Written by rjs, MarketWatch 666
Here are some more selected news articles about the oil and gas industry from the week ended 28 March 2020. Go here for Part 1.
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Standing Rock Sioux Tribe Prevails as Federal Judge Strikes Down DAPL Permits | Earthjustice – A federal court today granted a request by the Standing Rock Sioux Tribe to strike down federal permits for the controversial Dakota Access Pipeline.The Court found the U.S. Army Corps of Engineers violated the National Environmental Policy Act when it affirmed federal permits for the pipeline originally issued in 2016. Specifically, the Court found significant unresolved concerns about the potential impacts of oil spills and the likelihood that one could take place. For example, the Court criticized the Corps for failing to address the Standing Rock Sioux Tribe’s expert criticism of its analysis, citing issues like potential worst case discharge, the difficulty of detecting slow leaks, and responding to spills in winter. Similarly, the Court observed that DAPL’s parent company’s abysmal safety record “does not inspire confidence,” finding that it should have been considered more closely.The Court’s decision relies heavily on the technical analyses conducted by the Tribe’s agency directors and expert consultants, repeatedly citing the Tribe’s evidence that the risk of a spill, and the consequences should one occur, are far more serious than ever recognized. The Court ruling validates the Tribe’s hard work over several years to provide technical input into the remand process. “In this case, the operator’s history did not inspire confidence” View the entire document with DocumentCloud The Court ordered the Corps to prepare a full environmental impact statement on the pipeline, something that the Tribe has sought from the beginning of this controversy. The Court asked the parties to submit additional briefing on the question of whether to shut down the pipeline in the interim. “This validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” said Earthjustice attorney Jan Hasselman. “The Obama administration had it right when it moved to deny the permits in 2016, and this is the second time the Court has ruled that the government ran afoul of environmental laws when it permitted this pipeline. We will continue to see this through until DAPL has finally been shut down.”
Federal Judge Tosses Dakota Access Pipeline Permits, Orders Full Environmental Review | DeSmog –Today, a federal judge tossed out federal permits for the Dakota Access pipeline (DAPL), built to carry over half a million barrels of Bakken crude oil a day from North Dakota, and ordered the U.S. Army Corps of Engineers to conduct a full environmental review of the pipeline project. U.S. District Judge James E. Boasberg indicated that he would next consider whether to shut down the current flows of oil through DAPL while the environmental review is in process, ordering both sides to submit briefs on the question. The Dakota Access pipeline has been in service for nearly three years, following battles over the pipeline’s environmental impacts that raged for years. “The many commenters in this case pointed to serious gaps in crucial parts of the Corps’ analysis,” Judge Boasberg wrote in today’s order, “to name a few, that the pipeline’s leak-detection system was unlikely to work, that it was not designed to catch slow spills, that the operator’s serious history of incidents had not been taken into account, and that the worst-case scenario used by the Corps was potentially only a fraction of what a realistic figure would be – and the Corps was not able to fill any of them.”Judge Boasberg cited evidence submitted regarding the safety record of the pipeline’s operator, Energy Transfer (formerly known as Energy Transfer Partners, which merged with Sunoco). “In this case, the operator’s history did not inspire confidence,” the order says. “‘[Pipeline and Hazardous Materials Safety Administration] data shows Sunoco has experienced 276 incidents resulting in over $53 million in property damage from 2006-2016,’ which one expert described as ‘one of the lower performing safety records of any operator in the industry for spills and releases.'””This validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” Earthjustice attorney Jan Hasselman said in a statement. “We will continue to see this through until DAPL has finally been shut down.” Because the pipeline’s effects were “likely to be highly controversial,” the judicial opinion concludes, federal law – specifically the National Environmental Policy Act (NEPA) – requires a more thorough environmental review than was done.
‘Huge Victory’ for Standing Rock Sioux Tribe as Federal Court Rules DAPL Permits Violated Law – A federal judge handed down a major victory for the Standing Rock Sioux tribe of North Dakota on Wednesday, ruling that the U.S. Army Corps of Engineers violated the National Environmental Policy Act by approving federal permits for the Dakota Access Pipeline.The USACE must complete a full environmental impact study of the pipeline, including full consideration of concerns presented by the Standing Rock Tribe, the judge ruled. The tribe has asked the court to ultimately shut the pipeline down.The court chastised the USACE for moving ahead with affirming the permits in 2016 and allowing the construction of the Dakota Access Pipeline (DAPL) crossing the Missouri River after President Donald Trump assumed office in 2017, without considering the expert analysis put forward by the tribe. The Standing Rock Sioux had raised concerns regarding the likelihood and danger of potential oil spills, DAPL’s leak-detection system, and the safety record of Sunoco Logistics, the company behind the pipeline. Sunoco “has experienced 276 incidents resulting in over $53 million in property damage from 2006 to 2016” and has “one of the lowest performing safety records of any operator in the industry,” the tribe’s experts found.The federal ruling “validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” said Earthjustice attorney Jan Hasselman in a statement. “The Obama administration had it right when it moved to deny the permits in 2016, and this is the second time the court has ruled that the government ran afoul of environmental laws when it permitted this pipeline. We will continue to see this through until DAPL has finally been shut down.”DAPL and the fight against the pipeline was the subject of international attention in 2016 when thousands of water defenders gathered at camps in North Dakota, facing a highly militarized police force armed with tanks, riot gear, rubber bullets, and other weapons. Since Trump reversed former President Barack Obama’s December 2016 order denying the permits and allowed the construction to be completed in June 2017, the tribe haschallenged the permits and demanded the USACE conduct a full environmental analysis. Wednesday’s ruling represented a “huge victory” for the tribe, 350.org co-founder Bill McKibben tweeted.
Whiting, Continental Oil announce cost-cutting measures – Continental Resources and Whiting Petroleum Corporation are among the latest operators with Bakken assets announcing sharp drops to capital expenditures in the wake of an ongoing price war between Russia and OPEC. Continental said it will reduce its 2020 capital expenditures by 55 percent, dropping its 2020 capex to $1.2 billion. Whiting will cut capex by 30 percent, or $185 million, dropping its total capital budget to between $400 to $435 million. For Continental, this translates to a reduction of six rigs in the Bakken, dropping it from nine to three for 2020. Continental will also cut rigs in Oklahoma, going from 10.5 to about four rigs there. Whiting, which had already made some cuts last year, said it will drop another rig and another completion crew within the next month. Continental expects the revision to its capex to have slight impact on production statistics. It is projecting the drop in crude oil production will be less than 5 percent. Whiting said its cuts will have “moderate impact” on 2020 crude oil production, but deferred specifics to more formal guidance that it will release during its first quarter earnings call. Continental’s Chief Executive Officer Bill Berry said the company is also looking at cost-saving initiatives across its operations to remain free cash flow positive, and expects to remain cash flow neutral even under $30 per barrel WTI.
Lawsuit accuses Williston-based oilfield services company of massive fraud, racketeering – Oklahoma-based oil company Continental Resources is suing a Williston oilfield company in federal court, claiming it was fraudulently overbilled by more than $2 million. The suit, filed in the U.S. District Court for the Western District of Oklahoma, is against Wolla Oilfield Services and its owner, Jason Wolla. Attorneys for Continental claim that Wolla directed his employees to produce fake invoices and bill Continental for work that was never done. Wolla Oilfield Services started working for Continental in January 2017 and billed the company about $7.7 million between then and December 2019, according to the lawsuit. In September 2019, however, a whistleblower told Continental that Wolla Oilfield was systematically overbilling the company. During an audit, Wolla told Continental employees that he was certain the company had only been billed for work that had actually been done. But, Continental’s attorneys wrote, the audit uncovered that Wolla Oilfield had been submitting fraudulent bills. “The timesheets Wolla Oilfield’s drivers submitted to Wolla Oilfield consistently showed drivers actually worked less than 10 hours a day on average, but that Wolla Oilfield billed Continental for significantly more,” the company’s attorneys wrote in the suit. “In fact, Wolla Oilfield employees would often bill Continental for more than 24 hours of work in a day. For example, one Wolla Oilfield employee billed Continental and other customers for 28 hours on August 5, 2019, and 29.5 hours on August 6, 2019, even though his actual timesheet shows he only worked 12 hours on each of those days.” The company showed drivers how to falsify their timesheets to avoid suspicion, attorneys claimed in the suit.
