Oil, Gas, And Fracking News Reads: 19April 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 18 April 2020. Go here for Part 1.

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

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State responds to oily water spill at Trans-Alaska Pipeline terminal — Alaska’s Department of Environmental Conservation is responding to an oil spill at the Marine Terminal in Valdez – at the end of the Trans-Alaska Pipeline. On Sunday, equipment owned by Alyeska Pipeline Service Company malfunctioned and a mixture of North Slope Crude and water spilled under the snow. That mixture traveled over land and into the water in one of the tanker berths. As of 6 a.m. on Tuesday, Alyeska said that approximately 13,692 gallons of oily water had been recovered by an incident management team. Crews under contract with Alyeska have corralled a 30-foot by 30-foot area of oily water with fishing vessels and aircraft contracted to watch for any escapement.

Alyeska Pipeline cleaning up oil spill at Valdez Marine Terminal – Alyeska Pipeline Service Company says that as of Tuesday morning, roughly 326 barrels – 13,692 gallons – of oily water have been recovered at the Valdez Marine Terminal. APSC said in a press release that an oily sheen was noticed on water near the terminal’s small boat harbor on Sunday around 8:00 p.m. “Responders were on scene within the hour and continue response activities including deployment of sorbents sweeps, sausage boom and containment boom,” the company wrote. “A team of vessels were dispatched and continue deploying current buster boom while another team of responders is performing on-land cleanup.” Alyeska Pipeline says an incident management team responded to the terminal Monday night to aid in the investigation and spill management. The company says the cause of the spill and the volume of oil spilled are currently unknown. No injuries have been reported at this time.

Key BP Deal Threatened by Buyer’s Financing Snag – WSJ – BP’s sale of its Alaskan business is in jeopardy after a group of banks balked at financing the $5.6 billion deal to buyer Hilcorp Energy Co. amid a historic rout of oil and gas prices, according to people familiar with the deal. A failure to complete the deal would be a blow to BP, which already has the highest debt levels – in relation to its size – among the major oil companies and is counting on the transaction to help reduce its debt. It is the largest deal involving oil and gas production assets globally that has yet to close, according to data provider Dealogic. A group of banks led by JPMorgan Chase & Co. and including Wells Fargo & Co. had earlier discussed providing privately held Hilcorp with a reserve-based lending facility to help finance the deal. The proposed vehicle would essentially be a loan based on the future cash flows from oil and gas assets. But the collapse in oil prices related to the coronavirus pandemic and cratering energy demand has made the banks uncomfortable providing the loan, say the people familiar with the matter. BP declined to comment on the deal. JP Morgan and Wells Fargo also declined to comment. The global benchmark oil price has fallen nearly 60% this year as an unprecedented glut of crude builds while much of the global economy is closed. BP’s shares are down 29% this year, in line with peers such as Chevron Corp. and TotalSA . BP and other large, Western oil companies have been using asset sales to help fund their capital expenses and dividend payments to investors for years. But the market for oil and gas assets has become virtually nonexistent, meaning major oil firms may have to take on more debt to fund their budgets and maintain investor payouts.For BP, the deal with Hilcorp represents a large chunk of the $15 billion asset sales it aims to complete by mid-2021. The divestments should help lower the company’s gearing – the ratio of net debt to the total of net debt and equity – which stood at 35% including leases in the fourth quarter, higher than any of its peers. This is above the company’s long-term target level of between 20% and 30%.

Western Canadian Select Falls Below $5 | OilPrice.com Canadian oil is struggling. And I mean really, really having a tough time. Alberta’s benchmark, Western Canadian Select, is now cheaper than a pint of beer. Sitting at $4.71 at the time of writing, WCS is facing a nightmare scenario.Fortunately for Alberta, Canada’s Prime Minister Justin Trudeau said this month that the government was scrambling to secure an aid package for the country’s oil sector. And though the help has been slow to come, it seems the administration is now closer than ever to providing some relief for the ailing industry. “We recognize that the most important thing from the very beginning was to get help out to Canadians right across the country, regardless of the sectors they’re in, regardless of their situation or their location,” the prime minister said.And some relief has come. Not only have OPEC and a slew of other oil producers across the globe agreed upon a massive 9.7 million barrel per day cut in oil production, but the Canadian government has also been making some attempts to prop up the industry. In Saskatchewan, mineral rights have been extended until 2021, allowing more time for producers to plan since holding onto those titles typically means drilling a well – which in this environment, is currently out of the question. Warren Waldegger, the president and CEO of Fire Sky Energy, noted that “An extra year on some of those leases…hopefully will lead to future drilling activity.” Alberta too has seen some relief, with a $100 million loan to the Orphan Well Association to begin the reclamation and abandonment of up to 1000 more wells. Additionally, the government noted that it will enact important reforms under Bill 12 of the Oil & Gas Conservation Act, allowing the Orphan Well Association to sell oil from orphan wells to associated pipelines. But whether or not the government is doing enough to support the industry through this crisis remains unclear. The mega-relief package that Finance Minister Bill Morneau touted was only “hours away” a few weeks ago still hasn’t come.

Exploration firm Ascent Resources announces first acquisition in Cuba – Oil and gas exploration and production firm Ascent Resources has announced its first acquisition in Cuba, marking its entry into the Caribbean market. The acquisition includes UK-based Energetical Limited, which has exclusive rights to secure a production sharing contract (PSC) on a producing onshore Cuban oil licence. Energetical delivers exclusive rights to the Block 9B in Cuba. This block contains the onshore Majaguillar and San Anton fields, located on the north coast of Cuba. The block currently produces 190 gross barrels of oil per day (bopd) from three wells. Ascent said it is reviewing potential further acquisitions to develop a wider Cuban portfolio across the oil and gas sector, along with the existing oil and gas asset in Slovenia. Ascent Resources executive chairman James Parsons said: “Cuba is one of the last remaining largely untapped hydrocarbon provinces of scale. “We see here, despite the recent market turmoil and oil price collapse, the unique ingredients for a new, highly material, growth trajectory across oil, gas and mining when the cycle turns.

Brazil Cuts Oil Production On 62 Offshore Platforms – Petrobras has started shutting down production at 62 offshore platforms in the shallow waters off its coast, Reuters reported, adding that the cuts will amount to 23,000 bpd. Petrobras said earlier that as part of a global effort to support oil prices, it would cut some 200,000 bpd from its daily production, an earlier Reuters report said.OPEC+ agreed last week to reduce its combined production by 9.7 million bpd. This was less than most traders expected and a lot less than the slump in demand, which could be as much as 30 million bpd. However, with cuts from non-OPEC+ partners such as Brazil, Norway, Canada, and the United States, the total reduction in supply could reach 20 million bpd.The bad news is this won’t be enough. The International Energy Agency (IEA) said in its latest monthly Oil Market Report that the coronavirus outbreak has so far caused a record drop in oil demand, at 9.3 million bpd from 2019 levels. In April alone, demand fell by 29 million bpd. Over the second quarter, the IEA said, demand would recover somewhat, to 23 million bpd below 2019 levels, and then further down the road, it could recoup most of the losses, ending the year 2.7 million bpd below 2019 levels.It is clear to everyone that the cuts are necessary, but it also seems clear that they will not be enough to offset the demand decline fully. What’s worse is that global oil storage is filling up, and it will continue filling up despite the cuts. This seems to be the only thing that could force additional production cuts from most, if not all, oil producers. Brazil, too, may have to cut deeper. The country was on course to a new oil boom in its presalt zone offshore when the crisis hit and persistently low prices could be the death of this oil boom. Currently, the country is producing around 3 million bpd but had plans to increase this substantially. According to OPEC’s February MOMR, Brazil’s production was expected to grow by 310,000 bpd in 2020.

