Written by rjs, MarketWatch 666
Here are some more selected news articles about the oil and gas industry from the week ended 10 May 2020. Go here for Part 1.
This is a feature at Global Economic Intersection every Monday evening.
Please share this article – Go to very top of page, right hand side, for social media buttons.
Shale Producers Eye Potential Fracking Revival at $30 Oil— A pair of prominent shale producers said all they need is oil around $30 a barrel to consider bringing back curtailed crude output and fracking new wells. Diamondback Energy Inc. is curbing production this month by 10% to 15% and sending home most of its fracking crews for the whole quarter. The Midland, Texas-based company expects to end this year with more than 150 wells that were drilled but never fracked as U.S. producers avoid pumping oil into a vastly oversupplied market. Parsley Energy Inc., meanwhile, has curtailed a quarter of its output and temporarily abandoned its five-rig, two-frack crew program. The historic rout in crude prices amid the Covid-19 pandemic has spurred an unprecedented retreat from shale exploration. Producers from Chevron Corp. and Exxon Mobil Corp. to mom-and-pop drillers are curbing output as the world runs out of places to store additional oil supply. Benchmark U.S. crude futures rose 20% to $24.34 a barrel at 1:20 p.m. on the New York Mercantile Exchange, little more than two weeks before a precipitous collapse into negative territory. Still, they remain more than 60% below the 2020 peak of $65.65 touched in early January. When asked what oil price Diamondback needs before it turns the spigot back on, Chief Executive Officer Travis Stice said the company’s first priority would be restarting production that was choked back. Then, Diamondback would consider bringing back frack crews to tap supplies from wells that were drilled but never completed. “There’s a lot of factors that weigh into that, but you’ve got to have prices in the high-20s or low-30s before we kind of signal going back to work in an aggressive or even in a non-aggressive way,” Stice said on a call Tuesday. “As we evolve as an industry into this new world order, I think it’s going to look a lot different than what we’ve historically been accustomed to.”
Oil spill cleanup continues at village park lake in Marine – Leaders in the village of Marine believe it will take another two weeks for a crew to finish cleaning the oil spill at the Marine Heritage Park lake. A spill was first detected in an oil field north of Marine on April 19 and the spill was being contained by a series of three dams and vacuum trucks, according to Illinois Environmental Protection Agency spokeswoman Kim Biggs. However, during a “large” rainstorm on April 25, an estimated five barrels, or 210 gallons of crude oil flowed into the park lake, Biggs said in an email to the BND. A combination of salt water and oil leaked from the oil field when a pipeline broke. An estimated 40 barrels, or 1,680 gallons, of crude oil and 350 barrels, or 14,700 gallons, of salt water spilled after the pipe broke. The salt water and the crude oil traveled across a farm field, into a tributary to Marine Creek, and then into Marine Creek, Biggs said. Kimrose Operating Co. is the company that runs the oil field, according to Illinois Emergency Management Agency records. A company representative declined to comment Friday. Investigators do not know why the pipeline broke, according to the Illinois Department of Natural Resources, which is also investigating the spill. Another company has been hired to clean up the spill, village leaders said. Mayor John Molitor said the oil field is less than a half mile from the park lake.
Amid climate change fight, Rev. Jesse Jackson pushes for natural-gas pipeline – Axios – Breaking from other progressives, Rev. Jesse Jackson is calling to build a natural gas pipeline to serve an impoverished community near Chicago.This is one example of the complex tug of war between energy affordability and tackling climate change. The tension is poised to grow as America and much of the world careen into pandemic-fueled recessions.The move puts Jackson at odds with some Democrats and environmentalists who oppose fossil fuels because they drive climate change. The famous civil rights activist says the largely black community is being unfairly cut off from affordable energy. For several months Jackson has been working with local, state and federal officials in Illinois to get an $8.2 million, 30-mile natural gas pipeline built for a community in a rural part of Illinois 65 miles south of Chicago.
- Jackson, who has protested with environmentalists to oppose the Dakota Access oil pipeline, told me in a February interview: “I really do support the environmental movement.”
- However, he said, the people of this community – called Pembroke – have no gas at all and are paying exorbitantly high prices to heat their homes with propane.
- “When we move to another form of energy, that’s fine by me, I support that,” Jackson said. “But in the meantime, you cannot put the black farmers on hold until that day comes.”
- The area has about 400 homes, no manufacturing and only a few commercial establishments, said Mark Hodge, mayor of Hopkins Park, a town in the region.
- The community is 80% black and has an average annual income of less than $15,000, Hodge said. That’s compared to more than $60,000 nationally.
- The region, due at least partly to its rural setting, has never had access to natural gas. The topic is reaching the forefront now because Jackson has been focusing on it since last fall, largely at Hodge’s request, the mayor said.
Desperate pipeline companies try to push ahead during pandemic – Winona LaDuke – It’s been looking bleak for Native people: the Minnesota Pollution Control Agency pushed ahead with hearings on the water quality permits for Enbridge’s Line 3, over public concerns. Initially proposed for public meetings in mid March, White Earth Tribal Chairman Mike Fairbanks called on Governor Walz to cancel the public meetings as high risk and postpone the regulatory process. MPCA Commissioner Laura Bishop instead held electronic town hall meetings. The lines clogged at times with Canadian oil workers, pretending they cared about Minnesota water permits. Two days of “meetings”, offering a minute and a half of telephone testimony to the public were taken by the MPCA. The White Earth Tribe was forced to put together comments while most of the tribal employees were off work, to meet the regulatory deadline for comments.Why the rush? Enbridge is desperate, most of the oil industry is desperate. It seems strange that the MPCA would value the feelings of Enbridge over public health. While most of us were sheltered in place, Enbridge has been moving workers into the north country, taking up small motels, into campgrounds with RVs, clearcutting, and moving in equipment and staging for an eminent pipeline move. The problem is that they do not actually have the permits. On February 3, the Minnesota PUC approved in a split decision the certificate of need and the route permits for Line 3. However, those rulings are not formal until issued for the record. Three months later there is no formal record. There are no water permits, and the MPCA process of “electronic town hall meetings” just got challenged by attorneys for Red Lake, White Earth, Honor the Earth, Friends of the Headwaters and other organizations. That’s just the beginning. Enbridge is hoping to put in a pipeline and now there’s no need for oil. That’s why they are hoping to move ahead. On April 20, the price of oil dropped to minus $37 a barrel. No one is buying, and oil producers are basically paying to have the oil purchased. There is no precedent for this in modern capitalism. Storage tanks of oil are full across the planet, and tankers with about 20% of US oil supply are sitting off the coast of California hoping that someone will drive. No one is. Or at least, not like the good old days.
Big Oil posts big losses during coronavirus crisis –The numbers are in: We now know just how badly the country’s top oil drillers were hit by the coronavirus-fueled downturn. Three of the four biggest U.S. oil and gas producers posted multimillion to multibillion dollar losses in their latest earnings reports, a sign of just how damaging the drop in energy demand because of the covid-19 pandemic has been to the domestic oil business. ConocoPhillips, the third-biggest U.S. oil driller by market capitalization, announced late last week that it lost $1.7 billion during the first three months of the year. Phillips 66, the fourth-largest, reported a first-quarter loss of $2.5 billion.And ExxonMobil, long the nation’s top energy company, bled $610 million during the first three months of 2020, when oil globally lost two-thirds of its value. It is the first time the company has posted a quarterly loss in the past three decades. “We’ve certainly weathered the ups and downs of many price cycles,” its CEO Darren Woods said during an earnings call Friday. “However, I have to say, we’ve never seen anything like what the world is experiencing today.”The companies will try to sustain their bottom lines by cutting production in the Permian Basin. The storied oil-rich region stretches through western Texas and southeastern New Mexico, and enjoyed a surge in production with the advent of hydraulic fracturing technology. But now with the drop in the price of oil making Permian crude too expensive to get out of the ground, that boom is quickly turning into a bust.Exxon said it expects to ramp down Permian rigs by about 75 percent and end the year with only about 15 rigs. Altogether, the company is slashing its capital spending for 2020 by 30 percent. Chevron, the nation’s No. 2 oil company, said it expects to cut 125,000 barrels per day from its original production target for the Permian by the end of the year. It began the year running 17 rigs in the Permian but now is running only five. And ConocoPhillips said it expects to cut production not just in the Permian, but across North America by about 460,000 barrels per day by June. Overall, output from the top American and European oil majors is set to drop by nearly 11 percent next quarter,according to an analysis by Reuters. The European majors BP and Dutch Royal Shell saw declined profits to start 2020 too, with Shell slashing its dividend to shareholders for the first time since World War II.
