It was a week where oil prices tumbled to their lowest close in almost 6½ years but natural gas futures recovered from the stockpiles-inspired plunge to maintain status quo. On the news front, the top story came from the Obama administration’s approval to Royal Dutch Shell plc RDS.A for Arctic oil drilling.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures dived 3.1% to close at $42.50 per barrel, natural gas prices remained essentially unchanged at $2.80 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Crude Extends Slide, Icahn Bets on Cheniere Energy.)

Oil prices extended their losing streak and fell for the seventh straight week, the backdrop being another increase in the number of crude-directed rigs. An upwardly moving rig count has underlined concerns about an expansion in the commodity’s global supply glut. The recent turn of events in Greece, Iran and China also created pressure. In particular, Chinese growth worries have sparked fears about a drop in oil demand from the country. 

Meanwhile, natural gas stayed unmoved as the effects of a bearish inventory build was offset by predictions of strong late summer cooling demand with forecasts of warmer weather across majority of the country over the next few days.

Recap of the Week’s Most Important Stories

1.    Royal Dutch Shell plc’s arctic drilling plans finally received a green light from the U.S. government. The Anglo-Dutch major received permission to drill off the Alaskan northwest coast for the first time in over 20 years. This also marks a victory over the environmentalists who have been strongly opposing the move. Shell is expected to have till late September before drilling gets too difficult due to a frigid winter.

The Interior Department issued Shell the permit to drill an exploratory well in this oil-rich area of the Arctic Ocean. The company received permission to drill below the Arctic floor as it now has the necessary equipment to prevent a well blowout. Earlier, Shell had permission to drill only in the top regions. Since the arrival of the necessary equipments, however, the company has been allowed to explore the depths for the first time after its last exploration well in 1991.

2.    Brazil's state-run energy giant Petrobras PBR is looking to divest some assets in order to weather the plummeting crude prices and arrest its ballooning debt. As part of this plan, Petrobras is discussing the divestiture of a minority stake of its fuel distribution unit − BR Distribuidora – with three prospective buyers. The statement was given by Aldemir Bendine, the chief executive officer of Petrobras.

The transaction of the stake will take place before the planned initial public offering (IPO) of BR Distribuidora. However, Aldemir added that the final decision regarding the divestment of the minority stake has not been taken.

As of now, we can say that Petrobras may sell a small stake of BR Distribuidora to one of the three potential buyers. After that, an additional 25% − as per Bloomberg − of the fuel distribution unit will be divested during the IPO. Hence, the major portion of BR Distribuidora will still be retained by Petrobras. (See More: Petrobras to Sell Minority Stake in Fuel Distribution Unit.)

3.    Houston, TX-based oil and gas pipeline company Kinder Morgan Inc. KMI has started to obtain volumes from the Powder River Basin into its Double H pipeline system. A newly constructed connection near Douglas, WY is being used to transport the liquid into the Double H pipeline system. Thereafter, the crude oil will be delivered to Guernsey, WY The new connection has augmented the system capacity to about 99,000 barrels per day.

The successful open season earlier this year on the local Double H pipeline, along with the joint Hiland/Pony Express systems, resulted in additional commitments to the Double H pipeline from sources in North Dakota and Wyoming. These developments, in turn, have been the drivers for the Powder River Basin project. This will, therefore, enhance connectivity to the local and regional markets. (See More: Kinder Morgan's Double H Pipeline Starts Receiving Delivery.)

4.    Cheniere Marketing International LLP – a wholly-owned subsidiary of Houston-based natural gas company Cheniere Energy Inc. LNG – has signed a sales agreement with Électricité de France, S.A (“EDF”). Per the arrangement, Cheniere Marketing will deliver liquefied natural gas ("LNG") from the Sabine Pass LNG terminal to the Dunkerque LNG terminal in France.

Per the deal, up to 26 cargoes or about 100 MMBtus of LNG will be delivered through 2018. The Cheniere affiliate’s supply source is production from Sabine Pass Liquefaction, LLC. Cheniere holds a sale and purchase agreement with Sabine Pass Liquefaction, whereby it has right to purchase any additional produce from Sabine Pass that is not required by Sabine Pass’ customers. Cheniere has a similar sales and purchase agreement with Corpus Christi Liquefaction, LLC as well. (See More: Cheniere Energy Unit Enters LNG Sales Agreement with EDF.)

5.    Natural gas processor and distributor MarkWest Energy Partners L.P. MWE announced plans to build a dry gas gathering system along with The Energy & Minerals Group (“EMG”). This facility would further increase MarkWest Energy and EMG’s leading midstream position in the Utica shale.

Notably, the gathering system will be backed by a long-term contract with an affiliate of upstream operator Ascent Resources, LLC. Ascent holds about 280,000 net acres in the Marcellus and Utica shale plays. The company has allocated about 100,000 gross acres in northern Belmont and Jefferson counties, OH to this gathering system. (See More: MarkWest Energy, EMG to Build Utica Gas Gathering System.) 

Price Performance

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

Over the course of last week, the best performer was U.S. energy explorer Occidental Petroleum Corp. OXY that added 6.4% to its stock price, while the biggest loser was offshore driller Transocean Ltd. RIG, which edged down 4% during the period.

Over the last 6 months, downstream operator Tesoro Corp. was the chief beneficiary on the bourses with its shares advancing 19.7%. On the other hand, Houston-based independent exploration and production company ConocoPhillips was the laggard, as it witnessed a 26.8% price decline over the same time frame.

What’s Next in the Energy World?

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking a series of crucial economic reports, including those on housing and inflation.

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