Ecuador scrambles to contain oil spill in Amazon region (Reuters) – Ecuadorean authorities on Thursday were scrambling to limit the environmental impact of a crude oil spill in the country’s Amazon region, where pipeline bursts prompted by a landslide this week caused crude to enter the Coca river. The Energy Ministry said in a Wednesday evening statement that it had placed barriers around the spill in an area home to several indigenous communities and near the source of drinking water for the city of El Coca, with some 45,000 residents. State-run Petroecuador, which manages the SOTE pipeline, and private Heavy Crude Pipeline (OCP) said they had deployed six teams across several areas to “contain the spill.” Authorities have not yet provided an estimate for how much crude was lost due to the pipeline ruptures. El Coca had preventatively shifted its water supply to another nearby river, the Payamino, due to the spill and had faced some disruption, said Juan Baez, the city’s potable water director. He said normal service would likely be restored by Thursday evening. “This was big, something like this has never happened,” Baez said in a telephone interview. Holger Gallo, the president of the Panduyaku indigenous group in Sucumbios province, said pollution in the river from the spill was visible to members of his community. “Indigenous communities feel affected because our livelihoods come from hunting and fishing,” Gallo told Reuters. “Our way of life will be seriously affected.” The government and OCP said they would assist with potable water supply if it became necessary. Both OCP and Petroecuador said they would begin cleaning the banks of the Quijos and Coca rivers, and were installing temporary pipelines to continue pumping crude until the pipes could be repaired.

Turkish vessels avert tanker accident in Bosphorus -Crude oil tanker M/T Militos was taken under control by tugs, turned around and towed back to Marmara sea after it suffered an engine failure in southern Bosphorus, on April 12 [talasexpresshaber.com] () A possible accident in Bosphorous was averted by Turkish coastal authorities after a Greek-registered oil tanker suffered engine failure causing it to drift in the narrow water channel in Istanbul before being tugged into safety. The 274-metre M/T Militos crude oil tanker suffered engine failure during its journey from the Marmara Sea to the Black Sea. Turkish coastal police teams arrived at scene in less than 10 minutes after the alert was sent. The rescue vessel Mehmetçik and tugboats, which are on stand by 24/7 to respond to any possible call for help in various parts of the Bosphorus, repositioned the tanker and prevented it to drift. Difficult to navigate Bosphorus is one of the most difficult water routes in the world for large ships and vessels. Around 50,000 vessels pass through Istanbul’s 30-km and 700 metres wide Bosphorus every year, with some 9,000 vesseles carrying dangerous goods such as crude oil. About 2.4 million barrels of oil passes through Bosphorus every day, and accidents keep occurring in the strait. Some of them have caused major environmental disasters.

China’s March crude oil imports rose 4.5% year-on-year on stockpiling – (Reuters) – China’s crude oil imports in March rose 4.5% from a year earlier, according to official customs data, as refiners stocked up on cheaper cargoes despite falling domestic fuel demand and cuts in refining rates caused by the COVID-19 disease outbreak. China, the world’s top crude oil importer, took in 41.1 million tonnes of oil, according to the official data from the General Administration of Customs. That is equal to 9.68 million barrels per day (bpd). The official March figure in bpd compared to an average of 10.47 million bpd for the first two months of the year. Imports in the first quarter rose 5% from a year earlier to 127.19 million tonnes, customs said, equal to 10.2 million bpd. Reuters reported a higher import number earlier for March based on quarterly figures released in a customs statement and data from previous months. In the official data set, the customs department gave a lower figure for the quarterly imports. Refiners, including state majors and private plants, began slashing crude throughput in February as fuel demand collapsed amid a nationwide lockdown to contain the novel coronavirus. But independent plants, also known as “teapots”, started cranking up production rates in March, as a plunge in oil prices triggered by the Saudi-Russia price war boosted margins. “Teapots started to book crude oil from late February when domestic virus transmission was easing. Some of the vessels have arrived in March and more will come in April,” said Li Yan, senior analyst at Longzhong Information Group. Li also expected an increase in oil imports in late April and May as Chinese refineries scrambled to purchase cheap energy after oil prices collapsed.

Mexico Ends Oil Standoff With OPEC – Mexican President Andres Manuel Lopez Obrador said Friday that his country will cut its crude oil output by 100,000 barrels per day, joining OPEC and other producers in efforts to stabilize the market. Lopez Obrador, speaking at his daily press briefing, said President Trump “generously” offered for the U.S. to reduce output by an additional 250,000 barrels a day, according to The Wall Street Journal. OPEC was hoping Mexico would lower its output by 400,000 barrels a day, and the country’s initial delay in joining the pact had jeopardized the arrangement. “The United States will help Mexico along and they’ll reimburse us some time at a later date when they’re pepared to do so,” Trump said at a press conference on Friday. U.S. producers cannot coordinate to lower output because doing so would run afoul of antitrust laws. Governments on the state or federal level would have to “mandate a production cut,” allowing the market to “answer this from a U.S. perspective,” Stephen Shorck, founder and editor of The Shorck Report, told FOX Business. Ahead of Thursday’s meeting, U.S. producers, including Continental Resources, had already reduced their daily output by a combined 600,000 barrels per day, Shorck said. Still, there has not been an order from the Trump administration to lower production. The apparent end to Mexico’s standoff would potentially cement a deal between OPEC producers and their allies that would reduce global crude oil output by 10 million barrels a day until July, and initiate a ceasefire in the price war that began last month between Saudi Arabia and Russia.

OPEC and allies finalize record oil production cut after days of discussion – OPEC and its oil producing allies on Sunday finalized a historic agreement to cut production by 9.7 million barrels per day, following days of discussions among the world’s largest energy producers. It’s the single largest output cut in history. West Texas Intermediate crude, the U.S. benchmark, was up 0.83% on Monday to $22.95 per barrel. Brent crude was down 0.22% to $31.41. Sunday’s emergency meeting – the second in four days – came as oil-producing nations scrambled to reach an agreement in an effort to prop up falling prices as the coronavirus outbreak hammers demand. The agreement ends a Saudi Arabian-Russian price war that broke out at the beginning of March and had pressured oil prices as each sought to gain market share. On Thursday, OPEC+ proposed cutting production by 10 million barrels per day – amounting to some 10% of global oil supply – but Mexico opposed the amount it was being asked to cut, holding up the final deal. Talks continued on Friday when energy ministers from the Group of 20 major economies met, and while all agreed that stabilization in the market is needed, the group stopped short of discussing specific production numbers. Under OPEC+’s new agreement, Mexico will cut 100,000 bpd, a quarter of what it had been asked to cut on Thursday. The 9.7 million bpd cut will begin on May 1 and will extend through the end of June. The cuts will then taper to 7.7 million bpd from July through the end of 2020, and 5.8 million bpd from January 2021 through April 2022. The 23-nation group will meet again on June 10 to determine if further action is needed. “This is at least a temporary relief for the energy industry and for the global economy,” Rystad Energy’s head of analysis Per Magnus Nysveen told CNBC in an email. “Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided.” President Donald Trump, who has been heavily involved in brokering a Saudi Arabian-Russian price war, said in a tweet that it’s a “great deal for all” that “will save hundreds of thousands of energy jobs in the United States.”

OPEC : The 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting concludes – The 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting was held via videoconference, on Sunday, 12 April 2020, under the Chairmanship of HRH Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, and co-Chair HE Alexander Novak, Minister of Energy of the Russian Federation. The Meeting reaffirmed the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DoC) to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital. The Meeting emphasized the important and responsible decision to adjustment production at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 09/10 April. Furthermore, the Meeting took note of the G20 Extraordinary Energy Ministers Meeting held on April 10, which recognized the commitment of the producers in the OPEC+ group to stabilize energy markets and acknowledged the importance of international cooperation in ensuring the resilience of energy systems. In view of the current fundamentals and the consensus market perspectives, and in line with the decision taken at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, all Participating Countries agreed to:

1. Reaffirm the Framework of the DoC, signed on 10 December 2016 and further endorsed in subsequent meetings; as well as the Charter of Cooperation, signed on 2 July 2019.
2. Adjust downwards their overall crude oil production by 9.7 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020. For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 7.7 mb/d. It will be followed by a 5.8 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022. The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and The Russian Federation, both with the same baseline level of 11.0 mb/d. The agreement will be valid until 30 April 2022, however, the extension of this agreement will be reviewed during December 2021.
3. Call upon all major producers to provide commensurate and timely contributions to the efforts aimed at stabilizing the oil market.
4. Reaffirm and extend the mandate of the Joint Ministerial Monitoring Committee and its membership, to closely review general market conditions, oil production levels and the level of conformity with the DoC and this Statement, assisted by the Joint Technical Committee and the OPEC Secretariat.
5. Reaffirm that the DoC conformity is to be monitored considering crude oil production, based on the information from secondary sources, according to the methodology applied for OPEC Member Countries.
6. Meet on 10 June 2020 via videoconference, to determine further actions, as needed to balance the market.