Plains ordered to pay $60 million for Refugio oil spill– On May 19, 2015, a corroded pipeline owned by Plains All American Pipeline broke north of Refugio Beach, sending more than 100,000 gallons of crude oil into the waters of the Santa Barbara Coast. No corner of our community was left untouched by the devastation: industries like tourism and fishing were hammered, and the local ecosystem, including countless marine mammals and sea birds, were affected. As has been the case on several occasions in our city’s history, the negligence of the oil industry spilled out into the crystalline waters of the Pacific, and the community was left to put things back together. In September 2018, Plains All American Pipeline, a Houston-based energy company, was convicted of fouling state waters and harming local wildlife by a California jury. Now, in a settlement that came last week, Plains has been ordered to pay $60 million for the damages created by what were ruled to be negligent practices that contributed to the spill. However, some environmental organizations are holding back on celebrations. On March 19, the Environmental Defense Center (EDC) put out a statement questioning the wisdom of locking down the amount of Plains’ payment before the public has had the opportunity to review and comment on the damage assessment and draft restoration plan. Linda Krop, chief counsel for the EDC, also expressed concern that the gallon figure of 123,000 gallons may be too low. “There’s a scientific paper from UCSB suggesting that the number of gallons spilled might be as high as 450,000 gallons, so to us it doesn’t make sense to lock in a penalty that may actually be much too low,” said Krop. “This settlement is taking place before the public has an opportunity to comment on the draft assessment of impact to the environment and public recreation.”State Senator Hannah-Beth Jackson, who played a large role in the early days of investigating the incident and was highly critical of Plains’s conduct, expressed similar concerns. “The good news is that they’ll have to adhere to California standards, which they’d previously argued they should be exempt from because they claim to be an inter-state enterprise,” said Jackson. “But this business of making a decision about the dollar amount before the public has all of the information is problematic to me. I’m a little concerned about that.”
Overturned tanker spills 6K gallons oil near California dam (AP) – A tanker truck overturned down an embankment Saturday, spilling more than 6,600 gallons of crude oil into a river that flows into a dam and reservoir near the city of Santa Maria, authorities said. The driver was not injured and the cause of the single-vehicle crash on State Route 166 was under investigation, said Santa Barbara County Fire Capt. Nikki Stevens. He said crews were racing to stop the oil that spilled into the Cuyama River from reaching Twitchell Dam and reservoir, which provides flood control and water conservation to the region on the Central Coast. The spill stretching about 2 miles long was more than 10 miles away from the dam. They constructed dirt berms and threw a boom – essentially a floating fence – into the water to contain the oil. Additionally, Stevens said, they placed large pipes under the berms to keep uncontaminated water flowing to the dam while they use pads to absorb the floating oil slick. Time was of the essence because rain was in the forecast for Sunday. “The dirt berm is not going to withstand running water,” Stevens said. “They’re working as aggressively as they can to clean this up.” Stevens said the cleanup will take several days and water quality tests will be conducted.
Crews work to clean Cuyama River after crash spills 6,000 gallons -Most of the 6,000 gallons of crude oil that was spilled into the Cuyama River in Santa Maria has been contained.The Santa Barbara County Fire Department and California Department Fish and Wildlife worked through Saturday night to build two underflow dams to contain about 4,200 barrels of oil, according to fire Capt. Daniel Bertucelli.A tanker truck carrying more than 6,000 gallons of crude oil overturned and crashed into the Cuyama River east of Santa Maria on Saturday, according to the Santa Barbara County Fire Department. The crash took place on Highway 166, about 20 miles from Santa Maria.Authorities were notified at approximately 6 a.m Saturday and, by 3 p.m. that day, all of the forward flow of oil was stopped at the U.S. National Forest’s Pine Canyon Station.The driver was uninjured in the crash, fire Capt. Nikki Stevens said, but the crude oil began leaking from the tanker and heading downstream toward Twitchell Reservoir.Crews set up a yellow containment boom just below the spill and use heavy equipment to build a dirt berm with two containment underflow dams to allow the water to flow through, according to the Santa Barbara County Fire Department. Absorbent pads were placed downstream of the berm to pick up the rest of the oil.Personnel from multiple agencies – including the CHP, U.S. Fish & Wildlife Service, California Department of Fish and Wildlife, Caltrans, the Santa Maria Valley Water Conservation District, which operates Twitchell Reservoir – assisted on the incident.Pacific Petroleum was at the scene with four vacuum trucks to help clean up spilled oil, according to Bertucelli.The Oiled Wildlife Care Network has been activated and reports of oiled wildlife are being investigated, according to a California Department Fish and Wildlife news release.
Oil Industry Braces for Biggest Idling of Wells in 35 Years – Only the old hands at the Coffeyville oil refinery could remember anything like the prices posted this month. The small Kansas plant in the heart of rural America was offering just $1.75 a barrel for Wyoming sweet crude. With more than two billion people on virus lockdown from India to California, energy demand has plunged. In corners of the U.S., Canada, Russia and China, oil prices at the well-head are collapsing under the weight of an unprecedented glut. And with it, the industry is bracing for something that last happened on this scale 35 years ago: producers shutting down their wells as pumping crude makes no economic sense. “I have never seen anything like this in the markets,” said Torbjorn Tornqvist, the co-founder of Gunvor Group Ltd., a large commodity trading house. “We’ve never seen anything even close to today.” The oil market — hit by the double blow of a demand slump and a supply surge as Saudi Arabia and Russia wage a price war — is battling a surplus of as much as 20% of global consumption. The consequences are brutal: prices are now low enough to force a widespread suspension of production, or a shut-in as it’s known in the industry. For those waging the price war, it counts as a victory — as long as the shut-ins happen elsewhere. Western Canadian Select benchmark crude Brent and West Texas Intermediate, the benchmarks closely followed in Wall Street, are hovering around $25 a barrel. But in the world of physical oil — where actual barrels change hands — producers are getting much less. The industry is navigating what Paul Sankey, a veteran oil analyst at Mizuho Bank Ltd, described as “uncharted waters to unknown lands.” Wyoming Sweet, a landlocked crude with few outlets other than American refineries like Coffeyville, is paradigmatic of how the dynamics of the oil market are forcing output cuts. There are others: North Dakota Light Sweet has traded at $9.97 a barrel. Across the border, Western Canadian Select has plunged to $6.45. In Siberia, Russian crude has changed hands for less than $10 and Chinese domestic prices have fallen to single digits. Ultra-low oil prices are starting to work: Petrobras, the Brazilian state-run producer, is cutting output by 100,000 barrels a day from high-cost offshore platforms. Glencore Plc., the commodity giant, is shutting down its oilfields in Chad. In Canada, Suncor Energy Inc. has partially shutdown its Fort Hills oil sands mine. As the pain spreads, industry executives believe many other companies will stem production in the next few days.
Bipartisan lawmakers urge assistance for oil and gas workers -A bipartisan group of lawmakers wrote to congressional leadership asking for assistance for oil and gas industry workers as oil prices have plunged amid the coronavirus pandemic and international disputes. “We write to ask you to help address the unique challenges facing the people who work in the U.S. oil and gas sector,” said the letter, which was signed by seven Democrats and two Republicans. “We know from previous economic aid efforts that any COVID-19 relief package must protect all hard-working Americans. The effects of COVID-19 will be felt across the economy,” it continued. The lawmakers wrote that there have been layoffs in recent weeks linked to the decreasing fuel prices. A Texas oil regulator recently told Bloomberg that tens of thousands of people in the state were being laid off as drilling rigs close down.”As various sector-specific proposals are considered to address the impacts of COVID-19, this sector and the people who work in it must be taken into account,” the legislators wrote. The letter was signed by Reps. Lizzie Fletcher (D-Texas), Xochitl Torres Small (D-N.M.), Vicente Gonzalez (D-Texas), Sylvia Garcia (D-Texas), Michael McCaul (R-Texas), Al Green (D-Texas), Brian Babin (R-Texas), Kendra Horn (D-Okla.), and Marc Veasey (D-Texas.)It comes as Congress weighs certain relief for oil and gas companies. The Energy Department has asked Congress for $3 billion with which to purchase oil to be stored in the Strategic Petroleum Reserve.
