Oil, Gas, And Fracking News Reads: 05April 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 04 April 2020. Go here for Part 1.

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

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Oil demand could decline by 20 million barrels a day in April, says oil expert Dan Yergin – The oil market is facing a “double crisis” with a collapse in the OPEC+ alliance affecting supply and the slowdown in the global economy crushing demand, oil guru Dan Yergin said this week. “The breakdown of OPEC+ is only part of the picture,” the vice chairman of IHS Markit told CNBC’s “Capital Connection” on Monday. “The big thing is the coronavirus and the showdown of much of the world economy.” Infections around the world have now crossed 700,000, according to data compiled by the Johns Hopkins University. Nearly 34,000 people have died from COVID-19. Countries have implemented travel bans and instituted lockdowns to stem the spread of the virus. “Cars not on the road, airplanes not in the air, factories not working, people not going to work,” Yergin said. “We see, in this month of April that’s coming, what could be a 20 million barrel a day decline in oil demand.” “It’s unprecedented. That’s six times larger than the biggest downturn during the financial crisis period (in 2008),” he added. While demand is set to fall, major producers such as Saudi Arabia and Russia have announced they will increase supply in April after the OPEC+ agreement expires at the end of March. “This is what people are now looking at … where are you going to put all of the oil?” he asked. When oil storage runs out, prices could fall further, he added. “I think the prices that we’re seeing, that you’re talking about today are really precursors … April is going to be a very difficult month.”

Saudi Arabia says will raise oil exports further in May, in face of coronavirus hit to demand – Saudi Arabia’s energy ministry on Monday said it will boost its oil exports in May to 10.6 million b/d, further flooding an oil market in which prices have cratered due to the coronavirus pandemic’s hit to demand. In a statement, the ministry said an increase in the amount of natural gas used to generate electricity, along with a decrease in domestic demand for refined products due to the coronavirus outbreak would free up 600,000 b/d additional barrels of crude oil for export in May. That would bring “the total of Saudi petroleum exports to 10.6 million b/d.” The ministry had said two weeks ago it would “increase its crude exports during the coming few months to exceed 10 million b/d.” The shift in wording in Monday’s statement to “petroleum exports” suggests that now some of the volumes could include refined products, condensates or NGLs. Saudi ministry officials have not responded to questions on how much of the exports would be solely crude. The kingdom exported 7.29 million b/d of crude oil and 748,000 b/d of refined products in January, according to the latest figures reported by the Joint Organizations Data Initiative. There were no NGL exports from Saudi Arabia, the JODI data shows. Saudi Arabia has said its state oil giant Aramco will raise crude production to its maximum 12 million b/d capacity once its OPEC quota of 10.14 million b/d expires at the end of March, as well as draw 300,000 b/d from its vast storage inventories, to supply the market with 12.3 million b/d of crude, including its domestic consumption. Saudi refineries have been running about 2.2 million b/d of crude the last few months, according to JODI. If runs remain at the same levels and the kingdom eliminates the crude it uses for electricity generation, that would imply about 10.1 million b/d of crude for export. “It is not clear if the kingdom’s production after April 1 is 12 million b/d of crude oil or if it includes condensate and NGLs,” said Sara Vakhshouri, who heads the consultancy SVB Energy and closely follows the Saudi oil sector. “Also it’s unclear for how long Saudi Aramco intends to produce 12 million b/d.”M

5 charts that explain the Saudi Arabia-Russia oil price war so far Two of the world’s largest oil producers – Saudi Arabia and Russia – are set to increase production dramatically this month, after an agreement between OPEC and its allies to lower output expired at the end of March. OPEC+ countries have teamed up to reduce their supply to the market since 2017, but failed to reach a deal last month. Riyadh and Moscow then separately announced that they would flood the market with oil in April. That, against the backdrop of demand destruction due to the global coronavirus pandemic, has crushed oil prices. Crude oil benchmarks plunged to 18-year lows on Tuesday and have fallen more than 60% since the beginning of the year. Here’s how the oil price war unfolded. As early as mid-January, the future of oil demand came into question as the coronavirus spread, prompting factory closures and trip cancellations in China. These concerns have now intensified – many countries have gone into lockdowns and air travel has largely been halted in a bid to prevent infections. Chart: Oil consumption 200401 Asia Both OPEC and the U.S. Energy Information Administration (EIA) slashed their oil demand outlooks in March reports. The Middle-East dominated alliance now sees demand growing by 60,000 barrels per day, while the EIA expects a rise of 400,000 bpd. They had initially expected growth of more than 1 million bpd in January. As coronavirus fears arose, there was talk of an emergency meeting between OPEC and its allies to stabilize the market, but only the Joint Technical Committee met in February. While it officially recommended extending voluntary production cuts to the end of the year, reports said OPEC kingpin Saudi Arabia was considering cuts by 1 million bpd.Prices plummeted after Russia declined to approve OPEC’s proposal to cut production by an additional 1.5 million bpd, on top of the 1.7 million bpd agreed upon in December, excluding voluntary reductions. Saudi Arabia responded by offering discounts on its oil and announcing that it would increase production, leading both WTI and Brent to their worst days since 1991 on March 9, which in turn caused a sell-off in global markets.Analysts said Russia may have taken the action in order to target the U.S. “It’s Saudi Arabia against Russia, and Russia against the United States. I think that’s what it is,” vice-chairman of IHS Markit Dan Yergin said at the time.

The First Victims of the Oil Price War – As the oil price war and coronavirus pandemic rage on, it’s becoming increasingly clear that the energy market can remain choppy and irrational longer than entire nations can stay solvent. Everybody is watching to see which of the leading protagonists between Saudi Arabia and Russia is going to be the first to blink as high supply and low demand threaten to overwhelm available storage facilities. Scores of oil-producing countries have adopted a raft of austerity measures and spending cuts as they attempt to outlive the biggest oil bust in living memory. Unfortunately, it’s the riskier corners of the global financial markets that will emerge as collateral damage in the ongoing oil price war. American credit rating agency Moody’s has warned the dramatic plunge in oil prices is likely to cut fiscal revenue and exports for most exposed oil-exporting sovereigns by more than 10 percent of GDP and, consequently, weaken their credit profiles. According to Moody’s, the sovereigns most vulnerable to low oil prices in the 2020-21 period are those with the highest reliance on hydrocarbons for fiscal exports and revenues coupled with a limited capacity to adjust. The credit agency says the most vulnerable sovereigns are Oman, Iraq, Bahrain, and Angola due to their limited capacity to adjust to external shocks. These nations could see a decline in fiscal revenue in the range of 4-8 percent of GDP if low oil prices persist.The vast majority of Gulf Arab states are unable to balance their budgets with oil prices of $40 per barrel, let alone the current $20/barrel level. These developing economies are especially vulnerable due to ongoing massive cash outflows, with investors continuing to liquidate emerging-market assets. In contrast, Russia, Saudi Arabia, Qatar, Azerbaijan, and Kazakhstan are seen as being less vulnerable, with expected declines in fiscal revenue and exports of less than 3% of GDP. Interestingly, Moody’s analysts concur with a previous OilPrice.com opinion piece, which argues that Russia has the upper hand in the oil price war. Moody’s sees Russia as being less vulnerable to external shocks and turbulence in energy markets than most oil-exporting nations due to its massive forex reserves as well as a flexible exchange rate. Indeed, the lifting cost per barrel of oil equivalent for Russia’s largest oil producer, Rosneft, is now lower than the same metric for Saudi Arabia’s oil giant, Aramco – thanks mainly to a weaker ruble. The ruble has weakened about 15 percent against the U.S. dollar over the past 30 days, recently hitting a four-year low against the greenback after the oil markets imploded. Russia, though, says it’s quite happy with oil prices in the range of $25 to $30 per barrel and can hold out at these levels for 6-10 years. In fact, Russia’s Energy Minister Alexander Novak recently declared that Russian oil companies would remain competitive “at any forecast price level.”

Oil prices fall to 17-year low as Saudi Arabia-Russia standoff continues, coronavirus hits demand – Oil prices fell to the lowest in more than 17 years as demand plunged as a result of the pandemic and an unrelenting price war between Saudi Arabia and Russia showed no signs of easing. Brent crude prices hit $23.03 a barrel on Monday morning during Asia hours – the lowest level since Nov. 15, 2002. It has since clawed back some losses following that record decline, but was last still 5.86% lower at $23.47 a barrel. U.S. West Texas Intermediate (WTI) crude futures briefly dipped below $20 per barrel to $19.90 – their lowest level since March 20, when they fell as low as $19.50. WTI was last 4.51% lower at $20.54 per barrel. Those declines come as Saudi Arabia signaled no breakthrough in the oil price war with Russia. On Friday, the two countries were still at a stalemate, with Saudi Arabia saying it was not in talks with Russia to stabilize oil markets despite Washington stepping in to pressure both sides to end the price war. “Russia and Saudi Arabia show no signs of compromising in their standoff over oil supply,” National Australia Bank’s Rodrigo Catril wrote in a Monday note. In early March, OPEC and non-OPEC allies, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts. The fallout between OPEC kingpin Saudi Arabia and non-OPEC leader Russia has kickstarted an oil price war. OPEC recommended additional production cuts of 1.5 million bpd starting in April and extending until the end of the year, but OPEC-ally Russia rejected the additional cuts. Saudi Arabia has signaled its intent to flood the market with crude, announcing massive discounts to its official selling prices for April, Reuters reported. Such a move could prompt a wave of bankruptcies and investment cuts in the U.S. which, in turn, would have a noticeable impact on shale production. “We think oil supply from the US, Canada and China are the most likely to be curtailed at low oil prices. US oil production cuts are expected to be the most significant,” Vivek Dhar of the Commonwealth Bank of Australia said in a note on Monday. “The plunge in US oil rigs last week signals the pressure facing the US shale oil sector.” Countries have gone into lockdown due to the coronavirus pandemic, with flights all over the world canceled as airlines ground their planes, hitting economic activity and fuel demand. That has led to excess supply flooding the market as well.

