The "mega deal is back", The Guardian trumpeted this morning after Royal Dutch Shell announced it had agreed to buy oil and gas exploration firm BG Group for £47bn. As the oil price continues to languish at little more than half the figure it reached last summer, the two firms said they had reached a deal in which Shell would pay a mix of cash and shares that values each BG share at around £13.50. The deal could produce a company worth more than £200bn, which could "close the gap" on the world's biggest oil company, the American firm ExxonMobil, Reuters said. It would be one of the biggest mergers of 2015 and the first big oil merger in decades. In the late 1990s, when oil priced crashed to below $20 a barrel, a number of high-profile oil companies merged: Texaco merged with Chevron, Exxon acquired Mobil, and Texaco and BP bought Amoco. The same "core logic" underpins Shell's move on BG, said Stephen Bartholomeusz in The Australian. "With both oil prices and share prices depressed by the plunge in the price from $115 a barrel to below $60 a barrel, it is far cheaper to acquire a company and its oil and gas reserves than it is to successfully explore and develop them," Bartholomeusz said. Oil price falls amid Iran nuclear deal speculation March 31 Oil prices have fallen amid expectations of a deal on Iran's nuclear programme. Brent crude oil futures slipped below $55 a barrel as speculation grew that a last-minute deal over Iran's nuclear programme would be reached at Lausanne's Beau-Rivage Palace hotel. Such a deal could open the way for more Iranian crude to come into world markets. Brent crude for May delivery LCOc1 was down 31 cents at $54.80 a barrel this morning, reports Reuters. US crude for May delivery CLc1 was trading 53 cents lower at $47.07 a barrel. A German official at the talks between Iran and six world powers (Britain, China, France, Germany, Russia and the US) says that although there is no agreement yet, one is possible "if there is good will on all sides". As Michael Hewson, chief markets analyst at CMC Markets, explains, this could have significant impact on the oil trade. "If you get an agreement, there is the likelihood of Iranian oil being allowed to hit an already oversupplied oil market and drive prices lower," he said. Britain says key issues still need to be resolved at the talks but agrees with delegates from Tehran and Moscow that there is "a broad framework of understanding". Foreign Secretary Philip Hammond tells the BBC: "We hope to get there during the day." Oil price drop 'won't affect growth of renewables' March 31 The falling oil price will do "little to derail" the growth of the renewable energy sector, according to analysts at Citigroup, who say the "long-term outlook for renewables will only get brighter". The bank's researchers concluded that renewable energy would be "seriously threatened" only if the oil price dropped to the range of $20 to $30 a barrel. Brent crude bottomed out just above $50 a barrel at the beginning of this year, and after climbing back towards $65 is now trading at about $55 – half its price in June 2014. Even so, Citibank says that "the underlying drivers of renewable energy adoption – policy, increasing competitiveness and energy security – point to the continued long term growth" [of renewables]. The UK plans to generate 15 per cent of its energy from renewable sources by 2020. Bloomberg reports that Goldman Sachs and Deutsche Bank "also expect renewable energy to shrug off crude's decline" and forecast ongoing investment in wind and solar projects. "Slumping oil prices may even increase demand for clean power, especially if fossil fuel companies curtail production," it suggests. Some analysts expect that oil producers will reduce their output in order to increase demand and drive up the oil price, but Opec has so far resisted calls for cuts. One reason why renewable energy has remained competitive is that it too is becoming cheaper, the Financial Times says. The cost of solar panels has dropped significantly, leading to a 50 per cent drop in the cost of solar electricity since 2010. "Only four years ago, solar power didn't make sense, because it was not competitive," says Paddy Padmanathan, president and chief executive of Saudi Arabia's ACWA Power, one of the region's biggest green energy developers. "In the past 18 months, there has been a big change." Even in the oil-rich Middle East, renewable energy is gaining a foothold. Jordan, for example, has announced that it plans to generate ten per cent of its energy from renewables by 2020. And in the next few years, work will begin on more than £1.8 billion worth of solar energy projects in the region, the Middle East Solar Industry Association says, generating 1,800 megawatts of electricity. Last year, solar energy contributed just 300 megawatts. Oil price surges after Saudi airstrikes on Yemen 26 March Airstrikes against Yemen led to a sharp rise in the oil price as traders prepared for another round of instability in the Middle East. Small gains yesterday were followed by a sharper rise today, pushing Brent crude to a two-week high of $58.50 per barrel, a rise of five per cent on yesterday's closing price. Analysts suggested that military action in Yemen had served to correct oil prices, which had drifted lower than was justified. "The higher the