Oil, Gas, And Fracking News Reads: 14June 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 13 June 2020. Go here for Part 1.

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

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Exclusive: Oil major BP to cut 15% of workforce – (Reuters) – BP will cut about 15% of its workforce in response to the coronavirus crisis and as part of Chief Executive Bernard Looney’s plan to shift the oil and gas major to renewable energy, it said on Monday. Looney told employees in a global online call that the London-based company will cut 10,000 jobs from the current 70,100. “We will now begin a process that will see close to 10,000 people leaving BP – most by the end of this year,” Looney said in a statement. Reuters had earlier reported the planned job cuts, citing three company sources. The affected roles will be mostly senior office-based positions and not front-line operational staff, the company said. About a fifth of the job cuts will take place in Britain, where BP employs 15,000 people, a company spokesman said. Like all the world’s top energy companies, BP has cut its 2020 spending plans after the coronavirus pandemic brought an unprecedented drop in demand for oil. BP has flagged a 25% cut to $12 billion this year and said it would find $2.5 billion in cost savings by the end of 2021 through the digitalisation and integration of its businesses. On Monday, however, Looney said the company is likely to need to cut costs even further. BP is giving no pay rises to senior employees until March 2021 and said it is unlikely to pay any cash bonuses this year.

Hoard of North Sea Oil Is Starting to Diminish— A glut of benchmark North Sea oil that’s been sitting on ocean-going tankers for weeks is starting to diminish. Millions of barrels of the region’s unwanted crude have been stashed on oil tankers since the coronavirus caused a demand collapse. But now the volumes are starting to shrink sharply, data compiled by Bloomberg show. Anchored on vessels everywhere from the U.K., to France and the Netherlands, the floating hoard reached 12 million barrels at the end of May. That figure has now dropped by 35%. The decline in the region’s floating storage is important because the grades in question help shape the Dated Brent benchmark that’s used to settle millions of barrels of physical oil transactions between producers and refineries. Nations including Saudi Arabia and Russia are leading a global push to limit output and have cut deliveries into northwest Europe. That’s lifted oil prices and eliminated what traders call a super-contango, a pricing structure that had made it highly lucrative to store. “The incentives to build floating storage have greatly diminished,” said Harry Tchillinguirian, oil strategist at BNP Paribas SA. “The holders of the storage are probably keeping an eye out for opportunistic sales where we see pockets of demand recovery.” While a diminishing floating stockpile of benchmark grades offers producers cause to be optimistic that their cuts are effective, there’s still a lot of work to be done to eliminate a surplus in the global market. There were also 180 million barrels of crude stored at sea worldwide last week, according to data from Vortexa Ltd., a data analytics firm. That’s the highest since at least 2016. On-land stockpiles in Europe’s key storage hub of Amsterdam, Rotterdam and Antwerp, known as ARA, jumped to their highest level in two years last week, according to Genscape Inc. That includes non-benchmark grades from all over the world. Shipments tracked by Bloomberg show that deliveries into ARA from the region’s main supplier regions dropped to 1.28 million barrels a day so far this month, down by about 360,000 barrels a day compared with the average between March and May. While supplies from producers in the North Sea and the Mediterranean jumped so far in June, those from Russia fell sharply, tracking a similar drop in export programs. Just a sliver have reached northwest Europe so far this month from the Persian Gulf.

No source yet identified as oil spill near Postville continues to dissipate – The slick discovered in the waters off Postville, Labrador earlier this week continues to dissipate. That’s according to the Canadian Coast Guard which is in the area with its Environmental Response Team. A recent surveillance flight showed approximately 350 litres of pollution remaining on the surface of the water. Officials say the continued reduction in the size of the sheen indicates a light product that evaporates and disperses relatively quickly – such as diesel. Samples of the product have been collected, and booms have been placed at strategic points to contain the pollution and recover any residual product. Transport Canada and the federal department of Environment and Climate Change are continuing their investigation into the cause of the spill. Residents started noticing a strong smell and a sheen on the water around the time of a fuel delivery to the community. Officials have not yet identified the source of the pollution.

Oil spill Russia – Images captured from space show diesel in Arctic Circle – A major oil spill that took place in Russia and affected the Arctic Circle was spotted from space by two satellites of the European Space Agency (ESA). While the Russian officials claimed that the spill had been stopped, this incident prompted the country’s government to declare a state of emergency.The incident took place on May 29 after a power plant’s reservoir in the city of Norilsk in Siberia collapsed. In this incident, about 20,000 tons of diesel leaked into an Arctic Circle river. Satellites spot major oil spill in the Arctic Circle (photos) https://t.co/fSYaaFFHQi pic.twitter.com/SfHSc3GWm2 – SPACE.com (@SPACEdotcom) June 5, 2020 According to reports, the ESA was able to monitor the incident from space through its Copernicus Sentinel-2 mission. The mission, consisting of the twin satellites Sentinel-2A and Sentinel-2B, had two separate launches in 2015 and 2017. The goal of the mission is to study Earth by taking images from orbit. The ESA was able to spot the areas affected by the oil spill. As seen in the images obtained by the agency, the red-colored oil traveled down the Ambarnaya River before flowing into Lake Pyasino. Responding to this, Russian President Vladimir Putin declared a state of emergency. He also slammed the power planet known as NTEK, which is a subsidiary of Norilsk Nickel, for the delay in informing the government regarding the incident. Almost a week following the incident, officials from Russia confirmed that the oil spill had been stopped and contained. As of June 5, Russia’s Emergencies Ministry confirmed that it has already removed 200 tons of fuel in the affected region.

U.S. offers help in cleaning huge Arctic Circle fuel spill – The United States on Saturday offered to help Russia clean up a vast fuel spill that has fouled an Arctic river in northern Siberia.“Saddened to hear about the fuel spill in Norilsk, Russia,” Secretary of State Mike Pompeo wrote on Twitter. “Despite our disagreements, the United States stands ready to assist Russia to mitigate this environmental disaster and offer our technical expertise.”On May 29, a diesel-fuel tank at a power plant belonging to the giant Norilsk Nickel mining group collapsed near the Siberian industrial city of Norilsk, sending some 15,000 tons of diesel into a nearby waterway and pouring an additional 6,000 tons onto surrounding land.The spill – deemed the worst ecological catastrophe of the sort to ever hit the region – Colorado remote tundra waterways with bright red patches visible from space. President Vladimir Putin declared an emergency and said he expects the company to pay for the clean up, which could take years.Clean up work however has been complicated by marshy ground amid a springtime thaw and the shallow depths of the nearby Ambarnaya River, which prevents boats from reaching the scene. Russian officials said Friday that the spill was probably caused when long-frozen permafrost under the fuel tank melted and gave way, and ordered a review of infrastructure in vulnerable zones.

