Oil, Gas, And Fracking News Reads: 22March 2020 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles about the oil and gas industry from the week ended 21 March 2020. Go here for Part 1.

This is a feature at Global Economic Intersection every Monday evening.

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Continental Resources cuts capital budget by 55% given the recent collapse in oil prices – Continental Resources Inc. said Thursday it was cutting its capital budget for 2020 to $1.2 billion, which is down 55% from the original budget of $2.65 billion as a result of the “collapse” of crude oil prices. The oil producer said it was reducing its average rig count to 3 from 9 in the Bakken and to 4 from 10.5 in Oklahoma. The company expects 2020 production to be down less than 5% from a year ago. Continental Resources said it expects to be cash flow neutral with crude oil prices under $30 per barrel of West Texas Intermediate. Crude oil futures were up 11.2% to $22.66 in recent trading, but had tumbled 57.6% over the past month. The company said it has asked Congress for an “immediate investigation” under the Trade Expansion Act as it alleges Saudi Arabia and Russia have illegally dumped crude oil earlier this month at a time of low demand resulting from the coronavirus pandemic. The company’s stock, which rose 2.8% in premarket trading, as plummeted 69.8% over the past month through Wednesday, while the S&P 500 has shed 29.2%.

North Dakota weighs plan to keep some Bakken crude off market – Faced with declining demand and potentially months of oil prices below most Bakken breakeven prices, the North Dakota Industrial Commission next week will consider new rules aimed at preventing operators from either bringing more unwanted crude onto the market or abandoning wells completely. In January, the number of inactive wells in North Dakota climbed to 2,607, a new record for the state and an increase of 687 wells, or nearly 36%, from December. In a year, North Dakota’s inactive well count has climbed by 1,090 wells, an increase of nearly 72%. The surge in inactive wells has left operators with a choice: allow it to fall into abandoned status, making its transfer to a new operator difficult; or bring it on production, a path that has made less economic sense as prices have fallen in recent weeks. Currently, when a well has been inactive for a year it is moved by state officials into abandoned status. Once deemed abandoned, operators have six months to either put the well back on production, plug it, or post a bond to cover the costs of its ultimate reclamation. This process can take roughly three years and can delay production at the well and potential transfer of ownership. On Tuesday, the Industrial Commission is expected to approve a policy that would allow operators to remain in inactive status through a waiver process. “I think the commission needs to send a signal to the industry and to the markets that it doesn’t make good business sense to force North Dakota Bakken crude oil into a market that’s already priced well below breakevens and below really what long-term world demand says the market should be at,” Lynn Helms, the state’s top oil and gas regulator, said Tuesday. The state approved a similar waiver policy during the 2015 oil price crash out of concern that some marginal wells in inactive status would get prematurely plugged and abandoned, hurting the long-term prospects for a rebound in prices of enhanced oil recovery, Helms said. “What we don’t want to have happen is for wells that have potential for refracturing or something like that, ending up prematurely abandoned,” Helms said Tuesday. “We’ll just take it a month or a year at a time.”

U.S. Shale Goes Viral – International and domestic oil and gas markets and prices are under heavy pressure from COVID-19 impacts and the Russian-Saudi Arabia oil market battle. Now, all eyes are on U.S. domestic producers, especially those occupying the shale patch. Here is what one needs to consider: First, the U.S. has become world’s top oil and gas producer and no matter how one looks at it, meaningful growth in U.S. volumes has come from the “unconventional” plays. U.S. production has enlarged the global pie with commensurate benefits to customers and consumers of all types. From the advent of shale oil production in 2011, U.S. crude supply has grown 133 percent, with the Permian contributing almost 70 percent of that increase. For 2017-2018 alone, the U.S. had the world’s largest-ever annual increase in production for both oil and natural gas. From the 2016 bottom of about 8.8 MMBD through end of 2019, overall U.S. oil production increased 45 percent to roughly 13 MMBD. Oil and liquids supply from the mighty Permian grew almost 80 percent, from the Denver-Julesburg basin (Niobrara) about 77 percent, from the Bakken more than 50 percent, and from the Oklahoma shale plays (SCOOP, STACK and others) about 38 percent. The Federal OCS Gulf of Mexico (GOM), which had been edging toward a comeback, grew roughly 13 percent.Second, the vibrancy of the U.S. domestic producer population is unique in the world. Over the years, the industry has recovered from many setbacks to rebuild, tackle new frontiers, survive and thrive. Third, for some time, investors have preferred the lure of shale development risk to that of conventional exploration risk. Fourth, any new investment – even drilling to maintain a company’s operations and workforce – hinges on external capital. Even before the COVID-19 and Russia-Saudi, much less has been available to the industry, given investor discontent with profitability and cash positions. Unhappiness shows up in S&P industry weightings which, for oil and gas, declined from roughly 12 percent in 2009 post-recession to below 3 percent currently.

Can shale survive another bust? – – The shale oil and gas industry faced an uncertain future long before oil markets crashed this week as burgeoning supplies, lackluster prices, dwindling capital and increasing competition from renewable energy squeezed profits, cut employment and pushed some companies into bankruptcy. The dramatic plunge of crude to around $30 a barrel – half the price at the beginning of year – is likely to accelerate those trends, forcing more layoffs and bankruptcies and delivering another blow to the Houston economy. As with the last oil bust, which stretched from 2014 to 2016, only the strongest, best financed and most efficient companies will survive if prices remain depressed over a long period, analysts said, again reshaping the industry into one that is smaller, leaner and employing far fewer workers.“We will see a lot of defaults and Chapter 11 bankruptcies. That will be inevitable at $30 a barrel,” said Alexandre Ramos-Peon, a senior shale analyst with Norwegian research firm Rystad Energy. “It’s going to be tough times.” The cause of these tough times is a price war between Russia and Saudi Arabia that threatens to flood the global market with cheap crude, just as demand is weakening amid a economic slowdown caused by the novel coronavirus. Oil prices on Monday suffered their biggest one-day decline since the first Gulf War almost 30 years ago, plunging 25 percent to settle in New York at $31.13 per barrel, the lowest price since the last oil bust hit bottom in early 2016. Prices have remained in the low $30s since. Oil settled Friday at $31.73 a barrel. U.S. shale companies will likely bear the brunt of the fallout. While many shale companies can turn a profit with oil between $50 and $60 per barrel, few can survive at $30 without drastic cuts to production and staff. If oil prices stay in the $30 a barrel range this year, as many as 20,000 energy jobs could be lost in the Houston area alone, according to Bill Gilmer, an economist with the University of Houston. Energy companies have already begun to slash spending in response to the crash. Apache Corp., Devon Energy, Marathon Oil, Noble Energy and Occidental Petroleum this week reduced their capital budgets by about a third, each cutting at least $500 million from funds used for oil exploration and production across West Texas, New Mexico, Oklahoma and Wyoming. West Texas producers Diamondback Energy and Parsley Energy began idling oil rigs and laying off fracking crews.

The Energy Downgrade Avalanche Begins- Exxon Loses AA+ Rating – For the past 9 years ever since the downgrade of the US government by S&P from AAA to AA+, American energy giant Exxon, which back in 2007 had a market cap of over $500 billion only to see that cut by two thirds to $150BN today (half of where it was at the start of the year) , had the same Standard and Poor’s credit rating as the US government. That period of perplexing parity ended just after 1pm on Monday, when S&P, confirming it would move quickly on rating downgrades this time following a near record plunge in the price of oil last week, downgraded Exxon from AA+ to AA as Exxon’s “Lower Oil Price Assumption Weakens Cash Flow/Leverage Metrics”; and since the outlook is negative, it means more downgrades are coming. Highlights from the downgrade below:

• U.S.-based integrated oil company Exxon Mobil Corp.’s cash flow/leverage measures fell well below S&P’s expectations for the rating in 2019, and with lower oil and natural gas prices, low refining margins and weak chemicals demand anticipated over the next two years, the rating agency expects measures to remain weak without a significant change in the company’s financial plans.
• S&P revised its estimates to reflect the recent reduction in our crude oil and natural gas price deck assumptions.
• As a result, S&P is lowering its issuer credit rating and unsecured debt ratings on ExxonMobil to ‘AA’ from ‘AA+’.
• The negative outlook reflects the potential for a further downgrade if the company does not take adequate steps to improve cash flows and leverage over the next 12 to 24 months, in order to bring funds from operations (FFO)/debt closer to 60% and debt to EBITDA to about 1.5x for a sustained period.

The full note is below:

Senator Calls On Trump To Embargo Russia, OPEC Crude “We will not be bullied” is the message Senator Kevin Cramer would like President Donald Trump to send to Saudi Arabia and Russia about the unsettled oil markets that the two nations, along with the UAE are presently flooding.The Republican Senator from North Dakota issued a letter to the President on Wednesday, calling for an embargo for crude oil from Russia, Saudi Arabia, and other OPEC nations.The letter requests that an “immediate signal” be sent, saying that “The United States will not be bullied or taken for granted,” according to the Senator’s Twitter feed.“Foreign nations are now using the environment of the worldwide spread of COVID-19 to flood the market and cripple our domestic energy producers.” Senator Cramer takes an additional dig at Russia’s actions: “these bullying tactics by Russia have become the norm”, adding that Saudi Arabia, on the other hand, has been our partner, making its actions particularly concerning.Saudi Arabia, Russia, and the UAE have all vowed to ramp up oil production as of April 1 when the current OPEC agreement to curb oil production is set to expire, and Saudi Arabia has already prepared to unleash a flood of cheap crude on the market next month.Of the 284.3 million barrels of oil the United States imported in December last year, according to the Energy Information Administration (EIA), the United States imported an average of 43.7 million barrels of oil from OPEC nations (14.5 million of which came from Saudi Arabia), and 21.5 million barrels from Russia.