oversupply on the oil market became in recent months the more the geopolitical risks were ignored," a commodities analyst at Commerzbank told the Daily Telegraph. "These have suddenly come back into sharp focus, however, following the Saudi-led military air strikes carried out by ten Gulf states against the Houthi rebels in Yemen." Concerns about oversupply remain, but even before Saudi Arabia's action in Yemen the oil price had begun to creep back up, in part due to growing business confidence in Europe. Germany, the continent's biggest economy, saw business morale grow for the fifth straight month, according to the Ifo Institute for Economic Research. Ifo's business climate index, which is based on a monthly survey of 7,000 firms, increased from 106.8 in February to 107.9 in March, leading to expectations that demand for oil would increase, Reuters says. Stephen Davis, the CEO of Signal Investment Research, said that in his view oil prices have fallen "too far too fast" and should bounce back to $70 or $80 per barrel, CNBC reports. Speaking before the overnight air strikes, Davis argued that the strength of global growth, the gradual return of demand for oil, and signs that a slowing US economy will weaken the dollar - which tends to force oil prices upwards, as crude is bought and sold in the US currency. However, figures from Opec and the International Energy Agency suggest that supply is running at 1.5 million barrels per day above world oil demand. Analysts say that the imbalance is unlikely to be resolved until the second half of 2015, and until then will continue to exert downward pressure on the oil price. Oil price unlikely to rebound, says Saudi official 23 March Oil is unlikely to return to the record levels it hit over the past two years, Saudi Arabia's representative to Opec has said. Hitting $100 to $120 per barrel would be "difficult", Mohammed al-Madi, Saudi Arabia's Opec governor admitted to an energy conference in Riyadh. Brent crude, the global benchmark, fell by 46 cents in early trading on Monday to $54.74 per barrel at 10am GMT. West Texas Intermediate was also down 94 cents this morning to $45.56 per barrel. Saudi Arabia is Opec's biggest producer and is often referred to as the de facto leader of the oil cartel. Asked if it was possible for the price to return to the highs of $100 to $120 per barrel that it enjoyed in recent years, Madi replied: "I think it's difficult." Madi also denied that Saudi Arabia was allowing the price of oil to fall for political reasons, the BBC reports. "There isn't any political dimension in what we do at the oil ministry – our vision is commercial and economic... We are not against anybody or against the [production of US shale gas]. On the contrary we welcome it, as it balances the market in the long run." Saudi oil minister Ali al-Naimi said that the decision not to combat the market slump by cutting production, thereby propping up oil prices, was not designed to undermine rival oil-producing nations, such as Iran, Reuters reports. "There is no conspiracy and we tried to correct all the things that have been said but nobody listens," Naimi said. "We are not against anybody, we are with whoever wants to maintain market stability and the balance between supply and demand, and [with regards to] price the market decides it." Oil price falls below $55 as Opec holds its nerve 19 March The oil price dipped below $55 a barrel this afternoon after Kuwait said Opec had no choice but to keep production steady. The announcement reversed yesterday's brief rally in the cost of Brent crude, which followed the US Federal Reserve's signal that it would soon raise interest rates for the first time since the US economy slipped into recession seven years ago. The dollar fell sharply in reaction to the Fed's comments, raising the price of oil as well as metals priced in the currency, Reuters reports. "One of the biggest headwinds we’ve had has been the rising dollar," Phil Flynn, an analyst at the Price Futures Group in Chicago told the Wall Street Journal. But Brent's gains of almost $2 a barrel slipped away after the dollar snapped back by more than 1.5 per cent. At 3.30pm today, it was trading at $54.35. Since last June, the oil price has fallen from a peak of $115 per barrel, bottoming out at $45 in January. The drop follows comments from Kuwait's oil minister, in which he said that Opec had no choice but to maintain its current levels of production. "We don’t want to lose our share in the market," Ali al-Omair said. Oil investors and traders are monitoring a growing oil glut as supply remains steady despite the drop in global demand. US crude inventories are now at their highest level since 1930. Crude stocks in the country went up by another 9.6 million barrels last week, according to data from the Energy Information Administration. Traders are also concerned that the tank complex at Cushing, Oklahoma will reach capacity in the next few weeks, the Financial Times reports. Andy Lipow, a Houston-based energy consultant, warned that if the US oil industry is to avoid a storage problem, something will have to give. "We can’t continue on this pace indefinitely," he said. "In order to keep inventory from continuing to build, it will require that refiners kick up runs, domestic production levels off or starts declining or there's a