Commodities: Oil
STO has struggled to participate in any market gains through 2023, a frustrating position for many no doubt as this is a company analysts love. An underappreciation of their capex requirements we think is to blame while the energy sector more broadly tends to be very interest rate/recession correlated i.e. higher rates slows the economy which reduces the demand for oil and gas. We anticipate weaker sales in 2Q23 than current consensus estimates due to softer realised pricing but global oil fundamentals continue to support our view that a material supply deficit of nearly 2Mb/d will emerge over 2H23 pushing oil prices higher.
Crude oil tumbled well over $US2/barrel overnight on what appears to be disappointment towards the market’s reaction to further production cuts by Saudi and a major downgrade from Goldman Sachs i.e. they are now calling December Brent at $US86 compared to $US95 previously.
The market’s ongoing belief that the global economy is moving toward an inevitable recession combined with China’s fairly muted growth targets for 2023 has sent energy prices tumbling from their dizzy highs just one year ago e.g. Brent Crude is trading 45% below where it was this time last year.
Marathon Petroleum Corporation is an integrated, downstream energy company. The Company operates through two segments: Refining & Marketing and Midstream. The Refining & Marketing segment refines crude oil and other feedstocks, including renewable feedstocks, at its refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States. The Company sells refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to independent entrepreneurs who operate primarily Marathon branded outlets and through long-term supply contracts with direct dealers who operate locations mainly under the ARCO brand. The Midstream segment gathers, transports, stores and distributes crude oil, refined products, including renewable diesel, and other hydrocarbon-based products principally for the Refining & Marketing segment via refining logistics assets, pipelines, terminals, towboats and barges, and others.
Quarterly report today to round out the full year saw production fall into the end of the year, though revenue was high as LNG prices rebounded, jumping 44% to $US35/boe. Producing 7 mboe in the quarter was a 7% decline on the prior, which took the full year production up to 29 mboe which was largely in line with expectations.