US crude dips below $20 as lockdowns hit demand – Oil prices fell sharply on Monday, with U.S. crude briefly dropping below $20 and Brent hitting its lowest level in 18 years, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further. Brent crude, the international benchmark for oil prices, was down $2.19, or 8.78%, at $22.74, after earlier dropping to $22.58, the lowest since November 2002. U.S. West Texas Intermediate crude fell $1.41, or 6.5%, to $20.10. Earlier in the session, WTI fell as low as $19.92. The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher cost producers will have no choice but to shut production, especially since storage capacities are almost full. “Global oil demand is evaporating on the back of COVID-19-related travel restrictions and social distancing measures,” said UBS oil analyst Giovanni Staunovo. “In the near term, oil prices may need to trade lower into the cash cost curve to trigger production shut-ins to start to prevent tank tops to be reached,” he added. Rystad Energy’s head of oil markets, Bjornar Tonhaugen said: “The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May,” including cutting refineries runs and increasing storage. Besides demand destruction, oil markets have also been slammed by the Saudi Arabia-Russia price war that is flooding markets with extra supply. An official from Saudi Arabia’s energy ministry said on Friday the kingdom was not in talks with Russia to balance oil markets despite rising pressure from Washington to stop the rout that has cut prices by more than 60% this year. With world demand now forecast to plunge 15 million or 20 million barrels per day, a 20% drop from last year, analysts say massive production cuts will be needed beyond just the Organization of the Petroleum Exporting Countries. “OPEC, Saudi Arabia and Russia could mend their differences, but there’s not that much OPEC could do …. The demand shock from COVID-19 is just too big,”

Oil market volatility is at an all-time high – Crude oil prices have fallen significantly since the beginning of 2020, largely driven by the economic contraction caused by the 2019 novel coronavirus disease (COVID-19) and a sudden increase in crude oil supply following the suspension of agreed production cuts among the Organization of the Petroleum Exporting Countries (OPEC) and partner countries. With falling demand and increasing supply, daily price changes for the U.S. benchmark crude oil West Texas Intermediate (WTI) have been extremely volatile. Implied volatility measures an asset’s expected range of near-term price changes. OVX measures the implied volatility of oil prices and is calculated using movements in the prices of financial options for WTI, the light, sweet crude oil priced at Cushing, Oklahoma. VIX measures the implied volatility of the Standard and Poor’s (S&P) 500 – a stock market index of 500 large companies listed in the United States. Crude oil volatility is typically higher than the S&P 500’s volatility, generally because OVX represents changes in one commodity and VIX represents changes across a diverse group of 500 companies.Both volatility measures have been relatively high this month: on March 16, the VIX index measured 82.7, a level higher than any point during the financial crisis of 2008 – 09, the last time the global economy experienced a significant recession. Crude oil market volatility has been even higher. On March 20, OVX reached 190, the highest value since its inception in May 2007. Since 1999, daily WTI crude oil futures prices have settled within 2% of the previous trading day’s price about 70% of the time. Nearly all (99.5%) of the daily WTI price changes since 1999 have settled within 10% of the previous day’s price; larger price changes are relatively rare. March 2020 has had four days where WTI prices decreased by more than 10% and two days where WTI prices increased by more than 10%. The 25% decline on March 9 and the 24% decline on March 18 were the two largest percentage declines in the WTI futures price since at least 1999. On the days following those declines, WTI prices rose by 10% (March 10) and 24% (March 19), likely in response to announced plans from various countries’ governments that emergency fiscal and monetary policy would be forthcoming.

The Global Oil Market Is Broken, Drowning in Crude Nobody Needs – The global oil market is broken, overwhelmed by an unmanageable surplus as virus lockdowns cascade through the world’s largest economies.Onshore tanks in many markets are full, forcing traders to store excess oil in idle supertankers. Refineries are starting to shut down because nobody needs the fuels they produce. In physical oil markets, barrels are already changing hands for less than $10, and in a few landlocked markets producers are paying consumers to take away their crude. “The physical oil market has seized up,” said Gary Ross, an influential oil watcher and chief investment officer of Black Gold Investors LLC. “The logistics are struggling to cope because we are facing a catastrophic loss of demand.”Oil traders say it’s likely to get worse this week. The root cause is an accelerating plunge in consumption that’s without precedent since a steady flow of oil became essential to the global economy more than a century ago. The great crash of 1929, the twin oil shocks of the 1970s and the global financial crisis don’t come close. The world normally uses 100 million barrels of oil day, and traders and analysts reckon as much as a quarter of that has disappeared in just a few weeks. The global airline industry is grounded, countless businesses and factories are shuttered and billions of people have been forced to stay home. The immediate problem is a lack of storage in the right places. With demand running 20 million barrels a day below supply, the world won’t have enough tanks to store the surplus in two or three months. But the issue is even more pressing because global tank capacity, mostly concentrated in a few hubs like Rotterdam, the Caribbean and Singapore, isn’t available to every producer. For those without access to pipelines and ports, local storage will run out in days, traders and consultants say.For those with access to the coast, one solution is to use the supertanker fleet as floating storage tanks, and that’s happening at an unprecedented rate. The CEO of the world’s largest tanker owner, Frontline Ltd., said on Friday that he’d never known such demand to hire ships for long-term storage. Traders could book ships to put 100 million barrels at sea this week alone, he estimated, but even that could accounts forless than a week’s oversupply. In the U.S., one of the largest pipeline companies, Plains All American Pipeline LP, has asked oil producers to voluntarily cut output to avoid overwhelming the network that connects well heads to refineries through thousands of miles of pipelines.

Welcome to a Truly Free Oil Market – At the point we’re now at, postponing the oil-price war won’t make a lot of difference for an industry that’s already breaking down under the weight of demand destruction. With prices hitting a 17-year low on Monday, it’s too late to use diplomacy and artful negotiations to share the burden of output cuts that are now inevitable. The pumping free-for-all unleashed by Saudi Arabia and Russia is important for the long-term shape of the oil industry, but, as my colleague Javier Blas pointed out here, it’s a sideshow to the havoc being wrought by the lockdowns crippling economies worldwide in response to the coronavirus pandemic. Forecasts of a catastrophic drop in oil demand abound, with estimates of a whopping 20% year-on-year reduction in global consumption in April becoming more common. That’s 20 million barrels a day, equivalent to the entire consumption of the United States. And even those gloomy views may be too optimistic, according to Goldman Sachs. It would be impossible for any small group of producers to mitigate that kind of impact by reducing output, unless Saudi Arabia and Russia were both to slash their production to almost zero. And that’s not going to happen. On Wednesday, U.S. Secretary of State Mike Pompeo called on Saudi Arabia’s Crown Prince Mohammed bin Salman to take the lead as his country prepared to host a meeting of the Group of 20 nations. Pompeo urged the kingdom “to rise to the occasion and reassure global energy and financial markets.” That’s a reasonable request. Somebody has to show leadership and it doesn’t look like it’s going to be President Donald Trump. The trouble is that I suspect what Pompeo meant is for Saudi Arabia to cut its production unilaterally, rather than trying to bring together a short-term “coalition of the willing,” including the U.S., to work together to confront a global problem. After all, that’s always what’s happened in the past.. In February 1999, the Organization of Petroleum Exporting Countries agreed to its third successive output cut and by the end of the year Brent crude had recovered.. Those were the days when oil was regarded as a depleting asset whose value would only rise in the future, as demand outstripped available supply. That view no longer holds sway – battered both by the tsunami of crude extracted from shale rocks and the growing awareness of the need to reduce carbon dioxide emissions that has seen concerns about peak oil production replaced with worries (for producers) of peak oil demand. Oil left in the ground now is at risk of never being produced at all.