Disastrous Russian oil spill reaches pristine Arctic lake -A 21,000 tonne (approximately 23,000 U.S. ton) oil spill that prompted Russian President Vladimir Putin to declare an emergency last week has now reached a pristine Arctic lake, and there are concerns it could contaminate the Arctic Ocean.Environmentalists and local officials have raised alarms about the disaster, which they say is the worst of its kind in the Russian Arctic, according to BBC News. So far, the oil has spread 12 miles from the initial spill site, a fuel tank that collapsed May 29. “The fuel has got into Pyasino as well. This is a beautiful lake about 70 kilometres (45 miles) long. Naturally, it has both fish and a good biosphere,” Krasnoyarsk region governor Alexander Uss told Interfax news agency Tuesday, as AFP reported.Lake Pyasino flows into the Pyasina river, which in turn flows into the Arctic Ocean’s Kara Sea, BBC News explained. Greenpeace Russia director Vladimir Chuprov told AFP it would be a “disaster” if 10,000 tonnes (approximately 11,000 U.S. tons) of fuel or more had reached the lake. He said he feared it would reach the Kara Sea as well, which would have “harmful consequences.”Uss, however, was committed to preventing that from happening. “Now it’s important to prevent it from getting into the Pyasina river, which flows north. That should be possible,” he said, as BBC News reported.But regional officials told a different story.”We can see a large concentration of diluted oil products beyond the booms,” Krasnoyarsk region deputy environment minister Yulia Gumenyuk said, according to BBC News. Norilsk Nickel, the company that ultimately owns the power plant where the tank collapsed, denied that any oil had reached the lake.The spill has also contaminated rivers and soil. So far, cleanup efforts have removed 812,000 cubic feet of contaminated dirt, according to BBC News. “[The spill] will have a negative effect on the water resources, on the animals that drink that water, on the plants growing on the banks,” Vasily Yablokov of Greenpeace Russia said, according to BBC News.The polluted Ambarnaya and Daldykan rivers may take ten years to clean, The Guardian reported.

Siberian oil spill contaminates Arctic lake – An oil spill that sparked a state of emergency has contaminated a freshwater lake in the Russian Arctic, the regional governor said Tuesday, a claim denied by Norilsk Nickel, the metals giant linked to the leak. Russian President Vladimir Putin declared a state of emergency last week after 21,000 tons of diesel leaked from a fuel reservoir that collapsed May 29 outside the Arctic city of Norilsk. The spill has polluted the ground and waterways, triggering a major clean-up effort. Norilsk Nickel owns the power plant where the spill originated and its head Vladimir Potanin told Putin last week his company would pay for clean-up efforts estimated at $146 million. A spokeswoman for the taskforce in charge of the accident clean-up told AFP last week that the spill had been contained. But officials in the Siberian region of Krasnoyarsk this week said that high concentrations of polluted water had been discovered beyond floating barriers set in place to stop the fuel from spreading. “The fuel has got into Pyasino as well. This is a beautiful lake about 70 kilometers (45 miles) long. Naturally, it has both fish and a good biosphere,” said Krasnoyarsk region governor Alexander Uss, according to Interfax news agency. He added that it was important to prevent spilled fuel from reaching the Pyasina River, a vital waterway for the region that flows from the lake into the Kara Sea. At a video conference on Tuesday, Norilsk Nickel denied that the diesel had polluted the lake or risked reaching the Kara Sea. “Our samples at the Pyasino Lake show 0.0 percent contamination results,” said Sergei Dyachenko, the company’s first vice-president and chief operating Officer. “The distance from Pyasino Lake to the Kara Sea is more than 5,000 kilometers,” he added.

Concerns oil spill from Siberia could reach Arctic Ocean {sbs.com.au}- video – A Russian environmentalist has warned that a recent oil spill in Siberia could reach the Kara Sea, which forms part of the Arctic Ocean. The spill happened on May 29 at a power plant about 2,900 kilometers northeast of Moscow. An estimated 18,143 tonnes of diesel fuel was spilled from the power plant’s storage facility, contaminating waterways.

Russian oil spill leads to charges against plant director – The director of an Arctic power plant faces five years in jail after a major oil spill. Some 20,000 tons of diesel have flowed out of a collapsed storage structure, polluting waterways in Russia’s north. Russian investigators have charged the director of an Arctic power plant after a major oil spill, authorities announced on Monday. Investigative Committee spokeswoman Svetlana Petrenko said they had charged Vyacheslav Starostin with violating environmental protection rules. He faces up to five years in jail if found guilty. More than 20,000 tons of diesel has leaked into the ecologically fragile area in the Norilsk region since a storage tank collapsed on May 29, prompting fears for the environment and wildlife. The oil has contaminated local waterways and is threatening to reach the Arctic Ocean. Prosecutors partly blamed thawing permafrost for the collapse. Emergency workers have deployed booms to block the fuel from spreading further into the Ambarnaya River, a tributary of Lake Pyasino. That lake feeds a river that flows into the Kara Sea arm of the Arctic. The head of Russia’s natural resources agency Rosprirodnadzor, Svetlana Radionova, denied that any fuel has reached the lake, but local inspectors say the tests being performed aren’t adequate, and that fuel has likely poured into the body of water. “If a storm comes, (the fuel) will settle down on the banks and will slowly poison the ecosystem of Norilsk and Pyasino. The consequences won’t be immediate. It might also reach the Kara Sea,” regional inspector Vasily Ryabinin told The Associated Press.

Nigeria records 1,300 oil spills in two years – Over 1,300 oil spill incidents occurred in various parts of Nigeria between 2018 and 2019, latest figures compiled by the National Oil Spill Detection and Response Agency have revealed. It was also gathered that most of the oil spills were caused by the activities of vandals who break pipelines to steal petroleum products. The Director-General, NOSDRA, Idris Musa, said findings by his agency showed that an average of five oil spills was recorded daily in Nigeria. Musa, who spoke to journalists in Abuja, said, “In 2018 we had about 600 oil spill incidents and in 2019, we had over 700 oil spill-impacted sites across the country. “These were oil spill incidents recorded in Nigeria that we’ve compiled and it is based on the fact that by law if there is an oil spill, you must report it. You must report any oil spill, no matter how small.” On the major cause of the spills, the DG said, “Most of the spills that occur are as a result of oil theft by those who go to pipelines to install valves. We had a similar incident about two weeks ago.”Musa observed that it was difficult to record the type of oil spills that were recorded in Nigeria in any other part of Africa. “In fact, aside from Mexico, which is not an African country anyway, you will hardly find such situation anywhere else,” he stated. The NOSDRA boss added, “Whenever we go for international conferences and we say we record over 700 oil spills in Nigeria, people ask how it happened. “When you tell them that people go to oil pipelines to install valves to fetch oil like water, they will ask you if the people who fetch the products are crazy. This is because the pressure inside the pipes is so huge and it can cause severe damage if ruptured.” Musa further noted that the agency had realised that the underground tanks of many filling stations in the downstream oil sector leaked products into their surrounding environment. This, he said, was not healthy for the environment, adding that NOSDRA had started taking inventory of defaulters. He said, “If your tank spills oil as a downstream operator, you will have to clean it up. We have noticed that for some of them who have already spilled products, they find it difficult to clean up.”