$131B Less Could Go to New Upstream Projects This.Year –Sluggish global oil and gas demand amid the COVID-19 virus pandemic and the ongoing price war between Russia and Saudi Arabia could wreak havoc on new oil and gas project development plans in 2020, according to an impact analysis by Rystad Energy. In fact, the consultancy’s study found that exploration and production firms will likely reduce project sanctioning by as much as $131 billion – or roughly 68 percent – year-on-year. “Upstream players will have to take a close look at their cost levels and investment plans to counter the financial impact of lower prices and demand,” Audun Martinsen, head of energy service research for Rystad, commented in a written statement. “Companies have already started reducing their annual capital spending for 2020.” According to Rystad, total onshore and offshore project sanctioning last year amounted to $192 billion. Earlier this year, the firm had forecast that $190 billion in new projects would be approved in 2020. Thanks to recent developments, however, Rystad has dramatically altered its projection. The firm stated that it foresees just $61 billion in total project sanctioning if the Brent crude price averages approximately $30 per barrel this year. It added that the revised estimate assumes $30 billion would go toward onshore projects and $31 billion to offshore. In an approximately $40 average oil price environment, which Rystad contends is “getting more distant by the day,” the consultancy predicts that total sanctioning would hit $82 billion. In that case, the year-on-year decrease would amount to 57 percent, the firm added. “In North America, multi-billion dollar oil projects, including LLOG-operated Shenandoah Phase 1 and the Shell-operated Whale development, could face short-term delays in the offshore sector due to low oil prices, while in the onshore sector operators are expected to wait for the situation to stabilize before committing to new projects,”
Listen: A price collapse breaks a fragile US shale sector can it be fixed? – podcast – As oil prices dipped to levels not seen in nearly two decades, US shale operators slashed budgets and rig counts and braced for a hellish few months, if not years. Is even a modest price rebound possible in the near term? Will Saudi Arabia and Russia return to talks over a new supply cut? Has the price collapse forever altered US oil sanctions policy? On today’s Capitol Crude Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, talks about the path forward for US shale, the potential for a US import embargo and why resurrection of a global supply cut may be possible. “The question is: Did the Russians know that they were signing up for the current price environment?” Croft asks.
How Far Will Trump Go To Save U.S. Shale? – The U.S. is today showing signs of increased desperation as oil prices sink to levels that may pose a threat to the energy independence of the United States by kicking U.S. shale out of the market.Several recent actions taken by the United States indicate that it may be attempting to change the current trajectory of the global oil market, including by showing interest in stepping up negotiations with Saudi Arabia, which is spearheading the ongoing market share war that is fostering ultra-low oil prices. The United States is facing a national emergency. The Covid-19 pandemic in the world’s largest oil consumer, The United States, has dented demand to the extent that a couple months ago, no one thought possible. The virus struck – first in the world’s largest oil importer, China – at a time when the oil markets were already concerned about a global oversupply. The virus also struck around the same time that another critical oil-market event took place: the end of the OPEC+ production cut agreement and the start of the oil price war – with Saudi Arabia on one side and Russia on the other.The result is that the U.S. shale industry, often touted as the backbone of the U.S. energy independence movement, has found itself caught in the middle between the oversupplied oil market and severely hampered oil demand.And it looks like the government is getting worried. On Monday evening, the U.S. made the decision to appoint Victoria Coates as special energy representative to Saudi Arabia. While the United States insists that this was in the works for quite some time, even before the oil war began, the timing coincides rather nicely with the shocking price drop for the US crude grade West Texas Intermediate, which is now trading around $23 per barrel, down from $60-something per barrel at the beginning of the year.This $23 per barrel is not sustainable long term – perhaps not even short term – creating a sense of urgency in the United States to address the problem.And who better to address than the perceived perpetrator of the oil price war, Saudi Arabia. Despite the timing, the U.S. is not owning the fact that Coates’ new assignment and the oil price war have any noteworthy link. But the move comes after intense pressure from U.S. lawmakers and others in the industry in recent weeks, some of who have urged President Trump to take the extreme stance ofembargoing Russian and Saudi Arabian oil. Other calls to action include the Texas Railroad Commission’s suggestion to use pro-rationing that would force Texas producers to curb production – something that is unthinkable in America.Mississippi Senator Roger Wicker and Oklahoma Senator Inhofe asked the Department of Commerce to slap a tariff on foreign oil, citing national security reasons. Other ideas include outright conspiring – albeit in a somewhat unofficial capacity – with Saudi Arabia to coordinate production.
Price crash could upend western Canada’s propane export outlook – The collapse in crude oil prices has sent shock waves throughout the global energy industry and Canada has been no exception. Sorting through all the impacts will take time, but what’s clear is that any earlier optimism surrounding supply growth in Canada has evaporated, including for propane supply to feed the new propane export terminals on British Columbia’s coastline. Edmonton propane prices fell 58% since the start of March to as low as 10.25 cents per gallon in U.S. dollars on March 23 – the lowest level since April 2016 – and settled yesterday at 13.13 cents per gallon, according to data from our friends at OPIS. A dampened supply outlook means future export expansion plans also are being reconsidered. Today, we explore what the sharp decline in propane prices could mean for the region’s supplies and future propane exports, including from Pembina Pipeline’s nearly completed export terminal in Prince Rupert, BC. The past few weeks have seen many an energy outlook completely overturned. The effects of the huge downturn in crude oil prices have rapidly forced a large majority of producers in the U.S. and Canada to drastically reduce their spending plans for at least the first half of this year, and likely for all of 2020. Our examination of Canadian producers, both large and small, reveals more than C$6 billion ($4.1 billion) of capital spending reductions announced in just the past three weeks, with some producers still to release information on their capex plans. These spending reductions equate to a more than 30% cut versus previously announced capex plans for this year before prices came crashing down. The impacts may soon be seen in the number of drilled and completed crude oil and liquids-rich gas wells across Western Canada, although it may take some time for the supply impacts to be more fully realized. (See Deja Vu for reasons as to why supply impacts can take time to materialize.) The capital spending cuts have not been confined to just producers, but also have quickly surfaced in the form of capital reductions by major Canadian energy infrastructure companies such as Pembina Pipelines, Inter Pipeline and Keyera Corp.
Federated Cooperatives uses virus to demand concessions from locked-out Saskatchewan refinery workers – In an ominous signpost of the emerging corporate response to the coronavirus crisis and the ensuing stock market meltdown, Federated Cooperatives Limited (FCL) announced Sunday that it has rejected the mediator’s recommendations in the 111-day lockout of 750 oil refinery workers in Regina, Saskatchewan. The company is now demanding even deeper concessions on pensions, work rules, benefits and staffing levels. In a statement, the management of FCL’s Co-op Refinery Complex (CRC) wrote, “We must now consider the stark world developments that are presently unfolding and their impacts to both our business reality and our ever-more critical responsibility to our multiple stakeholders. Global economic circumstances have changed and, with that, we have seen a drastic decline in the consumption of fuel and rapidly declining oil prices that have put the CRC in a more difficult financial position than when negotiations began. Like all businesses, the refinery is now reassessing how to manage through the financial turmoil.” Last week, mediator Vince Ready had tabled his nonbinding recommendations for a resolution of the bitter dispute that has seen FCL deploy a large scab workforce, with the unstinting support of the right-wing Saskatchewan Party government, the capitalist courts, and police. Ready’s report granted virtually all FCL’s initial concession demands. The union, which had already proposed a series of increasingly draconian concessionary climbdowns, accepted the mediator’s recommendations and scheduled a Monday vote advising the workers to accept the rotten deal. Workers, starved out on the picket line and seeing no way forward, voted 98 percent to endorse the Ready recommendations. After the vote, local union President Kevin Bittman told reporters that the mediator’s report, which contained everything the workers had fought against for almost four months, was “a reasonable compromise.” Nevertheless, the lockout continues due to FCL’s refusal to endorse the Ready report. Unifor National President Jerry Dias said prior to Monday’s vote, “To be clear, our committee is not thrilled with the final report and the significant changes that are recommended. We have been trying to find a solution since we were locked out. … It is time to end this dispute and have our members running the refinery in these unprecedented times.”
European natural gas storage inventories are at record-high levels at the end of winter – European natural gas storage inventories as of March 1, 2020, were 60% full – the highest ever recorded level for the start of March, according to Gas Storage Europe’s Aggregated Gas Storage Inventory (AGSI+). European stock levels for both January and February 2020 were the highest ever recorded for those months. Europe’s high levels of natural gas in storage are the result of a mild winter, which limited winter heating demand, and growing natural gas imports by pipeline and as liquefied natural gas (LNG). Relatively mild winter weather across Europe – and especially in northern Europe, where natural gas heating is more common – reduced demand for residential and commercial heating. As a result, natural gas withdrawals from storage were lower than average, resulting in record-high January and February inventory levels. Europe’s natural gas storage capacity utilization for the first day of March has typically been 38%, based on the previous five years; in 2020, natural gas stocks in Europe started March at 60% of capacity. High natural gas stocks were partly the result of record-high deliveries to Europe both by pipeline and as LNG in 2019. LNG imports into Europe had been relatively low between 2012 and mid-2018, but they increased substantially in 2019, averaging 11 billion cubic feet per day (Bcf/d) or almost twice the volume in the two previous years. LNG imports set monthly records of 14 Bcf/d in December 2019 and February 2020 (excluding re-exports, where a country imports and then exports LNG), implying a Europe-wide regasification capacity utilization of almost 60%. Russia and the United States increased LNG exports to Europe last year by an estimated 1.4 Bcf/d and 1.5 Bcf/d, respectively, compared with 2018. The United States has been the largest LNG supplier to Europe since November 2019, and in February 2020, LNG imports from the United States reached a new record high at 5.1 Bcf/d – nearly double the volume of Europe’s second-largest supplier, Qatar. European pipeline import capacity has increased in recent years, including the Trans-Anatolian Pipeline from Azerbaijan. Additional sources of supply into the European market are entering service this year. In January, theTurk Stream pipeline entered service, delivering natural gas under the Black Sea directly to Turkey and Bulgaria. The Trans Adriatic Pipeline, which will deliver natural gas from Azerbaijan to southeast Europe, is currently undergoing commissioning and should be completed in mid-2020.European natural gas prices were at relatively low levels in 2019 and continue at those levels so far in 2020. The spot price of natural gas at the United Kingdom benchmark National Balancing Point (NBP) averaged $3.66 per million British thermal units (MMBtu) in January 2020, an all-time low for the month. Similarly, the price of natural gas at the Title Transfer Facility (TTF) trading hub in the Netherlands averaged $3.62/MMBtu in January, also a record low for the month and less than half of the 2018 average price.