Oil and gas companies set to lose $1 trillion in revenues this year – Oil and gas exploration and production companies, or E&Ps, are slated to lose a staggering $1 trillion in revenues in 2020, according to analysis by research firm Rystad Energy. The E&P industry, which includes oil majors, made $2.47 trillion in revenues globally last year, the firm says. But this year it’s projected to bring in $1.47 trillion, reflecting a 40% decline year-on-year. It comes as the coronavirus pandemic and ensuing lockdowns cripple demand and force companies to slash spending and cancel projects. Before the virus began to hit economies, Rystad projected E&P revenues for 2020 to reach $2.35 trillion. Returns for 2021 are now also projected lower, at $1.79 trillion compared to a forecast of $2.52 trillion before the pandemic. The slashed revenues, a similar story for most industries amid the worst economic downturn since the Great Depression, have clearly manifested themselves in the industry’s equity market position. The energy sector is shrinking so dramatically that it’s become the second-smallest group in the whole S&P index. The industry now represents just 3% of the index, compared to 15% a decade ago and 30% in 1980. The International Energy Agency predicts a record demand loss of 9.3 million barrels per day (bpd) in 2020, as all but essential businesses across many major economies are forced to remain closed and millions of residents shelter in place for an indefinite period of time. Air travel has dropped by 95% in the U.S. year-on-year, a reflection of the global travel industry as a whole. The price of global oil benchmark Brent crude is down more than 60% year-to-date to its lowest in more than 20 years, and this month saw an oil futures contract turn negative for the first time in history as the world runs out of storage space, forcing producers to take rigs offline and shut in production. Exxon is cutting its capital spending globally by 30%. Exxon CEO Darren Woods expects oil demand to fall by between 25% and 30% in the immediate term. Chevron, BP, Shell and Saudi Aramco are among other major producers that have announced spending cuts of between 20% and 25% in their operations globally. As an industry, oil companies have so far slashed $54 billion in planned spending, Reuters reported this month. U.S. shale, with higher production costs than many foreign competitors, is the largest contributor to this so far, with rigs and projects dropping like flies. The Energy Information Administration reported that U.S. production has now plunged by 1 million bpd, pumping 12.1 million bpd last week compared to a record 13.1 million bpd in mid-March. “This year might be marked by the lowest project sanctioning activity since the 1950s in terms of total sanctioned investments, dropping to $110 billion, or less than one-quarter of the 2019 level, with most of the projects being deferred,” Rystad wrote.
Coronavirus Downturn May Nullify 10 Years of Oil Demand Growth – Up until early April the oil market was being clobbered by the double whammy of a supply glut from a Saudi-Russian price war and demand destruction on an unprecedented scale caused by the coronavirus or Covid-19 global pandemic. The short-lived situation was unique in recent history. For instance, the price crash of 2008-09 was down to a demand slump in the wake of the global financial crisis while the 2015-16 downturn was caused by oversupply. But the current crisis brought both negative elements together for nearly a month before market attention turned back to demand after Moscow and Riyadh helped ink a historic 9.7 million barrels per day (bpd) cut on April 9 to “balance” the market. Those cuts kicked in on May 1 but market balance would be very hard to find, especially since the forecasting community remains divided over the extent of near-term demand destruction. At the start of the crisis in February, some were still suggesting nominal demand growth might still occur in 2020, even if projects were revised substantially down from pre-crisis growth predictions of 1.2-1.4 million bpd. Those projections would have put total global demand just north of a 99.67 million bpd average seen in 2019. But as the pandemic spread well beyond its point of origin in China to wider Asia, Europe and North America – the reality began to bite. From the outset, demand in China, the world’s second-largest crude oil consuming nation which imports on average 14 million bpd was badly hit. Now the biggest crude global consumer – United States – is in the grip of the pandemic, as are India, Japan and South Korea who are the world’s third, fourth and fifth-biggest consumers in that order. Deep into the pandemic airlines are grounded, vehicles are off road, factories are idle, production lines are offline and petrochemical demand is low because we are buying and consuming less, barring essentials wherever we might happen to be. So where does demand go from here? Restrictions and lockdowns may last for most of the second quarter and perhaps even half of third quarter. Furthermore, data suggests 187 countries currently have varying degrees of restrictions. Those will ease at a differing pace implying any demand recovery will not be uniform. Getting a complete handle on things will only occur once a vaccine can be found, which appears to be months or even up to a year away.
Fossil Fuel Companies Try Again to Get Colorado Climate Case Moved to Federal Court – Several Colorado communities squared off against Big Oil on Wednesday, before a three-judge panel in a virtual U.S. 10th Circuit Court of Appeals courtroom, over the perennial issue in climate liability lawsuits: jurisdiction. Richard Herz, an attorney with Earth Rights International, argued on behalf of the City and County of Boulder and San Miguel County that last year’s decision by federal district court Judge William Mart’nez to keep the case in state court should stand, and that the 10th Circuit’s legal leeway to review the lower court’s decision was limited. Representing ExxonMobil and affiliates of Suncor Energy, attorney Kannon Shanmugam countered that the case belongs in federal court, arguing that under the Clean Air Act, as well as precedents set in some other climate cases, federal law preempts state law when it comes to greenhouse gas emissions. Judge Carolyn McHugh seemed unpersuaded. “I have a hard time accepting a complete preemption argument under the Clean Air Act,” said McHugh, interrupting Shanmugam’s argument,“when the statute specifically indicates that it doesn’t displace state law.” The panel questioned Herz closely as well, with Judge Carlos Lucero asking for an explanation of how the communities have calculated the fossil fuel firms’ monetary liability. Herz compared his case to past litigation by states against tobacco firms, as well as more recent opioid lawsuits. “All these things are about sales and misrepresentations,” he told Judge Lucero, “and local governments have sued for local injuries in these areas, in state court, under state law.” In late March, the Colorado communities sent a letter to the court arguing that the March 2020 decision by the 4th U.S. Circuit Court of Appeals, in which the court ruled that a similar suit by the city of Baltimore belonged in Maryland state court, has set a precedent that applies in the Colorado case. In the lawsuit, first filed 2018, the Colorado communities are seeking monetary damages from the fossil energy firms to cover the costs of dealing with the intensifying effects of climate change, including more frequent and destructive heat waves, wildfires, droughts, and floods. They argue that the firms are liable for these costs because they knowingly misled the public for decades on the link between burning fossil fuels and rising global temperatures, while continuing to produce and sell “a substantial portion of the fossil fuels that are causing and exacerbating climate change.”
ENERGY TRANSITIONS: Coronavirus could drive ‘mass abandonment’ of oil wells — Tuesday, May 5, 2020 — In the wake of the coronavirus pandemic that’s shaken the global oil sector, oil states fighting to restart their economies may face another kind of crisis.