Clean-up operations following Barrackpore oil spill – An oil spill in Barrackpore caused by a busted line resulted in the spillage of three barrels of oil on a portion of land and into a watercourse. The discovery was made on Saturday and on Sunday mop-up operations continued at the site near Wilson Road. In a statement, Heritage Petroleum stated that the company received reports of the spill around 1 pm on Saturday. “Upon investigation, it was quickly discovered that the spill was emanating from a 4″ pump line. The leak was isolated and clamped by 3:00 PM on the same day. Heritage has estimated that approximately three (3) barrels of oil was spilled.” The company stated that it engaged the services of a contractor to clean up the spill and booms have since been reinforced along nearby watercourses to restrict migration of spillage to further downstream. In addition, company officials also visited the owner of nearby agriculture lands which may have been impacted and the parties will continue discussions on Monday. The company has since informed the Ministry of Energy and Energy Industries of the incident and will keep officials appraised of related containment and recovery. Barrackpore West councillor Nicholas Kanhai said he visited the site and observed that clean up operations were being undertaken. He said workers were able to contain the oil in the river from going downstream. He said the spill occurred in an unpopulated area and he has received no reports of damage to agriculture produce or harm to animals.

Put new gas wells on hold until OIL has a disaster plan — A preliminary report by Wildlife Institute of India (WII) on the environmental damage caused due to Oil India Limited’s (OIL) gas well blowout at Baghjan in Upper Assam’s Tinsukia district, which started on May 27, has found that oil has leaked into adjoining Lohit river, polluting the water and adjoining Maguri-Motapung wetland with toxic pollutants. Maguri-Motapung is located less than 10 km from Dibru-Saikhowa National Park and is a part of the Dibru-Saikhowa Biosphere Reserve (DSBR). The report, which has been submitted to the Union Ministry of Environment, Forest and Climate Change (MoEFCC) and seen by HT, has recommended that the approved new wells and further exploration in the area should be put on hold until OIL authorities put in place their disaster-handling capabilities. The report said a WII team conducted the survey from May 29 to June 4 and found several dead fish and insects that may have died due to oxygen depletion in the water following the oil spill. The survey found the presence of at least five endangered Gangetic dolphins in the 20-kilometre stretch of the Lohit river, a tributary of the Brahmaputra river, indicating that the species will be at grave risk from the ongoing spill. The team has collected samples of tissue and blubber from a Gangetic dolphin carcass found in Maguri beel, which is being analysed for presence of various contaminants. “The toxic fumes and oil coating has universally affected the area’s flora and fauna. The contaminants and oil are continuing to be released in the surrounding areas and immediate steps are needed to contain this spillover. The released toxins are known to have long-term persistence in soils and sediments, which will not only affect current life conditions, but due to sustained release, pose a serious health risk for a longer-term,” the report said. The WII team has also gathered from the local residents that OIL authorities did not have a mitigation plan for such a disaster, and consequently suggested a comprehensive impact assessment of their field operations in the biodiversity-rich Dibru Saikhowa National Park. “It’d be not only prudent but also essential for the well-being of all life forms that the approved new wells and further explorations in this area should be initiated only after a thorough investigation of potential impact, as well as evaluating disaster handling capabilities in place, with appropriate technology and trained manpower,” the report added.

More insurance cover needed for marine oil spills – Maritime NZ has published guidelines about a major increase required in insurance cover or other financial security for marine oil spills from offshore installations. Amendments to the Marine Protection Rules Part 102 now require owners of offshore installations to have insurance or another form of financial security from a third party of up to $1.2 billion. This is an increase from approximately $28 million. Maritime NZ Director Keith Manch says the insurance or other form of financial security is in addition to the unlimited liability imposed by the Maritime Transport Act for spill response costs and compensation for pollution damage to property. The certificate of insurance provides assurance that the money that would be needed is available to meet the costs of clean up and compensation for damage to property in case of an oil spill. Marine Protection Rules Parts 131 and 102 regulate offshore installations. They require an oil spill contingency plan and insurance or another form of financial security to cover the costs of clean up and damage to property. Part 131 requires an offshore installation operating in New Zealand continental waters and in the internal waters of New Zealand have an oil spill contingency plan approved by the Director that will support an efficient and effective response to an oil spill at sea. The amendments to Part 131 require the Director to be satisfied the operator will have the ability to implement the oil spill contingency plan when approving it.

Global gas demand on course for biggest annual fall on record: IEA – (Reuters) – The coronavirus crisis and a very mild winter in the northern hemisphere have put global natural gas demand on course for the biggest annual fall on record, the International Energy Agency said in its annual outlook on Wednesday. Global gas demand is expected to fall by 4%, or 150 billion cubic metres (bcm), to 3,850 bcm this year – twice the size of the drop following the 2008 global financial crisis. Major global gas markets have experienced price falls to record lows as lockdowns and reduced industrial output due to the COVID-19 pandemic have stunted demand. The oil and gas industry is cutting spending and postponing investment decisions. Although a rebound in demand is expected in 2021, the IEA does not expect a quick return to pre-crisis levels. For the full year, more mature markets across Europe, North America and Asia are forecast to see the biggest drops in demand, accounting for 75% of the total fall in 2020. “Global gas demand is expected to gradually recover in the next two years, but this does not mean it will quickly go back to business as usual,” said Fatih Birol, IEA executive director. “The COVID-19 crisis will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties,” he added. The IEA forecasts 75 bcm of lost annual demand by 2025 – the same amount as the increase in global demand in 2019.

Exclusive: Oil tankers turn away from Venezuela as more sanctions loom (Reuters) – Oil tankers that were sailing toward Venezuela have turned around and others have left the country’s waters as the United States considers blacklisting dozens of ships for transporting Venezuelan oil, according to shipping data and industry sources. The threat of tighter sanctions is already disrupting the global shipping market. Chinese oil firms are considering whether to decline to charter any tanker that has visited Venezuela in the past year, no matter where the ship is now or for what voyage, four shipping sources told Reuters on Tuesday. Washington is seeking to oust the socialist government of President Nicolas Maduro by choking the oil exports that provide its main source of income. The measures have contributed to a fall in Venezuelan oil exports to a 17-year low and deepened the country’s economic crisis, but Maduro has held on – to the frustration of U.S. President Donald Trump’s administration. The United States may add dozens more tankers to an existing blacklist, U.S. sources told Reuters last week. That would make it more difficult for state firm PDVSA to deliver oil to refineries abroad. Exports dropped to about 452,000 barrels per day in May, the lowest since a national strike paralyzed the economy and hit exports between 2002 and 2003. Venezuela’s Foreign Minister Jorge Arreaza said on Twitter on Tuesday that Washington was attacking Venezuela’s economy by blocking foreign revenue that could be used to import humanitarian goods, including food and medicine. The U.S. State Department did not immediately comment.