U.S., Saudi Arabia, Russia Lead Pact for Record Cuts in Oil Output – WSJ – Saudi Arabia, Russia and the U.S. agreed to lead a multinational coalition in major oil-production cuts after a drop in demand due to the coronavirus crisis and a Saudi-Russian feud devastated oil prices. The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact. As part of the agreement, 23 countries committed to withhold collectively 9.7 million barrels a day of oil from global markets. The deal, designed to address a mounting oil glut resulting from the pandemic’s erosion of demand, seeks to withhold a record amount of crude from markets – over 13% of world production. The U.S. has never been so active in forging a pact like this. On a hastily convened conference call with delegates from the 13-nation Organization of the Petroleum Exporting Countries and others, including Russia, participants raced to strike a deal before oil markets opened Monday. They expected prices to crash without an accord. It was a diplomatic victory for Mr. Trump. His allies in the oil industry prodded him to press international rivals to cut supply before it caused a wave of U.S. bankruptcies. Mr. Trump, on Twitter, said the deal will “save hundreds of thousands of energy jobs in the United States,” and he thanked the Russian and Saudi Arabian leaders for their cooperation. Mr. Trump and his representatives weren’t present at Sunday’s meeting. Still, the American president’s presence loomed large, after calling the Saudi leadership and Mexican President Andrés Manuel López Obrador over recent days. Mr. Trump also placed phone calls last month urging the Saudi and Russian leaders to call a cease-fire in their price war against each other. Christi Craddick, a regulator with the Texas Railroad Commission – which regulates oil in the U.S.’s largest oil-producing state – said Mr. Trump’s “aggressive actions and continued engagement to bring Saudi Arabia and Russia to the table to reduce global oil production was crucial to defending the domestic energy industry” and avoiding a downward spiral in oil prices. Investors remain concerned that the cuts might not be enough to support higher prices in the coming weeks as world-wide lockdowns pummel demand for gasoline, diesel and jet fuel.The curbs will mitigate some issues in oil markets, but some analysts said they were too little, too late. Amid travel restrictions and work stoppages, oil consumption is expected to fall by as much as 30 million barrels a day this month. Under the final deal disclosed Sunday, Mexico will cut 100,000 barrels a day of output, some 250,000 barrels fewer than Saudi Arabia initially wanted. The U.S. unlocked the standoff by pledging to compensate for the Mexican amount with 300,000 barrels of reductions of its own, the delegates were told. It couldn’t be determined whether that was in addition to other U.S. cuts, or how the U.S. cuts would be implemented.

OPEC and allies’ oil production cut is Trump’s ‘biggest and most complex’ deal ever: Dan Yergin – As the Organization of the Petroleum Exporting Countries and its allies came to an agreement on a record cut in oil production, U.S. President Donald Trump may have struck his “biggest and most complex deal,” according to oil expert Dan Yergin. “What was so interesting – among many, very interesting things in this unprecedented event – was the turnaround, the pivot by Donald Trump,” Yergin, who is vice chairman at IHS Markit, told CNBC’s “Street Signs” on Monday. Just a few weeks ago, Trump had said the early-March plunge in oil prices were “good for the consumer” as it meant lower gasoline prices. That drop in crude prices had been triggered by an oil price war between Saudi Arabia and Russia after Moscow rejected a proposal by OPEC to cut 1.5 million barrels of production per day. The sharp decline in oil prices spurred giant capex and job cuts across the U.S. shale industry, which has some of the highest production costs in the world. But Yergin said: “(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the U.S. economy … and he just jumped in.” “This must be the biggest and most complex deal (Trump)’s ever made,” Yergin said. “Not only was he a deal maker, but he was also something of a divorce mediator.” It looked like a mission impossible a few weeks ago. Yergin said there were two main factors driving the turnaround to the deal that just six weeks ago “would not have seemed possible.” Firstly, he said, the price of oil was in danger of crashing without a deal as there was limited inventory space left. That would have had “severe repercussions” beyond the oil industry itself and other sectors such as finance. The other driving factor was likely due to a dearth in oil demand, where the “producers found they couldn’t sell their oil.” Crude demand has taken a hit in recent weeks as measures taken by authorities to stem the spread of the coronavirus pandemic have left major economies effectively frozen. “I think all those things came together but then it was this dealmaker … Donald Trump who got on the phones,” Yergin said. “I would say it looked like a mission impossible a few weeks ago. Turned out, it was mission possible.”

OPEC+ deal saved ‘more than 2 million’ jobs in the US, says Russia’s sovereign wealth fund chief – The OPEC+ deal that’s supporting oil prices could save millions of U.S. jobs, according to the chief executive of Russian sovereign wealth fund RDIF. After days of discussion, OPEC and its allies reached an agreement on Sunday to cut production by a record 9.7 million barrels per day. It will be in effect from May 1 to the end of June, following which restrictions will be loosened. The alliance will also meet on June 10 to reassess the situation. U.S. President Donald Trump, who was involved in the negotiations, said in a tweet that the deal “will save hundreds of thousands of energy jobs in the United States.” Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said Trump was “modest” in saying that. “We believe that more than 2 million jobs in the U.S. will be saved as a result of President Trump’s leadership on this,” he told CNBC’s “Capital Connection” on Monday. “The total number of jobs in the U.S. oil and gas industry is 10 million. But if you count … other industries affected by this, you’re talking about huge job numbers,” he said, adding that Russian jobs will also be saved. America’s shale patch was seen to be vulnerable when oil prices went into a free fall amid the Russia-Saudi Arabia price war, which was triggered in early March, when Moscow refused to approve a proposal to cut production. Riyadh, in response, offered discounts on oil and prepared to ramp up supply. Analysts said Russia may have taken the action in order to target the U.S., which has higher production costs and struggles to break-even when prices are under $50 a barrel. Oil traded mixed on Monday evening in Asia, with U.S. crude futures up 0.13% at $22.79 and Brent dropped 2.06% to $30.83. While the oil benchmarks are still down by more than 50% from the beginning of the year, RDIF’s Dmitriev said the OPEC+ agreement supports oil prices “dramatically.” “Without this deal, oil prices would have gone a lot below $10 a barrel,” he said. It won’t push prices “exceptionally high,” in part because of demand destruction due to the coronavirus crisis, but does provide a “floor” going forward, he added.

Here Is The Secret Weapon That Allowed Tiny Oil Producer Mexico To Defy Giant Saudi Arabia – After the Saudis and Russia cobbled a historic OPEC+ oil production cut which at 10 million b/d was the biggest ever, and one which received the blessing – if not the participation – of Donald Trump, the rest of OPEC+ was supposed to applaud the two oil exporting giants who agreed to cut 23% of their, and everyone else’s output, and fall in line agreeing to the terms that were imposed upon them in hopes of sending the price of oil slightly higher, because as a reminder even the agreed upon 10 million cut would do nothing to balance an oil market crushed by what Trafigura calculates was a record 36 million b/d drop in oil demand. However, that did not happen because one country dared to stand up to not just Saudi Arabia, but also Russia and the rest of the OPEC cartel, and even forced Trump to bend to its will with the US president – desperate to get the price of WTI higher in hopes of avoiding mass defaults for the US shale industry – saying he would be responsible for Mexico’s production cut balance. That country is the southern US neighbor, Mexico, which pumps a relatively tiny 1.75 million b/d and which would have been forced to cap its output some 400,000 barrels lower to comply with the deal, however the most Mexico would agree to was a a minuscule 100kb/d cut – a number that is completely meaningless in the grand scheme of the oil market – yet one which openly defies Saudi Arabia which staked its reputation as OPEC’s most powerful nation by guaranteeing that every OPEC member would agree to the 23% production cut. But why is Mexico risking the collapse of OPEC, and another sharp plunge in oil prices, by refusing to comply with the deal – after all if Mexico cuts just another 250K barrels in output from its adjusted total it will unlock if not higher prices, then at least avoid an even sharper plunge in the price of oil. Sure, it may not balance the market, and $50 Brent won’t come back for a long time, but avoiding another dramatic plunge in oil would be worth the cut, right? Well, no because while that would be the reasonable economic equation for all other OPEC members, Mexico has always had what Bloomberg dubbed a “sector weapon” up its sleeve, one which incentivizes Mexico’s president to either get his way, or watch as oil craters… and get paid billions. We are talking of course about Mexico’s famous annual oil hedge, which in recent years has manifested itself mostly in the form of billions of dollars spent on oil puts, which we profiled extensively back in 2016 and 2017. As Bloomberg’s Javier Blas writes, for the last two decades, Mexico has bought “Asian” style put options from some of the most prominent US investment banks and oil companies, in what’s considered Wall Street’s largest – and most closely guarded – annual oil deal. The options give Mexico the right to sell its oil at a predetermined price. They are the equivalent of an insurance policy: the country banks all gains from higher prices but enjoys the security of a minimum floor. So – unlike all of its OPEC peers – if oil prices remain weak or plunge even further, Mexico will still book higher prices.