Big Oil Fears Keystone XL Ruling Means End of Easy Pipeline Permits – Steve Horn – On April 15, Judge Brian Morris nullified water-crossing permits in Montana that were granted for the Keystone XL, a major setback for the long-embattled tar sands oil pipeline. The ruling came just days after Keystone XL owner TC Energy, formerly known as TransCanada, obtainedbillions of dollars in subsidies from the Alberta government as global oil prices plummeted.The oil and gas industry has taken notice. Seemingly just a ruling on Keystone XL – the subject of opposition by the climate movement for the past decade – the ruling could have far broader implications for the future of building water-crossing pipelines and utility lines. In his decision, Judge Morris cited a potential violation of the Endangered Species Act when he ordered the U.S. Army Corps of Engineers to do a deeper analysis of potential impacts to protected species. Morris required the Corps to demonstrate whether or not it could construct the pipeline without harming endangered species, such as the Pallid Sturgeon or the American burying beetle. Instead, the Army Corps “failed to consider relevant expert analysis and failed to articulate a rational connection between the facts it found and the choice it made,” Morris ruled, when the Corps gave Keystone XL the initial green light. The original July 2019 complaint in that case – filed by Northern Plains Resource Council, Bold Alliance, Sierra Club, Natural Resources Defense Council, and Center for Biological Diversity – also argued that the Army Corps had violated the National Environmental Policy Act (NEPA) in using an obscure regulatory lever to fast-track the review process. Known as Nationwide Permit 12, the permit only requires a short environmental analysis compared to the more robust environmental impact statement required under NEPA for other major infrastructure projects. But Morris also wrote that the decision applied not just to Keystone XL, but to all major federal projects aiming to utilize Nationwide Permit 12, calling for it to be “vacated pending completion of the consultation process and compliance with all environmental statutes and regulations.” Just two days after this decision, Army Corps regulatory program Chief Jennifer Moyer wrote in an email obtained by the Associated Press that the agency should suspend the program indefinitely “out of an abundance of caution” until the issue is resolved legally. The Trump administration has already requested a procedural halt on implementing Morris’ decision until its potential appeal weaves its way through the legal system. “The Court has eliminated Nationwide Permit 12 for use by any utility line project anywhere in the country, which has extraordinary and immediate implications for numerous projects,” the U.S. Department of Justice attorneys wrote on behalf of the Army Corps.
‘Like watching a train wreck’: The coronavirus effect on North Dakota shale oilfields – (Reuters) – Oil executive Bill Kent was with fellow managers in the Colorado board room of Resource Energy headquarters on April 20 when benchmark U.S. crude prices collapsed to minus $37 a barrel. “As we were sitting around the board room watching what was happening with prices, it was like watching a train wreck,” said Kent, vice president of engineering and operations at Resource Energy, backed by private equity giant Apollo Global Management. With businesses locked down and billions of people staying at home, demand for oil to fuel cars, planes and industry has dropped around 30% worldwide. The resulting supply glut has pushed U.S. crude prices well below production costs, forcing companies to start winding down operations. Producers are shutting down the higher-cost output first – and those are also the operations likely to stay shut the longest. The Resource Energy team’s discussion turned to the remote Bakken shale region in North Dakota where the company, a relatively small producer, operates. Costs of extracting are some of the highest in the United States. So are the costs of transporting due to limited storage and the distance to refineries and consuming centers. Oil producers in the Bakken, which sprawls across North Dakota and eastern Montana, on average break even at $46.54 a barrel, according to an analysis by Deutsche Bank. That is well above the around $40 a barrel in the Permian basin, the largest U.S. shale field. Bakken crude BAK- fetched $3.40 a barrel on April 21. It has since recovered to about $14, still below the cost of producing. The team at Resource Energy realized they would need to consider shutting down the remaining 20 percent of output still operating in the Bakken shale region, Kent said. North Dakota, second only to Texas in oil output among U.S. states, was taking a big hit. In just one day in late April, some 60,000 bpd were shut in the state. Output has dropped by at least 400,000 bpd since March 1, nearly a third of the state’s around 1.4 million bpd output before the crisis. State officials expect the volume shut in to rise further. “This is truly unprecedented,” said Lynn Helms, director of North Dakota’s Department of Mineral Resources, the state regulator overseeing oil production. In the days following the price collapse, oil companies sent teams out to shut wells.
Task force aims at incentives for oil drillers amid virus (AP) – Hoping to avoid what North Dakota Gov. Doug Burgum has called a potential “economic Armageddon,” state and industry officials have formed a group intended to help oil and gas producers recover from falling crude prices due to meager demand amid the coronavirus outbreak. State Mineral Resources Director Lynn Helms announced the Bakken Restart Task Force on Wednesday as the number of oil wells in the state has decreased by more than 40% in recent weeks and oil production hit its lowest level in five years. Helms said in a statement the group is focused on proposals for regulatory relief, economic stimulus, tax relief and low-cost financing. The group is scheduled to meet weekly. Oil is a key contributor to the wealth of North Dakota, the No. 2 producer in the U.S. behind Texas. North Dakota’s oil production had exploded in the past decade with improved horizontal drilling techniques into the Bakken shale and the Three Forks formation below it. Before the pandemic devastated the U.S. oil industry, daily oil production in North Dakota was at a near-record 1.45 million barrels daily in February, the latest figures available. There were more than 16,100 wells operating at that time. Helms said Wednesday some 6,800 wells have been idled in recent weeks, amounting to about 450,000 barrels of lost oil production daily, a number he called “staggering.” Ron Ness, president of the North Dakota Petroleum Council, said oil has dipped to about 1 million barrels daily, the lowest production since 2015. The number of wells that have been idled in recent weeks is more than double the number of all wells in the state in 2006, he said.
OIL AND GAS: 14 states to court: Keep pipeline open during NEPA review — Tuesday, May 5, 2020 — Fourteen state attorneys general say a shutdown of the Dakota Access pipeline would hurt farmers and increase environmental risks if railways are forced to take on more oil shipments.
Judge Vacates Oil and Gas Leases on 145,000 Acres in Montana – NYTimes – A federal judge on Friday vacated 287 oil and gas leases on almost 150,000 acres of land in Montana, ruling that the Trump administration had improperly issued the leases to energy companies in 2017 and 2018. The judge, Brian Morris of the United States District Court for the District of Montana, said the Interior Department’s Bureau of Land Management failed to adequately take into account the environmental impacts of the drilling. In particular, Judge Morris found that the officials had not accounted for the drilling’s impact on regional water supplies and the global impact that the increased drilling would have on climate change. The decision is at least the third such legal loss that criticized the Trump administration for failing to consider the cumulative impacts of expanding fossil fuel production on the warming of the planet. It comes as the Trump administration is seeking to eliminate the legal requirements that the government take such impacts into account at all. Judge Morris wrote that in issuing the leases, the Trump administration’s failure to provide the legally required environmental analyses “largely relates to the absence of analysis rather than to a flawed analysis. In other words, the Court does not fault B.L.M. for providing a faulty analysis of cumulative impacts or impacts to groundwater, it largely faults B.L.M. for failing to provide any analysis.” Judge Morris sent the case back to the Bureau of Land Management and ordered the agency to perform the legally required environmental analyses before reissuing the leases. Derrick Henry, a spokesman for the bureau, wrote in an email: “With all due respect, we disagree with the Court’s conclusion, and the B.L.M. stands by its analysis in following the letter of the law to issue oil and gas leases in Montana. Regardless of the ultimate outcome of this dispute and despite the attempts of radical, special interest groups, the Department and the B.L.M. will continue to work toward ensuring America’s energy independence while preserving a healthy environment.” Efforts by President Trump to deliver on his campaign promises to help the oil, gas and coal industries and roll back President Barack Obama’s signature environmental policies have repeatedly been blocked by the courts. Many have been denied for reasons similar to those given by Judge Morris in Friday’s decision: The administration did not follow correct legal protocol in justifying its actions. In particular, Judge Morris followed other federal judges and cited the failure of the Trump administration to follow the provisions of the 1970 National Environmental Policy Act, known as NEPA. It requires the federal government to perform analyses of both the immediate local environmental impact of drilling and infrastructure projects and broader, cumulative effects of increased fossil fuel pollution on the planet. In recent years courts have interpreted that requirement as a mandate to study the effects of allowing more planet-warming greenhouse gas emissions into the atmosphere. In 2018, a federal court in New Mexico also concluded that, under NEPA, the Bureau of Land Management was required to consider the cumulative climate impacts of its oil and gas leasing decisions. In 2019, a federal court in Washington, D.C., reached the same conclusion.