Country With World’s Largest Oil Reserves Has Only One Rig Left – The collapse in oil prices and the tightening U.S. sanctions against Venezuela have accelerated the decline of the oil industry in the country sitting on the largest crude oil reserves in the world. As of May, Venezuela’s rig count plunged to just two, data from Baker Hughes shows, as production slipped by 16 percent to 645,700 barrels per day (bpd), Bloomberg reported on Thursday, citing documents containing production data it has seen. Of the two active rigs in Venezuela last month, one was working at an oilfield and another one was drilling for gas, according to Bloomberg. Those rigs are working in the Orinoco oil belt, where Venezuela’s state oil firm PDVSA operates oilfields in joint ventures with foreign firms, sources familiar with the matter told Bloomberg. Venezuela’s oil industry was collapsing even before the oil price crash and the pandemic, due to the increasingly stricter sanctions in the U.S. maximum pressure campaign against Nicolas Maduro’s regime and its sources of revenues. Oil income is pretty much the only hard currency that Maduro gets, so the U.S. is looking to stifle as much of Venezuela’s oil trade as possible. In addition, PDVSA is severely cash-strapped and hasn’t invested in repair and maintenance of oil facilities and refineries in years. The price crash and the COVID-19 pandemic further exacerbated the crisis in Venezuela’s oil sector and PDVSA started shutting oilfields because of fewer international customers for Venezuelan oil, Bloomberg reports. In March, Venezuela had 25 operational oil and gas rigs, according to the Baker Hughes international rig count data. Venezuela has seen some reprieve recently in its fuel shortage problem, after Iranian tankers shipped gasoline and refining components to the Latin American country in an open defiance of the U.S. sanctions. Maduro’s regime tried to alleviate the fuel shortage in the country home to the world’s biggest oil reserves, but a new scheme of subsidized gasoline failed to put an end to the long lines in which Venezuelans queued to fill their cars with fuel.

The Saudi-Russia oil price war was a ‘very big mistake,’ Qatar energy minister says — Qatar’s Minister of State for Energy Affairs shared his thoughts on some of the major oil producers’ market moves in recent months, shedding disapproval on the March decision by Saudi Arabia and Russia to launch into a price war, which sent oil prices into free fall. “I think it was a very big mistake,” Saad al-Kaabi told CNBC’s Hadley Gamble from Doha. Al-Kaabi is also CEO of Qatar Petroleum. “You know, flooding the market is what caused us to go to a very low level. And then the pandemic basically took it almost to a very dangerous area where people could not afford to produce anymore. And we saw, you know, negative pricing in (U.S. oil benchmark) WTI.” The markets were already being devastated by the crushing drop in demand due to global coronavirus lockdowns. The call to open the taps on oil production pulled the floor from under the market as Saudi Arabia slashed its selling prices and increased production after Russia refused to join its plan to further cut output and boost prices in early March. The hit to producing countries revenue was harsh enough to bring OPEC and its non-OPEC allies – known as OPEC+ – back to the negotiating table. In April, they agreed to the largest production cuts in history at 9.7 million barrels per day. “Now, I think the actions that have been taken by the same group really is to agree what was agreed in the past and keep more sensible … to cater for the supply and demand that we’re seeing,” al-Kaabi said. Qatar left OPEC in January 2019 after six decades with the organization. The country’s state oil producer, Qatar Petroleum, is slashing 30% of its spending this year due to the downturn. But the possibility of a second wave of coronavirus will continue to weigh on the energy outlook, including liquid natural gas prices. S “We may be more prepared for it and have less lockdowns around the world. If that’s the case, then we’ll see a much quicker recovery, maybe in six months to a year. If there is a second wave, then it could take a little bit longer,” he said. Al-Kaabi added, however, that he isn’t worried about the long term because it has largely been “short-term events that have affected” prices. Still, he warned the coronavirus could have “some long-lasting effects” on travel and means of doing business. “I think you’ll see less people doing business by traveling and more using video conferencing and other means that we got used to now and working from home and so on. So, I think there will be some change in our attitude about whether it’s business traveling or working from home,” al-Kaabi said.

Why Saudi Arabia Will Lose The Next Oil Price War – Saudi Arabia has instigated two oil price wars in the last decade and has lost both. Given its apparent inability to learn from its mistakes it may well instigate another one but it will lose that as well. In the process, it has created a political and economic strait-jacket for itself in which the only outcome is its eventual effective bankruptcy. OilPrice.com outlines why this is so below. The principal target for Saudi Arabia in both of its recent oil price wars has been the U.S. shale industry. In the first oil price war from 2014 to 2016, the Saudi’s objective was to halt the development of the U.S. shale sector by pushing oil prices so low through overproduction that so many of its companies went bankrupt that the sector no longer posed a threat to the then-Saudi dominance of the global oil markets. In the second oil price war which only just ended, the main Saudi objective was exactly the same, with the added target of stopping U.S. shale producers from scooping up the oil supply contracts that were being unfilled by Saudi Arabia as the Kingdom complied with the oil production cuts mandated by various OPEC and OPEC+ output cut agreements. In the run-up to the first oil price war, the Saudis can be forgiven for thinking that they stood a chance of destroying the then-relatively nascent U.S. shale sector. It was widely assumed that the breakeven price across the U.S. shale sector was US$70 per barrel and that this figure was largely inflexible. Saudi Arabia also held record high foreign assets reserves of US$737 billion at the time of launching the first oil war. As it transpired, of course, the Saudis had disastrously misjudged the ability of the U.S. shale sector to reshape itself into a much meaner, leaner, and lower-cost flexible industry. After two years of attrition, the Saudis caved in, having moved from a budget surplus to a then-record high deficit in late 2015 of US$98 billion. It had also spent at least US$250 billion of its precious foreign exchange reserves over that period that were lost forever.The even more enduring legacy of this first oil price war, though – and part of the reason why the Saudis could never hope to win the last one, or any future oil price war either – is that it created the resilience of the U.S. shale sector as it now stands. This means that the U.S. shale sector as a whole can cope with extremely low oil prices for a lot longer than it takes Saudi Arabia to be bankrupted by them.