G20 Oil Nations Agree To 3.7 Million Bpd Cut –Oil producers from G20 have agreed to reduce their combined crude oil output by 3.7 million bpd, according to Iran’s Oil Minister, Bijan Zanganeh, as quoted by IRNA. G20 met on Friday to discuss oil production, but reports from that day revealed that the group had failed to agree on a specific number.“To underpin global economic recovery and to safeguard our energy markets, we commit to work together to develop collaborative policy responses,” the group’s energy ministers said in an official statement. “We recognize the commitment of some producers to stabilize energy markets. We acknowledge the importance of international cooperation in ensuring the resilience of energy systems.”This is indeed way too vague for anyone’s comfort, although some hailed the G20’s declaration of support for the OPEC+ cuts as a positive development. Such broad support for an oil production-cutting effort is unprecedented, just like the crisis that prompted it. Still, there is a figure for at least one G20 member: the United States.U.S. President Trump spoke with his Mexican counterpart on Friday after Mexico refused to sign up for cuts of 400,000 bpd under the OPEC+ agreement. Following his talks with Trump, Mexico’s Andres Manuel Lopez Obrador said that the U.S. would implement cuts of 250,000 bpd to help Mexico, which will cut 100,000 bpd. Trump confirmed the agreement, saying Mexico will “reimburse” the U.S. when it can.Besides this 250,000 bpd cut, U.S. oil production could be lowered by as much as 2 million bpd by the end of the year, Energy Secretary Dan Brouillette said at the G20 meeting, as quoted by the Financial Times. “This is a time for all nations to seriously examine what each can do to correct the supply/demand imbalance,” Brouillette said in what could be seen as a departure from the official White House position until recently that the U.S. did not need to cut oil production on purpose because low prices would force a decline in production anyway.

Goldman Sachs: Don’t Expect Oil Prices To Rise On Historic Oil Deal — Even though oil producers finally agreed to cut production by nearly 10 million bpd, the deal will fail to support oil prices in the coming weeks as the agreement, albeit historic, is falling short of the enormous demand destruction and expectations, according to Goldman Sachs. The voluntary cuts from the OPEC+ group will be too little to counter a nearly 20 million bpd demand loss this month and next, Goldman said on Sunday, as carried by Reuters. The OPEC and non-OPEC producers known as OPEC+ who had managed their oil supply to prop up prices in the past three years put the Saudi-Russia feud behind and forged on Sunday a new collective deal to respond to U.S. pressure and to the glut threatening to fill up global storage within weeks as demand crashed in the COVID-19 pandemic. After four days of talks and mediation, the OPEC+ countries decided to cut their overall crude oil production by 9.7 million bpd for two months – May and June, before gradually easing the cuts.Still, while OPEC issued a timetable of cuts that would last through 2022, oil prices were barely up on at 7:50 a.m. EDT on Monday, with WTI Crude up 0.13% at $22.79, erasing earlier gains of 5% as the market seems to look at the deal as ‘too little, too late’ as global oil demand tumbles by 20-30 million bpd. The global oil deal would translate into just 4.3 million bpd of actual production reduction from Q1 2020 levels, according to Goldman Sachs, assuming that all major OPEC members comply 100 percent and all other producers comply at 50 percent with the agreement. “Ultimately, this simply reflects that no voluntary cuts could be large enough to offset the 19 million bpd average April-May demand loss due to the coronavirus,” Goldman Sachs said.“[W]hile these cuts are significant, there is still a sizeable surplus expected over the second quarter. Therefore, we still believe that there is downside risk to oil prices from current levels in the short-term,”

Oil Cuts Won’t Ease Mideast Storage Crunch— The coronavirus that’s throttling fuel demand and forcing global producers to make unprecedented output cuts has left markets awash in so much crude that even the Middle East’s main oil-trading hub has run out of room to store unwanted barrels. Terminal operators at Fujairah in the United Arab Emirates say they’re turning down requests from traders and refiners to store crude and refined products, whereas a year ago they had ample space. The port’s 14 million barrels of commercial crude-storage capacity is just a fraction of what Saudi Arabia and Abu Dhabi provide for their state oil companies. Without tanks to lease, traders face costly constraints on their role as matchmakers who link a specific supply here with a willing buyer there. The global oil glut is making it harder for traders to even out imbalances in the market, and the plunge in crude, down about half this year, is making matters worse. “If tanks are leased or blocked, then traders need to push back on taking crude,” said Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai. That, in turn, could force production in some places to halt, he said. Demand for storage, an unglamorous but essential link in the global energy supply chain, is at its highest in years. From Singapore to Cushing, Oklahoma, tanks are brimming with crude, gasoline and other products, nowhere moreso than in Fujairah, a gateway for shipments from the world’s most prolific oil-producing region. “The current capacity isn’t enough, for sure,” said Malek Azizeh, commercial director at Fujairah Oil Terminal FZC. Even a deal between oil producers to trim global output by about a tenth won’t ease the storage crunch at Fujairah. The Organization of Petroleum Exporting Countries and partners such as Russia finally agreed on Sunday, after four days of deliberations, to cut production by 9.7 million barrels a day. Other nations, including the U.S. and Canada, expect to pump less because crude prices are too low for some of their oil companies to make a profit. While a cut of this size would partly offset lost crude demand, it would fall short of OPEC’s own estimate for the drop in consumption. Trafigura Group sees oil use plunging by as much as 35 million barrels daily — roughly a third of normal global output — as countries prolong lockdowns over the coronavirus.

The Sad Truth About The OPEC+ Production Cut – Quite aside from the subtler elements of the oil deal announced late last week that are likely to undermine its ability to stave off further oil price lows in the coming weeks, the basic facts of the deal are sufficient to do so: global supply is to be cut by (sort of) 10 million barrels per day (bpd) whilst global demand has fallen by around 30 million bpd. That is really all anyone needs to know and is the key reason why oil prices are likely to continue to test the downside of recent lows and to surpass them over time. Terrible though these raw figures look, the overall deal itself is much worse the more that it is examined in depth, as it is below. […] Aside from fundamental mathematical failure of the oil deal, then, what else is wrong with it? For a start, there is the usual nonsense of the ‘baseline levels’ from which production is judged to have been cut. Both Saudi Arabia and Russia are to ‘cut’ around 2.5 million bpd each but only from the production baseline level of about 11 million, according to the OPEC statement last week. However, Saudi has never recorded sustained actual oil production of more than 10.5 million bpd for more than a brief period. The recent often-quoted ‘supply highs’ of over 12 million bpd are not – repeat not – actual production but rather production plus the use of oil inventory. To put it into historical – and real – terms, the average Saudi production from 1973 to the beginning of this year was 8.15 million barrels per day. This means that the Saudis are not in reality cutting production at all, it is just going to cut back on the use of its oil inventory, which it cannot afford to keep squandering at such low prices anyway. Russia, in the meantime, is geared up to produce around 11 million bpd anyhow – the baseline figure – so again this effectively means no cut, and even if the baseline figure was lower, Russia would take no notice and produce whatever it wanted, as it has done for every OPEC+ deal with which it has been involved, since the first agreed cut in December 2016. The third key failure of this deal is that the prospect of failure is explicitly built into it, in the form of a sliding scale of production reductions that are to be reviewed on a rolling basis as the market moves forward. Specifically, OPEC+’s tentative plan would see the output curbs dramatically reduced after two months, depending on the evolution of the coronavirus, with the 10 million-barrel-a-day cut liable to be reduced to 8 million a day from July and then to 6 million a day from January 2021 to April 2022, according to the OPEC statement. The group is planning another videoconference 10 June to discuss what additional measures need to be taken, which means that any slim optimism that may have supported oil prices has immediately been undermined with the prospect of a complete change to the parameters of the deal so quickly. With this prospect of reducing production quotas so close, it is also not unreasonable to expect the OPEC and OPEC+ producers to take a less than stringent approach to the absolute level of their oil production or exports, of course, although in the case of Saudi Arabia and Russia, the quotas, as mentioned, are meaningless.