Oil Tumbles to 18-Year Low – Oil tumbled to an 18-year low as coronavirus lockdowns cascaded through the world’s largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus. Futures in London plunged by 9% to the lowest level since March 2002, while New York crude dipped below $20 a barrel before settling just above that level. While U.S. President Donald Trump spoke with Russian counterpart Vladimir Putin Monday to discuss the importance of stable energy markets, that did little to stanch the decline. A huge oversupply is further collapsing the oil market’s structure, and there may be more weakness to come as the world quickly runs out of storage capacity. The slump in demand has shut refineries from South Africa to Canada, leading to excess barrels in the market. At the key storage hub of Cushing, Oklahoma, inventories are said to have ballooned by more than 4 million barrels last week, according to traders with knowledge of Genscape data, raising fears about storage capacity limits being reached. “We’re grinding lower here and we’ll continue to get lower as runs get cut globally,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “As we see specific points like Cushing near its limits, it’s just going to put greater and greater pressure on the price till we get to a clearing point.” Prices are on track for the worst quarter on record. Goldman Sachs Group Inc. estimates consumption will drop by 26 million barrels a day this week as measures to contain the coronavirus hurt global GDP. Consultant FGE estimated that refinery operating rates have been cut by over 5 million barrels a day worldwide, and could bottom out at between 15 million and 20 million lower. Meanwhile, Riyadh and Moscow are showing no signs of a detente in their supply battle as Saudi Arabia announced plans to increase its oil exports in the coming months. Prices:

• Brent declined $2.17 to settle at $22.76 a barrel.
• Front-month futures are poised for a plunge of over 65% this quarter, their worst ever.
• West Texas Intermediate slid $1.42 to $20.09, after falling to as low as $19.27.

In the market for physical barrels of crude, prices are already far below those of futures benchmarks. Oil from Canada touched a record low of $3.82, while many other key grades are trading below $10 a barrel, with some as low as just $3. It’s a similar picture in Europe, where Kazakh crude was offered at a 10-year low. The six-month contango on the global Brent benchmark has grown bigger than in the financial crisis, at more than $13 a barrel. The equivalent six-month contango for WTI is about $12.

Oil Prices Rebound After Falling to 18-Year Low – Oil prices ended March by clawing back some losses after prices fell to 18-year lows in the last session. International Brent Oil Futures gained 1.82% to $26.88 by 9:57 PM ET, whilst U.S. Crude Oil WTI Futures jumped 4.43% to $20.98. WTI slumped almost 7% to $20.09 a barrel on Monday, its lowest level since February 2002 as oil markets continued to search for a solution to its’ dilemma of oversupply. Saudi Arabia and Russia will be able to pump-at-will from tomorrow as the OPEC+ alliance failed to mediate a truce in the price war between the two producers. Meanwhile, most countries are extending lockdown deadlines as well as slashing transport numbers to deal with the COVID-19 pandemic. A conversation between U.S. President Donald Trump and his Russian counterpart Vladimir Putin on Monday to discuss the importance of stable energy markets, failed to make an impact. “Any little bit of optimism is welcome even if it is little more than a false dawn,” Stephen Innes, global chief market strategist at AxiCorp, told Bloomberg. “The demand devastation is the most aggravating factor these days, while the supply issues are exacerbating that pressure,” he added.

Crude-oil prices post the largest quarterly percentage drop on record – May West Texas Intermediate crude tacked on 39 cents, or 1.9%, to settle at $20.48 a barrel on the New York Mercantile Exchange. Prices based on front-month WTI crude fell by 54.2% this month, or $24.28 – the largest one-month net decline since October 2008, according to Dow Jones Market Data. For the quarter, prices lost 66.5% to post the largest quarter percentage loss based on records dating back to March 1983. Meanwhile, the global benchmark on ICE Futures Europe, May Brent crude BRNK20, -0.22% fell 2 cents, or 0.09%, at $22.74 a barrel on the contract’s expiration day. For the month, prices fell 55%, tallying a loss of 65.6% for the quarter – the largest quarterly decline based on records dating to June 1988. The new front month June Brent shed 7 cents, or 0.3%, to $26.35 for Tuesday’s session. WTI marked its lowest finish since February 2002, while Brent saw its lowest settlement since November of that year. The slight rebound Tuesday came even as U.S. benchmark stock indexes moved lower.

Oil prices just had their worst ever quarter as coronavirus slashes demand – Oil prices registered their worst quarterly performance on record over the first three months of the year, as the coronavirus pandemic continues to crush global demand for crude. Brent futures dipped 0.09% lower on the final trading day of the first quarter, settling at $22.74, while WTI gained almost 2% to settle at $20.48 in the previous session. It means Brent futures have collapsed more than 65% over the first three months of the year, registering their worst-ever quarter through our history to 1990, according to data compiled by CNBC. Brent also recorded its worst-ever monthly performance in March, falling over 54%. Meanwhile, WTI futures slumped more than 66% in the first quarter, recording their worst-ever quarterly performance back to when the contract began trading in 1983. WTI futures fell over 54% last month, registering its worst-ever monthly performance, too. A public health crisis has meant countries around the world have effectively had to shut down, with many governments imposing draconian measures on the daily lives of hundreds of millions of people. The restrictions have created an unprecedented demand shock in energy markets, ramping up the pressure on companies and governments reliant on crude sales. To date, more than 860,000 people have contracted COVID-19 worldwide, with 42,345 deaths, according to data compiled by Johns Hopkins University. International benchmark Brent crude traded at $25.34 a barrel Wednesday morning, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.18, more than 1.4% lower.

Oil falls on oversupply fears and US inventory growth – Global crude prices fell on Wednesday as a bigger-than-expected rise in U.S. inventories and a widening rift within OPEC heightened oversupply fears. Oil prices are near their lowest since 2002 amid the global coronavirus crisis that has brought a worldwide economic slowdown and slashed oil demand. Crude futures ended the quarter down nearly 70% after record losses in March. Brent crude was down $1.17, or 4.44%, to trade at $25.18 per barrel. U.S. West Texas Intermediate crude fell 19 cents, or 0.9%, to trade at $20.28 per barrel. U.S. crude inventories rose by 10.5 million barrels last week, far exceeding forecasts for a 4 million barrel build-up, data from industry group the American Petroleum Institute showed. “The market sentiment remains bleak as there is no clarity on how long the pandemic will continue,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities. Asian shares and Wall Street futures also fell on Wednesday as the coronavirus pandemic and the prospect of a global recession tore through investor confidence. Nearly 800,000 people have been infected across the world and more than 38,800 have died, according to a Reuters tally. The bearish mood in the market was also fuelled by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other members of OPEC were unable to come to an agreement on Tuesday to meet in April to discuss sliding prices. “It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses,” BNP Paribas analyst Harry Tchilinguirian said in a report issued on Tuesday. Adding to the downward pressure, sources told Reuters that top U.S. officials have for now put aside a proposal for an alliance with Saudi Arabia to manage the global oil market.

Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn – Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output. The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out. At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production. OPEC kingpin Saudi Arabia has pledged to hike output to a record high. “Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week. He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market. “For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.” International benchmark Brent crude traded at $25.33 Wednesday afternoon, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.54, around 0.3% higher. Both benchmarks recorded their worst-ever quarter through the first three months of the year, according to data compiled by CNBC. Brent futures collapsed over 65% in the first quarter, while WTI slumped more than 66% over the same period.

The oil price war could persist until year-end, analyst says – The oil price war could last until the end of the year, an analyst said Wednesday. Prices have plummeted more than 60% since the beginning of year after OPEC+ failed to reach an agreement, leading Saudi Arabia and Russia to enter a price war amid the global coronavirus crisis. Riyadh said it will boost output to 12.3 million barrels per day in April, while Moscow said it can increase production by 500,000 bpd in the long term. Chart: Saudi oil production 200401 Asia “This was always going to be an inevitability of the production-cut strategy that OPEC+ had been adopting,” said Edward Bell, senior director of market economics at Dubai-based bank Emirates NBD. “Saudi Arabia was not going to restrain production infinitely and allow for other producers in the rest of the world to take away its market share.” Brent crude fell 5.01% to $25.03 on Wednesday evening in Asia, while U.S. crude futures were down 1.03% at $20.27. Higher production levels can help Saudi Arabia maintain its oil revenues while prices are low, Bell told CNBC’s “Capital Connection.” “That suggests to us that the oil price war strategy remains in place for quite a long time, until the end of this year, if there is no real diplomatic breakthrough,” he said. If Russia, a non-OPEC member, or countries in the cartel decide to call for some kind of production restraint, the oil market could go back to behaving the way it has for the past few years, Bell said. “You could see prices rallying on the back of … 5, 10 million bpd being cut, and those are the kind of scales of cuts that could be required, given the severity of the demand destruction that we’re seeing,” he said. That, in turn, would also allow the U.S. shale patch to increase production again. However, Riyadh doesn’t seem prepared to back down from its price-war strategy, he said. “We don’t really see any change in the oil market diplomacy.” If the kingdom wants to carve out its place as the global dominant oil supplier, it’s going to mean “a lot of pain” for marginal producers, he added. “It’s going to have to try and squeeze them out of the oil market as permanently as it can.”