Series of failures contributed to Alaska oily water spill (AP) – A succession of mechanical failures led to a persistent spill of oily water in Port Valdez that lasted nearly two weeks, officials said. By the end of last week, crews had recovered 14 barrels of oil from a contained area near a boat harbor at the Valdez Marine Terminal, The Anchorage Daily News reported. More than 240 people are involved in the response to the spill of North Slope crude oil discovered on April 12. The amount of oil spilled is unknown. “The outflow is currently discharging high volumes of snow melt and rain water with a minor sheen being recovered from the tanks,” according to the spill incident management team. The team consists of terminal operator Alyeska Pipeline Service Co., the state Department of Environmental Conservation and the U.S. Coast Guard. There were three failures that led to the spill, Kate Dugan of Alyeska said. A valve in a pipe near a collection well failed to work. The pipe is part of a pipeline system that carries ballast water and water from the well. Debris in the valve prevented full closure. Finally, a pump should have engaged to deliver the liquid in the collection well into the ballast water system as the level of oily water rose. A water-level indicator failed to activate the pump, Dugan said. A single problem normally causes a spill, said Graham Wood, manager of the prevention, preparedness and response program with the Alaska Department of Environmental Conservation. “It’s not common for a series of misfortunes” to be the cause, Wood said. Wood said the response is on track and declined to discuss possible future enforcement actions.
As spill response enters third week, oil continues to make its way into Port Valdez – Entering the third week after an oil spill was identified at the end of the trans-Alaska Pipeline, responders say that some oily water is still making its way into Port Valdez. Kate Dugan, communications officer for the Alyeska Pipeline Service Company, which operates the trans-Alaska Pipeline, said that crews made major progress late last week in stemming the flow of oily water when they located a pipe that was discharging into the port. “We couldn’t see the end of the pipe until at some point last week, and it turns out it’s some part of a historical preconstruction era piping system, so it wasn’t on my of the current drawings that we could find,” she said. Crews found the system in historical diagrams of the area, said Dugan. Late last week, crews installed a treatment system, made up of three successive tanks from which the oil sheen at the top was skimmed. But even after treating that oily water, Dugan said there is still a sheen in water being discharged into the port. Though some oil is still getting into the port, Dugan said that responders have been able to reduce the total boomed area by about two thirds and that they are gradually decommissioning some of the response vessels. It is still unclear how the water made its way from the sump, a four-foot-diameter, sixteen-foot deep tank, that overflowed after a pump malfunctioned, into the old underground piping system. Dugan said that crews are still excavating around the area to try to determine the flow path of the oil in the ground. “We have to do it systematically, we have to engineer and survey because there’s so much underground utilities and piping systems around the terminal so it’s challenging work,” she said. Dugan said it might be weeks before Alyeska can complete an investigation to determine exactly what went wrong to cause the check valve in the sump and the pump to malfunction. So far, over fifty thousand gallons of oily water have been recovered from Port Valdez from which 590 gallons of pure oil have been recovered. The final amount won’t be known until off-site metering is completed.
Oil spill in Herschel, Sask., largely contained to Enbridge property, says Canada Energy Regulator – An above-ground oil spill in Herschel, Sask., was largely contained to Enbridge company property, said a release from the Canada Energy Regulator (CER). CER said about 150 cubic metres of sweet crude oil spilled at an Enbridge pump station. Enbridge said a limited amount of oil impacted nearby municipal land and no waterways were affected. The company told CER wildlife protection measures are in place and surface clean-up is underway. A CER inspection officer is on site, the release said. Herschel is about 150 kilometres southwest of Saskatoon. Pipelines need more monitoring: FSIN FSIN Chief Bobby Cameron said there needs to be “beefed up” monitoring of pipelines, including having First Nations people helping with the monitoring. “This incident shows that there is always a risk of leaks, even on recently built pipelines,” said FSIN Chief Bobby Cameron in a news release. “First Nations have reason to worry about the potential oil leaks from all pipelines that are near their lands.” The release notes that the Line 3 pipeline in Canada impacts 154 Indigenous communities. The CER release notes that the Enbridge Line 3 Indigenous Advisory Monitoring Committee was notified of the incident and is being kept up to date.
Cleanup underway at Enbridge pump station following oil spill in Herschel, Saskatchewan – The Canada Energy Regulator (CER) is overseeing an oil spill cleanup in Herschel, Sask., after Enbridge notified the federal agency of an above ground release of sweet crude oil. The incident occurred at the company’s Line 3 pump station and involved approximately 150 cubic metres of oil. The CER says there is no risk to public safety. According to Enbridge, the majority of the spill was contained to the company’s property with limited oil migrating to adjacent municipal land. No watercourses are affected and precautionary wildlife measures are in place, says the CER. Surface cleanup is underway, with the removal of contaminated soil to follow.
Trying to contain oil leakage in East Fjords – By the end of May, the Icelandic Coast Guard plans to make the first step toward preventing further leakage from the wreck of a British oil tanker, lying at the bottom of Seyðisfjörður, the East Fjords. The Icelandic government recently decided to allocate ISK 38 million (USD 258,000; EUR 238,000) toward the project. The tanker, El Grillo, was destroyed in the fjord by German military aircraft on February 10, 1944. There were no casualties in the attack, but the tanker sustained considerable damage and was subsequently sunk. The wreck is 134-m (441-ft) long, weighing 7,264 tons. Not surprisingly, there was an extensive oil spill, since the ship had the capacity to carry 9,000 tons of oil. In 1952, about 4,500 tons of oil were pumped from the ship. In 2001, another 60 tons were pumped out, but an estimated 10-15 tons of oil still remain. The heavy crude oil thickens in cold weather, but seeps faster through holes in warm weather and forms an oil slick on the surface of the ocean, causing the death of large numbers of birds. An inspection of the wreck last fall revealed the source of the leakage to be the corroding cover of a manhole, leading to one of the ship’s 36 tanks. The Coast Guard plans to pour concrete into a cast on top of the manhole, in order to close it. A stainless steel pipe and a valve will be installed, going through the concrete to the manhole, through which it will be possible to drill later on, in order to pump out oil. The Coast Guard ship Þór will sail to the location; at least five to six divers will participate in the operation, and there will be a diving chamber on board the ship. Þór will, in addition, be equipped with pollution prevention and pollution cleaning equipment during the operation. The plan is just to close the manhole with concrete, not to pump oil from the tanker. Due to corrosion of the tanker, however, this may only suffice to stop leakage of oil temporarily. The deck of the tanker is at a depth of 32 m (105 ft), and a special barge will be used for the work. A special type of concrete will be poured with a concrete pump through a hose from the barge into the cast around the manhole. Special attention will have to be given to ammunition and shells on board when diving around the wreck. Three of the divers participating in the project will explosives experts as well. Last fall’s expedition revealed 23 shells on board the ship. In the past, depth charges have been removed from the tanker as well.
Ecuador’s Amazon communities sue over oil spill – Indigenous communities in Ecuador’s Amazon region have filed a lawsuit against the government and oil companies after a devastating oil spill polluted rivers and deprived them of drinking water. The pollution in Orellana province near the Peruvian border was the result of an April 7 landslide that ruptured 3 pipelines, spewing 15,000 barrels of oil into nearby rivers including Amazon tributary the Napo, a community leader and an NGO said. (READ: Torment in Ecuador: virus dead piled up in bathrooms) “The families living on the river banks are lacking food and no longer know where to find water to drink, or with which to bathe,” Marcia Andi, a Kichwa and leader of the Mushuk Llacta community told AFP by phone. Around 27,000 indigenous people from the Kichwa and Shuar tribes living along the Coca and Napo rivers are affected by the spill, according to Maria Espinosa, a lawyer with the Amazon Frontlines NGO. Tulong Anakpawis and Purple Action for Indigenous Women’s Rights (LILAK) help communities by getting a permit from the local government units or directly sending money to community leaders They are seeking “immediate measures to guarantee the supply of water, food, and access to health for the populations that have been affected,” Espinosa told AFP, adding that aid provided to date was “insufficient” for the communities’ needs. State oil company PetroEcuador, named in the suit, said it had distributed 500,000 liters of water in containers to 59 indigenous communities affected by a spill. It said one of its pipelines had been ruptured and later repaired. The company said it had begun environmental cleanup work that also included the Quijos river. A second company, OCP Ecuador, was also named as it owned one of the ruptured pipelines. Local communities accuse the companies of not alerting them to the spill. Amazon Frontlines, which has been gathering evidence of the impact, said the spill is estimated to be the largest in the region since 2004.