Can the North Sea Survive the Oil Price Crash? -In the short-term, yes. That’s according to Neivan Boroujerdi, a principal analyst in Wood Mackenzie’s (WoodMac) North Sea upstream team. Longer term, however, investment is required to increase production and reduce unit costs, according to WoodMac. If the industry goes into “harvest mode”, a premature end is “inevitable”, the company noted. “Most final investment decisions for 2020 are off the table. At current prices, nearly two-thirds of development spend could be wiped from our forecast over the next five years,” Boroujerdi said. “Annual investment in the UK could fall below $1 billion as early as 2024. The threat of stranded assets is real – we estimate nearly six billion barrels of economically viable resources could be left in the ground, not to mention a further 11 billion of contingent resources,” he added. WoodMac highlighted that the North Sea has weathered several storms in its 50-year existence but noted that the events of the past few weeks mean the sector is entering “uncharted waters”. Last week, industry body Oil & Gas UK (OGUK) warned that the combination of the global economic impact of the continued spread of the coronavirus, the fall in oil price and the halving of gas prices was driving an “increasingly fragile” outlook for the UK’s offshore oil and gas sector. “Severe pressures are already building across the sector’s supply chain, with the pressures expected to significantly undermine the industry’s businesses, jobs and contribution to the economy,” OGUK said in an organization statement. The body said it was working with industry, regulators and government to understand how it can protect supply chain companies and jobs.
More on that oil storage problem – We warned last week that oil has a storage problem, which could translate to permanent production capacity shutdowns. On Thursday, Goldman’s commodities research team, headed by Damien Courvalin, offered some further insight into the issue and the inflationary pressures that are likely to come about as a result. Here are the key pars from their report, with our emphasis: Global isolation measures are leading to an unprecedented collapse in oil demand which we now forecast will fall by 10.5 mb/d in March and by 18.7 mb/d in April (our 2020 yoy demand forecast is now -4.25 mb/d). A demand shock of this magnitude will overwhelm any supply response including any potential core-OPEC output freeze or cut. Such a collapse in demand will be an unprecedented shock for the global refining system with margins simply not low enough given the required level of run cuts. Product storage saturation at refineries is therefore set to occur over the next several weeks. At that point, the product surplus will become a crude one and we expect its unprecedented velocity will create similar logistical crude storage constraints. This is the point at which crude prices will fall below cash-costs to reflect producers having to shut-in production.While seaborne crudes like Brent can remain near $20/bbl in 2Q, many inland crude benchmarks where saturation will prove binding are likely to fall much further (US, Canada, Russia, China). The scale of the demand collapse will require a large amount of production to be shut-in, of potential several million barrels per day. Such a hit on production will not be reversed quickly, however, as shutting-in can often permanently damage reservoirs and conventional producing wells. We therefore increasingly see risks that the rebound in prices will be much sharper than our base-case rally back to $40/bbl Brent by 4Q20, with a normalization in activity increasingly likely to be accompanied by a large inflationary oil shock. And here’s the chart that matters: File under evidence to suggest an inflationary paradigm shift is on the horizon.
Oil giants announce steep cutbacks – Royal Dutch Shell and Total this morning announced plans to sharply cut spending and freeze share buyback plans. The moves signal how cratering demand from COVID-19 and the collapse in prices are upending the outlooks for companies large and small. Shell is cutting planned capital spending this year to $20 billion or lower, compared to the pre-crisis estimate of $25 billion. It also plans to cut operating costs by $3 billion to $4 billion over the next 12 months. Meanwhile, Total said oil at $30 per barrel means a roughly $3 billion hit to capital spending, which means a new target of under $15 billion this year. The France-based multinational also said it can save $800 million in operating costs compared to 2019. They’re just the latest in a string of oil companies – including ExxonMobil and a number of independent U.S. shale producers – to unveil deep cuts of late.
Shell cuts 2020 spending by $5 billion, suspends share buyback – (Reuters) – Royal Dutch Shell will lower spending by $5 billion and suspended its vast $25 billion share buyback plan in an effort to weather the recent collapse in oil prices, it said on Monday. The Anglo-Dutch oil major said it would reduce capital expenditure to $20 billion or below from a planned level of about $25 billion while seeking to reduce operating costs by an additional $3 billion to $4 billion over the next 12 months. The cuts are expected to boost Shell’s cash generation by between $8 billion and $9 billion on a pretax basis. Shell’s shares were down 3.5% in early London trading, against a 3% for the broader European energy sector .SXEP Oil prices have crashed by more than 60% since January, hit by global demand destruction because of the coronavirus pandemic and a price war between top producers Saudi Arabia and Russia after this month’s collapse of a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and its allies.[O/R] The Shell cuts mirror moves by rivals such as Exxon Mobil (XOM.N), Chevron (CVX.N), BP (BP.L) and France’s Total (TOTF.PA), who have all announced plans for sharp reductions in spending.
Coronavirus could slash 1 million oil jobs – report — Thursday, March 26, 2020 — The global oil industry could see over 1 million jobs slashed this year because of the ongoing coronavirus pandemic and oil price war, according to a new report.
Exclusive – Coronavirus, gas slump put brakes on Exxon’s giant Mozambique LNG plan – (Reuters) – Exxon Mobil is likely to delay the greenlighting of its $30 billion (26 billion pounds) liquefied natural gas (LNG) project in Mozambique as the coronavirus disrupts early works and a depressed gas market makes investors wary, six sources told Reuters. Top U.S. oil and gas company Exxon said on Tuesday it was evaluating “significant” cuts to capital spending and operating expenses. Energy firms worldwide have slashed spending this month as oil prices plummeted to 18-year lows after global travel curbs and reduced economic activity destroyed demand. The coronavirus pandemic is forcing delays to projects worldwide. Qatar, the world’s largest producer of liquefied natural gas (LNG), is delaying a big expansion in which Exxon is a major partner. The Rovuma LNG project, which will produce from a deepwater block off Mozambique containing more than 85 trillion cubic feet of natural gas, was expected to get the go-ahead in the first half of 2020. But three sources familiar with the project told Reuters that Exxon’s partners want to push back a final investment decision (FID). A further three sources said the pandemic is disrupting work on the project to such a degree that FID before the second half is unlikely. Any delay would leave Exxon’s project further behind rival Total (TOTF.PA), which took FID last June on its neighbouring project. Exxon might be left with no choice. “COVID-19 is affecting guys going into Mozambique, it’s affecting Chinese and Korean financiers, and clearly you’ve had the arse drop out of the oil market,” said a source with knowledge of the project. The pandemic is causing delays to the financing needed for the project, the source added. Rovuma LNG is managed by Mozambique Rovuma Venture, a joint venture owned 35.7% each by Exxon and Eni (ENI.MI) with the remaining stake of 28.6% held by China National Petroleum Corporation (CNPC). LNG prices LNG-AS hit a record low of $2.7 per million British thermal units (mmBtu) last month, and Rovuma requires an average price of $7 per mmBtu throughout its life to be profitable, according to Bernstein analysts. Another source with knowledge of internal discussions said with the energy outlook uncertain and LNG supplies set to rise sharply by 2025, some of the project partners want to “cool Exxon’s heels” and delay.