Federal regulators approve Jordan Cove LNG project in Coos Bay and 230 mile feeder pipeline – Federal regulators on Thursday approved the Jordan Cove liquefied natural gas export terminal in Coos Bay and the 230-mile Pacific Connector Pipeline, presaging a battle with the state of Oregon, whose regulators have declined to issue the three most significant state permits for the facility. The project’s owner, Calgary-based Pembina Pipeline Corp., immediately informed the Oregon Department of Land Conservation and Development that it intends to file a federal appeal to that agency’s decision last month that the project is inconsistent with state land use laws. Statute allows the company to appeal the decision to U.S. Secretary of Commerce Wilbur Ross, and the Trump administration is a firm backer of energy exports in general, and the Jordan Cove project in particular. The notice of appeal the company sent to the agency Thursday may be a declaration of war with the state, however. Backers of the project have been promising locals for 15 years that they would comply with state and local permits, but Pembina is now signaling that it intends to preempt the state. FERC’s decision and the notice of appeal immediately drew fire from Gov. Kate Brown and Sen. Ron Wyden, and Brown vowed the project wouldn’t move forward without following state permitting processes. The Federal Energy Regulatory Commission voted 2-1 to approve the controversial project, effectively agreeing with a staff recommendation that most of the project’s impacts could be reduced to less than significant levels, and the public need for the facility outweighed any of those impacts. Oregon’s Department of Environmental Quality denied the project’s water quality certificate last year. It did so in part for procedural reasons and said Jordan Cove could reapply. But it also said at the time that it had “insufficient information to demonstrate compliance with water quality standards, and because the available information shows that some standards are more likely than not to be violated.”

TSX loses another 8% as Canadian oil price falls to lowest level on record | CBC News – The price of a barrel of Canadian oilsands crude oil fell to its lowest level ever on Wednesday, and the Toronto Stock Exchange sold off heavily as a result. Western Canadian Select (WCS) was changing hands at one point as low as $7.63 US per barrel, down $4.60 from Tuesday’s level. The U.S. benchmark known as West Texas Intermediate (WTI) also fell to below $22 a barrel, a level it has not hit since 2003. That was bad news for shares in oil companies, many of which trade on the Toronto Stock Exchange. Selling on the TSX was so heavy that automatic circuit breakers designed to give markets a pause during times of turmoil kicked in. When the decline hit seven per cent, markets were automatically shut down for a breather. When they reopened the selling continued, with the TSX closing down 963 points or almost eight per cent. The Dow Jones Industrial Average fared almost as bad, closing below the 20,000-point level. The TSX was mostly dragged down by shares in oil companies, which were themselves responding to a plunge in the price of crude. Oil is being walloped by too much supply in a time of reduced demand because of the coronavirus pandemic. After more than a year of an uneasy collaboration to limit supply and try to keep prices up, Saudi Arabia and Russia started a price war earlier this month, flooding the market with their cheap oil that kicked off a race to the bottom in terms of oil prices. Canadian oilsands oil always trades at a discount to lighter blends, such as Brent and WTI, because it is more difficult to transport and process. So the oversupply has hit the price of WCS even more than other types of oil.

Coronavirus causes ConocoPhillips to temporarily cancel flights for workers to North Slope fields – ConocoPhillips has canceled flights for hundreds of workers to the North Slope for the next two weeks to prevent the spread of COVID-19. The company is asking critical personnel who produce oil from the company’s North Slope fields to stay on for an extra multiweek rotation, ConocoPhillips said in a statement sent Tuesday to contractors and employees. The statement said that effective immediately, “we are asking all business-critical North Slope personnel supporting ConocoPhillips operations (both contractor and ConocoPhillips employees) to extend their shift by two weeks.” “All flights north for regularly scheduled shift changes have been canceled for the next two weeks,” the statement said. “We will be working to arrange transportation off the Slope for those who cannot extend their stay. “Please note that there are no confirmed cases of COVID-19 on the North Slope at this time,” the statement said.

Majors look to store jet fuel at sea as air travel drastically curbed – (Reuters) – Major oil companies including BP and Shell are preparing to take the rare step of storing jet fuel at sea as the coronavirus outbreak disrupts airline activity globally, while refiners are shifting to diesel because of the poor margins associated with jet fuel production. Jet fuel demand has cratered as airlines suspend flights due to the coronavirus pandemic, which globally has infected more than 204,000 people and killed 8,700, prompting travel restrictions from governments around the world, including the United States. Market participants and refiners have had to scramble to adjust to incredibly low prices. Storing jet fuel at sea, however, is something of a last resort. The product is sensitive to contamination and degrades more quickly than other refined fuels and especially crude oil, so after a few months, it no longer can be used for aviation, according to analysts. “The industry generally expects products will be used within three months of being produced,” said George Hoekstra, an independent consultant specializing in hydroprocessing technology. Gulf Coast jet cash prices were at 26.50 cents per gallon below futures, the lowest seasonally since at least 2011, the earliest data available, Refinitiv Eikon data showed.

Volunteers join fight against Baltic Sea oil spills in Latvia –The World Wildlife Federation in Latvia is contacting potential volunteers to help in the event of oil spills in Latvian waters, according to a Latvian Radio broadcast on March 16.Until now accidents have been very small, but intense shipping traffic in the Baltic Sea presents future risks should an accidental spill occur. According to WWF specialist Magda Jentgen, one project would assist Naval Forces and state agency rapid response, and another would draft a contingency plan for aiding animals. Both would require the assistance of volunteers.“It’s essential to engage volunteers in coastal oil cleanup. Moreover, cleaning the oil off of birds is a time-consuming process. Volunteers need to be instructed and need to be capable of assisting veterinarians in a crisis situation,” said Jentgen. Since March 50 volunteers have registered, but she said a larger accident would require several shifts of people.“At this time we’re compiling a list of volunteers, and then we plan to secure financing for training. These people will have the know-how to capture birds and how to clean wounded birds,” said Jentgen.One such accident occurred near Estonia in 2006, injuring ten to fifteen thousand birds. Only sixty were saved and returned to their natural habitat. Rotterdam has experienced an even bigger spill that required more than a year to clean up.Ilze Jēce is one of the volunteers with years of experience in the non governmental sector. “We don’t have the kind of civil society volunteering traditions that the US and other Western countries have. There people are accustomed to university programs with volunteering requirements and civil society work as a hobby in their free time. One-time help in a crisis is easier than planning for long-term involvement. That’s more difficult,” she explained.

European outright refined products sink to fresh multi-year lows on bearish cocktail | S&P Global Platts – European refined product markets on Monday fell to their lowest levels in three years, and for some considerably more, as the Russia-Saudi price war and coronavirus concerns weighed heavily on demand. Products took their lead from crude. S&P Global Platts assessed Dated Brent at $27.945/b Monday, down $3.90/b on the day. A price war between Russia and Saudi Arabia continues and OPEC+ canceled a meeting scheduled for Wednesday, signaling the likelihood that the global crude market will be flooded with crude come April. Saudi Arabia slashed its official selling prices last week; in response, others such as Abu Dhabi’s ADNOC, Iraq’s SOMO and Kuwait’s KPC all reduced their OSPs and many market participants expect Nigerian OSPs to follow suit. The propane CIF NWE large cargo fell to $194.25/mt Monday, the lowest flat price since March 2002 when the market was assessed at $190.50/mt. Similarly, the butane CIF NWE large cargo was assessed at $185.00/mt, the lowest value since May 2003. In the Mediterranean, the situation is similar to Northwest Europe, with the FOB Lavera coasters assessed at $242/mt, the lowest level since August 2003, when the market was assessed at $240/mt. The spread of COVID-19 has bought a degree of uncertainty to the LPG market in Europe as petrochemical crackers consider production cuts and seasonal heating demand begins to subside moving into springtime. Platts Naphtha CIF NWE cargo was assessed at $209/mt Monday, down $47/mt since Friday and the lowest in 17 years, according to Platts data. European naphtha has lost about 30% in value in a week and 50% since the beginning of the month, on decreased demand for gasoline blending and the uncertainty related to the coronavirus pandemic and global economy, sources said. The physical Platts gasoline Eurobob FOB basis AR barge flat price also saw a record low Monday on an extreme pressure sell-off as nations continue to adopt measures that will curb driving demand. Platts Gasoline Eurobob barge was assessed at $185.50/mt, down from $231.75/mt Friday. FOB ARA barges of ultra-low sulphur diesel slumped $30/mt on the day to a four-year low of $306.75/mt Monday. This is the lowest price of ULSD barges since February 25, 2016, when they were assessed at $304.25/mt, Platts data shows. “There is less spot demand for diesel cargoes in Europe but I haven’t seen any cargo getting cancelled; there is a contango so that helps” a trader said Tuesday, referring to storage demand that appeared last week amid the deepening contango in the paper market. “People will do everything they can to put as much jet into diesel as possible.” The market is in a widening contango and the outlook is bearish as more countries recommend social distancing and an increasing numbers apply a lockdown on both sides of the Atlantic, which has started to dent demand for the road fuel.