Saudi Arabia says ‘no room whatsoever’ for noncompliance over OPEC+ production cuts – OPEC kingpin Saudi Arabia and non-OPEC leader Russia said Monday that the success of the energy alliance’s latest production cuts relies on all members complying with the terms of the deal. The statement comes shortly after OPEC and non-OPEC allies, known as OPEC+, agreed to extend its deepest round of production cuts in history to take roughly 10% of oil supplies off the market through to the end of next month. “We have no room whatsoever for lack of conformity,” Saudi Energy Minister Prince Abdulaziz bin Salman said during a virtual press conference on Monday. Those that failed to conform to the OPEC+ deal in May and June should compensate with extra cuts from July through to September, Prince Abdulaziz said. Russian Energy Minister Alexander Novak said via a translator that he fully agreed with his Saudi counterpart. “I can say that overall conformity levels are extremely high, considering the magnitude of the cuts and how bad the situation is.” “We have spent a lot of time discussing full conformity and how this will be compensated because the success of the deal and the success of our efforts rests on all countries doing their part,” he added. International benchmark Brent crude futures traded at $41.72 a barrel, down around 1.3%, while West Texas Intermediate futures stood at $38.88, over 1.6% lower. Both contracts pared gains after rising to their highest level since March 6 earlier in the session, climbing to $43.41 and $40.44, respectively. What has been agreed? Oil prices have surged since some of the world’s most powerful oil producers brought in a production cut of 9.7 million barrels per day from May 1. The move was designed to prop up prices at a time when the coronavirus pandemic had led to an unprecedented demand shock in energy markets. The International Energy Agency estimated that roughly 25% of demand was drained from the market in April as confinement measures brought mobility to a near standstill for billions of people across the globe. The output cuts from OPEC+ were initially scheduled to be scaled back to 7.7 million barrels per day from July 1 through to the end of the year. But the new deal, secured over the weekend, means the group will now cut 9.6 million barrels per day through to the end of July. The figure is 100,000 barrels per day lower than the previous agreement because Mexico said it remained committed to the terms of the original deal and subsequent reduction in cuts.

Iraq Asks Buyers to Forgo Oil Cargoes— Iraq has asked some Asia refiners to consider forgoing prompt shipments of its Basrah crude, a potential signal the country is trying to meet the output-cut pledges it made to OPEC at the weekend. State-owned marketer SOMO sent requests to several customers asking if they would consider not taking some contracted cargoes for June and July loading, said people with knowledge of the matter. At least one buyer was unwilling to forgo shipments citing downstream commitments, while another will likely agree and seek replacement cargoes in the spot market, the people said. Suppliers such as Iraq and Nigeria that have traditionally been lax at complying with output curbs are coming under increased scrutiny following the latest OPEC+ agreement. The alliance agreed to extend record output cuts for another month on condition that Baghdad doubles down on efforts to rein in production and also makes up for previous non-compliance. Nobody responded to emails and text messages sent to SOMO seeking comment. The company typically sells two grades — Basrah Light and Basrah Heavy — to Asian customers in 1 million or 2 million-barrel shipments. Efforts by OPEC+ and involuntary supply cuts in the U.S. have been instrumental in helping oil prices recover from virus-induced lows in April. However, there’s speculation the rally could be stymied as the speed of the rebound entices producers to raise output before demand fully recovers. Iraq will be fully committed to the OPEC+ agreement, the country’s oil ministry said in a statement. The nation produced 4.2 million barrels a day in May, about 15% more than it was meant to under the previous OPEC+ deal struck in April. Iraq is set to release its official selling prices for July-loading crude exports in the coming days. Earlier, Saudi Aramco hiked official selling prices for all grades in a move that shocked buyers across Asia.

Saudi Arabia to end voluntary cuts on top of OPEC+ pact – (Reuters) – Saudi Arabia will boost output in July to match its output OPEC quota while ending deeper, voluntary cuts amid signs of global demand recovering, the Saudi energy minister said on Monday. OPEC, Russia and other producers agreed on Saturday to extend record output cuts of 9.7 million barrels per day (bpd) into July, curbing global supply by almost 10% amid a steep slump in demand due to the coronavirus pandemic. For June, Saudi Arabia, Kuwait and the United Arab Emirates (UAE) had pledged to cut by 1.18 million bpd on top of that, with Riyadh forfeiting 1 million bpd. Saudi Energy Minister Prince Abdulaziz bin Salman said that this would not continue in July, when Saudi Arabia will pump its OPEC quota, amid signs of demand recovery as nations around the world lift strict lockdown measures. “The voluntary cut has served its purpose and we are moving on. A good chunk of what we will increase in July will go into domestic consumption,” Prince Abdulaziz told an OPEC+ virtual news conference. Saudi crude use for power generation typically increases in the hot summer months, the minister noted. Saudi Arabia, OPEC’s de facto leader, and Russia have to perform a balancing act as they push up oil prices to meet their budget needs while not driving them much above $50 a barrel to avoid encouraging a resurgence of rival U.S. shale production. Producers must also weigh the recovery in global demand against a possible return of supply from Libya after months of a blockade that shut off most of its crude production as well as weak compliance with promised cuts from producers such as Iraq and Nigeria. “The market has to absorb millions of barrels of oil that will be released from storage. As prices rise, U.S. production will continue to fall month on month due to steep base declines, but the pace of declines is set to ease markedly,” Energy Aspects analysts said in a note. On Sunday, Saudi state oil company Saudi Aramco hiked its July selling prices for crude grades to all destinations in a move likely to discourage buying for storage but rather could help to lower inventories.

Global Oil Demand Rises – Barkley Rosser – Back on April 20 we saw briefly the bizarre appearance of negative oil prices in certain markets. Today for the first time in many months Brent crude briefly topped $40 per barrel, although it fell back below that level (WTI is tending to be about $3 behind it, despite a single day recently when for the first time in years it nearly matched Brent crude at only 18 cents lower). However, it looks like the recent trend of global oil prices rising will continue some more, with prices likely to go above $40 and stay there. How far beyond that I shall not forecast. But this is a price level where many oil exporting nations can get out of immediate financial crisis, with many of them actually making money, if not as much as they would with still higher prices. One element of this price rise is on the supply side, especially with Saudi Arabia and Russia apparently maintaining a production cut agreement they have. Rumors from OilPrice.com suggest there may be cheating on these agreements to come. But for now these two are holding the line on the supply side. More important has been the increase on the demand side, which looks set to continue rising for at least the near future. I have posted previously on how global carbon emissions appear to have bottomed around April 7, with them rising since, if still well below pre-pandemic levels. Burning fossil fuels is a major source of these emissions, so it is quite possible that oil demand has been rising since around then, even though it was 10 days after then that oil prices did their brief plunge into negative territory. According to OilPrice.com it is China that is leading this increase in oil demand. It was the first economy to drop due to the pandemic, with its oil demand declining about 40% during February. However, it looks that China’s demand has returned as of May to a level 92% of its peak prior to the pandemic. That is substantial, while leaving more room for further growth. Another nation with a large economy making an even sharper turnaround is India. In early April at the beginning of its two month lockdown its demand declined by 60%, but now it is estimated that in June its demand will return fully to its pre-pandemic level.