Small amount of oil seeped into river from GPL Kingston complex – An oil spill was discovered yesterday, 2020 May 6 within the compound of the Guyana Power and Light Inc. (GPL Inc.) Kingston Power Complex. A small amount of the spill seeped into the Demerara River. After the discovery, GPL’s personnel expedited industry standard safety, health and environmental procedures to contain the spill. The general public is hereby reassured that GPL’s efforts to contain the spill have thus far proven successful. GPL wishes to advise the general public that our company embraces industry standard fuel management practices and a thorough investigation will be conducted to prevent a recurrence.
Depressed demand and falling prices challenges LNG sector – The global liquefied natural gas (LNG) sector has been hit by supply overhang followed by Covid-19-induced economic slowdown and lower demand worldwide, says data and analytics company GlobalData. “Due to the sharp fall in oil prices, spread between oil-indexed long-term LNG contracts and spot contracts have considerably reduced. This can make it challenging for LNG producers to meet their revenue targets. In addition, a rapid decline in gas demand is affecting financing of capital-intensive new liquefaction projects, leading to inordinate delays and capex reductions,” explained Haseeb Ahmed, Oil and Gas analyst at GlobalData. To keep a check on spends, several operators are delaying their upcoming LNG projects. Operators are reducing their expenditures for 2020 as a measure to counter the impacts of Covid-19. Woodside Energy and Exxon Mobil have resorted to downsizing their capex by 60% and 30%, respectively, for 2020. In the meanwhile, British Petroleum has pushed the timeline for its Tortue FLNG project from 2020 to 2023 in response to the Covid-19 impact. Similarly, Qatar Petroleum has also postponed the project timelines of its Ras Laffan North Field LNG terminal development by a year to 2025. “A silver lining amid all the chaos induced by the pandemic outbreak is increased opportunities for new entrants to the LNG sector. Global LNG oversupply, as well as low LNG prices, might encourage new countries and companies to start importing LNG, contributing to LNG industry growth. Sustained low LNG prices will encourage several gas-importing countries to switch from coal and oil to cleaner natural gas,” Ahmed concluded.
Credit Risk: Identifying Early Warning Signals In The Oil And Gas Industry – This article provides a deep-dive analysis on the credit risk impact of the European Oil and Gas industry which takes into account the consequences of the COVID-19 pandemic, causing oil prices to plummet on oversupply and weakened demand. The analysis covers European public companies in the Oil and Gas sector between January 2, 2020 and April 16, 2020 and utilises S&P Global Market Intelligence’s Probability of Default Model Market Signals (PDMS) which captures equity market sentiment, providing signs of potential default for 71,000+ public companies[1]. The oil price war between Saudi Arabia and Russia came to an end on April 13, 2020 and the Organization of the Petroleum Exporting Countries (OPEC+) amongst other oil producing nations agreed to collectively cut production. The initial fall out and subsequent trigger for a decline in oil prices came in early March when Saudi Arabia and Russia could not agree on production cuts given the reduced demand from China. A series of key events from January 2020 until the middle of April 2020, provided early warning signals of a deterioration in credit risk which can be seen via PDMS. Table 1: Key Oil and Gas Industry Events and Median PDMS Scores for Europe News of weakening oil imports and a subsequent global economic slowdown began to surface which raised concerns in the oil markets towards the end of January 2020 (See Table 1). This event was captured by the PDMS early warning signal on January 24, 2020 and further PDMS early warning signals were observed over the course of March and April. These early warning signals mirror key industry events such as OPEC+ breakdown, Saudi Arabia cutting its crude prices, and the eventual OPEC+ agreement. Figure 1 shows the combined PDMS (%) for the Oil and Gas industry in Europe, PDMS early warning signals. The PDMS early warning signal unit is normalized in respect to the number of rating actions (e.g. if the maximum number of observed rating actions per day is 10 then the PDMS early warning signal value in the same period will have a signal equal to 10 plus one). The early warning signs from PDMS were also observed on February 24 2020 and March 9 2020 ahead of the OPEC+ disagreement on supply cuts on March 6 2020, and Saudi Arabia cutting its crude prices three days later on March 9, 2020. Post the OPEC+ production cuts on April 13, 2020, the PDMS model indicated that the market is not fully satisfied with the outcome, flagging further early warning signals on the April 16, 2020.
Oil spill found in Israeli stream – An oil spill was discovered by the Environmental Protection Ministry in the Gdora stream, which runs from Kiryat Ata to Kiryat Biyalik.Members of the Kishon River Authority are working with municipal staff to clean up the spill. The Green Police has opened an investigation into the issue.
Russian oil output falls near to OPEC+ target – sources – (Reuters) – Russia’s oil output in the first five days of May fell to 8.75 million barrels per day (bpd), close to its production target of 8.5 million bpd for May and June under a global deal to cut crude supplies, two sources familiar with the data told Reuters. Together with gas condensate, or light oil, which is not part of Russia’s target, the country’s output was 9.5 million bpd for May 1-5, the first time it has fallen below 10 million bpd since August 2009. While the latest data, which showed production of 1.296 million tonnes per day including gas condensate, was only for the first few days since the deal kicked in on May 1, it shows Russia is following through on its pledges so far. Russia’s Deputy Energy Minister Pavel Sorokin said in an online interview that domestic oil producers are striving to reach the target as soon as possible. He also said that the global oil demand declined by around 30% last month and the fall has eased since then. However recovery to pre-crisis levels would not be achieved quickly. Sorokin added that some countries, where international majors work, may have difficulties with sticking to targets under a global oil output cuts deal. He didn’t named those countries. Traders and industry sources said that Iraq has yet to inform its regular oil buyers of cuts to its exports, suggesting it is struggling to fully implement the cuts deal. Reuters uses a ratio of 7.33 barrels per tonne to calculate the daily output in barrels. Russia’s gas condensate output is typically about 700,000-800,000 barrels a day.