WTI Tumbles To $19 Handle After Biggest Crude Build Since 2016 – After its worst quarter ever, as COVID-19 lockdowns crushed demand, raising fears about overflowing storage tanks amid a price war that has flooded the market with extra supply, all eyes are glued to today’s official inventory data (after API reported a major surprise build in crude and gasoline stocks) as Standard Chartered analysts, including Emily Ashford warned in a report, oil tanks around the world could fill in six weeks, a move that will likely force significant production shut-downs, “Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” they wrote. So, eyes down… “There is the very real possibility that this week’s storage reports could be the energy patch version of last Thursday’s Weekly Jobless Claims,” Robert Yawger, Mizuho Securities USA’s director of energy said in a note. “I would expect the numbers to be supersized and challenge multi-year highs/lows on multiple data points. Of course, I have been expecting big numbers for the past couple week, but the fireworks have not happened. That leads me to believe that the data explosion will likely happen this week … Exports will likely be down big, and refinery utilization will likely pull back dramatically. That will leave a lot of crude oil on the sidelines … EIA crude oil storage has been higher for nine weeks in a row. Storage will likely double up and increase at the rate of around 10 million for another nine weeks…at least.” DOE:

• Crude +13.833mm (+4.6mm exp) – biggest since Oct 2016
• Cushing +3.521mm – biggest build since Mar 2018
• Gasoline +7.524mm (+3.6mm exp) – biggest build since Jan 2020
• Distillates -2.194mm (-600k exp)

API reported a massive crude build (and gasoline build) overnight but the official data showed an even bigger 13.8mm barrel crude build – the biggest since Oct 2016 and a huge increase in stocks at Cushing…

Oil ends lower after U.S. crude stockpiles jump (Reuters) – Oil prices fell on Wednesday after U.S. crude inventories rose last week by the most since 2016, while gasoline demand suffered its biggest weekly drop ever due to the coronavirus pandemic. Crude inventories rose by 13.8 million barrels last week, the U.S. Energy Information Administration said. That was the biggest one-week rise since 2016, and analysts expect similar data in coming weeks, as refineries curb output further and gasoline demand continues to decline. West Texas Intermediate (WTI) crude fell 17 cents to settle at $20.31 a barrel, after hitting a low at $19.90. June Brent crude fell $1.61 , or 6.1%, to $24.74 a barrel. The global benchmark fell to $21.65 on Monday, its lowest since 2002, when the now-expired May contract was the front month. The market has slumped on the sharp fall in demand because of the coronavirus pandemic and rising output from Saudi Arabia and Russia after a supply pact collapsed last month. Brent crude fell 66% in the first three months of 2020, its biggest ever quarterly loss. Saudi Arabia’s production rose to more than 12 million bpd in the most recent months, according to sources. “The likelihood of distressed cargoes, increased freight rates, force majeures, strains on storage capacity, VLCC availability will be combining in placing additional downside pressures on petroleum prices,” Russian President Vladimir Putin called on Wednesday for global oil producers and consumers to address “challenging” oil markets while U.S. President Donald Trump complained that oil cheaper “than water” was hurting the industry. Trump invited several energy industry executives, including the chief executives of Exxon Mobil and Chevron Corp, to a meeting on Friday to discuss aid for the industry, including possible tariffs on oil imports from Saudi Arabia, an administration source confirmed. News of those efforts has intermittently bolstered futures prices, but physical grades of crude are deteriorating, as refiners and shippers confront the coming wave of supply and freeze-up in demand. Gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd. That augurs for more refining cutbacks down the road. “Demand is a disaster,” said Bob Yawger, director of energy futures at Mizuho in New York. “That’s the whole problem here. It’s horrible.”

Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn – Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output.The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out. At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production.OPEC kingpin Saudi Arabia has pledged to hike output to a record high.“Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week.He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market.“For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.”

Unprecedented Demand Destruction Marks The Return Of Crude’s Super-Contango – These days, every corner of the oil market is “unprecedented” – from the demand destruction to the supply surge and the resulting glut. The oil futures curve is no exception and is also in a state never seen before. This is the super contango, the market situation in which front-month prices are much lower than prices in future months, pointing to a crude oil oversupply and making storing oil for future sales profitable. The last time a super contango appeared on the market was during the previous glut of 2015. During the peak of the 2008-2009 financial crisis, the super contango hit a record – the discount at which front-month futures traded compared to longer-dated futures was at its highest ever.The double supply-demand shock of the past month threw the oil futures market into another super contango. And this super contango is already beating previous records.The super contango is representative of the state of the oil market right now: the growing glut with shrinking storage capacity as oil demand craters, OPEC’s leader and the world’s top exporter, Saudi Arabia, intent on further cratering the market with a supply surge beginning this month. Storage costs are surging, and so are costs for chartering tankers to store oil at sea for future sales when traders expect demand to recover from the pandemic-hit plunge.The market structure flipped into contango in early February, when the Chinese oil demand slump in the coronavirus outbreak led to lower estimates for oil consumption. A month and a half later, oil consumption is set to plunge by 20 million bpd, or 20 percent, this month. Add to this the Saudi supply surge, and here we have what analysts expect to be the largest glut the oil market has ever seen.Earlier this week, the oversupply and fast-filling storage capacity sent the discount of the May futures of Brent to the November futures contract to the widest contango spread ever – $13.95 a barrel, higher than even the super contango at the peak of the 2008-2009 financial crisis. With the rollover of the front-month futures contract in April, the June Brent futures traded early on Wednesday at a discount of $10.30 a barrel to the November futures, while the June 2020 futures spread to the June 2021 futures was $13.59.One of the hottest ‘commodities’ in the market right now is storage – be it onshore or offshore – as commodity traders and oil majors are increasingly looking to profit from the super contango in several months’ time. Apart from the traders who manage to secure storage for stashing crude for sale in a few months, the other big winners of the super contango market structure are set to be tanker owners and operators, as rates for chartering tankers for storage are soaring.Over the next few months, the tanker companies will be the biggest winners from the double market shock as traders rush to secure what’s left of available crude carriers for storage in the super contango structure.The inventory buildup around the world will be so high that it will force up to 10 million bpd of global oil production to be “cut or shut-in from April to June 2020 as oil storage fills up and output from financially strapped companies begins to fall,” IHS Markit said on Tuesday.“Under current conditions second-quarter global demand for oil is expected to be 16.4 million barrels per day less than a year ago. That is more than six times the record drop experienced during first quarter 2009 during the Great Recession. In April the drop will be even bigger,” said Aaron Brady, vice president, IHS Markit.

Oil Companies on Tumbling Prices: ‘Disastrous, Devastating’ – The New York Times The once mighty oil industry is shrinking quickly around the world, hunkering down in survival mode.With the coronavirus pandemic all but eliminating travel and commutes, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel. Pipeline operators are telling producers that they can ship crude only if there is a buyer willing to take the fuel because storage tanks are filling up fast. And American oil companies are dropping rigs, dismissing fracking crews and beginning to shut down wells.As much as 20 percent, or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years.The Trump administration has been trying to convince Saudi Arabia and Russia that they should cut production to help stabilize the oil market; President Trump and President Vladimir V. Putin of Russia discussed energy markets in a call on Monday. But the energy demand destroyed by the virus now overshadows anything that Saudi Arabia or Russia could do to reduce exports. Global oil benchmark prices hover around $20 a barrel – levels not seen in a generation – and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say. “The picture looks bleak,” said Trent Latshaw, president of Latshaw Drilling, an oil service company active in Texas and Oklahoma with only 10 of its 41 rigs currently deployed. “We have never had this situation where you have a huge increase in supply and a huge decrease in demand at the same time. Oil prices are down to $20 a barrel, and we don’t know where the bottom is.”All told, global investments in exploration and production are expected to fall in 2020 by $100 billion, or 17 percent below last year, according to Rystad Energy, a research and consulting firm based in Oslo. That drop is only the latest jolt to an industry that has been tightening budgets for years. The $446 billion that the industry is expected to invest is just over half the $880 billion it spent on exploration and production in 2014.The share prices of large companies like Exxon Mobil, ConocoPhillips and Chevron have nearly halved in recent months, while the stocks of smaller firms with less healthy balance sheets have fallen even more.

GOP senator calls on Saudis to end its oil price war, says ‘Americans died’ protecting the kingdom – America’s strategic relationship with Saudi Arabia may permanently change if Riyadh does not end its latest oil price war, Sen. Dan Sullivan told CNBC on Wednesday. “The Saudis have really brought in a supply shock at exactly the wrong time,” the Alaska Republican said on “Squawk Box.” “These kind of crises really make it clear … who your friends are and who aren’t your friends.” Sullivan said that a group of U.S. senators has been applying pressure on Saudi Arabia, writing a letter to Crown Prince Mohammed bin Salman that was followed up by call with the Saudi ambassador to the U.S. in Washington. “All of the senators who were on that letter, on that conference call with the ambassador, have been strong supporters of the U.S.-Saudi relationship,” said Sullivan. “That is going to change if the Saudis don’t start playing a more constructive role with regard to energy markets.” Sullivan, who represents the oil-rich state of Alaska, said he reminded the Saudi ambassador of the past U.S. defense of the kingdom. “We’ve been there for you,” Sullivan said he told her. “First Gulf War, Saddam Hussein is getting ready to roll through your country. It wasn’t the Saudi military that stopped him. … It was the First Marine Division, 82nd Airborne. Americans died in that war.” The Saudi Embassy was not immediately available to respond to CNBC’s request for comment.