Victoria bans fracking for good, but quietly lifts onshore gas exploration ban -Amid coronavirus chaos, the Victorian government announced its decision earlier this week to lift the ban on onshore gas exploration, but also to make the temporary state-wide ban on fracking permanent.This decision was made three years after aninvestigation foundgas reserves in the state could be extracted without any environmental impacts, and new laws will be introduced to parliament for drilling to start in July next year.The state government first introduced the moratorium(temporary ban) on onshore conventional and unconventional gas production in 2017, enshrined in theMineral Resources (Sustainable Development) Act 1990. It effectively made it an offence to either conduct coal seam gas exploration or hydraulic fracturing (fracking) until June 2020.The ban was originally imposed amid strong concerns about the environmental, climate and social impacts of onshore gas expansion. But lifting the ban to allow conventional gas exploration while banning fracking and unconventional gas (coal seam gas), doesn’t remove these concerns. The new laws seek to do two things: lift the ban on conventional onshore gas production, and to entrench a ban on fracking and coal seam gas exploration into the state constitution.The government has stated it wants to make it difficult for future governments to remove the fracking ban. But this is highly unlikely to be legally effective. Unlike the federal constitution, the Victorian constitution is an ordinary act, and so it can be amended by another legal act.The only way entrenching an amendment in the state constitution so that it is permanent and unchangeable is if it relates to the operation and procedure of parliament. And fracking does not do this. This raises the spectre of a future government removing the fracking ban in line with an accelerating onshore gas framework.

The effects of the oil spill on the Hangar eliminate the clock -in emergency Mode because of spilled diesel fuel on the Hangar in motiginsky district of withdrawn. “News. Krasnoyarsk” has received official comment from representatives of the company “Krasnoyarsknefteproduct”.we will Remind, earlier it was reported that due to leakage in the fuel base in the Fish to the surface of the river fell about a hundred tons of oil products. The cause of the accident was the rupture of the pipe. The spill occurred in the area of 8 thousand square meters. In this place the Hangar is still covered with ice. A large part (about 7,5 thousand sq. metres) of snow already cleaned. currently, the remains of diesel fuel collected from the ice of the river using sorbents. Work is being done around the clock. They involve about a hundred people.

Shell reports 41% rise in onshore Nigeria oil spills (Reuters) – Royal Dutch Shell’s onshore Nigeria subsidiary saw a 41% rise in the number of crude oil spills due to theft or pipeline sabotage in 2019, the group said in its annual report. Shell Petroleum Development Company of Nigeria (SPDC) also recorded a rise in the volume of oil spilt in the Niger Delta as a result of illegal activity to 2,000 tonnes in 2019 from 1,600 tonnes a year earlier. Of a total 164 SPDC spills of more than 100 kilograms in the delta, 157 were due to theft and sabotage, Shell said. That compared with 111 spills due to sabotage in 2018. SPDC is a joint venture of the Nigerian National Petroleum Corporation (NNPC), which holds a 55% stake, Shell, its operator, with 30%, France’s Total with 10% and Italy’s Eni with 5%. It produces around 1 million barrels of oil per day and operates more than 6,000 kilometres of pipelines in the delta.

Gas Explosion in Nigeria Leaves 15 Dead, More Than 50 Buildings Damaged – More than 50 buildings were damaged in the blast, National Emergency Management Agency (NEMA) acting coordinator in Lagos Ibrahim Farinloye told reporters, as The Vanguard reported. One of the buildings was the Bethlehem Girls College, and at least 60 injured students were taken to a hospital for treatment. “The fire started with smoke,” one eyewitness told Reuters. “The smoke was coming up and later we heard a sound … and some houses collapsed even the roofs.”More than 50 buildings were damaged in the blast, National Emergency Management Agency (NEMA) acting coordinator in Lagos Ibrahim Farinloye told reporters, as The Vanguard reported. One of the buildings was the Bethlehem Girls College, and at least 60 injured students were taken to a hospital for treatment.”The fire started with smoke,” one eyewitness told Reuters. “The smoke was coming up and later we heard a sound … and some houses collapsed even the roofs.”The explosion occurred in Abule Ado area of Lagos, but the blast was so loud it could be heard almost all across Lagos state, Pulse TV reported.It occurred around 9 a.m., and one family of four was killed in the blast returning from church, according to The Vanguard. The explosion was sparked when a truck hit some gas cylinders at a gas processing plant near a pipeline owned by the Nigerian National Petroleum Corporation (NNPC), the state-owned company told Reuters. “The resulting fire later spread to the Nigerian National Petroleum Corporation (NNPC) oil pipeline passing through the area even though the pipeline has been shut down as a precautionary measure. “The fire was eventually extinguished at 3:30 p.m. through the combined efforts of officials of the Lagos State Fire Service, Federal Fire Service, and Nigerian Navy Fire Tender.” The fire also damaged the pipeline, but NNPC said that the pipeline shutdown would not impact oil delivery to the rest of the state, according to Reuters. Pipeline explosions are a recurring danger in Nigeria, where they are usually caused by attempts to steal from the pipelines. One such fire killed 60 people in 2018. Nigeria is Africa’s leading producer and exporter of oil, but it has paid a price for its fossil fuel extraction. In the Niger Delta, that extraction has led to oil spills of 40 million liters (approximately 10.6 million liquid gallons) every year, The Guardian reported. This has polluted air and water and harmed residents’ health.

Oil supply surge and crumbling demand could overwhelm global storage – “An OPEC+ supply surge and crumbling oil demand are leading to concerns about a surplus that could overwhelm global storage,” BofA Global Research said in a note this morning . The number of companies announcing spending and workforce cutbacks keeps growing.

• This morning, the huge U.S. producer ConocoPhillips said it would cut $700 million from its planned capital spending this year and scale back its share buy-back program.
• Oilfield services giant Halliburton is furloughing about 3,500 employees in Houston as oil producers slow operations, per Reuters.
• “The sudden crash in global oil prices has prompted Australian oil and gas producer Oil Search to cancel sale talks and slash spending by up to $675 million by shelving projects around the world,” the Sydney Morning Herald reports.
• Argus Media’s Ben Winkley, via Twitter, tallies several more announcements as they come “thick and fast.”

Analysts are racing to update their estimates of how much global oil demand is cratering. Rystad Energy this morning sharply revised their projections from a week ago. They now see year-over-year demand dropping 2.8 million barrels per day, which would be a 2.8% decline. A week ago they were projecting only a 600,000 barrel per day full-year drop. “At the moment we expect the month of April to take the biggest hit, with demand for oil falling by as much as 11 million bpd year on year,” the consultancy notes. ExxonMobil, citing an “unprecedented environment,” said last night that it plans to “significantly” cut spending in light of the coronavirus and the collapse in oil prices. The oil giant’s announcement is the latest sign of how deeply the upended market is affecting the sector.

Asian appetite for petroleum storage, reserves will not save global oil prices – China’s insatiable appetite for hoarding oil reserves or the expansive independent petroleum storage capacity from Singapore to South Korea will not be enough to absorb the coming flood of crude and refined products, which threatens to push oil prices even lower. For decades, Asia’s petroleum storage has expanded in the form of underground salt caverns, independent tank farms, operational storage for mega refineries and even oil in pipelines by key oil companies, national oil companies and commodity trading houses alike. This expansion had a big role in absorbing global oil shocks in the past, such as the 2015-2016 oil downturn when global inventories hit a peak of 5.3 billion barrels in late 2016, according to industry estimates, forcing OPEC to make production cuts to help ease the glut. But the current market is seeing a rare simultaneous instance of a global supply shock, due to the oil price war between Saudi Arabia and Russia, and a demand shock, due to the coronavirus pandemic, creating an unprecedented oil surplus that stretches storage capability to its limits. The initial surplus will be seen in refined products as refineries maximize margins on low crude prices. But there is not much room left after oil companies and traders hoarded compliant fuels in anticipation of the International Maritime Organization’s global low sulfur marine fuel requirements, that took effect January 1. As 2020 rolled in, global shipping was hit by the coronavirus outbreak and demand never materialized, leaving tanks full. “We saw a big movement of storage towards the end of last year getting ready for January 1st. That storage is still in play,”

Oil’s big storage problem – Back in 2008 the economy suffered from massive oil demand destruction. The result was an epic contango structure in the futures curve which encouraged traders to charter tanks to store oil. A contango (the opposite of backwardation) manifests whenever the price of commodities in futures contracts is higher than the cash price of commodities available today. This allows traders to profit from buying cheap oil today and selling it on the futures market at a premium tomorrow. As long as the cost of storage is lower than the profit generated by the trade, the market structure encourages hoarding. In 2008 the contango got so big (it was known as the super-contango) the economy ran out of spare capacity in on-the-ground facilities to store it in. But the profitability of the contango trade was so huge it actually paid to charter tankers explicitly just for the purpose of storing oil. While it’s tempting to say the same thing will happen this time round, it might well not. The problem the sector is now facing is that there will probably not be enough physical storage capacity to park all the unneeded global oil supply for the duration of this crisis. If that’s true, some fields may have to be shut down irrespective of what Opec targets dictate. Not doing so would pose an environmental disaster, otherwise. But again it’s not as easy as just turning off the tap. Some fields are much less capable of adjusting their pump rates than others. This is especially true of Russian fields, where temporary shutdowns pose the risk of them never being able to be revived at the same rates again. People are now talking about a $10 target for WTI. We’d argue that in a scenario where there’s literally nowhere to put oil, it’s not inconceivable prices could go negative. Such rates would indicate that permanent supply destruction — which might never be brought back again — was now going on. Which would be a big problem for the world if the same rate of economic activity as before was returned to post Covid-19.