reduction in imports." US crude hits six-year low 17 March Oil prices tumbled on Monday due to higher output in the US and Libya, and growing confidence that talks with Iran may result in oil sanctions coming to an end. The US crude oil price fell by nearly $2 on Monday, reaching a six-year low of $42.85 before recovering slightly to close the day at $43.88. The recovery may be short-lived, as growing American stockpiles raise the likelihood that prices will slip yet further. The construction of new storage tanks in Oklahoma, which can hold three million barrels more oil, could mean that US stockpiles hit record highs for a tenth straight week, Reuters reports. However, the new Cushing facility may provide producers with a buffer, analysts suggest. In recent weeks, oil traders had been concerned that US oil production would outperform the country's ability to store it, forcing the industry to "shut off their wells until growing demand caught up to shrinking supply", according to the Globe and Mail. "The US is aflood with oil and other production points around the world are not letting up in their output," Gene McGillian, a senior market analyst at consulting firm Tradition Energy told Reuters. "The question is how much more oil can we take before the storage tanks hit capacity?" Libyan production has also risen dramatically, to about 490,000 barrels per day. That is more than double the country's output two weeks ago. And there are signs that the US and Iran may be moving closer to a nuclear deal that could result in the removal of sanctions against Tehran, allowing Iranian oil to flow more freely to the market. Brent crude also took a hit in trading yesterday, closing down $1.23 at $53.44 after hitting a six-week low of $52.50 in intraday trading. Oil price will fall further, warns International Energy Agency 13 March Another sharp fall in the oil price is likely despite its recent rebound, the International Energy Agency warned on Friday. The oil price dropped by more than 60 per cent between June 2014 and January 2015, but have recently shown signs of stabilising, the Daily Telegraph reports. Brent crude, the global benchmark, has bounced back from six-year lows to around $60 per barrel, while West Texas Intermediate in the US has fluctuated around the $50 mark. But the Paris-based energy watchdog, the International Energy Agency, warned that further price drops are possible. "Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly," said the IEA in its closely watched monthly oil market report. Global oil prices have slumped due to a combination of oversupply and tepid demand. Opec's decision not to cut production in October last year also had an impact on the market. In its report, the IEA said that the rebound was in part due to the mothballing of unprofitably American drilling rigs "Steep drops in the US rig count have been a key driver of the price rebound," the report said. "Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations." The IEA also identified "tentative signs" of a recovery in demand since the beginning of 2015. However, it warned the markets that this upturn may prove deceptive "as it rests partially on one-off factors such as cold weather and a low point of comparison the previous year", the Telegraph says. Global supply rose to 94m barrels per day in February, 1.3m barrels per day higher than in the previous February. The reduced supply from war-torn Iraq and Libya is being offset by higher supply from Saudi Arabia, Angola and Iran, the Financial Times says. Oil price: bankruptcy threat as low oil prices bite 10 March The Houston-based oil company BPZ became the second oil company to file for bankruptcy in two days as low oil prices continue to drive redundancies, belt-tightening and reduced drilling and exploration across the industry. In a statement on Monday, BPZ chief Manolo Zuniga said that the decision to file for bankruptcy was due to "the industry downturn" as well as the company's difficulties in refinancing its debt, Fortune reports. "Our efforts to negotiate additional financing to fund business activities and pursue identified strategic alternatives were further impeded when oil prices plummeted and production growth faltered, creating additional obstacles to our restructuring efforts," Zuniga said in a statement. On Sunday, another Houston-based oil company, Dune Energy, filed for bankruptcy protection citing falling oil prices as a factor. The company explores and produces oil on 1.9 million acres both on- and offshore in Ecuador and Peru. The news follows predictions from the Opec secretary-general that the crude oil market will recover in the second half of the year as demand picks up and producers trim their costs. Opec Secretary-General Abdalla El-Badri said that according to the cartel's projections, consumption this year will increase by 1.2 million barrels a day, Bloomberg reports. The price of crude oil has lost half its value since June last year, due to a growing oil glut and lower demand. In November, Opec decided not to reduce its oil production – a move that some analysts said was driven by Saudi Arabia's desire to take on the threat posed by US shale oil producers. Defending the decision, El Badri said that production cuts would not have solved the problem. "If we made a cut in the November meeting, then we would have