Brent crude will need to work through oversupply issues despite the OPEC+ output cut, says analyst – Brent crude needs to work through its oversupply issues before it can punch through its current price range of between $40 and $50 per barrel, according to Thom Payne, director at Westwood Global Energy Group. That’s despite the latest agreement by the Organization of the Petroleum Exporting Countries and its oil-producing allies to extend a historic oil production cut until the end of July. The alliance cut production by 9.7 million barrels per day at the start of May 1, and the cuts – which have helped push up crude prices in the last two months – was initially set to decline on July 1. “If you take February to May, you’ve got an average built position, oversupply of 14 million barrels a day. So we’ve effectively built about 2 billion barrels of additional storage,” Payne told CNBC’s “Street Signs” on Monday. “We definitely need to drain that before we can see prices move materially above that kind of ($40 to $50) price structure,” Payne said. His comments came after the group, known collectively as OPEC+, on Saturday agreed to extend its record oil production cut for another month as it seeks to balance the global oil market. Commenting on the recent OPEC+ agreement, JPMorgan’s Head of Asia Pacific Commodities Research, Scott Darling, said: “I’d take some positives out of this – you’ve got compliance.” “I think you’ve also got now monitoring on a month-by-month basis and it also feels there’s not just near-term views on oil but gradually a sort of longer-term vision around where they want oil to go,” he added. Oil prices have seen a partial recovery since seeing a plunge in April due to several concerns – ranging from uncertainty over demand due to the coronavirus pandemic that was spreading rapidly, to issues with crude oversupply. In the afternoon of Asian trading hours on Monday, international benchmark Brent rose 1.49% to trade at $42.93 per barrel. Similarly, U.S. crude futures gained 1.34% to trade at $40.08 per barrel. Looking ahead, Payne from Westwood Global said: “What’s likely to happen is that the oil markets move to a net draw or undersupply position by around July, August of this year.” This would be “very supportive” of the current $40-50 per barrel price range for Brent, he added. For his part, Darling said that JPMorgan sees Brent at $40 dollar per barrel this year and $47 per barrel for next year.

Hedge fund buying dries up after oil prices double – Kemp – (Reuters) – Hedge funds have started to temper their bullishness towards oil after crude futures prices have doubled since late April. Crude prices are nearing levels expected to see some shale production restart and there are concerns the rally is outrunning the recovery in demand.Hedge funds and other money managers purchased the equivalent of just 6 million barrels in the six major petroleum futures and options contracts in the week to June 2.Portfolio managers have bought petroleum derivatives in nine out of the last ten weeks, increasing their bullish position by a total of 324 million barrels since late March (tmsnrt.rs/3cKiMVA).But purchases last week were the smallest for nine weeks (if the single week when funds were actually net sellers is excluded), indicating the buying wave may be fading.Position changes were mostly insignificant with purchases of NYMEX and ICE WTI (+7 million barrels) and European gasoil (+8 million) but sales of Brent (-2 million) and U.S. gasoline (-8 million) and no change in U.S. diesel. But there were some tentative indicators the rally in crude prices may be running out of steam, while funds try to anticipate an improvement in the relative price of distillates, where margins have become uneconomic: Portfolio managers added new short positions in petroleum last week and their ratio of bullish longs to bearish shorts dipped for the first time since the end of March.Fund buying in WTI was some of the smallest since portfolio managers started to accumulate positions in U.S. crude in March. Funds were net sellers of Brent for only the second time in nine weeks.Funds have been net buyers of European gasoil for three weeks running, and last week’s purchases were the largest yet, indicating traders are trying to position themselves ahead of an anticipated improvement in distillate margins.None of these is a strong signal and there is a big risk of over-interpreting them. But taken together they suggest a possible pause or even a future reversal in fund buying.

Saudis Raise Oil Prices by Most in 20 Years— Saudi Arabia increased prices for some crude exports by the most in at least two decades, doubling down on a strategy to bolster the oil market after OPEC+ producers extended historic output cuts over the weekend. The steepest jump in July exports will hit buyers in Asia, state producer Saudi Aramco’s largest market, according to a pricing list from the company on Sunday. The increases erase almost all of the discounts the kingdom made during its price war with Russia earlier this year. Saudi Arabia is using all the tools at its disposal to turn around the oil market after prices plunged in March and April with the spread of the coronavirus. As the price setter in the Middle East, its increases may be followed by other producers. Unprecedented output cuts led by the Saudis and Russia boosted prices in May, and the OPEC+ group decided Saturday to extend those limits through July. Brent crude has more than doubled since late April, though its still down 35% this year. It rose 1.7% to $43.02 a barrel by 6:55 a.m. in London Monday. Still, oil refiners’ profits are being squeezed by crude’s rally, and the sharp Saudi hikes are likely to exacerbate that problem. Representatives for refineries from Europe and Asia expressed concern and said the new pricing would crush their margins. The month-on-month increase in the official selling price for flagship Arab Light crude to Asia, which accounts for more than half of Saudi oil sales, is the largest in at least 20 years. Aramco raised Asian Arab Light by $6.10 a barrel from June to a premium of 20 cents over the benchmark. The company increased all grades to Asia by between $5.60 and $7.30. That compares with an expected increase of about $4, according to a Bloomberg survey of eight traders and refiners. Buyers in the U.S., the Mediterranean region and northwest Europe will also pay more for oil. Arab Light for northwest Europe was raised to a 30 cent premium over the benchmark from a discount of $3.70. Aramco made the steepest increases in its lighter grades, which are the easiest to process into gasoline. That suggests the company sees good prospects for the fuel’s revival, “though refinery margins remain very weak,” Mills said.

Oil rally and Saudi price spikes could hurt refiners, stifling market recovery – Oil prices pared gains on Monday, despite the weekend announcement by OPEC and its allies, known as OPEC+, that historic production cuts of 9.6 million barrels per day across the group would continue through July as the coronavirus pandemic continues to weigh on demand. The move spurred hopeful talk of a recovery for oil prices, which are down about 30% year-to-date after a 56% recovery for international benchmark Brent crude in the month of May. But data from refineries across several regions shows weak margins, or “crack spreads” – the difference between the price of crude that refiners buy versus the price that the market is paying for the refined products. Higher crude costs without increased returns for the products refineries are selling suggests demand growth isn’t in line with the growth in prices, and could force refineries to buy lower crude volumes, translating into lower crude prices. “One word of caution is if we look at the rally we’ve seen in crude oil prices, it’s been amazing, but the big uncertainty is if you look at refinery margins, they are very weak across the board across all regions,” Warren Patterson, head of commodities strategy at ING. “And what that suggests is that maybe demand isn’t recovering as quickly as many had anticipated, or at least it’s not keeping up with the move higher that we’ve seen in crude oil prices.” The crack spread for refined products in the U.S. was at $9 last week, compared to $21 at the same time last year, Reuters reported, citing Refinitiv Eikon data. Margins for European diesel reached a record low of $2.90 per barrel last week. “Very poor refining margins and the recent sharp decline in U.S. crude bases now comfort us in our sequentially bearish outlook,” analysts at Goldman Sachs wrote this week. They see Brent pulling back to $35 per barrel in the coming weeks, compared to spot prices at $43. And soon to pressure refineries further is Saudi Aramco’s announcement over the weekend that it’s raising official selling prices (OSPs) for all of its customers in July, and for some the highest increases in twenty years. Saudi selling prices will spike next month by $5 to $7 per barrel just for Asian buyers, for instance – “again further hitting refining margins,” Patterson said. What refineries need is for the demand side to match up with the steady revival of crude prices, expected to gradually improve as economies reopen and lift their lockdowns meant to stem the spread of the coronavirus. “Refiners are facing weak cracks (margins) at the moment and the current pick-up in crude prices will only make them worse,”