The Countries Hit Hardest By The Oil Price War — The recent plunge in oil prices has put the financially ravaged U.S. shale industry in the spotlight over the past week, but the market downturn will blow a hole in the budgets of oil-producing countries as well. Credit ratings agency Fitch said that a wave of sovereign downgrades could be forthcoming if oil prices remain at low levels. “Countries that are in a somewhat vulnerable external position and have a fixed exchange rate are of course particularly vulnerable,” Jan Friederich, a Middle East and Africa sovereign analyst with Fitch, told Reuters. Russia has stated that it can withstand oil prices in the range of $25 to $30 per barrel for six to ten years. Russia’s Energy Minister Alexander Novak went further,declaring that Russian oil companies will remain competitive “at any forecast price level.” Russia has a few things working in its favor, such as a flexible exchange rate that allows oil firms to earn dollars but pay expenses in rubles. A declining oil price tends to be offset somewhat by a weaker local currency.In that context, Saudi Arabia is less flexible, needing to shell out foreign exchange to prop up its fixed exchange rate. The Saudi government can do that for a long time, but not forever. In addition, while Saudi Arabia has some of the lowest oil production costs on the planet, the budget requires oil prices in the mid-$80s per barrel to break even. Riyadh apparently believes it can force out high-cost producers before the pressure on its own finances becomes too great to bear.But smaller oil-producing countries with fixed exchange rates could be in more trouble. Nigeria, for instance, does not have the deep pockets of Saudi Arabia. It too has to defend a fixed exchange rate, and during the last market downturn (2014-2016), the government imposed currency controls to stop the outflow of dollars. Today, only a week after the OPEC+ collapse, there are already signs of ashortage of dollars in Nigeria.There are other countries at risk, including Iraq, Oman, Angola, Suriname and Gabon, according to Fitch. None of the Gulf Arab states can balance their budgets with oil at $40 per barrel or lower, according to S&P and Reuters.Mexico’s Pemex may have shielded itself somewhat from a rather large hedging program, but the state-owned oil firm has been at the precipice of having its credit rating downgraded further for quite some time. Last year, Fitch put Pemex into junk territory, but additional downgrades would trigger even more capital flight. Mexico also has the unfortunate reality of having its economy depend on the U.S., which is about to go into a deep freeze of mass coronavirus quarantines.

Saudi Arabia floods markets with $25 oil as Russia fight escalates – (Reuters) – Saudi Arabia is flooding markets with oil at prices as low as $25 per barrel, specifically targeting big refiners of Russian oil in Europe and Asia, in an escalation of its fight with Moscow for market share, five trading sources said on Friday. The sources, from oil majors and refiners which process crude in Europe, said Saudi state oil company Aramco told them it would supply all requested additional volumes in April. Sources previously told Reuters Saudi Arabia is also seeking to replace Russian oil with Chinese and Indian buyers, although not all refiners received volumes they had asked for. Tanker rates soared as Saudi Arabia provisionally chartered around 31 supertankers to take extra oil, including to the United States, where Russian oil is usually less in demand. Oil prices have halved since the start of the year because demand has been hit by the coronavirus outbreak and after Russia and OPEC failed to reach a new deal on supply cuts. Moscow refused to support new deeper cuts, saying the impact from the virus could be much worse than thought, and Riyadh retaliated by opening its taps and pledging to pump record volumes on to the market. Russia has so far said it is not planning to come back to the negotiating table despite feeling the pressure from the extraordinary Saudi moves.

US crude falls below $30 as Fed move fails to calm markets – U.S. crude fell below $30 on Monday as emergency rate cuts by the U.S. Federal Reserve and its global counterparts failed to tame markets and China’s factory output plunged at the sharpest pace in 30 years amid the spread of coronavirus. Brent crude was down $2.89, or 8.5%, to $30.96 a barrel by 1012 GMT. The front-month price had risen $1 earlier in the session. U.S. West Texas Intermediate (WTI) crude was at $29.94, down $1.79 or 5.6%. To combat the economic fallout of the pandemic, the Fed on Sunday cut its key rate to near zero, triggering an unscheduled easing by the Reserve Bank of New Zealand to a record low as markets in Asia opened for trading this week. The Bank of Japan later stepped in by easing monetary policy further in an emergency meeting. However, the measures failed to calm the investors, and stock markets weakened again. “It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors,” said Hussein Sayed, chief market strategist at FXTM. Meanwhile, China’s industrial output fell by a much larger than expected 13.5% in January-February from the same period a year earlier, the weakest reading since January 1990 when Reuters records began. Brent’s premium to WTI is close to its narrowest since 2016, making U.S. crude oil uncompetitive in international markets. “The relative weakness in Brent shouldn’t come as too much of a surprise, given the severity of the breakout across Europe,”

Oil Collapse Deepens on Widening Virus Measures – — Oil’s spectacular collapse deepened as widening global efforts to fight the spread of the coronavirus looked set to trigger the most severe contraction in annual oil demand in history. Futures tumbled by more than 6% after losing a quarter of their value last week — the largest drop since 2008. Even a massive emergency move by the U.S. Federal Reserve to cushion the world’s biggest economy just added to the fear gripping markets, with New York crude at one point dropping below $30 a barrel. Gasoline prices collapsed in the U.S. The market is being pushed deeper into turmoil by unprecedented simultaneous demand and supply shocks. Forecasts for global oil use are being cut dramatically as government measures to contain the spread of the pandemic restrict the movement of people and throw supply chains into chaos. At the same time, giant producers are embarking on a destructive price war after the disintegration of the OPEC+ alliance that’s unleashing a flood of supply. “Global financial markets are being rattled by the growing severity of the coronavirus and at the same time spooked by the enormity of the stimulus measures to combat it,” said Vandana Hari, founder of Vanda Insights in Singapore. “If the pandemic continues to worsen across the globe, oil will head lower. If it worsens in the U.S., belt up for an apocalypse.” Oil traders, executives, hedge fund managers and consultants are revising down their estimates for global oil demand. The growing fear is that consumption, which averaged just over 100 million barrels a day in 2019, may contract by the most ever this year. That would easily outstrip the loss of almost 1 million barrels a day in 2009 and even surpass the 2.65 million barrels registered in 1980, when the world economy crashed after the second oil crisis. Brent crude tumbled as much as 6.6% to $31.63 a barrel before trading 5.9% lower at $31.87 as of 6:58 a.m. in London. Futures fell 25% last week, the most since December 2008. West Texas Intermediate slid 4.2% to $30.40 on the New York Mercantile Exchange, after earlier dropping as low as $29.75. Travel restrictions across the globe tightened further over the weekend, with the U.S. extending its travel ban to include Britain and Ireland. Australia said anyone entering the country must self-isolate for two weeks, Spain imposed a lockdown and France closed cafes and restaurants. New York City limited restaurants and bars to takeout and delivery service, and shut nightclubs, movie theaters and concert venues.

Oil drops 10% at the low, breaking below $29 as demand evaporates – Oil prices slid more than 10% at the low on Monday as the acceleration in coronavirus cases worldwide, which is bringing travel and business to a standstill, further dents global demand for crude. U.S. West Texas Intermediate crude dropped $1.66, or 5.2%, to trade at $30.07 per barrel. Earlier in the session WTI dropped more than 10% to hit a session low of $28.03 per barrel. International benchmark Brent crude fell 9.4%, or $3.22, to $30.66. Earlier Brent dropped more than 12% to $29.74 per barrel, its lowest level since at least Feb. 2016. “The demand drop unfolding is like nothing anyone has ever witnessed,” Simmons Energy analyst Pearce Hammond said in a note to clients Sunday. Oil is coming off what Hammond called a “horrific week” for the energy market. Both contracts posted their worst week since the financial crisis after dropping more than 23%, although prices did get a temporary boost Friday evening following President Donald Trump’s call to fill the U.S. strategic petroleum reserve. “Oil prices have reacted extremely negatively and we believe … that we have not seen the bottom of the oil price just yet,” Rystad Energy’s head of oil markets Bjoernar Tonhaugen said. “The potential loss of demand in March-April may dwarf anything the World has ever seen, just when OPEC+ producers open the floodgates of new supply to the market,” he added. Oil continues to be hit on both the demand and supply side. The coronavirus outbreak has led to softer demand for crude as people cut back on travel, for example, while a breakdown in OPEC talks means there could soon be a supply glut as Saudi Arabia gets set to ramp up production to a record 13 million barrels per day. The move lower comes even after President Trump said Friday that the Department of Energy would purchase crude oil for the SPR in a bid to prop up prices.