Jet fuel refining profits disappear as airlines ground fleets – (Reuters) – Asian jet fuel refining margins have turned negative for the first time in over a decade as airlines continue to ground flights on international and domestic routes amid stringent travel restrictions to contain the coronavirus pandemic. The already-battered profit margins are expected to come under further pressure as there is no concrete recovery timeframe in sight, trade sources said. “Global air traffic is down by about 40-45% at present, according to flight tracking sources, with further deterioration expected over the coming weeks as more flight restrictions and airline capacity reductions take effect,” said Richard Gorry, managing director at JBC Energy Asia. “We expect global jet/kero demand to fall by 4.3 million barrels per day (bpd) quarter-on quarter in Q2-2020 to just 2.5 million bpd, representing a year-on-year decline of 5.6 million bpd (-70%) as air passenger travel activity is reduced to a minimum.” Refining margins for jet fuel plunged to minus 7 cents per barrel over Dubai crude on Monday, a level not seen in the last 11 years, according to Refinitiv Eikon data that goes back as far as March 2009. Also known as cracks, refining margins are the difference in value between the raw material, crude oil, and the products churned out by refineries. A negative jet fuel refinery margin means refiners would lose money by producing the aviation fuel at current prices, indicating they will either reduce jet fuel output or lower overall refinery throughput. (GRAPHIC: Asia jet fuel margins dive into the red for the first time in 10+ years amid global lockdown – here)
China’s crude oil imports surpassed 10 million barrels per day in 2019 – Today in Energy – U.S. Energy Information Administration (EIA) China’s annual crude oil imports in 2019 increased to an average of 10.1 million barrels per day (b/d), an increase of 0.9 million b/d from the 2018 average. China remains the world’s top crude oil importer, surpassing the United States in 2017. China’s new refinery capacity and strategic inventory stockpiling, combined with flat domestic oil production, were the major factors contributing to the increase in China’s crude oil imports in 2019.In 2019, 55% of China’s crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), the smallest share since at least 2005. China’s crude oil imports from Saudi Arabia increased by more than 0.5 million b/d in 2019 to 1.7 million b/d, or 16% of total crude oil imports.From 2017 until earlier this year, OPEC members and other partner countries had been voluntarily reducing crude oil production, which resulted in some non-OPEC producers increasing their shares of China’s crude oil imports in recent years. In addition, in 2019, sanctions were placed on Iran and Venezuela that significantly affected their ability to export oil, reducing their shares of imports.Russia remained the largest non-OPEC source of China’s crude oil imports in 2019, averaging 1.6 million b/d, or 15% of total crude oil imports. Brazil overtook Oman as the second-highest non-OPEC source of China’s crude oil imports, increasing by less than 0.2 million b/d to average 0.8 million b/d for the year. China’s crude oil imports from the United States declined in 2019, primarily as a result of trade negotiations that imposed tariffs on many U.S. goods, including crude oil. Several factors contributed to China’s increase in crude oil imports in recent years. Although China’s domestic crude oil production increased 0.1 million b/d in 2019 – averaging 4.9 million b/d – it has remained essentially flat since 2012, ranging between 4.8 million b/d and 5.2 million b/d. In contrast, the U.S. Energy Information Administration (EIA) estimates China’s consumption of petroleum and other liquids grew 0.5 million b/d in 2019 to 14.5 million b/d, and China’s net imports for crude oil and other liquids grew 0.4 million b/d to 9.6 million b/d in 2019. China’s crude oil imports also grew in 2019 because of strategic stockpiling of crude oil and increases in commercial crude oil inventories following refinery expansions, which require increases in storage as refineries begin operations. Last year, China’s refinery capacity increased by 1.0 million b/d, primarily because two new refining and petrochemical complexes came online with capacities of 0.4 million b/d each. As a result, the country’s refinery processing also increased to an all-time high in 2019, averaging 13.0 million b/d for the year.
In oil market standoff with Saudi Arabia, weakened rouble helps Russia – (Reuters) – In Russia’s battle for oil market share with Saudi Arabia, a sharp fall in the rouble has handed the Russians one advantage – they can now produce cheaper than the Saudis, according to Reuters calculations. The Russian currency has lost nearly a fifth of its value against the U.S. dollar – the currency of oil – since their talks on coordinated output cuts collapsed on March 6. Brent crude futures have fallen by nearly 50% to about $26 a barrel and that has knocked the rouble, which is down more than 15% to 80 per dollar, its weakest level since early 2016. In contrast, Saudi Arabia’s riyal is pegged to the dollar at a rate of 3.75 riyals. Russian producer Rosneft’s lifting costs last year averaged 199 rubles per barrel of oil equivalent, or $3.10, versus Saudi Aramco’s at 10.6 riyals or $2.80, financial reports from the two firms show. Rosneft’s costs have now fallen to $2.50, below Aramco’s, according to Reuters calculations based on the current rouble rate against the dollar. Rosneft did not reply to a Reuters request regarding how the ruble’s recent fall had affected its costs. Aramco has said it will be supplying, both domestically and for export, a record high 12.3 million barrels of oil per day (bpd) for the next few months starting from April. Russia’s production is currently 11.30 million bpd, led by state-run Rosneft. Russia may add up to 500,000 bpd in a matter of months, officials have said.
The Oil Price War – One consequence of the emerging global Covid-19 recession has been that it has helped push world oil prices down from the $60.77 per barrel range near the beginning of 2020 to $23.12 for West Texas Crude and $29.00 for Brent Crude, levels not seen since the end of 2008. But part of why that decline has been so sharp and deep has been thet Saudi Arabia has increased production while Russia has kept up production, despite the Saudis demanding that they cut production. So there is an oil price war going on. Of course this will tend to cushion the recession for oil consumers. But the US has become a small net oil exporter, and reports have it that a subsidiary reason for the Saudis and Russians getting into this price war has been to tank the US fracking industry in oil and natural gas, which by most reports cannot survive if prices remain as low as they are now. So while US oil products buyers may be better off, the recession in oil producing parts of the US will be made worse. It should be kept in mind that a non-trivial part of the US economic growh in 2017 was a major increase in fracking activity, with half the increase in capital investment coming from that sector alone. The damage to oil production in the US will probably exceed the benefits from lower prices at the pump in the US. A curious corollary to this is that the leaders of both Russia and Saudi Arabia have made serious moves to enhance and expand their own power. In Russia, Putin has moved to change the constitution so that instead of having to step down as president, he can run again twice more, keeping him still in as late as 2036, by which time he will be 84. This still needs to pass a referendum, but few doubt that it will fail to do so, despite reported declines in Putin’s popularity. In Saudi Arabia, Crown Prince Mohammed bin Salman (MbS) has had several rivals arrested on charges of treason, which can bring the death penalty. One arrested is the former crown prince, Mohammed bin Nayef, whom MbS forcibly removed in a coup supported by Trump. Another is an uncle of his, Ahmed bin Abdulaziz, one of the few remaining brothers of MbS’s father, with the line of succession having previously gone through them. The charges are clearly trumped up, with Mohammed bin Nayef having been under house arrest since he was removed from power, and Ahmed bin Abdulaaziz having been very careful to avoid any public criticism of MbS. But not good enough, they both need to be decapitated.
Oil drops as much as 8%, extending declines after worst week since 1991 // Oil turns positive, snapping back from worst week since 1991 – Oil prices moved higher on Sunday, snapping back from a week of steep declines that saw U.S. West Texas Intermediate crude post its worst week since 1991. Investors are waiting on Washington to agree to an economic stimulus and rescue plan.WTI rose 0.6% to trade at $22.77 per barrel, erasing early losses that had sent the contract tumbling more than 8%. International benchmark Brent crude shed 2.7% to trade at $26.25 per barrel.Prices have dropped as the coronavirus outbreak has slowed worldwide travel and business activity, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production.The rapid decline in crude prices is wreaking havoc on the financial markets, forcing investors to sell other assets such as Treasuries or equities indiscriminately to cover the losses in their energy positions. WTI crude futures have been cut in half this month.The Dow Jones Industrial Average and S&P 500 are now trading in bear market territory as the coronavirus hits the airline and hospitality industries the hardest.The government has said it is prepared to step in, and on Saturday National Economic Council Director Larry Kudlow said an economic stimulus package will total more than $2 trillion, noting it will be equal to roughly 10% of U.S. economic output. If the bill, which was brought before the Senate on Sunday night passes, oil prices could turn a corner.As traders attempt to quantify what increasingly strict travel restrictions and stay-at-home mandates will mean for longer-term crude demand, prices have swung in either direction. On Wednesday WTI dropped 24.4% to a more than 18-year low, in its third worst day on record. One day later, prices snapped back, surging 23.8% for the largest percentage gain in history. Given WTI’s 60% decline this year, a smaller gain, of course, now accounts for a much larger percentage move. But the volatile swings are notable.