Saudi Arabia’s big oil gamble will hurt the kingdom – but it’ll likely pay off – April is going to be a hellish month for the oil industry. Already down more than 65% year-to-date, crushed by the coronavirus crisis and the Saudi-Russia oil price war, crude prices are set to tank even further when Saudi Arabia and others turn on the taps following the expiration of the OPEC+ output cut deal on April 1 that had reined in production to boost the market. Oil at $20 per barrel was unimaginable a few months ago; now some forecasters are calling prices as low as $10 or even single digits as the world runs out of storage space and the global economy grinds to a halt. But when the dust settles, many analysts believe it’ll be Saudi Arabia – even with its overwhelming reliance on oil revenue – that comes out on top. The kingdom is willingly inflicting pain upon itself by slashing its selling prices and committing to increase production to more than 12 million barrels per day – a record amount – after a bid to cut output together with Russia failed. Its strategy now is going after maximum market share. Its revenue is taking a massive blow and its budget deficit could rise by 40%, prompting plans for spending cuts and borrowing. The IMF estimates the kingdom needs oil at $80 a barrel to balance its budget; Brent crude closed at $22.74 per barrel on Tuesday, ending its worst quarter ever, with the second quarter expected to be even worse. Despite the dire numbers, however, enduring months of fiscal pain while it pursues greater exports may ultimately pay off. “Saudi will definitely be one of the winners on the other side,” Abhi Rajendran, director of research at Energy Intelligence, told CNBC. His call is based on the assumption that oil prices will rebound in 2021 post-coronavirus; his firm sees oil back up to $80 per barrel within three years. Rajendran predicts Saudi Arabia’s market share will “definitely grow,” adding that “in a year or two they will have to increase production because the market will need it… and it will be ahead of the U.S. again in terms of volume.”

Oil Surges On Report China Buying For Strategic Reserve, Hopes For Saudi-Russia Truce – Oil surged as much as 13% this morning following a report that China is planning to start buying cheap crude for its strategic reserves, as well as speculation that President Trump said he thought Saudi Arabia and Russia would resolve their differences in the oil price war that has sent supply soaring even as global oil demand tumbles. Following massive builds in crude in the US as reported by the DOE and API, and amid sporadic reports that various storage facilities are starting to fill up: … overnight, Bloomberg reported that Beijing instructed government agencies to start filling state stockpiles after oil plunged 66% over the first three months of the year, while the global benchmark’s nearest timespread also rallied strongly. Beijing has asked government agencies to quickly coordinate filling tanks, Bloomberg source said. In addition to state-owned reserves, it may use commercial space for storage as well, while also encouraging companies to fill their own tanks. The initial target is to hold government stockpiles equivalent to 90 days of net imports, which could eventually be expanded to as much as 180 days when including commercial reserves. According to Bloomberg calculations, 90 days of net crude imports translated to about 900 million barrels. By comparison, the U.S. currently holds about 635 million barrels in its Strategic Petroleum Reserve, according to government data. And while the current size of China’s state reserves is unknown, and Beijing could use a different method for calculating net imports, oil traders and analysts at SIA Energy and Wood Mackenzie estimated it could amount to China buying an additional 80 million to 100 million barrels over the course of the year before it ran into logistical and operational constraints. In September, the head of development and planning at the National Energy Administration said the country had total oil reserves, including strategic stockpiles, for about 80 days. In December, state-owned China National Petroleum Corp. said on its website that the government intends to boost the capacity of its strategic petroleum reserves to 503 million barrels by the end of this year, an indicator of the maximum amount the government can store. While the purchases could help soak up some excess supply, traders said it will fall well short of offsetting the overall glut created by the virus lockdowns and the price war between Saudi Arabia and Russia. As Bloomberg adds, China’s move comes as the physical crude market shows deepening signs of strain as supply explodes and demand collapses due to the coronavirus. Dated Brent, the benchmark for two-thirds of the world’s physical supply, was assessed at $15.135 on Wednesday, the lowest since at least 1999. Crude has slipped below $10 in some areas including Canada and shale regions in the U.S., Belarus wants to buy Russian oil for $4, while some grades have posted negative prices.

Trump Eyes 10MMbpd Global Oil Cut – President Donald Trump is trying to get the world to cut oil production by 10 million barrels a day in an effort to end a market-share war that sent crude prices plunging to the lowest levels in two decades. Trump shocked markets on Thursday by tweeting that he expected Russia and Saudi Arabia alone to cut about 10 million barrels — or roughly a 10th of global petroleum, sending oil prices soaring. A person familiar with the discussion later said that Trump, after a call with Saudi Arabia Crown Prince Mohammed bin Salman, was hoping to get other oil market participants to contribute to that cut, too. A second person familiar with the situation said Trump’s goal is purely aspirational and will ultimately hinge on whether Saudi Arabia and Russia can reach a deal. Any across-the-board reduction of this size will face serious challenges. Saudi Arabia hasn’t voiced outright support for the move and instead called for an “urgent meeting” of the world’s oil producers to discuss a “fair agreement.” The response signals the country will only cut output if others do so and raises the question of whether the Trump administration is willing to cap America’s own production to reach a global accord. Russia’s response was arguably harsher. In his tweet, Trump said he had spoken to MBS, who had in turn spoken with Russian President Vladimir Putin. But a Kremlin spokesman, Dmitry Peskov, said the conversation hadn’t happened and confirmed that no production cut had been agreed to with the Saudis. Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry! – Donald J. Trump (@realDonaldTrump) April 2, 2020 An OPEC+ delegate familiar with the conversations similarly said Saudi Arabia and Russia had yet to agree to production cuts — let alone their size. Any proposed curbs would be conditioned upon every other major oil producer also agreeing to reduce production, the person said, asking not to be named discussing diplomatic conversations. Meanwhile, Trump told reporters on Thursday that he expected a deal to be reached soon.

Oil surges as Trump talks up hopes for truce in Saudi-Russia price war – Crude oil futures jumped 10% on Thursday after U.S. President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war and Russian President Vladimir Putin called for a solution to “challenging” oil markets. Brent crude futures rose 11.36%, or $2.81, to $27.55 as of 0701 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased 10.0% or $2.03, at $22.34. Trump said he had talked recently with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal to end their price war within a “few days” – lowering production and bringing prices back up. Trump also said he has invited U.S. oil executives to the White House to discuss ways to help the industry “ravaged” by slumping energy demand during the coronavirus outbreak and a price war between Saudi Arabia and Russia. “The market is hoping that this U.S. intervention will bring us closer to an agreement between Saudi and Russia in cutting production,” said CMC Markets analyst Margaret Yang, adding that bargain hunting is also lifting oil prices. Speaking at a government meeting on Wednesday, Putin said that both oil producers and consumers should find a solution that would improve the “challenging” situation of global oil markets. Saudi Arabia supports co-operation between oil producers to stabilize the market but Russia’s opposition to a proposal last month to deepen supply cuts has caused market turmoil, a senior Gulf source familiar with Saudi thinking told Reuters. Some analysts cautioned there is still a long way to go before any output cut agreement is struck.

Oil Soars on Trump’s Saudi-Russia Output Cuts Claim — Oil soared after U.S. President Donald Trump said Saudi Arabia and Russia would make major output cuts, though uncertainty swirled over the volume of curbs and whether reductions would be made at all. While Trump tweeted that cuts of 10 million to 15 million barrels were possible, he didn’t specify if that reduction would be per day. He also said he spoke to Saudi Crown Prince Mohammed Bin Salman about the market. His comments immediately triggered skepticism, even within the U.S. government. One person familiar with the administration’s discussions with the Saudis said there was widespread internal confusion about what the president was referring to and the numbers he mentioned may not be reliable. The prospect of the U.S. joining in on any output cuts was raised after Ryan Sitton of the Texas Railroad Commission, in a rare move for the state’s oil regulator, spoke with Russian Energy Minister Alexander Novak on reducing global supplies by 10 million barrels a day. He said he would also talk to the Saudi oil minister soon. Meanwhile, Kremlin spokesman Dmitry Peskov said Russian President Vladimir Putin hasn’t spoken to the Saudi crown prince and hasn’t agreed to cut oil production to boost prices. The Middle East kingdom also didn’t confirm the cuts, but called for an urgent meeting of the OPEC+ producer alliance to reach a “fair deal” that would restore balance in oil markets, state-run Saudi Press Agency reported. Any curbs by the group would be conditional on other countries joining, according to a delegate. U.S. West Texas Intermediate futures jumped as much as 35%, before closing up almost 25% — their biggest single-day advance ever. Brent crude increased as much as 47%, the global benchmark’s largest surge in intraday trading. “The 10, 15 million barrel a day cut is just not going to happen. On top of that, Russia has older oil wells, so they can’t restart in the same way that Saudi Arabia can,” said Tariq Zahir, a fund manager at Tyche Capital Advisors. If Trump meant 10 million barrels per day, that would equal both Moscow and Riyadh curbing nearly 45% of their production in what would prove an unprecedented move. If collective action does remove that much from the market, that would be the equivalent of about 10% of world demand prior to the impact of coronavirus crisis. Still, that may not be enough to stop the pain that’s rippled across the energy industry as demand craters with the coronavirus outbreak shutting down economies around the world.