As oil prices tank, BP CFO warns demand could be negative in 2020 – Demand for oil will likely be negative in 2020, adding further downward pressure to plummeting prices, according to BP CFO Brian Gilvary. Around the time of its earnings report in early February, the energy giant anticipated that demand would weaken by around 300,000 to 500,000 barrels a day. But on Monday, Gilvary told CNBC’s “Squawk Box Europe”: “If you ask me that question today, it is more like flat demand year-on-year, maybe even negative demand – we will probably likely see negative demand this year.” This would mean that demand for oil actually contracts this year – a very rare occurrence – rather than just growing at a slower rate than previously expected. The combination of an unfolding price war between oil production giants Russia and Saudi Arabia and concern over a potential demand shock from the global coronavirus pandemic have hammered oil prices in recent weeks. International benchmark Brent crude was trading down 9.3% at around $30.70 per barrel on Monday afternoon while U.S. West Texas Intermediate (WTI) dipped below $30 a barrel to $29.50, down 6.8%. So far this year, Brent and WTI are down 53.8% and 52% respectively. Gilvary suggested that activity beyond this year would depend on what “the new normal” becomes for businesses. “We have got a demand side shock and then you also have the combined issue of a significant amount of oil now coming on the market in April, so the direction of the oil price can only go in one direction, and that is down,” he said.

Oil prices could hit teens in coming weeks as markets crater over coronavirus and price war – An end to the oil price plunge is nowhere in sight, energy experts say, as futures of international benchmark Brent crude fell below $30 a barrel Monday for the first time since 2016. That’s a stunning 54% drop year-to-date. “Oil could easily be in the teens at the bottom. Could even be low teens at the lowest,” Abhi Rajendran, director of research at Energy Intelligence, told CNBC on Monday. “The main driver is for, a week or two, we could have global market oversupply of over 10 million barrels per day (bpd). Which is insane and unprecedented.” Energy stocks have been hammered as demand plummets amid the escalating coronavirus crisis, but moves by state actors to unleash a flood of supply are driving them decisively into the ground. Saudi Arabia has slashed its oil prices to buyers and will be maxing out its production, as will Russia, as the two major producers throw themselves into an all-out price war to fight for greater market share. “The last time there was a global surplus of this magnitude was never,” Jim Burkhard, vice president and head of oil markets at IHS Markit, wrote in a note Monday, predicting an oil demand contraction of up to 10 million bpd for March and April. “Prior to this, the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more.”

Goldman slashes oil forecast, sees US crude at $22 per barrel – Goldman Sachs slashed its oil forecast on Tuesday as the COVID-19 outbreak continues to pressure demand. “Demand losses across the complex are now unprecedented,” Goldman’s global head of commodities research Jeffrey Currie wrote in a note to clients Tuesday. The firm said that oil use has fallen by eight million barrels per day as the coronavirus has led to a near standstill in travel, among other things. Goldman now sees U.S. West Texas Intermediate crude and international benchmark Brent crude both averaging $20 per barrel in the second quarter. Earlier on Tuesday the firm said WTI would average $22, before revising the forecast to $20 just a few hours later. Goldman has cut estimates multiple times in the last few weeks. The firm previously lowered its target for WTI to $29 and Brent to $30 after the breakdown in OPEC talks earlier in March. WTI settled at $28.70 on Monday, so the new target implies an additional 30% downside ahead. This would be on top of WTI’s 53% drop this year. Goldman’s Brent target is 33% below the contract’s Monday settle of $30.05. The drop in demand comes as powerhouse producers Saudi Arabia and Russia get set to ramp up production beginning April 1, which is when the OPEC+ production cuts currently in place expire. The firm said that the sudden drop-off in demand, which began in January when the virus started hitting Chinese fuel demand, aided the price war that’s broken out between OPEC and its allies, which includes Russia. Goldman said that the virus will likely lead to far worse outcomes than previously thought – even below estimates from just a month ago – for both the commodities and equity market from just last month. On Sunday, Jan Hatzius, Goldman’s chief economist, lowered his first-quarter GDP growth forecast to zero from 0.7%.. The economist also sees a 5% contraction in the second quarter, followed by a sharp snapback for the remainder of the year. But unlike equities, which the firm believes will swiftly rebound, oil will likely stay lower for longer.

Oil prices jump as recent sharp falls draw investors – Oil drops 6% breaking below $27 as recession fears, pump war weigh –Oil dropped more than 6% to multi-year lows on Tuesday, and analysts said more declines may follow as the coronavirus pandemic hits demand and Saudi Arabia and Russia battle for market share. Countries including the United States and Canada, along with nations in Europe and Asia, are taking unprecedented steps to contain the virus, curbing demand for crude and products such as gasoline and jet fuel. Brent crude fell 98 cents, or 3.2% to trade at $29.07 per barrel, having earlier touched $31.25. On Monday it sank to $29.45, the lowest since January 2016. U.S. West Texas Intermediate crude reversed all of an earlier 4.7% gain to shed $1.75, or 6.1%, and close at $26.95 per barrel, its lowest level since Feb. 2016. “Unfortunately for the bulls, we believe we have not seen the worst of the price rout yet,” said Bjornar Tonhaguen of Rystad Energy.” “The market will soon come to realize that the it may be facing one of the largest supply surpluses in modern oil market history in April.” U.S. President Donald Trump warned on Monday that the United States may be heading into recession as economic activity across the globe slowed and stock markets tumbled. The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR). Other countries and companies are planning similar measures to fill storage tanks.

Oil mixed after slipping to lowest since early 2016 amid coronavirus chaos – Oil prices steadied early on Wednesday after sliding to their lowest in four years, sapped by fears for fuel demand and the global economy amid travel and social lockdowns triggered by the coronavirus epidemic in a number of countries around the world. Brent crude was up 8 cents, or 0.3%, at $28.81 a barrel by 0029 GMT, after falling earlier to $28.40, the lowest since early 2016. The international benchmark fell 4.3% on Tuesday. U.S. crude was down 2 cents at $26.93 a barrel, after falling to as low as $26.20, also the lowest in four years. West Texas Intermediate fell 6% on Tuesday. A fall in U.S. inventories of crude, gasoline and distillates, as reported by an industry group, provided some support to prices, but the demand outlook remains grim amid a price war among major producers. In efforts to support economies, the world’s richest nations prepared to unleash trillions of dollars of spending to lessen the fallout from the coronavirus outbreak, as well as imposing social restrictions not seen since World War Two. Meanwhile, Virgin Australia became the latest airline to shut down its international network with the suspension of all international flights, while Prime Minister Scott Morrison warned that the situation could last six months or more. Elsewhere, Iraq’s oil minister pleaded for an emergency meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to discuss immediate action to help balance the oil market.

Oil prices lowest since 2003 – U.S. oil prices reached their lowest point since 2003 on Wednesday as the coronavirus has reduced demand in countries around the world. The prices fell for a third session, with U.S. crude Clc1 reaching $25.06 per barrel, the lowest prices since late April 2003. As of 11:35 GMT, U.S. crude Clc1 hit $1.51 cents or 5.6 percent at $25.44 per barrel, Reuters reported. The last time the prices were that low, the U.S. had recently invaded Iraq and China was rising in the global economy, sparking an increase in global oil consumption to record levels, Reuters noted. Meanwhile, Brent crude LCOc1 traded down 95 cents at $27.78 a barrel after reaching $27.56, the lowest point since early 2016. “The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note obtained by Reuters. Goldman Sachs projected in the note that Brent crude would decrease to as much as $20 in the second quarter, which the prices have not seen since early 2002. The bank predicted that the global demand would decrease 8 million barrels per day by late March and 1.1 million per day annually, which would be a new record, according to Reuters. Consultant firm Rystad Energy anticipated a drop of 2.8 million barrels per day around the world in 2020. “To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said, according to Reuters. Iraq’s oil minister is requesting an emergency meeting between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers to take action to stabilize the market. Russia and Saudi Arabia’s battle for market shares has also put additional pressure on the market, Reuters noted. .

Oil Prices Crash, Settle At 18-year Low –— Crude oil prices crashed to their lowest level in about eighteen years on Wednesday as growing worries about an imminent recession due to the coronavirus outbreak raised concerns about global energy demand. A price war between Russia and Saudi Arabia following disagreement about production cuts in the recent concluded OPEC+ meeting is adding to the woes in the oil market. West Texas Intermediate Crude oil futures for April ended down $6.58, or 24%, at $20.37 a barrel, the lowest settlement price since February 2002. The contract fell to a low of $20.06 a barrel in the session. Today’s fall is the second biggest single-day drop for crude oil futures, after the about 33% tumble recorded on January 17, 1991. Brent Crude futures were down by about $4.20, or over 14%, when the contract fell to a low of $24.53 in the session. On Tuesday, WTI Crude oil futures for April ended down $1.75, or about 6.1%, at $26.95 a barrel, the lowest settlement price since February 2016. Data released by the Energy Information Administration this morning showed oil inventories in the U.S. rose by 1.9 million barrels in the week ended March 13, compared with expectations for a build of about 3.3 million barrels. Gasoline inventories were down by 6.2 million barrels, while distillate stockpilesfell by 2.9 million barrels in the week. The American Petroleum Institute reported on Tueday that crude oil inventories in the U.S. saw a decrease of 421,000 barrels in the week ending March 13. With major economies going into the lockdown mode, concerns about the outlook for energy demand continue to rise by the day. “Demand losses across the complex are now unprecedented,” said Jeffrey Currie, Goldman’s global head of commodities research in a report. Goldman Sachs sees U.S. West Texas Intermediate crude averaging $20 per barrel in the second quarter with international benchmark Brent crude at $20 per barrel.