needed to make another cut in January, and then we would need another cut in June as supply will keep increasing from non-OPEC," he said. Last month, insolvency experts warned that low prices have increased the number of British oil- and gas-related companies at risk of going bankrupt up by almost three quarters. Oil price tops $60 as fighting breaks out in Libya 03 March The oil price rebounded by more than $2 towards $62 a barrel today following reports of fierce fighting between Libyan rivals around oil terminals. Stronger equity markets and improved demand also helped Brent futures to recover from their biggest one-day loss in a month. On Monday, Brent crude fell by almost 5 per cent due to ongoing concerns among traders about the growing global oil glut, but the market rebounded today due to concerns over the future of Libya's oil capacity. Libyan forces were involved in "tit-for-tat air strikes" on oil terminals and an airport this morning, Reuters reports, prompting fears about the Opec member's ability to keep up the supply of oil. The news had an immediate effect on the market, pushing the price of Brent up past $60. Oilfields are "increasingly a target" for rival forces in Libya attempting to fill the power vacuum left after the ousting of Muammar Gaddafi in 2011. Forces claiming allegiance to Islamic State have also begun targeting oilfields and pipelines, Reuters said. The rising price was also fuelled by a resurgent yen which, in knocking the US dollar off an 11-year high, helped to make commodities priced on the US dollar –including oil – more appealing to holders of other currencies, CNBC reports. A drop in the number of operating US rigs has also been boosting oil prices, and some analysts believe that the low oil prices could now be beginning to stimulate the market. "The low prices have helped demand, and that has supported the crude oil market," said Olivier Jakob of PetroMatrix. However, according to ABN AMRO senior energy economist Hans van Cleef, the global oil glut will continue to keep prices low. "Oversupply is still an issue," van Cleef said, "and this caps the upside potential of oil prices in this supply-driven market". Oil price rises ahead of key US oil rig data 27 February The oil price rallied on Friday ahead of the release of key US data that is predicted to show a reduction in drilling. Crude futures have been volatile over the past few weeks as the market attempted to weigh the possibility of US supply cuts against a continuing excess of supply elsewhere in the world, Fox reports. Brent, the global oil price benchmark, has risen by more than 13 per cent in February while West Texas Intermediate remained largely flat. New data is expected to be delivered later today by oilfield-services firm Baker Hughes, on the latest count of rigs operating across the US. Drillers have been "idling rigs" at a record pace, Bloomberg reports, laying off thousands of workers and shutting down operations. The number of rigs operating in the US has reportedly fallen by more than 35 per cent since October. There are now 1,019 US rigs drilling for oil, the fewest since July 2011. Oil explorers such as Royal Dutch Shell and Chevron say they have cut costs by $50 billion since 1 November last year. The closing of rigs shows that Saudi Arabia's strategy of maintainin Opec's output levels to protect its market share is "paying off", Bloomberg says. "It is having the effect that we would expect," says Francisco Blanch, head of commodities research at the Bank of America, "which is a decline in investment and ultimately supply, and somewhat higher demand." The International Energy Agency, a Paris-based energy policy advisor, says that world dependence on oil from Opec nations is set to increase due to lower production forecasts from other nations. The slightly weaker US dollar also helped to buoy oil prices on Friday, Fox says. "As oil is priced in dollars, it becomes more attractive to holders of foreign currencies when the greenback depreciates," the network says. Oil price plunge could hit UK jobs after 'bleak' 2014 24 February The UK oil and gas industry has reported its worst annual performance in 40 years, after the oil price plunged in the second half of 2014. Oil & Gas UK, which represents energy companies, said the sector invested £5.3bn more than it earned from sales last year. Rising costs also contributed to the shortfall. It said that the results posed a serious challenge to the future viability of the industry, The Guardian reports. The cost of producing a barrel of oil has risen to a record high of £18.50, on top of investment, tax and decommissioning costs, the group said. Simultaneously, the falling oil price – which dipped below $50 a barrel earlier this year – cut revenues to just over £24bn for the year. That was the lowest since 1970. Malcolm Webb, chief executive of Oil & Gas UK, said thousands of jobs were in danger unless taxes were cut and new incentives offered. "Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground," Webb said. Opec is currently considering calling an emergency meeting to address the ongoing fluctuations in the oil price. The Opec president, Diezani Alison-Madueke, said further volatility would make it "highly likely that I will have to call an extraordinary meeting of Opec in the next six weeks or so".

Source