@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 ‘>@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 ‘>@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 ‘>What Really Caused Oil To Rally By 25%? – Oil prices spiked 25 percent on Thursday after President Trump tweeted that Saudi Arabia and Russia would cut production by 10 to 15 million barrels per day (mb/d), but there are a variety of reasons why a cut of this size faces steep odds. Incidentally it was the biggest one day percentage surge in the price of oil in history. This should be prefaced with the fact that nobody knows what will happen and that the onset of a global pandemic means that all of the old rules are thrown out the window. Anything can happen in the context of the greatest public health and economic crisis in a century. But Trump’s tweets raise a ton of questions. Right off the bat, a 10-15 mb/d cut is incredibly massive. How could that be divided up? Russia and Saudi Arabia are both at around 11 mb/d; would they both cut their output in half? That’s an absurd notion. Indeed, immediately, Russia shot down the idea that there was some agreement. That was followed by a clarification from Saudi Arabia, which called for an emergency OPEC+ meeting that could lead to cuts with “another group of countries” in an attempt to arrive at a “fair solution.” That statement means that Saudi Arabia has not signed onto anything, and would only cut if a lot of other countries did the same. The Saudi statement hints that it wants more than just the OPEC+ coalition, which presumably would include the U.S., Canada, Brazil and/or some other non-OPEC producers. Then, news surfaced that Saudi Arabia was willing to cut output below 9 mb/d if others joined them. That means that Saudi will chip in around 2 mb/d of cuts, which is incredibly modest compared to what Trump’s tweet suggests. It would also bring Saudi output roughly back to where it was a month ago, prior to the breakdown of the OPEC+ negotiations. Meanwhile, an even larger question is what the U.S. would need to give in order to achieve anything close to what Trump claimed. Reuters reported that the Trump administration does not actually plan on asking domestic drillers to cut production. Trump is set to meet with a group of oil CEOs on Friday, but he apparently won’t ask them to cut output, Reuters says. Bloomberg reported that there was widespread confusion even within the U.S. government about what Trump’s tweet meant. If the U.S. is not going to cut, what, then, is Trump talking about? One thing to consider is that Saudi Arabia can earn some goodwill in Washington by agreeing to call for an emergency OPEC+ meeting. The Saudis could be nodding along with Trump, commiserating about low oil prices, while also suggesting that they could take strong action…if others go along. Riyadh does not have to agree to anything immediately, but by putting the ball in the court of the U.S. and Russia, they may entice production cuts from elsewhere.

Why A 15 Million Barrel Per Day Cut Will Never Happen – Oil prices exploded on Thursday morning after US President Trump tweeted that he spoke with Saudi Crown Prince Mohammed bin Salman about a potentially ‘huge’ output cut. According to Trump, the production cut from Saudi Arabia and Russia could be as high as 15 million bpd. For anyone wondering why oil prices just spiked by over 25%… https://t.co/xjkfxOAaoS – OilPrice.com (@OilandEnergy) April 2, 2020The reality, however, is very different. Earlier this morning, Dmitry Peskov, spokesman of Russian President Vladimir Putin told reporters that ‘’No one has launched any talks about a potential new oil-production deal to replace the OPEC+ format’’ Peskov assured reporters that no one is happy with current oil prices, but that there are no high-level talks scheduled for either Thursday or Friday. It seems then that US pressure on Riyadh has convinced Saudi Arabia to reopen negotiations once again, but as I wrote before, neither of the parties will be willing to hand an easy victory to the others. While both Russia and Saudi Arabia have started to hint that they are willing to talk about new cooperation, neither of them have proposed any specific new deal. The situation changed this morning after Saudi Arabia’s official news agency reported that the Kingdom is calling for an urgent OPEC+ meeting with the aim of ‘’seeking a fair agreement’’. In other words, Saudi Arabia is willing to return to the negotiating table if every other nation is willing to cut production. According to Dow Jones, Riyadh is willing to reduce output to 9 million bpd, roughly what it produced in February before the OPEC+ deal fell apart. It also seems that the Kingdom will only be happy to cut production back to 9 million bpd if Moscow agrees with the 500,000 bpd production reduction it rejected at the previous OPEC+ meeting in Vienna. Even if Saudi Arabia gets Russia to agree to the 500,000 bpd cut (which remains unlikely), this means that the markets will see a production reduction of only 3.5 million bpd – a far cry from the 10-15 million bpd that President Trump claimed in his tweet this morning.

Oil’s Trump Bump Fades as Doubts Rise— Oil slid back below $25 a barrel after a record surge as doubts crept in about a deal touted on Twitter by U.S. President Donald Trump that would see deep supply cuts from producers including Saudi Arabia and Russia. Futures dropped as much as 7.1% after surging almost 25% in New York on Thursday following Trump’s tweet that he expected global producers to slash output by 10 million barrels or more. However, the Kremlin later said that President Vladimir Putin had not spoken to his Saudi counterpart and hasn’t agreed to reduce production. Citigroup Inc. and Goldman Sachs Group Inc. said any supply deal would be too little, too late as demand craters. While futures spiked, the outlook for the physical market remains bleak as discounts for some grades of physically delivered oil across the U.S. and Canada widened. Heavy Louisiana Sweet crude lost $1.75 a barrel relative to West Texas Intermediate to a record $10.50 discount. Oil has whipsawed this week after plunging to an 18-year low on Monday. While Trump tweeted that he had spoken to Saudi Crown Prince Mohammed bin Salman, who had in turn spoken with Russian president, a person familiar with the situation said the U.S. president’s goal is purely aspirational and will ultimately hinge on whether Riyadh and Moscow can reach a deal. After Trump’s request, Saudi Arabia said it had called a meeting of the OPEC+ alliance that includes Russia to discuss a “fair agreement,” signaling it would only cut output if others do so. Producers are facing an unprecedented collapse in demand as nations try to stem the spreading coronavirus. “Even if there is an agreement to curtail 10 million barrels a day of output, the fundamentals show demand destruction and inventory builds,” said John Driscoll, chief strategist for JTD Energy Services Pte in Singapore. The “anxiety and mayhem out there is reminiscent of the financial crisis,” he added. West Texas Intermediate for May delivery fell $1.26, or 5%, to $24.06 a barrel on the New York Mercantile Exchange as of 1:53 p.m. Singapore time. The contract is still up about 12% this week, set for the first weekly gain since February. Brent for June settlement lost 4.9% to $28.48 on London’s ICE Futures Europe exchange. Prices are up 14% this week. Texas Railroad Commission Ryan Sitton, in a rare move for the state’s oil regulator, tweeted on Thursday that he spoke with Russian Energy Minister Alexander Novak and discussed a 10-million barrel a day global output cut and would talk to the Saudi oil minister soon. Trump is scheduled to meet with U.S. oil company executives Friday as the administration seeks ways to help the beleaguered industry.

Russia, Saudis Deny Trump “Expectation” Of 10 Million bpd Oil Production Cut – Whether it’s just more desperate jawboning or resembles reality, CNBC’s Joe Kernan reports that he just spoike to President Trump who claims his conversations with Putin and MbS suggest an oil production cut of up to 15mm barrels/day is imminent.President Trump tells CNBC that he spoke to President Putin yesterday and Saudi Crown Prince today and expects them to announce an oil production cut of 10 million barrels and could be up to 15 million. President Trumptold reporters in Washington this morning that…”Worldwide, the oil industry has been ravaged. Its very bad for Russia, its very bad for Saudi Arabia. I mean, its very bad for both. I think they’re going to make a deal.”..and has just tweeted his confirmation:Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry! – Donald J. Trump (@realDonaldTrump) April 2, 2020 The result is not surprisingly a massive 35% surge in crude… Shortly after the market exploded higher on Trump’s tweet which also sent oil soaring by a mindblowing 35%, Kremlin spokesman Dmitry Peskov said in a text message that: Russian President Vladimir Putin has not spoken to Saudi Crown Prince Mohammed Bin Salman and hasn’t agreed to cut oil production to boost prices, “No. There was no conversation,” Peskov said when asked about tweet by U.S. President Donald Trump saying that Russian, Saudi leaders had agreed to cut oil output to boost prices. Caught between a rock (not pissing off Trump), and a hard – or rather soft – place, (hoping to flood the world with millions of barrels in excess oil), moments ago Dow Jones reported that the Saudis are mulling a production cut to 9mmb/d but only if others join. Again, this means Crown Prince MbS is only willing to go back to where the March Vienna OPEC summt was… just before Russia refused to cut by 500kb/d and all hell broke loose. In other words, this is not a negotiation, this is an offer to return to the bargaining table at the point where Russia balked. Oh, and there is another problem: even if Saudis cut from 12mmb/d to 9mmb/d and Russia cuts by 500k, that’s 3.5mmb/d less in supply. Meanwhile, global demand is down by over 15mm barrels! In other words, the only way the oil market will rebalance is if both Saudi Arabia and Russia both stop pumping, even as shale continues to flood the world with US oil (because as Whiting showed yesterday, the company will continue business as usual even under Chapter 11).

