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- 🛢️ OPEC+ is in the Driver's Seat Now
🛢️ OPEC+ is in the Driver's Seat Now
Plus Ovinitiv Considering a $4B Permian Acquisition

Good morning; here's what the Oilman has for you today:
OPEC+ Punches Oil Market with a New Cut
Ovintiv Eyes $4B Expansion in the Permian
Tweet of the Day

OPEC + Punches Oil Market with a New Cut
OPEC+ announced an unexpected additional production cut of more than 1 million barrels daily just a day before its regularly scheduled monthly meeting.
The move expectedly sent oil prices soaring and prompted what was politely referred to as “criticism” from the White House.
Whoever holds the oil sets the price
Earlier this year, at CERAWeek, the cream of the oil industry warned that OPEC is going to play a more important role in price-setting from now on as U.S. shale growth falters.
But has the U.S. shale industry really faltered? The latest from EIA shows that output rebounded to 12.46 million bpd in January—the highest since pre-pandemic times.
Yet, while that news didn’t pressure prices, the OPEC+ news immediately sent them flying.
Why?
Because OPEC+ accounts for more than 40% of the global oil supply, that’s why.
Not surprisingly #WhiteHouse didnt welcome #opec+ #oil production cuts announced yesterday. But reaction more tamed than last yr when group announced bigger cuts. Back then #US warned ‘there will be consequences’. From my interview with @daniburgz & @mat@mattmiller1973o@Bloombergp
— Dr Carole Nakhle كارول نخله (@carole_nakhle)
2:30 PM • Apr 3, 2023
From cold war to colder war?
In all the reports covering the big OPEC+ news, one tidbit in the Financial Times coverage stood out.
FT said that people familiar with Saudi thinking believed Riyadh had gotten angry at Washington for going back on its plan to start refilling the SPR this year.
Such a move would have raised oil prices, which Riyadh would have liked very much. But the Biden administration said it won’t rush to buy.
This obviously left its former friends in the Middle East no other choice but to take matters into their own hands, which they promptly did. Hard to believe a nation would think of their own interests, right?
Could it have happened any other way? Not really. Not when the interests of buyers and sellers of oil are so at odds.
It’s not a coincidence the Saudis are taking on 500,000 bpd of the total additional curbs.

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Ovintiv Eyes $4B Expansion in the Permian
Ovintiv is nearing a deal to buy the Midland assets of EnCap in a $4-billion deal.
Reports by Reuters and Bloomberg citing people in the know said the deal could be made public this week.
Ovintiv buying Black Swan, Piedra, PetroLegacy
— Chris Atherton (@atherton_chris)
11:32 PM • Apr 2, 2023
Permian remains a magnet for investors
Despite some pretty serious pressure from the White House against the oil industry, the star performer of the shale patch—the Permian—remains an attractive destination for investors.
Midland, where the EnCap assets eyed by Ovintiv are, is the tastiest morsel in the dish with its low-cost acreage.
Yeah, amazingly, there's still low-cost acreage in the Permian. Lots of it, if the Ovintiv news is any indication.
Ovintiv already had expansion plans for the Permian: it said earlier this year it would spend more on production growth there than in any other place it has assets.
Could more consolidation be on the way?
The EnCap deal, if finalized, would be Ovintiv’s first major acquisition since 2019. And it could be a sign of more deals down the road.
Think about it: the reason Ovintiv didn’t go down the acquisition road earlier was the fact it was focusing on reducing its debt.
Most other companies did the same. But now that debt piles are considerably smaller thanks to last year’s price rally, maybe interest in acquisitions could return.
Especially if prices continue higher in the wake of OPEC+’s latest stunt with a production cut.
Which they probably will.
It’s pretty safe to say the U.S. federal government will renew its calls for “Oil! More oil!” soon…
And this could well mean more acquisitions.

Around the Global Patch
🇺🇸 The Fed’s job just got harder due to OPEC+
🇬🇶 Marathon + Chevron + Equitorial Guinea = Gas Deal
🇲🇾 Malaysia & China dispute oil & gas rights in S. China sea

Tweet of the Day
$80 OIL
WE'RE SO BACK, EVEN THE SQUIRREL RETURNED
rated pg-13 (language)— Real PETE (@RealPETE2020)
3:02 AM • Apr 3, 2023

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