Saudi Arabia gets Moody’s downgrade, prepares for ‘painful’ measures – but can likely weather crisis – Saudi Arabia is preparing to enact “strict, painful measures” in the face of its worst growth contraction in two decades brought on by the twin shock of coronavirus lockdowns and low oil prices, its finance minister Mohammed al-Jadaan said in a sobering interview over the weekend. The oil-rich kingdom, in the midst of historic social and economic liberalization, is going to have to slash projects and spending as it sees its foreign currency reserves shrinking at a record pace, its fiscal deficit widening and its risk assets deteriorating. Forecasts for GDP contraction this year are as steep as -3.2%, while ratings agency Moody’s downgraded the country’s sovereign outlook to negative from stable on Friday. Aside from the risks to the kingdom’s fiscal strength from the pandemic and oil price shocks, further risks lie in “the uncertainty regarding the degree to which the government will be able to offset its oil revenue losses and stabilize its debt burden and assets in the medium term,” Moody’s wrote. “We must reduce budget expenditures sharply,” al-Jadaan told Al Arabiya TV on Saturday. “Saudi finances need more discipline and the road ahead is long.” The striking change in tone from the minister, which just ten days prior was more vocally optimistic and spoke of the country’s resilience to deal with the situation, was not taken well by markets: Saudi Arabia’s stock exchange, the Tadawul, dropped more than 7% during trading the following day. While al-Jadaan in April suggested additional borrowing on international markets, this time he said that “all options for dealing with the crisis are open.” “The list is extremely long,” the minister said of the cost-cutting possibilities. But likely high on that list are some of the multibillion dollar mega-projects in areas from tourism to infrastructure that fell under Crown Prince Mohammed bin Salman’s ambitious Vision 2030, meant to drive private industry and diversify the kingdom’s economy away from oil. Still, despite facing what may be the greatest period of uncertainty in its modern history, Saudi Arabia is in a better position than most to weather this crisis. This is thanks to the sizable wealth buffers it’s built up over the previous two decades – including $473 billion in international reserves as of March, according to the Saudi Arabian Monetary Authority – the highest of any country in the Gulf and broader Middle East. Saudi Arabia’s debts are also low by global standards, and it has easy access to capital markets for borrowing, as its bond issuances of the past two years – oversubscribed many times over – demonstrate. Its $7 billion bond issuance in mid-April reportedly saw some $54 billion in orders by investors. “Though the outlook is challenging, Saudi Arabia has significant balance sheet strength on which it can draw to ensure that the fiscal deficit is adequately funded and the investment programme remains on track,” Ehsan Khoman, head of MENA research and strategy at Japanese bank MUFG, wrote in a note Monday. “Stability will come at a cost, however, and we see public debt rising to 31.6% of GDP this year – the highest level since 2005,” Khoman wrote, adding that MUFG expects foreign currency reserves to drop by $47 billion this year, though they will remain ample, accounting for nearly three years of import cover. Analysts at Moody’s agree on the point of Saudi fiscal strength, despite the crisis and ratings downgrade, affirming its issuer rating of A1. “Saudi Arabia’s A1 rating is supported by the government’s still relatively robust, albeit deteriorating, balance sheet,” Moody’s wrote, “which is underpinned by a still-moderate debt level and substantial fiscal and external liquidity buffers.”
Global Oil Glut Set to Halve in May – The global imbalance between oil supply and demand is set to halve to 13.6 million barrels per day (bpd) in May. That’s according to a new Rystad Energy analysis, which predicted a further fall to 6.1 million bpd in June. Rystad warned, however, that despite the improvement, the stock build will still overwhelm remaining global storage, which it says will fill “in weeks”. “While this may seem like a drastic improvement from April, the oil market is not magically fixed,” Rystad Energy Oil Market Analyst Louise Dickson said in a company statement. “The storage issue still looms large and will spill over onto trading floors, as buyers are left with crude they cannot physically place, and into the boardrooms of oil companies which must make very costly but necessary decisions to scale back production and give the market some breathing space,” Dickson added. According to Rystad, if sufficient production isn’t shuttered by May 19 – the expiration of the WTI June 2020 contract – then the potential remains for another “nightmare WTI price collapse”, which it does not rule out spreading to other crude blends. “However, given that most oil futures outside of WTI do not require the buyer to physically take oil delivery, and instead have cash settlement options, the destruction to other benchmarks should be tamer,” Rystad stated. Rystad outlined that it expects the oil price bottom is “in front of us rather than behind us” but added that it still believes in an oil price recovery, “possibly starting as early as June”. Rystad also highlighted that it sees a risk for a tight market in 2022 with prices “much higher than pre-crisis levels”. “This will be facilitated by a recovery in demand to above pre-Covid-19 levels in 2022, ongoing OPEC+ cuts, and a loss of supply capacity in both U.S. shale and long-cycled global production,” Rystad stated.
Oil pares losses and turns positive on demand recovery – Oil prices moved higher on Monday, reversing early losses, as optimism around a demand recovery offset fears after a fresh spat broke out between the United States and China over the origin of the virus. West Texas Intermediate crude rose 74 cents, or 3.7%, to trade at $20.46 per barrel, while Brent crude gained 65 cents, or 2.4%, to trade at $27.09. While global oil demand is expected to recover modestly from April lows as countries ease some lockdown measures, the glut created over months in storage facilities will loom over the markets. “As oil inventories are likely still increasing over the coming weeks, oil prices remain vulnerable to renewed setbacks,” said UBS analyst Giovanni Staunovo. However, Goldman Sachs was more optimistic than before about the rise of oil prices next year due to lower crude production and a partial recovery in oil demand. The Wall Street bank raised its 2021 forecast for global benchmark Brent to $55.63 per barrel from $52.50 earlier. The bank hiked its estimate for WTI to $51.38 a barrel from $48.50 previously. Signs that the output cuts may help reduce the supply overhang have emerged with the narrowing of Brent’s contango – the market structure in which later-dated prices are higher than prompt supplies. The six-month spread of Brent futures hit its narrowest in almost a month at a discount of around $6.50, up from a record wide discount of almost $14 in late-March, reflecting decreasing oversupply expectations and making storage for later sale less profitable. The re-emergence of trade tensions between the United State and China also weighed on prices. Adding to U.S. President Donald Trump’s threat last week to impose tariffs on China, Secretary of State Mike Pompeo said on Sunday there was “a significant amount of evidence” that the new coronavirus emerged from a Chinese laboratory. Concerns about weak manufacturing data in Asia and Europe, assessed by Purchasing Managers’ Index (PMI) of manufacturing companies, also put pressure on oil prices. In Asia, a series of PMIs from IHS Markit fell deeper into contraction from March, with some diving to all-time lows and others hitting levels last seen during the 2008-2009 global financial crisis. PMIs in France, the euro zone’s second-biggest economy, dropped in April to the lowest level on record. IHS Markit’s Final PMI for German manufacturing, which accounts for about a fifth of Europe’s largest economy, shrank at the fastest rate on record. The U.S. dollar surged against most major currencies on Monday amid fears that last year’s U.S.-China dispute will be re-ignited. Oil is usually priced in dollars so a stronger greenback makes crude more expensive for buyers with other currencies.
Oil prices rise on demand prospects as lockdowns start to ease – Oil prices climbed in early trade on Tuesday, adding to gains in the previous session, on expectations that fuel demand will begin to pick up as some U.S. states and nations in Europe and Asia start to ease coronavirus lockdown measures. West Texas Intermediate (WTI) crude futures rose as much as 8.2% to a three-week high of $22.06 and were up 7.6%, or $1.55, at $21.94 at 0108 GMT. The U.S. benchmark is on a five-day win streak that started on April 29. Brent crude futures hit a high of $28.37 a barrel in early trade and were up 4.1%, or $1.12 cents, at $28.32. Brent is up for a sixth straight day. Both benchmark contracts rose about 3% on Monday. Prospects improved for fuel demand as some U.S. states and several countries, including Italy, Spain, Portugal, India and Thailand, began allowing some people to go back to work and opened up construction sites, parks and libraries. “Considering … the depths of demand destruction, markets are probably inclined to take any good news relatively quickly,” said Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group. Global oil demand probably collapsed by as much as 30% in April, analysts have said, and the recovery is likely to be slow, especially with airlines expected to remain largely grounded for months to come. Australian national carrier Qantas Airways’ Chief Executive Alan Joyce said on Tuesday that “international travel demand could take years to return to what it was.” With Saudi Arabia, Russia other major producers and companies slashing output, the market shrugged off a decision by the Texas energy regulator to cancel a vote on mandating a 20% output cut in the United States’ biggest oil-producing state. The Texas Railroad Commission had been due to hold the vote on Tuesday, but Commissioner Ryan Sitton was unable to win support from his fellow commissioners for the plan. The proposal was strongly opposed by oil trade groups and major shale producers. “The intent in itself was positive – but it was always going to be a long shot,” Hynes said.