Oil prices drop as US economic package stumbles in Senate – Oil prices fell at the open in Asia on Monday after a trillion-dollar Senate proposal to help the coronavirus-hit American economy was defeated and death tolls soared across Europe and the US. Brent crude futures fell $1.09, or 4 percent, to $25.89 a barrel by 0209 GMT. West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7 percent, at $22.48 a barrel. Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory. The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. Prices have fallen to multi-year lows in recent weeks as lockdowns and travel restrictions to fight the virus hit demand, and top producers Saudi Arabia and Russia engage in a price war. The latest drop came after a trillion-dollar Senate proposal to rescue the US economy was defeated after receiving zero support from Democrats, and with five Republicans absent from the chamber because of virus-related quarantines. The measure faltered after it failed to get the necessary 60 votes in the 100-member chamber to clear a procedural hurdle after days of negotiations, with 47 senators voting in favour and 47 opposed. US Senate Majority Leader Mitch McConnell, frustrated over the deadlock on a major coronavirus response bill, late on Sunday announced a procedural vote will be held early on Monday on a bill that senators already rejected. McConnell, a Republican, said that unless a bipartisan deal is reached before 9.45am Monday (1345 GMT), he will force a second vote on a bill Democrats opposed.
Oil markets slump amid coronavirus chaos – Oil prices fell on Monday as governments escalated lockdowns to curb the spread of the global coronavirus outbreak that has slashed the demand outlook for oil and threatened a global economic contraction. Brent crude futures fell $1.09, or 4%, to $25.89 a barrel by 0209 GMT. West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7%, at $22.48 a barrel. Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory. The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month. The current production cut deal expires March 31. Almost a third of Americans are now under orders to stay at home as states took extra measures to stem the rising numbers of cases in the world’s biggest economy, while in New Zealand Prime Minister Jacinda Adern said all non-essential services and business are to be shut down. Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10% of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader. Goldman Sachs estimated demand loss could total 8 million bpd, brought about by countries slowing economic activity to combat the coronavirus outbreak. Oil refiners worldwide are slashing production or considering cuts as the pandemic causes the evaporation of fuel demand.
Oil prices wallow near 20-year lows amid coronavirus price war – Oil prices came close to hitting 20-year lows today, as Brent crude and West Texas Intermediate (WTI) dropped under the growing coronavirus economic panic.Brent crude fell as low as $25 a barrel before falling 2.2 per cent down at $26.40. That is still a level not seen since 2003. WTI, a US oil benchmark, eked out a 0.4 per cent increase to $22.72 per barrel. However, this is still one of its lowest levels since 1999.Oil prices began their steep fall by crashing around 21 per cent earlier this month when Saudi Arabia and Russia started a price war.Russia refused to countenance more production cuts to prop up the price of oil as the world’s coronavirus crisis led to global travel bans.Saudi Arabia then flooded the market with cheap oil to safeguard its market share, a move later followed by the United Arab Emirates.The fall in oil prices has been rapid, with Brent crude’s price having halved from $50 since February. And analysts have warned the price could fall further.As a result, major oil producing companies have announced plans to reduce spending.Royal Dutch Shell today said it will cut its full year capital expenditure by $5bn (Pound Sterling4.34bn) and suspend the next tranche of its share buyback plan. Similarly, Total will cut its capital expenditure by 20 per cent and find additional cost savings of around $400m this year.
What Happens If Oil Prices Go Negative? – Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, “Oil prices can go negative.” That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply.In reality, inventory levels are already rising.CNN quotes Sankey, who said global oil demand is only around 100 million barrels per day.However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent.This would create a 20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity – hence, in effect, negative oil prices. The American government plans to purchase a total of 77 million barrels of oil starting within weeks the article states, but according to Sankey, this can only be done at a rate of 2 million barrels per day, leaving a massive excess that will be looking for a home.Brent oil prices have already fallen to the lowest level for 17 years. The consequences for the U.S. oil industry if a coronavirus-induced recession drives down demand could be catastrophic.West Texas Intermediate crude (WTI) collapsed by a staggering 19.2 percent to $22 while the Mexican Basket is down 22.4 percent.For a short while, hedges will protect producers and they will continue to pump oil. While that will protect producers for a while, it encourages counter-cyclical practices; producers should be cutting back but instead will probably continue to pump and ship into store.Francisco Blanch, a commodity strategist at Bank of America, warns in a Fox Business report that the demand destruction caused by the COVID-19 virus and the price war between Saudi Arabia and Russia could cause inventories to swell by 900 million barrels in the second quarter alone. He estimates the world currently has about 1.5 billion barrels of available storage.Storage, however, is regional and may not match neatly with excess supply.China continues to build storage capacity, having traditionally been short of space, but is now in a better position to take advantage of ultra-low prices. “In a severe scenario, if the market struggles to find a home for surplus barrels, then oil prices might have to trade down into the teens,” Blanch suggests. That would leave U.S. and Canadian producers deeply in the red when hedges run out. Weaker OPEC countries, like Iraq, Iran, Venezuela, and Nigeria, could see their economies collapse, while all offshore production would be loss-making if oil prices remain suppressed into the teens over the long term.
Oil jumps 3% in volatile session as Fed promises aggressive asset purchases to support markets – Oil jumped more than 3% on Monday as the Federal Reserved announced aggressive asset purchases to support markets. The move higher was a reversal from last week’s steep declines, which saw U.S. West Texas Intermediate crude post its worst week since 1991. In a volatile session that saw oil alternate between gains and losses, WTI gained 3.23% to settle at $23.36 per barrel. Earlier, prices fell as much as 6%. International benchmark Brent crude traded 0.6% higher at $27.18 per barrel. The COVID-19 outbreak and subsequent business slowdown has pressured oil prices and sent the Dow Jones Industrial Average and S&P 500 tumbling into bear market territory. On Monday, the Federal Reserve announced a new round of measures aimed at propping up the economy. The central bank said it will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions. Traders are hoping that this additional support will put a floor under oil prices, which have been hit especially hard by the coronavirus outbreak. WTI crude futures have been cut in half this month as a travel slowdown eats into crude demand, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production. The rapid decline in prices has wreaked havoc in other areas of the financial markets, as investors have been forced to sell other other assets such as Treasuries or equities indiscriminately to cover losses in their energy positions. Ed Morse, Citi’s global head of commodity research, believes there’s more downside ahead. He’s forecasting crude below $20 per barrel for much of the second quarter. “I think it can go much lower,” he said Monday on CNBC’s “Squawk Alley.” “We don’t think the one-two punch is over, particularly on the demand side where the impact on transportation fuels in Europe and the U.S. is just beginning.”
Oil struggles to hold gains as US ramps up economic support measures – Oil prices moved between gains and losses on Tuesday, boosted by hopes that the United States will soon reach a deal on a $2 trillion coronavirus aid package that could blunt the economic impact of the outbreak and in turn support oil demand. But gains were capped as demand continues to decline. Brent crude oil futures for May delivery gained 33 cents to trade at $27.36 per barrel, while West Texas Intermediate crude futures gained 5 cents to trade at $23.41 per barrel. “Oil is clawing its way higher, mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” said Edward Moya, senior market analyst at broker OANDA. “WTI crude volatility will remain high and traders should not be surprised if this rally eventually gets faded.” The U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from restrictions on commerce that scientists say are needed to slow the coronavirus pandemic. While a $2 trillion coronavirus economic stimulus package remained stalled in the U.S. Senate on Monday as lawmakers haggled over its provisions, U.S. Treasury Secretary Steven Mnuchin voiced confidence that a deal would be reached soon. The expected stimulus pushed the U.S. dollar lower as it will increase the cash supply. The dollar index, which measures the greenback against six major currencies, fell 0.5% on Tuesday. A weaker greenback boosts dollar-denominated oil prices since buyers paying in other currencies will pay less for their crude. Still, the overall crude demand outlook remains low as long as travel restrictions are in place and governments curtail commercial activities to prevent the coronavirus spread.