Oil falls 3% despite OPEC+ cuts as Gulf ends voluntary curbs – Oil fell more than 3% on Monday after OPEC+ nations agreed to extend output cuts, but Saudi Arabia and two other Gulf producers said they would not maintain supplemental reductions that amount to more than a million barrels of daily supply. Brent crude fell, breaking a seven-day streak of gains. Brent futures fell $1.50, or 3.6%, to settle at $40.80 a barrel. US West Texas Intermediate crude (WTI), meanwhile, fell $1.36, or 3.4%, to $38.19. The Organization of the Petroleum Exporting Countries, Russia and other producers agreed in April to cut supply by 9.7 million barrels per day (bpd) in May and June to support prices as coronavirus lockdowns caused demand to collapse. The group, known as OPEC+, agreed on Saturday to sustain those cuts, equal to about 10% of global supply, through July. However, Saudi Energy Minister Prince Abdulaziz bin Salman said on Monday that the kingdom and Gulf allies Kuwait and the United Arab Emirates would not continue an additional 1.18 million bpd in reductions. “It would be too good to be true to have a total of nearly 11 million bpd in voluntary cuts extended for a month at times when we see supply deficits,” said Bjornar Tonhaugen, analyst at Rystad Energy. US shale producers, meanwhile, have started to reopen closed wells as prices have rebounded. Analysts said this could undercut the fragile demand recovery, and undermine OPEC’s efforts to shore up prices. Saudi Arabia, in addition, raised prices for its crude, anticipating stronger demand. “US production is returning to the market, and there is speculation that the huge increase in Saudi (prices) will kill already struggling refiner margins in Asia,” said Bob Yawger, director of energy futures at Mizuho in New York. China, the world’s largest crude importer, said purchases hit a record high of 11.3 million bpd in May.

Why Oil Prices Didn’t Rally After The OPEC+ Extension – OPEC+ agreed to extend the production cuts for another month, but with the extension mostly baked into market expectations, it has done little for oil prices at the start of the week. Meanwhile, the U.S. officially entered an economic recession in February.. Even as OPEC+ agreed to extend the production cuts for another month, Saudi Arabia said that it would end the extra supply cuts that it had imposed in the second quarter. “The voluntary cuts served their purpose and we are moving on,” Prince Abdulaziz said in a press briefing on Monday. Revenues from Saudi oil exports plunged by nearly 22 percent in the second quarter, a decline of $11 billion. Saudi Arabia increased the official selling price for its oil by the most in two decades, with Saudi Aramco raising prices of Arab Light to Asia by $6.10 per barrel. The move is a sign that Saudi Arabia wants to continue to boost the oil market by erasing all the discounts it offered at the start of the price war several months ago. Weak refining margins could kill the oil price recovery, according to a new report from Goldman Sachs. If refiners pull back on processing, crude will pile up, pushing down prices. Other analysts see the same trend. “One word of caution is if we look at the rally we’ve seen in crude oil prices, it’s been amazing, but the big uncertainty is if you look at refinery margins, they are very weak across the board across all regions,” Warren Patterson, head of commodities strategy at ING, told CNBC. The retreat of the Libyan National Army from the siege on Tripoli could pave the way for more Libyan oil to hit the global market. On Saturday, Libya restarted production at its largest oil field, the Sharara, which could bring 300,000 bpd back online. But a day later, the field shutdown after an armed group stormed the facility.. Tropical Depression Cristobal forced 34 percent of U.S. offshore oil production to be temporarily taken offline.

Goldman Sachs says an oil price correction as deep as 20% ‘may already be underway’ – Goldman Sachs sees a correction in oil prices on the horizon even amid a significant recovery in the last month and the recent decision by OPEC and its allies to extend historically large production cuts through July. “With oil now above $40/bbl, supplies will be incentivized to return, but we believe the risks to the downside have increased substantially and are now looking for a 15-20% correction which may already be underway after Monday’s modest sell-off,” Goldman Sachs’ commodities research team led by Jeffrey Currie wrote in an analyst note on Tuesday. “Despite the rally, we have been hesitant to recommend a long position this early in the cycle for several reasons,” the analysts wrote. For one, it’s because of surplus inventory that still very much exists – by an estimated 1 billion barrels, piled up as the world’s economic activity and travel remains largely at a standstill amid coronavirus fears. Goldman also describes the commodities rally as having gotten “ahead of fundamentals” with metals the only exception, and noted that returns on commodity indexes are still well behind spot price growth – and you can’t invest in spot commodity rates. That disparity is exemplified by the fact that fund inflows from retail investors since the start of April “have generated a -20% return despite a 95% rally in spot WTI prices.” Some analysts believe it could take until the middle of 2021 to reverse the inventory build, and that’s assuming that demand does recover and OPEC sticks to its cutting quotas.

Energy investing is ‘speculative gambling,’ says pro with 20 years in the industry – Since dropping into negative territory for the first time on record in April,West Texas Intermediate, the U.S. oil benchmark, has staged a record rebound and now trades around the $39 level. But David Ramsden-Wood, who has 20 years of experience in the industry and was previously COO of OneEnergy Partners, said the recent run is nothing to cheer about, and investors should steer clear of the sector. “I have a hard time seeing oil above $40, and I would probably say it averages $30 for the next 12 to 18 months as supply around the world, and in particular in the U.S. and Canada, comes down to match global demand,” he said Tuesday in discussion with CNBC’s Brian Sullivan during the latest installment of the LIVE PRO Talk series.

Oil Prices Fall As EIA Confirms Crude Inventory Build Crude oil prices accelerated their fall today after the Energy Information Administration reported a rise in U.S. crude oil inventories of 5.7 million barrels for the week to June 5 and an increase in fuel inventories.A day earlier, the American Petroleum Institute reported a crude oil inventory build of 8.42 million barrels, which caused prices to dive after several days of gains. Analysts had expected the EIA to report an inventory decline of 1.45 million barrels for last week. A week earlier, the EIA reported a decline in crude oil inventories, at 2.1 million barrels.In gasoline, the authority reported an inventory increase of 900,000 barrels for the week to June 5, down from a build of 2.8 million barrels a week earlier. Gasoline production last week averaged 8.1 million bpd, compared with 7.8 million bpd a week earlier.In distillate fuels, inventories went up by 1.6 million barrels last week, which compared with a hefty 9.9-million-barrel increase a week earlier. Distillate fuel production averaged 4.8 million barrels daily, compared with 4.7 million bpd a week earlier.Refinery runs rose last week, to average 13.5 million bpd. This compared with 13.3 million bpd a week earlier. Capacity utilization averaged 73.1 percent, compared with 71.8 percent a week earlier.Before the API shocked traders with its estimated inventory build, oil was trendinghigher on hopes the market would soon rebalance. However, there was downward pressure following news that U.S. producers were restarting production and worry that some Middle East producers, notably Iraq, will continue to produce more than their OPEC+ quota calls for. At the time of writing, Brent crude was trading at $40.40 a barrel, with West Texas Intermediate at $38.10 a barrel, both down by about two percentage points from opening today.