Oil jumps 13% in fifth day of gains on demand recovery and production cuts – Oil prices surged on Tuesday as optimism around ongoing production cuts and a recovery in demand with the reopening of economies around the world pushed prices higher. West Texas Intermediate, the U.S. benchmark, jumped 13%, or $2.66, to trade at $23.05 per barrel. The contract gained 3.08% on Monday – closing above $20 for the first time since mid-April – and is on pace for its fifth-straight day of gains for the first time since February. International benchmark Brent crude traded 7.8% higher at $29.32 per barrel, and is also pacing for its fifth-consecutive positive session. “One thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise,” said Per Magnus Nysveen, Rystad Energy’s head of analysis. The “key reason behind the price strengthening is regional traffic data, which indicate the demand bottom is behind us,” he added. Oil demand has fallen off a cliff as the coronavirus pandemic spread around the globe, forcing billions of people to remain inside and bringing air travel to a near standstill. By some estimates as much as a third of worldwide demand was erased in April. But with economies gradually starting to reopen – a number of U.S. states, including Florida, began phase one reopening plans on Monday, while millions of Italians will return to work this week – investors believe there will be an uptick in demand. “The reopening of economies has injected a degree of cautious optimism back into an oil market that plunged to historic lows only weeks ago,” RBC analyst Michael Tran said in a note to clients Tuesday. “There’s reason to believe the worst of the demand destruction is behind us. Commentary from multiple companies pointed to an improvement in US demand at the end of April, particularly for gasoline,” added Stacey Morris, director of research at Alerian. The improving demand outlook comes as producers have scaled back production, which has also supported prices. The historic cut from OPEC and its oil-producing allies, which takes 9.7 million barrels per day offline, went into effect on May 1. Norway and Canada have also curbed production. In the U.S., data from the Energy Information Administration showed that weekly production averaged 12.1 million bpd for the week ending April 24, roughly 1 million bpd below the all-time high levels from March. Exxon, Chevron and ConocoPhillips are among the companies that have cut production in the face of depressed prices. Oil’s recent strength barely puts a dent in its historic fall, however. Both WTI and Brent are firmly in a bear market, plunging 68% and 62%, respectively, from their 52-week high levels. The decline has also been swift – WTI’s 52-week high of $65.65 is from Jan. 8.
Oil surges 20%, posts fifth straight day of gains for first time since July – Oil prices surged on Tuesday as optimism around ongoing production cuts and a recovery in demand with the reopening of economies around the world pushed prices higher. West Texas Intermediate, the U.S. benchmark, jumped 20.45%, or $4.17, to settle at $24.56 per barrel. The contract gained 3.08% on Monday – closing above $20 for the first time since mid-April – and posted its fifth-straight day of gains, which is the longest daily winning streak since July. International benchmark Brent crude settled 13.86% higher at $30.97 per barrel, and also posted its fifth-consecutive positive session. “One thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise,” said Per Magnus Nysveen, Rystad Energy’s head of analysis. The “key reason behind the price strengthening is regional traffic data, which indicate the demand bottom is behind us,” he added. President Donald Trump weighed in on the jump in prices, writing “Oil prices moving up nicely as demand begins again!” in a tweet on Tuesday morning. Oil demand has fallen off a cliff as the coronavirus pandemic spread around the globe, forcing billions of people to remain inside and bringing air travel to a near standstill. By some estimates as much as a third of worldwide demand was erased in April. But with economies gradually starting to reopen – a number of U.S. states, including Florida, began phase one reopening plans on Monday, while millions of Italians will return to work this week – investors believe there will be an uptick in demand. “The reopening of economies has injected a degree of cautious optimism back into an oil market that plunged to historic lows only weeks ago,” RBC analyst Michael Tran said in a note to clients Tuesday. “There’s reason to believe the worst of the demand destruction is behind us. Commentary from multiple companies pointed to an improvement in US demand at the end of April, particularly for gasoline,” added Stacey Morris, director of research at Alerian. The improving demand outlook comes as producers have scaled back production, which has also supported prices. The historic cut from OPEC and its oil-producing allies, which takes 9.7 million barrels per day offline, went into effect on May 1. Norway and Canada have also curbed production. In the U.S., data from the Energy Information Administration showed that weekly production averaged 12.1 million bpd for the week ending April 24, roughly 1 million bpd below the all-time high levels from March. Exxon, Chevron and ConocoPhillips are among the companies that have cut production in the face of depressed prices.
Oil prices dip due to rise in US crude inventories — Oil prices have edged-down as higher than expected rise in US crude inventories has raised concerns over supply glut amid a slump in demand due to coronavirus. US West Texas Intermediate (WTI) crude futures were down $0.27, or 1.1%, to $24.29a barrel, at 0436 GMT, while Brent crude LCOc1 futures fell $0.20 to $30.77 a barrel at this time, Reuters reported. According to the data from the American Petroleum Institute (API), oil prices slipped after a report indicated a rise of 8.4 million barrels in the US crude inventories last week. National Australia Bank commodity strategy head Lachlan Shaw was quoted by the news agency as saying: “We’re talking about normalisation of supply and demand but we’ve got a long way to go.” SK Innovation, the South Korea-based owner of refining firm SK Energy, said that it expects refining margins in the second quarter to be under pressure due to weak fuel demand and a glut in refined products as a result of the pandemic. Analysts also cited comments by US-based hydrocarbon exploration firm Diamondback Energy, which stated that it would consider reviving drilling plans if WTI crude futures are held above $30 per barrel. This signals that shale producers do not intend to shut production for a long period. Meanwhile, investors are awaiting official inventory data from Energy Information Administration (EIA), which is due to be released later today.
WTI Rebounds On Smaller-Than-Expected Crude Build, Production Cuts – Oil prices suddenly tumbled this morning after a five-day surge as it appears the surge in ADP unemployment data (completely expected) seemed to remind the machines of the persistent concern that the global glut will take a long time to eliminate as demand remains crushed by the coronavirus. Most analysts don’t see demand rebounding to pre-virus levels for at least a year, with some questioning if that will ever happen. The risk of a second wave of infections in the U.S. as states reopen can’t be discounted, while deteriorating relations between Washington and Beijing may hamper the global economic recovery.“We’ve gone on Brent from $20 to $32, that’s a lot,” said Tor Svelland, chief executive officer of commodities fund Svelland Capital.“The demand destruction is still there, it’s a very, very strong move.”And while initially last night’s bigger-than-expected API-reported crude build was ignored, oil prices are losing steam fast this morning. DOE:
- Crude +4.59mm (+7.1mm exp, +9.51mm WHIS)
- Cushing +2.068mm
- Gasoline -3.158mm (-400k exp)
- Distillates +9.518mm (+3.5mm exp) – biggest build since Jan 2019
This is the 15th straight week of crude inventory builds but notably less than expected (and lower than API’s print). It appears the bulls are choosing to ignore the huge build in distillates (think perhaps airlines) WTI tumbled back to around $23.50 ahead of the DOE print and ripped back higher (though still down on the day) after the smaller than expected build… We will see if this spike holds…
Oil Prices Remain Lower Despite Tame Inventories Rise – Oil prices shrugged off bullish weekly report on U.S. inventories Wednesday as traders took a breather after the mammoth recent rally. WTI futuresfell 3.8% to $23.62 at 11:00 AM ET (15:00 GMT). London Brent was down 4.4% at $29.62. Oil inventories rose by 4.6 million barrels for the week ended May1, the EIA said. That compared with expectations for a build of about 7.8 million barrels, according to forecasts compiled by Investing.com. Stocks at the national storage hub at Cushing, Okla., rose by 2.07 million barrels, the smallest increase in six weeks. That continued the downward trend in inventory builds as economies around the globe begin to reopen and eased some worries about storage room in the U.S. that forced futures to turn negative for the first time ever last month. Gasoline inventories unexpectedly fell by 3.2 million barrels, versus forecasts for a rise of about 43,000 barrels. Distillate stockpiles soared by 9.5 million barrels, compared with expectations for a build of about 2.9 million barrels. “On the bullish side, we have an unexpected 3.2-million-barrel drop in gasoline that nicely follows through with the previous week’s 3.7-million drop,” Krishnan said. “You also have a Cushing build that’s slightly higher than the 1.8 million level cited by Genscape, instead of the scarier 2.8 million reported by API. This certainly takes some pressure off Cushing builds that had averaged 5 million barrels in four previous weeks.” “On the bearish end, of course, distillates came in more than treble to expectations,” he added. “And if you add the 1.7 million barrels that went into SPR storage last week, that will give you a net crude build of 6.3 million barrels.” “Also, refinery runs are finally above the 70% to capacity rate. Though that’s way below the 90% and above norm for this time of year, it’s still helped take more crude off the market compared to the previous week.”