Oil trims early gains despite deal between Saudi Arabia, Russia – The world’s biggest oil producers on Sunday agreed to historic production cuts, representing almost 10 percent of global supply, putting an end to a price war between Saudi Arabia and Russia. West Texas Intermediate, the U.S. benchmark, was up 0.22 percent at $22.81 a barrel on Monday, after being up as much as 5 percent overnight. Brent crude, the international benchmark, turned lower by 0.4 percent at $31.35. “We took the responsive and responsible action to focus on adjusting crude oil production by 10 mb/d beginning on 1 May 2020, for an initial period of two months; then by 8 mb/d from July to December 2020; and by 6 mb/d for the period of January 2021 to April 2022, in the interests of producers, consumers, and the global economy,” OPEC Secretary General Mohammad Barkindo said Sunday in a statement. The so-called OPEC+ group, which consists of Saudi Arabia, Russia and their allies, agreed to a 9.7 million barrel per day cut after four days of negotiations and pressure from President Trump, who came to the defense of the battered U.S. shale industry. The U.S., Canada and Brazil will lower their output by about 3.7 million barrels per day, but some of that could come in the form of market-driven losses, according to The Wall Street Journal. Mexico, will lower its production by 100,000 barrels per day – less than the 400,000 that Saudi Arabia was originally seeking. “The big Oil Deal with OPEC Plus is done,” Trump tweeted Sunday afternoon. “This will save hundreds of thousands of energy jobs in the United States.”

Record oil output cuts fail to make waves in coronavirus-hit market – (Reuters) – The minimal impact on oil prices from a global deal for record output cuts showed that oil producers have a mountain to climb if they are to restore market balance as the coronavirus shreds demand and sends stockpiles soaring, industry watchers said. After several days of discussions, oil producing and consuming countries aim to remove nearly 20 million barrels per day (bpd) or 20% of global supply from the market, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday. The oil market has barely shrugged, however: Brent crude gained 1.5% on Monday, while U.S. crude ended the day lower. The move underscores what both investors and producers already understand – that the monumental deal to cut supply in face of a 30% drop in demand could only accomplish so much initially. The Saudi energy minister downplayed the move in oil prices on Monday, saying anticipation of the cuts was the reason for a rally in oil prices before the meeting. Since dipping below $22 a barrel two weeks ago, Brent has rebounded by roughly 48%. “It’s the typical deal, you know: buy the rumour, and sell the news,” Prince Abdulaziz bin Salman said. The minister added on Monday that effective global oil supply cuts would amount to around 19.5 million barrels per day, taking into account the reduction pact agreed by OPEC+, pledges by other G20 nations and oil purchases into reserves. The Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, are cutting 9.7 million bpd in supply. Other major producers like the United States and Canada gave indirect commitments to cuts as well, playing up forecasts for drastic production declines in coming months due to the free-fall in prices. He said that G20 nations had pledged to cut about 3.7 million bpd and that strategic reserves purchases would reach roughly 200 million barrels over the next couple of months. Both Brent LCOc1 and WTI CLc1 have lost more than half of their value this year.

Oil Suffers on Demand Loss Despite OPEC+ Output Cuts— Oil in London eked out a modest gain on Monday as investors weighed whether an unprecedented deal by the world’s biggest producers to cut output could stabilize the market reeling from the coronavirus pandemic. Futures rose less than 1% after earlier surging 8% following the OPEC+ alliance agreement to slash production by 9.7 million barrels a day starting in May. West Texas Intermediate fell 1.5%, and the May-June timespread moved deeper into contango, indicating that traders see the physical glut worsening even with the output cuts. The group reached the deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday. While the OPEC+ deal amounts to the largest coordinated cut in history, it’s dwarfed by the estimated 20 million barrels a day or greater decline in oil consumption as a result of the coronavirus pandemic. The U.S., Brazil and Canada will contribute an additional 3.7 million barrels in nominal production reductions as their output declines, and other Group of 20 nations will cut 1.3 million more. The G-20 numbers don’t represent real voluntary cuts but rather the impact that low prices have already had on output, and they would need months, or perhaps more than a year, to take effect. The OPEC+ deal came after days of brokering by U.S. President Donald Trump, who spoke by phone to Mexican President Andres Manuel Lopez Obrador, followed by a three-way conference call with Russian President Vladimir Putin and King Salman of Saudi Arabia. The Saudis are ready to cut oil production further if needed when the OPEC+ alliance meets again in June, Prince Abdulaziz bin Salman, the oil minister, told reporters on a conference call on Monday. Trump on Monday morning asserted in a tweet that the cut would be closer to 20 million barrels per day, without getting into specifics. West Texas Intermediate for May delivery fell 35 cents to close at $22.41 a barrel on the New York Mercantile Exchange. May’s discount to June settled at $6.85 a barrel, the biggest it’s been since 2009. Brent for June delivery gained 26 cents to close at $31.74 a barrel on the ICE Futures Europe exchange. Saudi Aramco reduced pricing for all its grades to Asia, signaling the state company’s intention to defend sales in its biggest market even while paring output.

Oil Tumbles After IMF Slashes Global Growth Forecast – As if oil prices needed any more help on their downward spiral towards the teens, The IMF just slashed global growth to the worst since the ’30s.“This crisis is like no other,” Gita Gopinath, the IMF’s chief economist, wrote in a foreword to its semi-annual report.“Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”As Bloomberg notes, The International Monetary Fund predicted the “Great Lockdown” recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns.In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated on Tuesday that global gross domestic product will shrink 3% this year. That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. Of course, there is the hockey-stick recovery with IMF anticipating growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks lay to the downside.

Oil prices may now be at a bottom after historic OPEC deal, US energy secretary says – The historic deal reached by OPEC and its oil-producing allies to cut production has worked to “stem the tide, stem the damage that was being done to the market,” since the onset of the coronavirus pandemic and the Saudi Arabia-Russia oil price war, U.S. Energy Secretary Dan Brouillette told CNBC. Oil prices are down more than 55% year-to-date, having experienced the worst price plunges in nearly two decades in the face of record supply, disappearing storage space and global demand eviscerated by coronavirus lockdowns around the world. But they would be even lower if no agreement had been reached, Brouillette told CNBC’s Hadley Gamble via phone interview Tuesday. “Think about what would have happened in the alternative had there been instead of a cut of 10 million on the part of OPEC and OPEC+, what if that number had been zero, what would we be looking at today suggests that it’s probably something much lower than where we are,” he said. “And I think we may be at a floor. I think the intent of this conversation with OPEC and the rest of the G-20 countries is simply to do exactly that, to mitigate.” An early victim of the oil price crash has been the U.S. shale industry, which is now hemorrhaging jobs as highly-indebted oil producers in the U.S. begin filing for bankruptcy. Up to 240,000 oil-related jobs in the U.S. will be lost this year, according to consultancy firm Rystad Energy. Saudi Arabia slashed its oil selling prices and increased production after Russia refused to join its plan to further cut output and boost prices in early March. With the two countries reversing course on oil policy in order to pursue greater market share, many suspected the moves were targeting U.S. shale, whose production would largely cease to be economically viable once prices fell below around $50 per barrel. U.S. benchmark West Texas Intermediate is now trading at less than $20 per barrel.

