk Tankers and Torm are already refusing to commit to fresh Iranian business, fearing complications relating to processing of freight and insurance related payments, sources said Monday.
One of several tantalizing tidbits dropped by Musk on Tesla’s quarterly earnings call: he expects the production version of the Tesla Semi to have a 600-mile range. When Tesla unveiled the Semi last November, it promised a 500-mile range.
Infrastructure constraints are weighing on crude prices in the Permian basin and costs are rising, independent oil firms in the region say.
Connected vehicle technology delivers real and meaningful benefits to users today, including improved fuel economy, reduced emissions, enhanced safety, anticipated maintenance, and reduced costs
North American Class 8 orders for March reached 46,300 units – the third highest month on record according to FTR. The 133,900 heavy-duty trucks ordered in the first three months of the year nearly doubled the amount from the same period last year and is largest order total of any quarter in history.
American shale drillers are still spending more money than they are making, even as oil prices rise. Of the top 20 U.S. oil companies that focus mostly on fracking, only five managed to generate more cash than they spent in the first quarter, according to a Wall Street Journal analysis of FactSet data.
Maersk is cutting back on capacity to fight falling freight rates and increased fuel costs after reporting a weak first quarter, the Wall Street Journal reports. The underlying loss came from rampant overcapacity, and a blooming trade war between the U.S. and China would ruin and hopes of recovery in the shipping industry.
The European Union’s energy chief sought to reassure Iran on Saturday that the bloc remained committed to salvaging a nuclear deal with Tehran despite U.S. President Donald Trump’s decision to exit the accord and reimpose sanctions.
The European Union is not doing enough to preserve the benefits for Iran from the 2015 international nuclear pact following the withdrawal of the United States, Iran’s foreign minister told the EU’s energy chief on Sunday.