An oil price war is here to stay, analysts warn – even as prices tumble to nearly two-decade lows – An oil price war between Saudi Arabia and Russia will most likely accumulate over the course of the year, energy analysts have told CNBC, with no end in sight until 2021 at the earliest. International benchmark Brent crude traded at $26.01 Wednesday, down around 9%, while U.S. West Texas Intermediate (WTI) stood at $22.73, more than 15% lower. Brent fell to its lowest level since September 26, 2003 on Wednesday, while WTI slumped to lows not seen since March 6, 2002. It comes as the coronavirus continues to spread worldwide and amid an ongoing price war between OPEC kingpin Saudi Arabia and non-OPEC leader Russia. Analysts at Eurasia Group believe the price war between Riyadh and Moscow is likely to last throughout 2020. “The Gulf countries see Moscow as an important power that can play a broader security role in the region over the long term. The relationship between Mohammad bin Salman and President Vladimir Putin probably took a hit but the strategic imperatives have not changed,” analysts at the risk consultancy said in a research note. “Extensive pain from the oil price shock will accumulate over the course of 2020 and create the necessary conditions for negotiations, compromise, and probably a new production restraint agreement,” they added. “Saudi policy will now revolve around inflicting pain on other producers over the short term, but its long term objective is to be the predominant market manager and price setter,” analysts at Eurasia Group said.Aramco plans to increase its output to 12.3 million barrels per day (b/d) from April, with the United Arab Emirates also pledging to raise output from next month. “The Saudis have a potent weapon at their disposal, namely spare production capacity,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note. “As the long-time purveyor of global spare capacity, Saudi Arabia is reopening the oil spigots after having done most of the heavy lifting in curbing supply.” “Put simply, the Saudis are in for the long haul,” Brennock said.

Oil jumps 13%, rebounding from Wednesday’s steep losses – Oil prices rose more than 10% on Thursday after a three-day sell off drove them to their lowest levels in almost two decades as demand plummeted due to the coronavirus and supplies surged in a fight for market share between Russia and Saudi Arabia. Benchmark Brent, which has lost half its value in less than two weeks, was offered some respite as investors across financial markets assessed the impact of massive central bank stimulus. Brent crude jumped $1.29, or 5.1%, to $26.16 per barrel, after plunging to $24.52 on Wednesday, its lowest level since 2003. U.S. crude gained $2.63, or 12.9%, to trade at $23.00 per barrel, after dropping nearly 25% in the previous session to an 18-year low. But analysts said gains were likely to be temporary, as tumbling demand due to the coronavirus outbreak was compounded by the collapse this month of a deal on supply curbs between OPEC and other producers. Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, which kicked off a price war with Russia that sent prices into tailspin, is planning to keep pumping at a record rate of 12.3 million barrels per day (bpd) for months. “From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens,” Jefferies said in a note. “Unless somebody intervenes, no oil producer benefits from the current environment.” U.S. senators on Wednesday upped the pressure on Saudi Arabia and Russia to stop the price war and held talks with the kingdom’s envoy to Washington. They urged President Donald Trump to impose an embargo on oil from the two countries. But analysts have still been slashing growth forecasts for China, where the disease erupted, to the lowest levels in decades. Meanwhile, the spread of the virus elsewhere is showing no sign of abating, with governments resorting to lockdowns in a bid to contain the disease, hammering economies and raising prospects for a global recession.

Oil Soars 24% In Biggest One-Day Surge On Record – One day after oil crashed by a near record 25%, a move which made some sense in light of the historic dollar short squeeze and surge to all time highs in the Bloomberg dollar index, today oil has rebounded violently, and after rising as much as 26%, WTI settled up $4.85 at $25.22, or 23.81% higher…… its biggest one day move on record!There was no actual catalyst, although some oil traders cited a rogue rumor that emerged just before the big spike according to which “Putin has instructed Novak to engage the #Saudis to resume #OPEC+ supply cuts.”#Oil prices are green again. Why? Rumors #Putin has instructed Novak to engage the #Saudis to resume #OPEC+ supply cuts. DoE announced tender for 30 million barrels #SPR stocks. All from small & mid sized #American producers.#OOTT pic.twitter.com/29N3oU0kF3

However, that was merely a regurgitation of a rumor that hit one day earlier.Remarkably, today’s record surge took place even as the dollar index continued to soar, suggesting the move was most likely a counter-trend short squeeze. That said, putting the move in context, despite today’s record surge, oil is still down 17% for the week.

Oil rallies, with U.S. prices scoring their biggest daily percentage climb on record – Oil prices bounced off their lowest levels in 20 years on Thursday, with U.S. prices scoring their largest one-day percentage climb on record,Investors absorbed news of a plethora of central bank and government support measures to combat the economic fallout from the coronavirus pandemic, Russia indicated it would like to see higher prices, and the Trump administration reportedly said it may intervene in oil-price war between Saudi Arabia and Russia.Thursday’s climb for oil is “more symbolic of the volatility that should continue to rattle global markets, rather than a clear signal that prices are ready for a sustained rebound of recent lows,” said Robbie Fraser, senior commodity analyst at Schneider Electric. The front-month April West Texas Intermediate crude contract, the U.S. benchmark, rose $4.85, or 23.8%, to settle at $25.22 a barrel. That was the largest one-day, front-month percentage climb on record based on data going back to March 1983, according to Dow Jones Market Data.On Wednesday, the WTI contract plunged more than 24%, to settle at $20.37 a barrel on the New York Mercantile Exchange, for the lowest finish since Feb. 20, 2002. Adjusted for inflation, oil traded around the lowest level since March 1999, according to Dow Jones Market Data.Global benchmark May Brent crude rose $3.59, or 14.4%, to $28.47 a barrel. On Wednesday, the contract fell $3.85, or over 13%, to finish at $24.88 a barrel on ICE Futures Europe, for its lowest settlement since May 8, 2003.The move for oil “comes as central banks around the world continue to offer major supportive measures to global financial markets, albeit with sometimes limited initial market reaction,” said Fraser.The Federal Reserve late Wednesday announced more moves to stabilize U.S. financial markets rocked by the sudden pullback of economic activity stemming from the deadly coronavirus outbreak. The Fed widened support to include money market mutual funds.

Oil price scores largest one-day percentage increase in the traded oil price in NYMEX history – Oil futures rallied Thursday, with U.S. prices up nearly 24%, to score their largest one-day percentage climb on record. Some of the increase could be traced to remarks by President Donald Trump that he might intervene in the Russian-Saudi production dispute, if it continues unabated. April West Texas Intermediate oil rose $4.85, or 23.8%, to settle $25.22/bbl on the New York Mercantile Exchange. That was the largest daily front-month contract percentage climb on record, based on data going back to March 1983, according to Dow Jones Market Data. WTI prices had settled Wednesday at their lowest rate, in constant dollars, since the Asian Financial Crisis of the late 1990s.Other energy prices continued their Thursday surge, in tune with the rebound in domestic WTI oil prices. The global benchmark Brent crude contract advanced $3.99 to $28.87/bbl. Natural gas futures were 4 cents higher, at $1.60 per 1 million BTU.Meanwhile, HighPoint Resources (HPR) jumped out to a more than 16% gain after the oil and gas producer Thursday said it was shelving all new drilling and completion activities following the recent plunge in crude oil prices. Highpoint has completed all of its existing wells and said that the moratorium on new drilling will not affect production volumes for the first half of 2020.Regarding another factor bolstering prices, the U.S. Department of Energy said on Thursday that it will buy up to 30 MMbbl of crude o il for the Strategic Petroleum Reserve by the end of June. This will be a first step in fulfilling President Trump’s directive to fill the emergency stockpile, to help domestic crude producers.