Oil drops more than 10% as producer cuts fail to banish demand fears – Oil prices shed more than 10% on Tuesday, with investors apparently unconvinced that record supply cuts could soon balance markets pummeled by the coronavirus pandemic, though a predicted plunge in U.S. shale output provided some support. U.S. West Texas Intermediate crude fell 10.26% to settle at $20.11 per barrel, having dropped 1.5% in the previous session. Brent futures fell $2.14, or 6.7%, to $29.60 per barrel after settling up 0.8% on Monday. Global oil producers worldwide are expected to cut overall output by roughly 19.5 million barrels per day, or nearly 20% of world supply. However, those commitments – which include voluntary cuts that will happen gradually in places like the United States – will not be enough to reduce the growing worldwide supply glut. Oil prices remain more than 50% down this year. “With demand destruction forecasts ranging from 15 million to 22 million bpd in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term,” said Nitesh Shah, director of research at New York-based WisdomTree Investments. The bulk of the mandated reductions come from the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+. That group agreed this weekend to cut output by 9.7 million bpd in May and June. The rest from the United States, Canada and others, will come as a result of weak pricing and happen over time. As a result, physical markets where crude is traded, such as in Houston or London, suggest prices will not recover for a while as storage fills.

Oil Tumbles As Saudis Quietly Launch New Price War With Record Discounts – This weekend’s 11th hour decision to cut OPEC oil output by 23% was supposed to end the oil price war between Saudi Arabia and the rest of OPEC+, but it appears Saudi Arabia did not get the memo. While oil production may (or may not) be cut by 9.7mmb/d on May 1, Riyadh remembered that to capture market share one can manipulate volumes, which are now set as per this weekend’s OPEC+ agreement or one can adjust price discounts, which are not. And as the kingdom faces stiff competition from rival suppliers for market share in the prized Asian market (or at least what’s left of it after India cut demand by 70%), the OPEC leader slashed its official selling prices to Asian customers for May by larger-than-expected margins this week, while keeping prices flat for Europe and raising them for the United States.On Monday, Saudi Arabia’s oil giant Aramco set the May price for its Arab light crude oil to Asia at a discount of $7.3 to the Oman/Dubai average, down $4.2 a barrel from April, according to a document seen by Reuters.Asian refiners had called on Saudi Arabia to slash its crude OSPs for a third straight month in May after Middle East benchmarks and refining margins dropped amid ample supplies and lower demand due to the coronavirus. Overnight, China’s customs bureau reported that overseas energy purchases weakened in March as demand from the top importer took a hit from the coronavirus pandemic. Crude oil imports fell to the equivalent of about 9.72 million barrels a day, the least since July. While Aramco cut Asian prices in hopes of beating Russia, Iran and other producers to the punch, it raised the May OSP of its Arab light crude oil to the United States to a discount of $0.75 per barrel versus the Argus Sour Crude Index (ASCI), up $3 a barrel from April, according to the document. Aramco left its OSP for Arab light crude oil to Northwestern Europe unchanged from April at a discount of $10.25 per barrel to ICE Brent. Then on Tuesday morning, Saudi Aramco again cut official selling prices of all four grades to new record lows from Egyptian port of Sidi Kerir for May, in line with big cuts in prices for other customer regions, with some grades sold at a discount of as much as $10.95/bbl:

• Arab Light OSP set at $9.85 discount to ICE Brent, vs -$8.40 for April
• Arab Extra Light also at -$9.85/bbl vs -$5.60/bbl
• Arab Medium -$10.95/bbl vs -$10.20/bbl
• Arab Heavy -$10.95/bbl vs – $10.50/bbl

Prices of all four crude grades from Sidi Kerir are 45c higher than those shipped from Ras Tanura in Persian Gulf for customers in Mediterranean, compared with 20c higher in April’s price list. And so, between the IMF’s warning earlier today, and Saudi Arabia’s quiet restart of the oil price war, Brent tumbled by over 5.5% this morning, sliding below $30, after hitting a high over $36 just two trading days ago as the unprecedented chaos in the energy market continues.

Oil Glut May Overwhelm Storage Tanks in Weeks— Global oil demand will plunge by a record 9% this year due to coronavirus lockdowns, thwarting efforts by OPEC+ to contain the resulting glut of crude, the International Energy Agency said. A decade of demand growth will be wiped out in 2020, when consumption will slump by just over 9 million barrels a day, the agency said in its monthly report. April will suffer the hardest hit, with fuel use contracting by almost a third to the lowest level since 1995. While production cuts agreed the OPEC cartel and its partners at the weekend will bring about an unprecedented pullback in supply next month, facilities for storing the remaining surplus could be exhausted by the middle of the year. “Never before has the oil industry come this close to testing its logistics capacity to the limit,” said the Paris-based IEA, which advises most major economies on energy policy. The collapse in demand is prompting a similarly sharp pullback in supply. Saudi Arabia, Russia and other exporter in the OPEC+ coalition announced that they will collectively slash output by just under 10 million barrels a day over the next two months. This “should help bring the oil industry back from the brink of an even more serious situation than it currently faces,” the IEA said. Despite the efforts of OPEC+, global inventories will still accumulate by 12 million barrels a day in the first half of the year, according to the agency. The glut “threatens to overwhelm the logistics of the oil industry – ships, pipelines and storage tanks – in the coming weeks,” it warned.

“We’re Crippled At $30” – Oil Prices Hold Big Losses After Massive Crude Build – Oil prices cratered today – completely shrugging off the OPEC+ deal as if it never happened – following IMF slashing global growth expectations and the Saudis launching a price war (heavily discounting crude). WTI broke below $20 and Brent below $30, and a key gauge of the oil market’s health is at its weakest in more than a decade as supplies build and futures contracts roll over. West Texas Intermediate crude for May delivery traded at more than $7 a barrel below its June contract on Tuesday, the deepest contango since 2009. The May contract is nearing expiration and exchange-traded funds, including the United States Oil Fund, have been selling front-month contracts and buying second-month futures. Simply put, this is an indication of extreme oversupply.“At least over the next month or so, before these cuts have an opportunity to kick in, we are going to be very stressed on inventories,” And so all eyes are once again on the inventories for any positive signs…API:

• Crude +13.143mm (+10.1mm exp)
• Cushing +5.361mm
• Gasoline +2.226mm (+7.1mm exp)
• Distillates +5.64mm (+1.8mm exp)

This is the 12th weekly build in crude stocks and follows two weeks of massive build in all oil products.

Oil Weighed Down by Lingering Demand Fears– Oil was anchored near $20 a barrel after tumbling 10% on Tuesday as concerns over virus-driven demand destruction overshadowed a historic deal by the world’s biggest producers slash output. While Saudi Arabia and other Gulf producers have pledged to cut supply starting next month, they continue to flood the market, swelling global stockpiles and testing capacity limits. The world is still choking on too much oil and will run out of places to store it within a month, according to trader Gunvor Group Ltd. In the U.S., industry data indicated American crude stockpiles rose by more than 13 million barrels last week, while a key timespread for New York futures moved deeper into contango, signaling an expanding physical glut. Oil has lost around two-thirds of its value this year after the coronavirus prompted lockdowns across the world to stem its spread, vaporizing consumption for everything from crude to fuels. The International Monetary Fund estimated that global gross domestic product will shrink 3% in 2020, a signal that energy demand may remain weak longer than anticipated. “This is a demand driven market at the moment and clearly lockdown measures across most of the world are keeping that under pressure,” said Daniel Hynes, an analyst at Australia & New Zealand Banking Group Ltd. in Sydney. “We expect to see prices remain relatively volatile.” West Texas Intermediate crude for May fell 1 cent to $20.10 a barrel on the New York Mercantile Exchange as of 7:53 a.m. London time after rising as much as 3.9% earlier. The contract has lost almost 20% in the past three sessions. Brent for June delivery dropped 1.6% to $29.13 on London’s ICE Futures Europe exchange after closing 6.7% lower Tuesday. Dated Brent, the benchmark for two-thirds of the world’s physical supply, was assessed at $20.66 on Tuesday, compared with $23.73 on Thursday.