Oil drops 2%, snapping five-day winning streak in volatile trading session – Oil prices dropped on Wednesday, snapping a five-session winning streak, as oversupply concerns outweighed optimism over economies reopening. West Texas Intermediate, the U.S. benchmark, shed 2.3%, or 57 cents, to settle at $23.99 per barrel. In a volatile session, the contract swung between a gain of more than 6% at the high – climbing to $26.08 – and a more than 8% loss, hitting a session low of $22.58 per barrel. On Tuesday the contract soared 20.45%. Brent crude, the international benchmark, settled 4% lower at $29.72 as the coronavirus pandemic continues to hit demand. Data from the U.S. Energy Information Administration released Wednesday showed that for the week ending May 1 inventories rose by 4.6 million barrels, which was smaller than the 8.67 million barrels build analysts had been expecting, according to FactSet. Over the last week, WTI has soared more than 50% as easing shelter-in-place restrictions fueled optimism that demand for oil may have bottomed. “Crude oil volatility persists and after a nearly 100% sensational move higher (off of $14 on 4/29) WTI is incurring some profit taking,” he told CNBC. “Additionally, the demand for crude remains quite opaque as re-openings of economies globally occur,” he added. NationsShares president and chief investment officer Scott Nations noted that the recent run took the WTI contract for June delivery to its highest level since it became the front-month contract, so “the getting probably seemed good.” An improving demand outlook spurred recent optimism, with prices also supported by producers announcing scale backs in operations. The historic cut from OPEC and its oil-producing allies, which takes 9.7 million barrels per day offline, went into effect on May 1. Norway and Canada have also curbed production. In the U.S., data from the Energy Information Administration showed that last week production declined by 200,000 bpd to 11.9 million bpd. This is 1.2 million bpd below March’s record high. Exxon, Chevron and ConocoPhillips are among the companies that have cut production in the face of depressed prices. But some note that as storage continues to fill, the announced shut-ins are still not enough. “Indications show that for yet another week, storage is continuing to fill up, despite the shut-ins and the output cuts,” noted Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Demand, which indeed now is on the recovery road, is not yet enough to balance the produced oil and that oil has to go somewhere,” he added.
Oil drops nearly 2%, erasing earlier gain of more than 11% – Oil prices turned negative in afternoon trading on Thursday, as optimism that had previously supported prices began to fade. Earlier oil moved higher on several bullish factors, including U.S. companies cutting production, Saudi Arabia raising its official oil selling price and gasoline demand improving as economies around the world reopen. But oil couldn’t hold onto early gains, and ultimately settle in the red. West Texas Intermediate, the U.S. benchmark, shed 44 cents, or 1.83%, to settle at $23.55 per barrel. Earlier in the session WTI had been up more than 11%, hitting a high of $26.74. Brent crude, the international benchmark, settled 26 cents lower at $29.46 per barrel. Still, for the week WTI is up 19%. “Nascent signs of rebounding gasoline demand in the U.S. and a rapid curtailment of oil production that has seen U.S. producers cut over 1 million barrels per day of output in a matter of weeks has enabled oil prices to recover,” Again Capital’s John Kilduff told CNBC. “Volatility will remain the watchword, but there is an increasing sense that the worst is behind the industry, at this point.” On Wednesday, data from the Energy Information Administration showed that for the week ending May 1 production declined by 200,000 barrels per day to 11.9 million bpd, which is more than 1 million bpd below March’s record high. Exxon, Chevron and ConocoPhillips are among the companies that have cut production in the face of depressed prices. “There has just been a fierce reaction by U.S. oil and exploration and production companies to really crater U.S. output. It’s still very high, but it’s working its way down rapidly,” Kilduff added. While inventory in the U.S. is still rising, it’s now at a slower clip. Last week, stockpiles grew by 4.6 million barrels, which was smaller than the 8.67 million barrels build analysts had been expecting, according to FactSet. And while demand for gasoline is still well below its highs, government data showed that it is starting to turn a corner as states open up their economies. Mizuho energy analyst Paul Sankey noted that oil also got a boost after Saudi Arabia raised its official oil selling prices, which “alleviates pressure on global crude pricing.” “They are still fighting for market share (against Iraq/Iran primarily) in Asia, but have backed off US market share competition all-but completely,” he wrote in a note to clients Thursday. Given WTI’s nearly 40% gain this month, some say the rally is overdone, especially as storage around the world continues to fill. “We’re not out of the woods yet,” Kilduff added. “There still may be one more flirtation with negative pricing when this June contract goes off the board in a couple of weeks, but beyond that we should be clear of those kind of worries.”
Oil jumps 5%, posts second straight week of gains – Oil prices rose on Friday and were on course for a second consecutive week of gains as U.S. producers rapidly shut crude production and more states moved ahead with plans to relax lockdowns intended to prevent the spread of the worst public health crisis in a generation. U.S. West Texas Intermediate crude gained $1.19, or 5%, to settle at $24.74 per barrel, while international benchmark Brent crude gained $1.51 to settle at $30.97 per barrel. “This advance of the past couple of weeks has been a bit suspect given the fact that coronavirus cases continue to increase and the U.S. crude surplus is maintaining a steep up trend where a record U.S. stock level is likely to be achieved in next week’s EIA report,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report. The U.S. Energy Information Administration’s weekly report on Wednesday showed 15 weeks of consecutive rises in crude stocks although the rate of growth in inventories has slowed since a record build of 19 million barrels in early April. However, the number of operating oil and natural gas rigs fell by 34 to an all-time low of 374 this week – reflecting data going back 80 years – as the energy industry slashes output and spending to deal with the coronavirus-led crash in fuel demand. North American oil companies have shut production faster than analysts expected and are on track to withdraw about 1.7 million barrels per day (bpd) of output by the end of June. These commercially-driven cuts are in addition to those by Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group know as OPEC+, which began implementing a deal to curb a record 9.7 million bpd from the start of May. Market spectators are now watching for more data that supports OPEC+ countries are complying with production cuts, according to Andrew Lipow, president of Lipow Oil Associates in Houston. “I expect now prices will pull back to $20 a barrel because skepticism will come into the market about the compliance of OPEC+ on the production cuts,” said Lipow. Iraq has yet to inform its regular oil buyers of cuts to its exports, suggesting it is struggling to fully implement supply cuts. “All it takes is one or two countries not to comply and it could open the door for others,” Lipow said. .
Oil futures finish higher, with U.S. prices up 25% for the week – Crude-oil futures finished higher on Friday, with optimism over production cuts and rising demand for gasoline lifting to U.S. benchmark prices up by 25% this week. The moves come a day after a sharp rally collapsed amid doubts over compliance with an agreement to cut global production and comments from central bankers that injected some doubt about the pace of global economic recovery in the aftermath of the COVID-19 pandemic. “While rising crude and product stocks continue to pose a threat to market fundamentals, key trends on both the supply and demand side have shifted bullish in recent data,” said Robbie Fraser, senior commodity analyst at Schneider Electric. West Texas Intermediate crude for June delivery on the New York Mercantile Exchange rose $1.19, or 5.1%, to settle at $24.74 a barrel. Prices for the front-month contract rose 25.1% for the week, according to Dow Jones Market Data. Global benchmark July Brent crude added $1.51, or 5.1%, at $30.97 a barrel on ICE Futures Europe, for a 17.1% weekly climb. “On the supply side, Saudi Arabia has increased its export price” as output cuts of nearly 10 million barrels per day by the Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC+, are officially under way, Fraser said in a daily market note.
.