Crude oil spikes in best day ever – here’s what could come next – Crude oil just had its best day ever, only a day after its third-worst drop in history. West Texas Intermediate jumped more than 23% to $25.22 a barrel on Thursday. However, it remains on track for its worst monthly decline on record as a supply glut and demand concerns keep oil investors on edge. Jeff Currie, global head of commodities research at Goldman Sachs, says selling across commodities has been indiscriminate. “I think we have more downside. When we look at the demand losses, they’re unprecedented – not only in oil but the entire commodity complex, and particularly those commodities that are more leveraged to this whole idea of self-isolation. Not only is oil down because we’re not moving around, but also things like beef that are leveraged to restaurant demand, they’re down. … There’s another dynamic at play here that’s really became more important in commodities in the last, I would say, two to three days, which are liquidity constraints. And if you look at gold, a lot of people ask why is gold going down right now. One of the key reasons why gold is going down is because people are selling assets to raise cash. Paul Sankey, oil analyst at Mizuho, sees more trouble ahead for oil prices unless excess output is reined in. “It’s simply a question of when you don’t have enough available inventory capacity to offtake and that then the physical reality of oil, and having to deal with the sort of black viscous liquid that you need to put somewhere could conceivably take prices negative, particularly at the extremes of the chain, for example in Canada or maybe in North Dakota where you’re further away from markets. … In my role as an analyst we’ve been trying to put pressure on Saudi, to be honest, because I think that adding oil in this market isn’t really what’s needed, to say the least. And that may recover things so we’ve been doing some fairly doomsday-type scenarios of what Q2 looks like if Saudi keeps pumping and if we continue to have a rolling shutdown of the United States of America, which is the biggest oil market in the world. At that point, you get to very low prices.” Harold Hamm, founder of Continental Resources, says he has faith in the federal agencies tasked with stabilizing markets. “The good thing about this situation as we just talked about is that we have an agency that is charged with protecting American interests such as this. So, that’s a good thing we have a Secretary of Commerce that understands and can deal with this quickly. And we talk with him. Obviously, with the Armed Services Committee moving forward to take charge here, and also the Commerce Committee and the Senate, they can move very, very quickly and stop this situation has been imposed on us.”

Oil Prices Resume Plunge Amid Wall Street Meltdown – After steadying somewhat Thursday, world oil prices resumed their plunge Friday and dismissed the massive stimulus package announced by the European Union and President Donald Trump’s hint he might intervene in the raging price war between Saudi Arabia and Russia.Oil prices plummeted 11% Friday, completely erasing early gains Thursday that saw the benchmark Brent crude oil climbing briefly above $30 a barrel. Now, Brent crude futures fell $1.49 or 5.2%, to settle at $26.98 per barrel. U.S. crude futures for April fell $2.79, or 11.06%, to settle at $22.43 per barrel.On Friday morning, WTI (U.S. crude) rose 2.97% to $26.62, while Brent Crude was up 3.40% on the day at $31.25. But by 11:00 a.m., WTI had sunk to $25.02, with Brent falling to $30.13. Thursday’s price climb, however, was WTI’s single best day on record but isn’t receiving universal approval.”The outsized gains by WTI reflect the hope and not the reality of the U.S. shale industry,” said Jeffrey Halley, senior market analyst at OANDA. “Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began.”WTI and Brent both collapsed about 40% over the past two weeks since the breakdown of talks between the Organization of the Petroleum Exporting Countries (OPEC) and its 10 allies, including Russia. Saudi Arabia boosted production, and has kept boosting production, leading to the ruinous price was that now has some analysts speculating about $5 oil. The immediate result of the Saudi’s price was, which it launched to punish Russia, was $20 oil. Analysts affirm oil prices are set for a weekly drop of more than 10% for the fourth weekly decline in a row. Worse is to come. Amid this unprecedented oil demand destruction, Saudi Arabia, the United Arab Emirates (UAE), and Russia intend to flood the market with up to a combined 4 million bpd in April when demand will be at its weakest due to the fast spread of COVID-19 in the U.S.

Oil falls 11%, on track for worst month on record – Oil dropped 11% on Friday, giving back early gains, even as the world’s richest nations poured unprecedented aid into the global economy to stop a coronavirus-driven recession and U.S. U.S. crude futures for April fell $2.79, or 11.06%, to settle at $22.43 per barrel. Brent crude futures fell $1.49 or 5.2%, to settle at $26.98 per barrel. Thursday was WTI’s single best day on record. “The outsized gains by WTI (U.S. crude) reflect the hope and not the reality of the U.S. shale industry,” said Jeffrey Halley, senior market analyst at OANDA. “Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began.” As the spread of the coronavirus brings much of the world to a halt, nations have poured increasing stimulus into their economies while central banks have flooded markets with cheap dollars to ease funding strains. “Positive risk sentiment and a weaker U.S. dollar are helping crude on Friday. Also, comments from U.S. president Trump that he might get involved in the oil (price) war at an appropriate time is supporting oil,” said UBS oil analyst Giovanni Staunovo. “My concern relates to the likelihood of more mobility restrictions around the globe, which is likely to weigh further on oil demand. Hence, the worst is probably not over for oil prices.” U.S. crude and Brent have both collapsed about 40% in the past two weeks since the breakdown of talks between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, leading Saudi Arabia to ramp up supply. Trump said on Thursday that he would act on the price war at the appropriate time, saying low gasoline prices were good for U.S. consumers even though they are hurting the industry. Despite the rise of oil prices on Thursday and Friday, Brent was still on track for a weekly loss of more than 10%, its fourth consecutive weekly decline.

Oil Suffers Biggest Weekly Loss Since 1991 With Demand in Focus – Oil capped its biggest weekly decline in almost three decades as concern that the collapse of global fuel demand will deepen outweighed talks between OPEC and Texas’s energy regulator. Futures in New York tumbled 11% Friday, bringing the week’s plunge to 29%, the biggest since January 1991. Some traders see demand shrinking as much as 10 to 20 million barrels a day as drivers stay home and flights are grounded across the world. Two of the three commissioners at Texas’s oil agency are skeptical of a plan currently being weighed to curtail crude production in the state in an effort to balance global supply with demand and stabilize prices. “The uncertainty of what will happen is still an overhang and destabilizing markets,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “A deal between Texas and OPEC would have been unthinkable a few weeks ago.” “With other governments manipulating oil markets, it’s fair to ask: Why shouldn’t our government step in to try to reinstate a more market-based approach?” Sitton said in a Bloomberg Opinion column. “It would stave off a total oil industry meltdown.” The plan comes as the nearest timespread for the U.S. benchmark indicated its deepest oversupply since 2016. The American shale industry has found itself caught in the middle of the fight between Saudi Arabia and Russia. The sector has so far scaled back operations and is also threatened with a wave of bankruptcies. West Texas Intermediate for April delivery, which expires Friday, fell $2.79 to settle at $22.43 a barrel in New York. The more active May contract slid $3.28 to $22.63 a barrel.Brent for May settlement fell $1.49 to settle at $26.98 a barrel on the ICE Futures Europe exchange.

OPEC and IEA warn developing countries could lose up to 85% of oil and gas income this year – Developing countries’ oil and gas income could fall to their lowest levels in more than two decades if current energy market conditions persist, the IEA and OPEC have warned in a rare joint statement. IEA Executive Director Fatih Birol and OPEC Secretary General Mohammed Barkindo expressed “deep concerns” about the coronavirus pandemic on Monday, warning it could have “potentially far-reaching economic and social consequences.” Birol and Barkindo said they expect developing countries to see their oil and gas income fall by 50% to 85% in 2020. They singled out public sector spending in vital areas such as health care and education as being especially vulnerable. International benchmark Brent crude traded at $29.91 Tuesday morning, down around 0.7%, while U.S. West Texas Intermediate (WTI) stood at $28.98, more than 1% higher. Oil prices slid 10% in the previous session, as the coronavirus continues to spread worldwide and amid an ongoing price war between OPEC kingpin Saudi Arabia and non-OPEC leader Russia. On Monday, Saudi Arabia’s state-owned oil giant Saudi Aramco said it would likely continue with a planned oil production hike from April into May, reportedly suggesting it was “very comfortable” with an oil price of $30 a barrel. Russia, which refused to sign up to OPEC’s proposal of deeper production cuts earlier this month, has claimed it can withstand lower oil prices for as long as a decade. OPEC’s Barkindo and the IEA’s Birol did not address Russia specifically in their joint statement, but both “underscored the importance of market stability, as the impacts of extreme volatility are felt by producers.” They agreed to “remain in close contact on the matter” and continue their regular consultations on oil market developments.

Why Saudi Arabia’s Oil Price War Is Doomed To Fail – Oil price wars rarely achieve their objectives. Saudi Arabia and Russia racing to out-pump each other is unlikely to be any different.Instead of declaring a victory in seizing market share back from their common rivals in the form of US shale, the main protagonists in Moscow and Riyadh are more likely to cause long-lasting damage to petrodollar economies already under pressure from demand destruction caused by climate change action and the onslaught on the global financial system from the coronavirus pandemic. The effective collapse of the OPEC+ coalition when the group and its allies failed to agree on an additional 1.5 million b/d of cuts on March 6 has triggered a 30% collapse in prices, with no floor in sight. Brent crude is now below $30/b and test levels last seen back in 2004. Some industry veterans even fear prices could plummet further to historic lows.Abdullah bin Hamad al-Attiyah, Qatar’s former oil minister and OPEC president, fears markets are entering virtually uncharted territory.“I saw the first shock and the first collapse and this is worse,” said the former OPEC grandee in an interview from Doha with S&P Global Platts on March 9.“My expectation is for oil to fall below $20/b. We have seen it before.” Al-Attiyah was referring to the time when former Saudi oil minister Zaki Yamani, under pressure from the kingdom’s late ruler King Fahd, launched the OPEC cartel into a price war with ascendant North Sea producers. The strategy saw crude fall to $10/b and Yamani losing his job. Within a year, Saudi Arabia was forced into an ignominious reversal in tactics in a desperate attempt to boost prices.Al-Attiyah sees echoes of the crisis playing out in today’s market between Russia and the kingdom.“I was there when OPEC had its emergency meeting in 1985 and Sheikh Yamani said open full production and the North Sea producer will come begging to Vienna,” said Al-Attiyah.“They never came and it took us 15 years to properly recover. We have to learn.” Despite the best efforts of Saudi Arabia, OPEC and fluctuating prices, North Sea producers have proved remarkably resilient. Better technology and efficiency means the offshore basin continues to play an important role in the market. Although the best days are over, its resilience was underscored recently by the start of the giant 450,000 b/d Johan Sverdrup field.