OPEC+ debates biggest-ever oil cut as virus destroys demand – – OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10% of global supply, an OPEC source said, after the U.S. president called on producers to stop the market rout caused by the coronavirus pandemic. The meeting of OPEC and allies such as Russia has been scheduled for Monday, April 6, the Azeri energy ministry said, but details were still thin on the exact distribution of production cuts. No time has yet been set for the meeting, OPEC sources said. Oil prices have fallen to around $20 per barrel from $65 at the start of the year as more than 3 billion people went into a lockdown because of the virus, reducing global oil demand by as much as a third or 30 million barrels per day. U.S. President Donald Trump said on Thursday he had spoken with both Russian leader Vladimir Putin and Saudi Crown Prince Mohammed bin Salman and they agreed to reduce supplies by 10-15 million bpd out of a total global supply of around 100 million bpd. But the International Energy Agency warned on Friday that a cut of 10 million bpd would not be enough to counter the huge fall in oil demand. Such an output cut would still result in a 15 million bpd stock-build in the second quarter, said Fatih Birol, the head of the agency. Trump said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a U.S. domestic production cut – a move forbidden by U.S. antitrust legislation. White House economic adviser Larry Kudlow said Trump will fight any international collusion in energy markets that would hurt U.S. producers, but that the administration cannot dictate to oil producers. “I think… oil companies, seeing a decline in price are going to pull back on production. That’s just common sense,” he said, adding that he sees no reason why Trump’s talks with Saudi Arabia and Russia on oil will not “bear fruit”. Some U.S. officials have suggested U.S. production was set for a steep decline anyway because of low prices. “The U.S. needs to contribute from shale oil,” an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC were only lending support to higher-cost U.S. shale producers.

Putin Responds To Trump Oil Gambit- 10MM Production Cut Possible But US Needs To Join -Earlier today we said that ahead of Monday’s (virtual) R-OPEC conference, a new ask had emerged from within the oil producing nations – any production cut would have to include the US, which alongside with Russia, Saudi Arabia and others R-OPEC nations, would to around 10 million b/d. Then moments ago, Vladimir Putin confirmed just that. The Russian president said that he had spoken with US President Trump saying “we are all worried about the situation” and that he is “ready to act with the US on oil markets” with 10mmb/d in oil production needed to be cut, adding that cuts must be taken from Q1 2020 levels which was a jab at Saudi Arabia which is hoping to “cut” by 3 million b/d to go back to where it was in February. And by we, he meant the “we” that includes the US, because as he explained “joint actions” are required on oil markets, i.e., shale too. Observing that the situation on global energy markets remains difficult and that demand is falling (by 26mmb/d according to Goldman), Putin said that he wants “long-term stability” of the oil market, and that he is comfortable with $42 oil. The Russian president was also kind enough to summarize the reasons for the oil price collapse which he blamed on the coronavirus, the lack of oil demand and, drumroll, the Saudi withdrawal from the OPEC+ deal. At this point Russia’s energy minister Novak chimed in and explained what it would take to get such a cut: speaking to Putin, the Russian energy minister said it is necessary to cut oil production for everybody, including Saudi Arabia and the US, and that output should be cut for the next few months and gradually recovered thereafter. Novak also said that Saudis are still negatively influencing oil market, and that oil storage could be filled for next 1.5 to 2 months only. Finally, there was some speculation that Russia would not be present at next week’s R-OPEC conference, so Novak defused any confusion, by confirming that the meeting is set for April 6th. There was no reaction in the price of oil which now awaits to see how Trump will respond to the Saudi/Russian demand that shale join equally in any upcoming production cut.

Oil rises on hope of output deal – Oil rose on Friday as traders eyed a possible deal on production cuts after President Donald Trump said he expected a deal of at least a 10 million barrel production cut to soon be announced, and after Saudi Arabia called an “urgent” meeting for OPEC. Brent crude futures were up 9%, or $2.75, at $32.69 per barrel. Brent soared as much as 47% during Thursday’s session, its highest intraday percentage gain ever, before closing 21% higher, but still at less than half the $66 it was trading at at the end of 2019. U.S. West Texas Intermediate crude also moved back into positive territory, rising 4.5%, or $1.13, to $26.45 per barrel, after surging 24.7% on Thursday. U.S. President Donald Trump said on Thursday he had brokered a deal which could see Russia and Saudi Arabia cutting output by 10 to 15 million barrels per day (bpd) – an unprecedented amount representing 10% to 15% of global supply. Trump said he had made no offer to cut U.S. output. Saudi Arabia called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, saying it aimed to reach a fair agreement to stabilize oil markets. Kuwait’s oil minister Khaled al-Fadhel said on Friday he supported Saudi Arabia’s invitation for a meeting between OPEC and non-OPEC oil producers. The energy ministry of non-OPEC producer Azerbaijan, meanwhile, said the OPEC+ meeting is planned for April 6 and will be held as a video conference, Russia’s RIA news agency reported. “There does appear to finally be collective acceptance that the market is in such an extraordinary state of oversupply that coordinated action is needed,” said Callum Macpherson, Investec’s Head of Commodities. “For now, the possibility of ‘something’ happening could make short sellers more wary and help to limit downward pressure on oil prices, but there may need to be more tangible signs of progress fairly soon if a retest of recent lows is to be avoided before long.”

Oil jumps as much as 12% a day after its best day on record as traders expect big production cuts – Oil prices surged again on Friday on the hope that a production cut deal will soon be reached after OPEC and its allies announced they will hold a virtual meeting on Monday, and after Russian President Vladimir Putin reportedly said that the county wanted to see global action on cuts of around 10 million barrels per day. U.S. West Texas Intermediate crude jumped 11.93%, or $3.02, to settle at $28.34 per barrel. At the session high, WTI gained more than 12% to trade at $28.56. For the week WTI rose 31.7% in its best week on record back to the contract’s inception in 1983. International benchmark Brent crude rose 13.9% to settle at $34.11 per barrel. Russia initially rejected additional cuts proposed by OPEC in early March, but Reuters reported on Friday that Putin said production needs to be cut by around 10 million barrels per day, but that the U.S. must also take action. “In our view there is no OPEC+ choice involved, the rhetoric is window-dressing, the market will deliver cuts, and they will be deeper than any OPEC+ agreements,” Mizuho managing director Paul Sankey said in a note to clients Friday. On Thursday WTI and Brent posted their best day on record after President Donald Trump told CNBC that he expected Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a deal to cut oil production by 10 million to 15 million barrels, although the exact details of the cut remained unclear. WTI gained 24.67% to settle at $25.32, while Brent rose 21% to settle at $29.94. But some have questioned whether a cut of the magnitude Trump is suggesting is possible, especially if the U.S. doesn’t participate. According to a report from Reuters, the administration does not intend to ask U.S. companies to scale back production. “President Trump might have been shooting from the hip when he Tweeted about oil yesterday, promoting the idea of a deal too early on negotiations of high complexity that need more time to blossom,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said in an email. Texas Railroad Commissioner Ryan Sitton said that the state would potentially agree to curb production in an effort to prop up prices. “This will be part of a singular deal. We’re following the President’s lead on this … If this is part of that international agreement, in light of the fact that we are in arguably the worst economic pandemic in mankind’s history, then we will participate in extraordinary measures due to those extraordinary circumstances,” Sitton said Friday on CNBC’s “The Exchange.”

OPEC and allies reportedly set for video meeting as analysts pour skepticism on Trump’s intervention – Oil producer group OPEC and its partners will reportedly hold an emergency virtual meeting on Monday, with all members of the energy alliance expected to take part in an effort to stabilize markets. It comes less than 24 hours after President Donald Trump told CNBC that he expected OPEC kingpin Saudi Arabia and non-OPEC leader Russia to take up to 15 million barrels of crude off the market. International benchmark Brent crude traded at $32.78 a barrel Friday morning, up over 9%, while U.S. West Texas Intermediate (WTI) stood at $26.59, more than 5% higher. Brent settled up more than 21% on Thursday, registering its best day since contract inception in 1989, while WTI closed up over 24%, also marking its best-ever daily rally. It leaves both benchmarks on pace for their best week since January 2009, although, year-to-date, Brent and WTI are still down more than 54%. On Friday, Azerbaijan’s energy ministry said a virtual meeting between OPEC producers and non-OPEC partners, an alliance sometimes referred to as OPEC+, had been scheduled for April 6, according to the RIA news agency. OPEC was not immediately available to comment when contacted by CNBC Friday morning. Trump said via Twitter on Thursday that he expected OPEC+ to cut approximately 10 million barrels of oil, “which, if it happens, will be GREAT for the oil & gas industry!” Around 30 minutes after his first tweet, Trump then suggested the deal “could be as high” as 15 million barrels. This would be “great news for everyone!” he added. Oil production is typically discussed in terms of barrels per day, but Trump made no reference to the time frame of the cuts. Additionally, it was not clear how the cuts would be distributed across oil-producing countries. “Donald Trump’s tweet … It’s nonsense, really,” Patrick Armstrong, chief investment officer at Plurimi Investment Managers, told CNBC’s “Squawk Box Europe” on Friday. “There is no way that Russia and Saudi Arabia are going to cut production by 50%, which is the midpoint of the 10 to 15 million barrels per day he was talking about,” he added.