U.S. Oil Crashes Below $20 On Record Demand Plunge – WTI Crude prices tumbled early on Wednesday to below $20 a barrel, after the International Energy Agency warned of a record oil demand slump this year, adding additional bearish tilt to the market which is already digesting huge U.S. inventory builds and too-little-too-late OPEC++ actions to support prices. At 8:55 a.m. EDT on Wednesday, WTI Crude was trading down 1.59 percent at $19.77 and Brent Crude was tumbling to below $30 a barrel – down by 3.72 percent on the day to $28.60. Following the Easter holiday weekend, oil prices were volatile on Monday as the market seemed to think that Sunday’s OPEC+ decision to cut 9.7 million bpd in May and June would not go far to prevent a huge global inventory build amid crashing oil demand in the COVID-19 pandemic. On Tuesday, oil prices were pressured again, by a report from the International Monetary Fund (IMF) saying that the global economy will likely contract by 3 percent in 2020, due to the coronavirus outbreak and the following “Great Lockdown” which will plunge many economies into recession.Later on Tuesday came the report of the American Petroleum Institute (API), which estimated another large crude oil inventory build of 13.143 million barrels for the week ending April 10 as demand destruction stemming from the coronavirus wears on. On Wednesday, oil prices crumbled after the IEA issued its monthly report, saying that it expects global oil demand to plunge by a record 9.3 million barrels per day (bpd) in 2020 compared to last year. Even if travel restrictions are lifted in the second half of this year, demand for the whole 2020 would drop by a record level of 9.3 million bpd, “erasing almost a decade of growth,” said the agency, also warning that the historic OPEC++ deal may not be able to prevent global storage from overflowing within weeks. Three days after the global oil deal – described as historic by OPEC+ and the U.S. – the market has already forgotten the calculations of v oluntary and forced cuts and has turned its attention again to the massive demand loss in the pandemic.

WTI Extends Losses Below $20 After Record Surge In Crude Inventories – WTI crashed below $20 (tagging $19.20) overnight after API reported huge inventory builds and was not helped by comments from the International Energy Agency that a historic production cut deal won’t be enough to counter a record demand slump this year.This appears to confirm a key gauge of the oil market’s health which is at its weakest in more than a decade as supplies build and futures contracts roll over. West Texas Intermediate crude for May delivery traded at more than $7 a barrel below its June contract on Tuesday, the deepest contango since 2009. The May contract is nearing expiration and exchange-traded funds, including the United States Oil Fund, have been selling front-month contracts and buying second-month futures. Simply put, this is an indication of extreme oversupply. “At least over the next month or so, before these cuts have an opportunity to kick in, we are going to be very stressed on inventories,” Bart Melek, head of commodity strategy at TD Securities, said by telephone. And so all eyes are once again on the inventories for any positive signs… DOE

• Crude +19.25mm (+10.1mm exp)
• Cushing +5.724mm
• Gasoline +4.914mm (+7.1mm exp)
• Distillates +6.28mm (+1.8mm exp)

Everything is significantly worse than expected with record breaking builds in crude and gasoline and at Cushing…Total US Crude stocks are now at their highest since June 2017… And Gasoline stocks are at record highs… …as Gasoline demand collapsed to series lows… US production continued to slide (with U.S. Refineries running at the lowest rates since 2008)… Source of graphs: Bloomberg. WTI crashed back below $20 after ramping up before the DOE data…

Coronavirus crisis will erase nearly a decade of oil demand growth this year, IEA says – The International Energy Agency (IEA) said Wednesday that it expects the coronavirus crisis to erase almost a decade of oil demand growth in 2020, with countries around the world effectively having to shut down in response to the pandemic. A public health crisis has prompted governments to impose draconian measures on the lives of billions of people. It has created an unprecedented demand shock in energy markets, with mobility brought close to a standstill. Activity in the transportation sector has fallen dramatically almost everywhere, the IEA said, noting that confinement measures had been implemented in 187 countries and territories in response to the Covid-19 outbreak. “Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3 million barrels a day versus 2019, erasing almost a decade of growth.” In its closely-watched monthly report, the Paris-based agency said demand in April is estimated to be 29 million barrels per day lower than a year ago, hitting a level last seen in 1995. For the second quarter of the year, oil demand is expected to be 23.1 million barrels per day below year-ago levels. Yet, while a recovery is forecast to be underway in the second half of the year, the IEA said it expects this to be gradual and, in December, demand will still be down 2.7 million barrels per day year-on-year. Oil prices, which were already trading slightly lower Wednesday morning, extended their losses shortly after the report was published.

Oil drops to more than 18-year low on inventory build, supply concerns – Oil dropped to its lowest level in more than 18 years on Wednesday amid reports suggesting persistent oversupply and collapsing demand due to global coronavirus-related lockdowns could continue to hammer prices. The International Energy Agency (IEA) on Wednesday forecast a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years and said no output cut could fully offset the near-term falls facing the market. Brent crude fell $1.91, or 6.45%, to settle at $27.69, giving up an earlier gain. U.S. West Texas Intermediate crude fell 24 cents, or 1.19%, to settle at $19.87 per barrel, its lowest settle since Feb. 2002. According to data from the U.S. Energy Information Administration, for the week ending April 10 inventory increased by 19.2 million barrels. Analysts polled by FactSet had been expecting a rise of 12.02 million barrels. “There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report. “However, the past week’s achievements are a solid start.” The drop in prices and demand has pushed global producers to agree unprecedented supply cuts. The Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other producer – a grouping known as OPEC+ – has partnered with other oil-pumping nations, such as the United States, in the record global supply pact. Officials and sources from OPEC+ states indicated the IEA, the energy watchdog for the world’s most industrialised nations, could announce purchases of oil for storage of up to several million barrels to buoy the deal. But as of Wednesday, no such IEA purchases had materialised. The agency, in its report, said it was “still waiting for more details on some planned production cuts and proposals to use strategic storage.” The United States, India, China and South Korea have either offered or are considering such purchases, the IEA added. Some analysts said they expect more downward pressure on the market without a demand recovery. “The slow implementation of the agreement, the risk of non-compliance and no firm commitment from others to follow suit could see the market remain under pressure until the pandemic loosens its grip to let fuel demand recover,”

Oil prices hold at 18-year low on demand concerns amid coronavirus shutdowns– Oil prices held steady at a 18-year low on Thursday after OPEC lowered its global oil demand forecast due to the “historic shock” delivered by the coronavirus outbreak. Before the Organization of the Petroleum Exporting Countries released its latest forecast, global benchmark Brent futures were up over $1 a barrel as investors hoped record builds in U.S. inventories would prompt producers there to cut output quickly. West Texas Intermediate crude settled unchanged at $19.87 per barrel, the lowest level since February 2002. Brent crude settled up 13 cents, or 0.47%, at $27.82 per barrel. OPEC said in a monthly report it now expects global demand to contract by 6.9 million barrels per day (bpd), or 6.9%, in 2020, and noted the reduction may not be the last. Last month, OPEC projected a small increase in demand of 60,000 bpd. OPEC and its allies, including Russia – a group known as OPEC+ – agreed over the weekend to reduce output by 9.7 million bpd for May and June. Russian energy firms have already significantly revised down their plans for oil exports in May following the OPEC+ deal, three company sources and two traders told Reuters on Thursday. “Low prices are here to stay until there is some clarity on when and by how much non-OPEC+ countries will chip in with additional production cuts,” analysts at Rystad Energy said. Hoped-for cuts of another 10 million bpd from other countries, including the United States, could lower production by around 20 million bpd, although some analysts have questioned that number. “Oil prices must remain depressed to force shut-ins among non-cartelised producers,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer, referring to producers such as the United States, where a lot of production is unprofitable at current prices. Some countries have also committed to increasing purchases of oil for their strategic stockpiles, but there are limits to how much oil can be bought and the extent of global coordination. Speaking of U.S. strategic reserve buying, Commerzbank analysts said that “this would accommodate 23 million barrels, which would normally constitute a massive additional reserve but these days would only just be enough to cope with one weekly increase in stocks.”