Trump eyes intervention in Saudi-Russia oil dispute – President Trump said Thursday he’s eyeing intervention in the oil price war between Russia and Saudi Arabia, a dispute that combined with COVID-19’s economic toll is pushing prices sharply downward and creating financial jeopardy for U.S. producers. The pledge came in Trump’s first extensive comments on the upended oil market, but he also suggested that he has mixed feelings about the price collapse. Trump, at a White House briefing on the COVID-19 response, said low gas prices were helpful to consumers. But he also said the decline “hurts a great industry and very powerful industry.” “We’re trying to find some kind of medium ground,” the president said. Prices for West Texas Intermediate, the U.S. benchmark, rose into the $25-per-barrel range Thursday, since dropping Wednesday to about $20, an 18-year low. However, it’s still far below the roughly $63 range where prices were at the beginning of the year. Early this month, the production-limiting agreement between OPEC and Russia collapsed, prompting Saudi Arabia to announce lower prices and plans to increase supplies. Trump did not say what form the U.S. involvement could take. But the Wall Street Journal reported Thursday that the U.S. could ask Saudi Arabia to revisit plans to hike output via communications through the State Department and National Security Council. The story, citing an unnamed administration official, said the U.S. is weighing potential sanctions against Russia. Separately, the Energy Department on Thursday announced a solicitation to buy an initial 30 million barrels of oil for the Strategic Petroleum Reserve, part of a wider plan to fill the stockpile. However, the plan requires congressional approval.

Saudi Arabia announces $32 billion in emergency funds to mitigate oil, coronavirus impact – Saudi Arabia’s government unveiled stimulus measures amounting to 120 Saudi billion riyals ($32 billion) on Friday to support an economy hit by the double blow of the coronavirus crisis and dramatically lower oil prices. The sum includes Riyadh’s 50 billion riyals package announced last week to support small and medium-sized businesses. Friday’s announcement introduces a further 70 billion riyals to aid businesses, including the postponement of tax payments and exemptions of various government levies and fees. Earlier this week, the kingdom cut its 2020 budget by almost 5%, a step that many economists predict will be the first of a series of cutbacks and potentially even austerity measures to keep its finances intact amid oil prices plunging by nearly 60% year-to-date. The relief measures in the new stimulus package include exemptions on expat levies, postponing some private sector fee payments to the government, and postponing the collection of customs duties on imports. It also allows employers to extend exit and re-entry visas free of charge for three months and enables businesses to postpone paying value-added tax, income tax and other levies for the next three months. “Some budget appropriations will be reviewed and reallocated to the sectors most in need in the current situation, including allocating additional funds to the health sector as needed,” the statement quoted Finance Minister Mohammed al-Jadaan as saying. “An emergency budget was also introduced to cover any costs that may arise during the developments of this global crisis.” Saudi Arabia has taken sweeping measures to stem the spread of the coronavirus, including suspending numerous flight routes and temporarily halting entries for religious pilgrims coming to the kingdom for Hajj, a journey taken by some two million Muslims annually.

US On Brink Of War In Iraq – “Self Defense” Strikes Against Iranian Proxies On Table: Pompeo -What a time for war to be brewing in the Middle East yet again: Washington warned Iraq’s government on Monday it is ready to act “self-defense” if American forces come under attack. This follows last week’s rocket attacks on Taji base just north of Baghdad, which houses US troops. At least two Americans have been killed in the recent attacks, blamed on Iran-backed militias, especially Kataib Hezbollah.Pompeo told Iraqi PM Adil Abd al-Mahdi in a phone call that Baghdad “must defend Coalition personnel supporting the Iraqi government’s efforts to defeat ISIS,” according to a Monday State Dept. press release.Those “responsible for the attacks must be held accountable,” the statement warned. The US “will not tolerate attacks and threats to American lives” and will take “military action as necessary in self-defense,” it added. Defense Secretary Mark Esper said last week “all options” remain on the table, and that President Trump had authorized a military response. An initial Pentagon response did come last Thursday in the form of broad airstrikes across southern Iraq, targeting at least 5 Kataib Hezbollah military sites. Iraq was prompt to condemn the US strikes which left at least 6 dead, most Iraqi national military personnel, as well as one civilian. Meanwhile, Iraq’s Foreign Ministry says it will submit a formal complaint to the UN Security Council condemning the repeat US violations of Iraqi sovereignty. “Iraq will complain to the United Nations and the Security Council about overnight U.S. air strikes, a spokesman for the foreign ministry said on Friday,” Reuters reports. “The Iraqi military said earlier on Friday that the air strikes had killed six people and described them as a violation of sovereignty.”

Yemen reiterates warning against possible catastrophic ‘Safer’ Explosion – The Yemeni government has reiterated its warnings against possible disastrous consequences of the explosion or spill at Safer offshore oil platform, which floats off Hodeidah’s northern Red Sea coast. Information Minister Muammar al-Eryani has listed in a series of tweets the most disastrous consequences. “We renew our warning against the threats posed by Iran’s mercenaries (Houthi militias) who continue to prevent the United Nations panel of experts from inspecting and maintaining Safer oil tanker.” Any explosion at Safer will cause a catastrophic oil spill with irreversible environmental damage. Eryani explained that in case of a leak due to the corrosion of the oil tanker, technical reports indicate the estimation of 138 million liters of crude oil spill in the Red Sea. He pointed out that this would be four times worse than the 1989 Exxon Valdez oil spill disaster in Alaska, stressing that the region still did not fully recover after almost 30 years from the incident. He also noted that the tanker’s explosion would lead to closing Hodeidah port for several months, which would cause shortages in fuel and needs, as well as a rise in fuel prices by 800 percent and the doubling of the prices of goods and food. “Such an explosion will cost Yemeni economic fishing stocks $60 million a year or $1.5 billion over the next 25 years.” Eryani said the possibility of the oil tanker’s burning would affect three million people in Hodeidah. He added that 500,000 people who work in the fishing sector will need food aid, while fish stocks may take 25 years to recover.

Arab countries urge UN to inspect decaying oil tanker off Yemen – Several Arab countries have called on the UN to pressure Yemen’s Houthi rebels into allowing the world body to inspect a decaying oil tanker moored off the country’s coast, warning that it may explode and cause “widespread environmental damage” to the Red Sea region. The Safer oil tanker has been docked 60km (37 miles) north of Yemen’s port city of Hodeidah since the late 1980s, but has not been in use since the Houthis seized the region in 2015. Amid a lack of maintenance and breakdown of crude inside the vessel, the UN has repeatedly warned that there is a risk of a chemical explosion. In August, when a UN team attempted to access the tanker, the rebels blocked them, demanding revenue from the sale of oil aboard the vessel as a precondition for the inspection. The Safer may hold as many as 1.1 million barrels of oil, which could be worth more than $60m. In a letter sent to the UN Security Council on Thursday, the UN ambassadors for Yemen’s exiled government, Saudi Arabia, Djibouti, Egypt, Jordan and Sudan warned that a leak or explosion could be “four times worse” than the Exxon Valdez oil spill in 1989 in Alaska. The countries said that an explosion would not only bring more hardships to three million people in Yemen’s Hodeidah, but 40 percent of nearby agricultural land would be “covered with black clouds, which would result in the elimination of grains, fruits, and vegetables”. “It could increase fuel prices by 800 percent and double the price of food and goods, resulting in more economic challenges for the people of Yemen,” the letter read. Yemen’s internationally recognised government has been fighting the Houthi movement since 2015, when the rebels took over the country’s capital Sanaa. The ongoing war has devastated Yemen, with about 80 percent of the population – 24 million people – requiring some form of humanitarian or protective assistance, according to UNOCHA. Saudi Arabia and its allies, including the United Arab Emirates, have been major backers of the ousted Yemeni government. The government’s coalition has accused Iran of arming its Houthi rivals, a charge both Tehran and the rebels deny.

Abu Dhabi acts to cushion the blow of coronavirus on UAE companies – Abu Dhabi is putting its development plans “on steroids” despite low oil prices and the global coronavirus outbreak, according to the chairman of the city’s department of economic development. “One of the most important things is that Abu Dhabi as a government is continuing developing its capital investments … which was planned for 2020,” Mohammed Ali al-Shorafa told CNBC’s “Capital Connection” on Thursday. “Abu Dhabi has the resources, even at these levels of crude oil prices, to continue with its planned progression,” he said. That may include fiscal reform, monetary policy initiatives and new projects. “We haven’t moved away from the plans, we’re actually putting these plans on steroids,” he added. His comments come as economies around the world grapple with the ongoing health crisis that has sickened more than 207,000 people and killed at least 8,600. The United Arab Emirates has close to 100 confirmed cases, and on Thursday implemented stringent restrictions that bar even residency visa holders who are abroad from entering the country for two weeks.

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