Opec March output at three-month high as deal expired – Opec output rose to a three-month high in March, the final month of the Opec+ production restraint agreement. Opec and its partners will meet on 6 April to discuss how to proceed, after the expiry of the deal weighed on global crude prices. Opec output increased by 1.02mn b/d to 28.76mn b/d last month, with Mideast Gulf members notably increasing production. The deal that expired on 31 March obliged participating Opec and non-Opec countries – collectively known as Opec+ – to curtail combined production by 1.7mn b/d in the first quarter of this year, with Saudi Arabia voluntarily cutting a further 400,000 b/d. The Opec participants’ target for the quarter was 25.15mn b/d. They were collectively just 27pc compliant with that in the deal’s final month. Saudi Arabia’s production exceeded 10mn b/d for the first time since October. It has a stated target to supply 12.3mn b/d for foreign and domestic consumption this month. The UAE raised output by more than 500,000 b/d to 3.53mn b/d. It said that it will supply 4mn b/d of crude in April. Kuwait’s 180,000 b/d increase was supplemented by the recent ramp-up of crude output from the Neutral Zone that it shares with Saudi Arabia. Production continued to decline from deal-exempt members Iran and Venezuela, as demand from key buyer China fell because of the coronavirus pandemic that has since led to country-wide lockdowns and caused run cuts at European refineries. Libyan production dwindled further as blockades continued at oil infrastructure, some of which have been in place since the middle of January. Opec+ members and other oil producing countries will hold an extraordinary video conference to discuss oil output strategy next week. Russian president Vladimir Putin – whose country opposed deepening cuts in March – has advocated a 10mn b/d decline from first-quarter levels, and said that Russia is willing to co-operate with the US on this. Washington has signaled it is unlikely to send a delegate, but it has held talks with Russia and Saudi Arabia in recent days.

Brent crude could still drop to $10 a barrel and stay there in Q2: IHS Markit – Oil prices on Thursday rallied more than 20% following reports of a possible deal to cut production by an enormous 10 million barrels per day, but one analyst is still predicting that Brent crude will sink to $10 a barrel. The benchmark Brent crude was trading up 9.92% trading at $32.91 on Friday afternoon in Asia, while West Texas Intermediate gained up 4.82% at $26.54. “We are projecting that Brent is going to drop to around $10 a barrel in April and will likely stay at that level in the second quarter,” said Victor Shum, vice president of energy consulting at IHS Markit. “There is little chance of any OPEC+ deal that’s going to save the crude oil market from the attack of the COVID-19,” he told CNBC’s “Capital Connection” on Friday. “I think any talk of big cuts is probably too little, too late.” Oil futures have fallen more than 50% since the beginning of the year amid a Saudi-Russia price war and demand destruction because of the coronavirus pandemic. CH 20200402_oil_volatility_since_march_6.png U.S. President Donald Trump attempted to play “moderator” between Saudi Arabia and Russia, and said on Thursday that he was expecting a cut of 10 million bpd to 15 million bpd. Riyadh called for an emergency meeting of OPEC and its allies, which was supported by Iraq, according to Reuters reports. Still, Shum said, given that both sides produce around 10 million bpd to 11 million bpd, he considers it “highly unlikely that Saudi Arabia will agree to a unilateral massive cut or even a bilateral cut with Russia.” “Are we talking about asking Saudi Arabia and Russia to cut 50% or more of their production? That seems incredible,” he said. Trump told reporters that he has not offered to lower American oil output.

OPEC+ meeting delayed as Saudi Arabia and Russia row over price collapse – (Reuters) – OPEC and Russia have postponed a meeting planned for Monday until later next week, OPEC sources said on Saturday, as a row intensified between Moscow and Saudi Arabia over who is to blame for plunging oil prices. The meeting’s delay came despite pressure from U.S. President Donald Trump for the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, to urgently stabilize global oil markets. OPEC+ is working on an unprecedented oil output curb equal to about 10% of world supply, or 10 million barrels per day, in what member states expect to be a global effort that will include the United States. Oil prices hit an 18-year low on March 30 due to sliding demand caused by government lockdowns to contain the coronavirus outbreak, and the failure of OPEC and other producers led by Russia to extend an earlier deal on output curbs that expired on March 31. Washington, however, has yet to make a commitment to join the effort and Russian President Vladimir Putin on Friday put the blame for the collapse in prices on Saudi Arabia – prompting a firm response from Riyadh on Saturday. “The Russian Minister of Energy was the first to declare to the media that all the participating countries are absolved of their commitments starting from the first of April, leading to the decision that the countries have taken to raise their production,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement carried by state news agency SPA. Putin, speaking during a video conference with government officials and heads of Russian major oil producers on Friday, said the first reason for the fall in prices was the impact of the coronavirus on demand. “The second reason behind the collapse of prices is the withdrawal of our partners from Saudi Arabia from the OPEC+ deal, their production increase and information, which came out at the same time, about the readiness of our partners to even provide a discount for oil,” Putin said. Three OPEC sources, who asked not be identified, said the emergency virtual meeting planned for Monday would likely be postponed until April 8 or 9 to allow more time for negotiations.

Risk of environmental disaster as safer tanker decays in Yemen – Six Arab countries have filed a request to the UN to access the Safer oil tanker – filled with 138 million liters of Yemeni oil – to prevent an environmental disaster of drastic proportions. The tanker’s decay in Hodeidah would cause an environmental disaster with dire economic and humanitarian consequences, threatening millions of residents in the Hodeidah governorate and the Red Sea riparian countries. “It’s a great danger,” political analyst Dr. Hamdan Al-Shehri told Arab News. The tanker has been lying in the port of Ras Isa for five years without any maintenance. UN ambassadors from Djibouti, Egypt, Jordan, Saudi Arabia, Sudan and Yemen said in the letter that an explosion or leak from the Safer would close the port of Hodeidah for several months. This would halt critical imports and “could increase fuel prices by 800 percent and double the price of goods and food, resulting in more economic challenges for the people of Yemen,” they said. A leak or explosion would also affect 1.7 million people working in the fishing industry and their families, the six countries said. Al-Shehri said: “The tanker is used as a strong-arm point by the Houthis. Using it from time to time and reaping its goods but denying access to the UN.” He added that one of the main reasons the Houthis have kept the international community and the UN at bay is “if the tanker was maintained and fixed it would affect their revenue. But the Houthis do not keep their word and have lied over and over again to their benefit.” On July 18, 2019, Mark Lowcock, the UN’s undersecretary-general for humanitarian affairs, told the UN Security Council that its assessment team had been denied the necessary permits by Houthi rebels who control the area. The tanker could face two potential hazardous scenarios.There could be an explosion or leak, which could lead to one of the worst environmental disasters the world has seen. The spill would be four times worse than the oil spill of the Exxon Valdez off the coast of Alaska in 1989, where the region still has not fully recovered. The aftermath of a fire or explosion would prevent the recovery of nearshore species in nearly 25 years, 1.7 million people would need food aid as the closure of the port can create shortages.

Saudis Claim US Patriot Missiles Activated In Major Yemeni Houthi Attack On Riyadh – Houthi rebels in Yemen over the weekend launched what’s being described as among the largest assaults on Saudi Arabia since the start of the war five years ago. Starting on Saturday the Saudi military said it intercepted at least two ballistic missiles over the capital of Riyadh, as well as over the southern city of Jizan, in the first such major attack in more than a year. Saudi military spokesman Turki al-Malki confirmed there were injuries among residents on the ground from “debris scattering on some residential areas” in Riyadh and Jizan. Saudi press agency SPA later said “two civilians were slightly injured due to the falling of the intercepted missile’s debris as it exploded in mid-air over residential districts”.At least three blasts were heard in Riyadh during the attack, followed by the blare of emergency sirens. Saudi-owned Al-Arabiya television also indicated significantly that US-supplied Patriot missiles were activated during the attack.On Sunday a military spokesman for Yemen’s Houthi movement confirmed responsibility for the major attack, saying, “the joint military operation of the missile force and the Air Force managed to target a number of sensitive targets in the capital of the Saudi enemy, Riyadh, with Zulfiqar missiles, and a number of Samad-3 aircraft.” “The major military operation also targeted a number of economic and military targets in Jizan, Najran and Asir, with a large number of Badr missiles and 2K bombers,” he added.The Houthi military spokesman warned: “The Saudi regime will suffer from these painful operations if it continues its aggression and siege on Yemen,” and promised to keep up the pressure, noting “the armed forces will reveal the details of the wide and qualitative military operation in the coming days.”

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