Oil mixed as shrinking China economy overshadows Trump plan to ease US coronavirus lockdown – Oil prices were mixed on Friday after the weakest Chinese economic data in decades showed the impact of the coronavirus pandemic, offsetting some earlier gains on optimism for President Donald Trump’s early plans to revive the U.S. economy. Brent was up by 55 cents, or 2%, at $28.37 a barrel by 0406 GMT, while U.S. crude for May delivery, which expires on April 21, was down 13 cents, or 0.7%, at $19.74 a barrel. The more active June contract was up $1, or 4%, at $26.53. China’s economy shrank for the first time since at least 1992 in the first quarter, as the coronavirus outbreak paralysed production and spending and punched a huge hole in global demand for crude and refined products. That data was released after Trump laid out a three-stage process for ending lockdowns to stop the spread of the coronavirus that has now killed more than 32,000 Americans and nearly 140,000 worldwide. “Oil markets found baseline support from President Trump’s U.S. reopening plan,” said Stephen Innes, market strategist at AxiTrader. Still, downside risk remains the dominant factor, he said. Both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil around 18-year lows: Analysts have slashed forecasts for prices and demand due to the spread of the coronavirus and oversupply concerns. The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for 2020 global oil demand and warned it may not be the last revision downward. OPEC now sees a contraction of global demand of 6.9 million barrels per day (bpd), compared with a small increase predicted last month, due to the coronavirus outbreak. “Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast. OPEC and other producers including Russia, in a grouping known as OPEC+, over the weekend agreed on production cuts of nearly 10 million bpd, after an earlier cooperation agreement collapsed. ConocoPhillips said on Thursday it will reduce planned North American output by 225,000 bpd, the largest cut so far by a major shale oil producer to deal with the unprecedented drop in demand. “This highlights that the market will see meaningful cuts from outside the OPEC+ group without the need for mandated cuts,” said ING bank in a note on Friday. “Instead, market forces will do the job, with the low price environment forcing producers to cut back.”

Demand For OPEC Oil Falls To 30-Year Low – The sharp contraction in global oil demand amid lockdowns and stalled industrial activity will lead to the lowest demand for OPEC crude in more than thirty years this quarter. Global oil demand in Q2 is set to be at around 86 million bpd, down by 12 million bpd year on year, OPEC said in its closely watched Monthly Oil Market Report on Thursday. In the second quarter, the call on OPEC crude will be 19.73 million bpd, down by 9.6 million bpd from the demand for OPEC’s oil in Q2 2019.The fewer-than-20-million-bpd demand for OPEC crude in Q2 2020 would be the lowest since 1989, the last time OPEC pumped so little crude oil, according to Bloomberg estimates.Even with the historic OPEC+ agreement to remove 9.7 million bpd from the market in May and June, OPEC alone is faced with a gaping hole between crashing demand for its oil (and for any other oil, for that matter) and still persistent oversupply, even if all OPEC members were to comply fully with their cuts – something never seen in the industry before.In the unlikely event of all OPEC members fully complying with the cuts, demand for OPEC crude in Q2 at just below 20 million bpd would still be much lower than OPEC’s potential all-members-complying-100-percent production of 23.4 million bpd, according to Bloomberg estimates. For the full-year 2020, OPEC expects demand for its crude at 24.5 million bpd, down by 5.4 million bpd compared to 2019. When compared with the same quarters in 2019, demand for OPEC crude in Q1 2020 and Q2 2020 is expected to be 8.2 million bpd and 9.6 million bpd lower, respectively, the cartel said in its monthly report. Those projections, however, remain “heavily subject to uncertainty surrounding current market conditions,” OPEC said. As far as the entire global oil demand is concerned, OPEC expects it to drop by 6.8 million bpd this year, as “The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale.”

IMF warns ‘vulnerabilities high’ in the Middle East hit with dual shock of coronavirus and oil plunge – The International Monetary Fund forecasts a dramatic contraction for Middle Eastern and North African economies this year, predicting a worse outlook for the region than for the global economy as a whole in its latest regional economic report. The IMF expects the MENA region to contract by 3.3% in 2020, compared to last year’s projected growth of 0.3%. That’s worse than the Fund’s forecast for the world economy, which is expected to contract by 3% this year. “Vulnerabilities are high in certain countries, especially those with high levels of unemployment and low growth,” the IMF’s Middle East and Central Asia Director Jihad Azour told CNBC on Tuesday. He acknowledged the possibility of civil unrest as the region’s economies face strains caused by the “dual shock” of coronavirus and low oil prices. The IMF expects growth in Lebanon to decline by 12% in 2020. The small Mediterranean country has the third-highest debt-to-GDP ratio in the world and was facing an economic crisis long before the coronavirus pandemic set in. Egypt is the only country in the MENA region the IMF expects to grow in 2020, by 2%. Lebanon’s ailing economy – forecast to have contracted by 6.5% in 2019 – with governance issues and rampant corruption resulted in mass demonstrations last year, and ultimately forced former Prime Minister Saad Hariri’s government to resign. The structural reforms required of an IMF bailout could have deeper social and economic repercussions, however, and push the government to look elsewhere for funds. Both Lebanon and Iraq have explored further funding from the IMF, Azour confirmed to CNBC, as the Fund responds to an unprecedented demand for emergency assistance. The Washington-based organization provides financing to members and has $1 trillion in lending capacity.

Something Good From The Pandemic? Maybe A Cease Fire In Yemen – Barkley Rosser – Yes, in the midst of deaths and deep recession there may be someting good that may come from this pandemic. Saudi Arabia’s leaders have announced a cease fire in Yemen after five years of war, one also accepted by its ally, the recognized government there. Unfortunately so far the Houthi enemies of the Saudis and the recognized government have not so far accepted this proposed cease fire, and in fact it is not the first time the Saudis have called for one, with the previous efforts having failed. However, this time maybe it will stick. So far there are no officially recognized cases of covid-19 in Yemen. But tens of thousands of Yemenis are returning home from KSA, thrown out as low oil prices have strained the Saudi economy, with the numerous Yemeni guest workers taking the hit, Yemenis being the only non-Saudis allowed to come and go without getting visas, so easy come and easy go. In KSA there are now over 3,000 recognized cases while in Yemen more than half the health infrastructure has been destroyed by the Saudis in the war. Yemen is facing a potentially disastrous situation. A further aspect of this on the Saudi side is that 150 members of the Saudi royal family have apparently become infected. Most of these are in the lesser branches, with the family now ridiculously large at about 15,000, of whom about 2,000 are “core.” But in fact some serious “senior” members have fallen ill, with perhaps the most prominent (and seriously ill) is the powerful governor of Riyadh province, which contains the capital city, Faisal bin Bandar bin Abdulaziz, a nephew of King Salman, who is reportedly hiding on an island in the Red Sea, with de factoo ruler Crown Prince MbS also in seclusion somewhere. This seems to have spooked the Saudi leadership so that even if the Houthis do not like what is being offered, the Saudis may simply stand down. The virus may be bringing about peace in a long-suffering nation. Let us hope so.

Chinese Oil Giant Helps Kuwait Turn Refinery Project Into Hospital – China Petroleum & Chemical Corporation, or Sinopec, is helping Kuwait to remodel a camp at a refinery into a hospital to treat the rising number of coronavirus patients in one of OPEC’s core oil producers. Sinopec’s unit Sinopec Fifth Construction Co is helping Kuwait to turn the living quarters of construction workers at the Al-Zour New Refinery Project (NRP) into a makeshift hospital, Sinopec, one of China’s biggest oil and petrochemical firms, told Chinese publication the Global Times on Tuesday.As of early Tuesday, April 14, Kuwait had 1,355 confirmed coronavirus cases and 3 deaths, with a growing curve of daily COVID-19 cases.“The Kuwaiti government chose our camp because it is in the desert, a good place for isolation. With its existing facilities, it can be converted into a makeshift hospital with little modification,” a Sinopec Fifth Construction employee told the Global Times.Last month, Sinopec launched two production lines for N95 respirators and surgical masks in response to a shortage created by the coronavirus pandemic.While life in China begins to return to normal after a two-month lockdown, the coronavirus is spreading to nearly all other countries in the world. Globally, as of 2:00 a.m. CEST on April 14, there have been 1,812,734 confirmed cases of COVID-19, including 113,675 deaths, reported to the World Health Organization (WHO).In the Middle East, the countries including Kuwait are being directly hit by the pandemic and by the indirect hit from the colossal oil demand loss that has been weighing on the price of oil and consequently, on the oil revenues of the oil-exporting nations in the region. Some Middle Eastern producers, such as Qatar and Abu Dhabi, have tapped the international debt markets in the past week amid growing fiscal pressures on their economies and wealth funds in the oil price crash and the coronavirus pandemic.

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