The Oil Price Rebound Won’t Last – Oil showed some signs of life at the start of Tuesday trading due to progress in Washington on a stimulus package, but analysts still think that the next major move for prices is down.. Multiple reports from analysts and investment banks see further room to fall for oil because of fears over a lack of adequate storage. “Any traders with the capacity to store oil are probably putting their hands up, looking at the contango,” Stephen Innes, chief Asia market strategist at Axicorp Ltd., told Bloomberg. “Oil could head to $10 to $15 a barrel very quickly” if OPEC and Texas can’t reach an agreement on cutting production. OPEC Secretary-General Mohammed Barkindo spoke with Texas Railroad Commissioner Ryan Sitton, raising speculation about mandatory cuts in Texas. “Just got off the phone with OPEC SG Moh[ammed] Barkindo. Great conversation on global supply and demand,” Sitton said on Twitter. “We all agree an international deal must get done to ensure economic stability as we recover from COVID-19.” The Texan official said the OPEC chief had invited him to the next meeting of the organization in June. Most analysts see such a Texas-OPEC deal as highly unlikely. The Trump administration will appoint Victoria Coates as a special envoy to Saudi Arabia on energy issues, in an effort to negotiate an end to the price war. Russia’s currency has lost 20 percent of its value in the past three weeks, a trend that cushions the blow for Russian oil producers as it deflates costs. Saudi Arabia has to defend a fixed exchange rate. According to the Wall Street Journal, major U.S. airlines are “drafting plans for a potential voluntary shutdown of virtually all passenger flights across the U.S.” No decisions have been made. Royal Dutch Shell, Total and Chevron all said they would cut capex by roughly 20 percent each, while also suspending share buybacks. Chevron said it would cut spending in the Permian in half, which would translate into 125,000 bpd less by the end of this year than previously expected. With analysts predicting $10 oil, more cuts are expected.
Oil Prices Soar As Dollar Extends Slide On Fed Stimulus – Oil prices soared on Tuesday and the dollar fell for a second day running after the U.S. Federal Reserve unveiled fresh measures to supply precious liquidity into funding markets. Meanwhile, if media reports are to be believed, U.S. Senate leaders and the Trump administration appear closer to reaching bipartisan agreement on a stimulus bill that would inject nearly $2 trillion into the economy. Benchmark Brent crude surged 5.9 percent to $28.62 a barrel, while West Texas Intermediate (WTI) crude futures were up as much as 7.4 percent at $25.09. Global risk sentiment improved after the Fed said it would go beyond the $700 billion in asset purchases announced last week. The Fed proposed to buy a wide range of investments, including corporate bonds for the first time, to improve trading in markets that help home buyers finance the purchase of houses, state and local governments borrow and businesses get enough short-term cash to make payroll. Investors also monitored news headlines on the coronavirus, which infected more than 350,000 people worldwide so far. Britain went into lockdown late Monday while Italy reported a smaller increase in coronavirus cases for the second consecutive day. Spain imposed an Italy-style lockdown in a bid to contain the spread of the virus. There is lockdown in most parts of India to deal with the novel coronavirus threat.
WTI Extends “Hope For More Stimulus” Gains On Surprise Crude Draw – Oil prices rallied along with the rest of the markets today on hope The Fed’s buying will work and optimism that US Congress will agree a bigly Stimulus Bill.Notwithstanding today’s gains, there are still concerns about the outlook for near term energy demand.“It is highly questionable whether the good mood will continue on the oil market, however. Not only is there a daily stream of bad news on the demand front; the unprecedented price war between oil producers is also continuing despite the unprecedented demand weakness,” said Eugen Weinberg, analyst at Commerzbank, in a note.So all eyes are once again on the inventory data for signals of extremes from the global demand collapse. API:
- Crude -1.25mm (+2.5mm exp)
- Cushing +1.066mm
- Gasoline -2.622mm (-2.4mm exp)
- Distillates -1.901mm (-1.6mm exp)
Crude inventories were expected to rise for the 9th week in a row (and distillates draw down for the 11th week in a row) but API reported a surprise crude draw of 1.25mm barrels (ending the streak)… Source: Bloomberg“It remains to be seen whether the recovery in equity markets can hold up, but the number of coronavirus cases has yet to peak and the worst of it has yet to visit most of the country,” said Marshall Steeves, energy markets analyst at IHS Markit.“Thus, the extent of demand destruction remains unknown.” The “risks remain to the downside and WTI could plunge below $20,” he told MarketWatch. WTI managed gains today and hovered around $24 ahead of the inventory data and extended gains after the print…
WTI Erases Overnight Gains On Demand Fears, Crude Inventory Build – Oil prices extended gains overnight, along with the rest of the markets, on hope The Fed’s buying will work and optimism that US Congress will agree a bigly Stimulus Bill and helped by a surprise crude draw reported by API.But early on this morning that all started to fall apart and WTI plunged back to a $23 handle after the boss of Vitol Group said demand is down about 15 million to 20 million barrels a day and will shrink further with India’s decision to go into lockdown.“The hope for more stimulus is giving a short-term boost,” said Josh Graves, market strategist at RJ O’Brien & Associates LLC.“From a fundamentals standpoint, we’re still looking at two cataclysmic supply and demand shocks. Those need to be addressed before we see any sustained rally.”So once again, all eyes are on the official inventory data…as road and airline traffic has collapsed.Bloomberg Intelligence’s senior energy analyst Vince Piazza warns:“Near-term crude builds are likely with refining runs cut back as demand downstream demand weakens. The price war and downdraft in consumption from the virus is a double hit to domestic producers, as export volume will retract on narrower differentials and cash flow will degrade. Look for floating storage levels to rise across the globe as arbitrage is once again profitable.” DOE:
- Crude +1.62mm (+2.5mm exp)
- Cushing +858k
- Gasoline -1.537mm (-2.4mm exp)
- Distillates -678k (-1.6mm exp)
After last night’s surprise crude draw (reported by API), official government data showed a build (though smaller than expected). This is the 9th straight week of crude builds, 8th straight week of gasoline draws, and 10th straight week of distillate draws…
Oil jumps 2%, extending gains as optimism over US stimulus lifts markets – Oil prices extended gains for a third session on Wednesday, rising alongside broader financial markets as the United States is expected to approve a massive aid package to stem the economic impact of the coronavirus pandemic. Demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to stop the spread of coronavirus. Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed. U.S. weekly gasoline product supplied – a proxy for demand – dropped 859,000 barrels per day (bpd) to 8.8 million bpd last week, the biggest decline since September 2019, according to the U.S. Energy Information Administration. Overall fuel demand fell by nearly 2.1 million bpd. Brent crude gained 29 cents, or 1%, to trade at $27.44 per barrel. U.S. crude futures gained 48 cents, or 2%, to settle at $24.49 per barrel. Both contracts had posted strong gains of more than $1 a barrel earlier in the session. Crude inventories rose by 1.6 million barrels in the most recent week. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity. The U.S. energy sector is slashing capital spending and jobs as business activity plunged and the outlook has turned “extremely pessimistic” amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday. “All indexes pointed to worsening conditions among oilfield services firms,” the Fed said in its report, noting that the business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey’s four-year history. U.S. senators and Trump administration officials have reached an agreement on a $2 trillion stimulus bill that congress was expected to pass on Wednesday. Oil prices have fallen by more than 45% this month after OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, failed to agree on extending output cuts. Although oil futures received a “sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a ‘nowhere to hide’ situation very soon”,
Oil prices fall as demand continues to shrink – Oil prices fell on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity. West Texas Intermediate (WTI) crude futures slipped $1.04, or 4.25%, to trade at $23.45 per barrel, while Brent crude futures fell 44 cents, or 1.6%, to trade at $26.97 per barrel. “With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note. The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May. “Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said. U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases. Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.
Oil sheds more than $1 as weakening demand outweighs stimulus hopes – (Reuters) – Oil prices dropped more than $1 a barrel on Thursday as a growing number of virus-related restrictions on travel slashed global fuel demand, overshadowing expectations that a $2 trillion U.S. stimulus package will bolster economic activity. The head of the International Energy Agency said worldwide oil demand could drop as much as 20 million barrels per day, or 20% of total demand, as 3 billion people are currently under stay-at-home orders due to the novel coronavirus outbreak. West Texas Intermediate (WTI) crude CLc1 futures settled at $22.60 a barrel, falling $1.89, or 7.7%. Brent crude LCOc1 futures settled at $26.34 a barrel, shedding $1.05, or 3.8%. Both contracts are down about 60% this year. The twin shocks of the coronavirus pandemic and the supply surge from Saudi Arabia and Russia after the two nations failed to come to an agreement to limit supply has roiled crude markets, which have lost about half their value in March. “With demand down 20% or more globally, it’s two Saudi Arabias-worth of production that would need to be cut out to try to even attempt to balance this market,” said John Kilduff, a partner at Again Capital in New York. U.S. futures were notably weaker than international benchmark Brent crude. The U.S. Department of Energy scrapped a plan to purchase domestic crude oil for its Strategic Petroleum Reserve (SPR) after funding was not included in the broader stimulus package. “There was a certain assumption that it was going to happen so you had that backstop, to a certain degree, (for WTI) that didn’t exist for the international benchmark,”
WTI Tumbles To $21 Handle After Saudis Crush Hopes Of Russia Detente – While oil prices were already sliding, headlines from the Saudis that there are no talks with Russia ongoing sent prices tumbling with WTI back to a $21 handle…“There have been no contacts between Saudi Arabia and Russia energy ministers over any increase in the number of OPEC+ countries, nor any discussion of a joint agreement to balance oil markets,” the Saudi Ministry of Energy said in a statement.Not pretty… The last three months have been quite a ride for crude… Maybe The Bank of Canada and The Fed should start buying (and storing) oil?
Oil Tumbles Towards $20 As Glut Grows – Markets rallied this week as the U.S. Congress appears poised to pass a $2 trillion stimulus plan. Jobless claims in the U.S. topped 3 million, with economists seeing unemployment nearing Great Depression levels in the coming months. Meanwhile, despite the rally for equities, oil prices did not hold up, with WTI back down close to $20 per barrel as the historic glut continues to worsen. The U.S. Department of Energy withdrew its plan to buy 77 million barrels of oil for the strategic petroleum reserve (SPR) after funding for the plan was removed from the $2 trillion stimulus plan. The top five oil majors added $25 billion in debt last year, while hiking dividends. Now, on the ropes with oil in the mid-$20s, debt will accumulate much faster. More investors are calling for a cut to dividends. “Long term, it is appropriate to cut the dividend. We are not in favor of raising debt to support the dividend,” Jeffrey Germain, a director at Brandes Investment Partners, told Reuters. “Latin America’s flowing production is over 7 million barrels per day. At current prices, we estimate that half is non-economic, taking into account all costs, including transportation and taxes,” Ruaraidh Montgomery from oil research firm Welligence, told Reuters. As of March 1, storage for gas in Europe was 60 percent full, the highest ever recorded at the start of March. Secretary of State Mike Pompeo spoke with Saudi Crown Prince Mohammed bin Salman by phone this week, asking for the Saudis to pull back from the price war. Pompeo urged Riyadh to “rise to the occasion and reassure” energy markets at a time of economic uncertainty. A group of Republican senators sent Sec. of State Mike Pompeo a letter, accusing Saudi Arabia of economic warfare because of Riyadh’s decision to increase oil production. The letter said the U.S. could explore antitrust authority as well as revisit support for the war in Yemen, a clear threat to Saudi Arabia. Saudi Arabia is struggling to find buyers for extra oil as demand collapses. Royal Dutch Shell, China’s Unipec, Finland’s Neste, some Indian refiners and other U.S. refiners are taking less crude from Saudi Arabia, according to Reuters. Taken together, the inability to find buyers reduces the odds of Saudi Arabia ramping up production aggressively to over 12 mb/d.
Oil plunges posting fifth straight weekly loss despite stimulus efforts –(Reuters) – Oil prices plunged 5% on Friday and posted a fifth straight weekly loss as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world. Both contracts are down nearly two thirds this year and the coronavirus-related slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies. Brent crude settled down $1.41, or 5.35% at $24.93 a barrel. The contract fell about 8% on the week. U.S. crude settled down $1.09, or 4.82% at $21.51 a barrel. During the week, U.S. crude fell more than 3%. “We ran out of ammunition to support the market,” said Bob Yawger, director of energy futures at Mizuho in New York. “The government used up all their bullets this week – next week the market is on its own.” Physical crude oil traders said they expect Permian basin prices to slide by as much as another $10 a barrel by May, when tanks in the region as well as across the country are seen hitting maximum capacity. That would leave the price of a barrel of oil pumped from the Permian – where nearly 5 million barrels are extracted every day – in the single digits. With 3 billion people in lockdown, global oil demand could be cut by a fifth, International Energy Agency head Fatih Birol said as he called on major producers such as Saudi Arabia to help to stabilise oil markets. The calls may not be enough to bring the market back into balance. “We have our doubts about whether Saudi Arabia will allow itself to be persuaded so easily to return from the path of revenge that it only recently embarked upon,” said Commerzbank analyst Eugen Weinberg, referring to the price war being waged between Russia and Saudi Arabia. The Group of 20 major economies on Thursday pledged to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”. Leaders of the U.S. House of Representatives are determined to pass a $2.2 trillion coronavirus relief bill by Saturday at the latest, hoping to provide quick help as deaths mount and the economy reels.
U.S. to send envoy to Saudi Arabia; Texas suggests oil output cuts – (Reuters) – The Trump administration plans to send a special energy envoy to Saudi Arabia to work with the kingdom on stabilizing the global oil market, officials said on Friday, as the U.S. scrambles to deal with a price crash so deep that regulators in Texas considered curbing production there for the first time in nearly 50 years. The crash has shocked the oil industry as a pact among OPEC and non-OPEC producers to cooperate imploded, triggering a production free-for-all. The United States is sending a special representative to negotiate with Saudi Arabia, officials said Friday, after the kingdom unleashed production following years of touting its role as a stabilizing force for markets. Saudi Arabia and Russia are locked in a war for global oil market share after their three-year deal to restrain output collapsed this month. The kingdom has vowed to increase production to a record 12.3 million barrels per day, and has chartered numerous tankers to ship oil around the world, pushing prices to near 20-year lows this week. U.S. officials believe Saudi Arabia’s move to flood oil markets compounds the global economic crash during a crisis caused by the pandemic. A senior Energy Department official will be sent to Riyadh for months at least to work closely with State Department officials and the existing energy attache, the senior U.S. officials said, on condition of anonymity. Trump administration officials said Saudi Arabia has for decades been a steadfast leader of stability in the global oil market. The energy representative would help the countries return to a path of stability, they said. The price crash is also devastating to U.S. oil producers, some of which have already begun putting employees on furlough.
US urges Saudi Arabia to ‘rise to the occasion’ and end its oil price war with Russia – The U.S. has called on OPEC kingpin Saudi Arabia to put a stop to its ongoing oil price war with non-OPEC leader Russia. In a statement released by the U.S. State Department Wednesday, a spokesperson confirmed that Secretary Mike Pompeo had spoken with Saudi Crown Prince Mohammed bin Salman on Tuesday. “Secretary Pompeo and the Crown Prince focused on the need to maintain stability in global energy markets amid the worldwide response,” the statement said. “The Secretary stressed that as a leader of the G-20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty,” it added. Pompeo and bin Salman expressed their “deep concern” over the coronavirus pandemic and underlined the need for all countries to work together to contain the outbreak, according to the statement. International benchmark Brent crude traded at $26.46 a barrel Wednesday afternoon, down 2.5%, while U.S. West Texas Intermediate (WTI) stood at $23.47, more than 2.2% lower. Oil prices have more than halved since climbing to a peak in January, with analysts warning crude futures could soon plunge into the teens over the coming weeks. It comes as the coronavirus pandemic continues to crush oil demand worldwide and with no end in sight to the ongoing price war between Riyadh and Moscow. Earlier this month, the OPEC group of oil producers and its non-OPEC allies – sometimes referred to as OPEC+ – failed to agree on extending oil supply cuts beyond March 31. This has led to heightened concerns of a supply surge from April 1, with Saudi Arabia and the United Arab Emirates both pledging to ramp up production.
Nearly 1,600 Trees Vandalised by Israel Settlers in the West Bank Since Start of 2020 – Nearly 1,600 olive trees have been vandalised by Israeli settlers in the occupied West Bank since the start of 2020, according to UN OCHA.According to the agency’s latest fortnightly report, during the period 3-16 March, Israeli settlers vandalised at least 385 Palestinian-owned trees and vehicles in the West Bank.Three such attacks involved settlers cutting down or uprooting some 200 olive trees and 150 grape vines “belonging to farmers from Al Khader and Khallet Sakariya villages that are planted next to the Gush Etzion settlement area (Bethlehem), and 35 olive trees next to Bruchin settlement (Salfit)”.Meanwhile, five additional attacks in the Nablus governorate “involved slashing the tires of 11 vehicles in Huwwara town, stoning and damaging two houses and four vehicles in ‘Einabus village, and vandalising an uninhabited house in Burin village.”In addition, UN OCHA stated, Palestinian residents of the ‘Ein ar Rashash herding community near Ramallah reported 25 lambs “stolen by a settler residing in an adjacent settlement outpost”. On top of the numerous incidents of attacks on Palestinian-owned property and livestock, Israeli settlers “physically assaulted and injured three Palestinians”, including a woman, in three separate incidents in Al Auja town and the Israeli-controlled area of Hebron city (H2). “Additional settler attacks not resulting in injuries or damage were reported in the H2 area on 10 and 11 March, during celebrations of a Jewish holiday (Purim),” the UN OCHA report added. Over the reporting period, UN OCHA documented the punitive demolition of two homes, as well as the demolition or seizing of an additional 14 Palestinian-owned structures on the grounds of a lack of building permits, displacing 29 people and affecting around 60 others.
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