US Crude Oil Stockpile Reaches Record High, Production Hits 20-Month Lows – WTI is trading lower this morning after API’s report signaled a surprise jump in crude inventories, underscoring the market’s patchy road to rebalancing. All eyes now focused on the official data to see if API’s data was right (both crude and distillates which saw a big build – not a good sign in working off the stubborn diesel glut that is holding back the oil market’s broader recovery… DOE:

• Crude +5.72mm (-1.2mm exp)
• Cushing -2.279mm
• Gasoline +866k (-200k exp)
• Distillates +1.568mm (+2.9mm exp)

DOE data confirmed API’s reported surprise crude build, but at 5.72mm it was less than API’s. Distillates also saw another build – the 10th weekly build in a row)… Notably, as Bloomberg’s Julian Lee explains, with space in the Strategic Petroleum Reserve being rented out to producers, it is vital to include movements of crude into and out of the reserve in assessments of stockpile movements at this time. And total crude stockpiles, including commercial and SPR inventories, rose by 8 million barrels last week, that’s the second largest build in the past six weeks. Graphs Source: Bloomberg EIA actually reports that U.S. Crude Oil inventories rise to record highs at 538.1M Bbl.

Oil prices finish higher, with the U.S. dollar weaker on Fed plan to keep interest rates near zero – Oil futures finished higher on Wednesday, buoyed by weakness in the dollar that followed the Federal Reserve’s announcement that it plans to keep interest rates at near zero through 2022.The U.S. dollar got hammered after the Fed’s statement, pushing crude prices toward the highs for the day “after a bearish-tilted EIA report,” said Matt Smith, director of commodity reach at ClipperData.The Fed said that it would do what it takes to support the economy – easing worries about energy demand.The news from the central bank helped to offset earlier pressure from U.S. government data that showed a weekly climb of nearly six million barrels for U.S. crude inventories and a grim forecast from the OECD on the global economic outlook.“The fact that the Fed expects zero interest rates through 2022 supported financial markets including energy futures,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch.Also providing support, in the latest U.S. petroleum data showed that demand is “starting to perk up with refinery utilization recovering to satisfy higher demand for gasoline and distillates,” he said. The revival in demand, combined with an extension of production cuts by major producers through July, “are adding up to a global market rebalancing.” West Texas Intermediate crude for July delivery CL.1, -2.50% CLN20, -2.50%, the U.S. benchmark, rose 66 cents, or 1.7%, at $39.60 a barrel on the New York Mercantile Exchange, after touching an earlier low of $37.73. The settlement was the highest since March 6, according to Dow Jones Market Data.

Record US Crude Stockpiles Reveal Cracks in Oil Market Recovery— Swelling U.S. oil stockpiles are signaling that a difficult path lies ahead for OPEC and its allies who are trying to stabilize the market with record output cuts. Just weeks after American explorers began shutting in wells in the wake of a slump in demand, a recent recovery in crude is prompting some producers to turn the taps back on at a time when a fresh onslaught of the virus challenges pockets across the country. A month into the state’s reopening, Florida this week reported the most coronavirus cases of any seven-day period. In Texas, hospitalizations on Tuesday jumped to the highest since the pandemic emerged, rising for a third consecutive day. California’s hospitalizations are at their highest since May 13. Those gains in cases are leading to concern that oil’s rebound may unwind if governments implement lockdowns again. The OECD is forecasting a sharp contraction in the global economy this year that could get worse if there’s a second wave of virus infections. “Demand isn’t coming back fast enough, and supply is coming down more slowly than the market needs,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. American oil stockpiles reached 538.1 million barrels last week, the highest level in data going back to 1982, according to Energy Information Administration data, even though American production has fallen by at least 2 million barrels a day since mid-March. In the U.S., more excess oil is being sent for storage to the Strategic Petroleum Reserve, which rose by 2.2 million barrels last week to the highest level since November 2018. Rising inbound crude shipments drove stockpiles to a record in the Gulf Coast, with the region accounting for the lion’s share of the inventory increase. Net petroleum imports stand at the highest since August.

Oil Slides After US Crude Stockpiles Expand — Oil slumped in New York as an increase in American crude stockpiles to a record high raised fresh concerns about excess supply, while the Federal Reserve forecast a long road to recovery for the U.S. economy. Futures lost 4.1% to trade near $38 a barrel, erasing all of the gains from the past two sessions. Crude inventories unexpectedly rose last week, even as oil production fell, while gasoline stockpiles also saw a surprise expansion. Fed Chairman Jerome Powell said the pandemic could inflict longer-lasting damage on the economy and the central bank signaled it would keep rates near zero possibly for years to come. There are also fears that a second wave of infections in the U.S. may derail its fragile recovery. Global supply cuts and the easing of lockdowns in some countries has pushed prices higher after oil plunged below zero in April. However, the recovery is expected to be fragile and uneven, and there are concerns that producers may pump more with crude above $30 a barrel, adding to a glut. A new wave of coronavirus infections pushed the overall count in the U.S. past 2 million cases, with hospitalizations in Texas jumping. “Prices may have run ahead of themselves over the last month or so,” Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore, said by phone. “As we approach the second half of the year, there will be some rethinking about how far this rally can continue given the high volume of stockpiles that still exists.” West Texas Intermediate for July delivery fell $1.61 to $37.99 a barrel on the New York Mercantile Exchange as of 7:10 a.m. London time after rising 1.7% on Wednesday Brent crude for August delivery lost 3.5% to $40.26 on the ICE Futures Europe exchange after adding 1.3% in the previous session U.S. crude stockpiles rose by 5.72 million barrels last week to 538.1 million barrels, according to the Energy Information Administration. That’s the highest level in data compiled by Bloomberg since 1982. Still, oil production fell for a 10th week, while supplies at the key storage hub of Cushing, Oklahoma, dropped below 50 million barrels.

Oil drops more than 10% as fears over second wave of coronavirus cases hit the market — Oil prices dropped more than 8% on Thursday amid a broader market sell-off as fears over a second wave of coronavirus cases led to investors shedding assets. West Texas Intermediate crude futures, the U.S. oil benchmark, fell 10.25%, or $4.00, to trade at $35.60 per barrel. International benchmark Brent crude slid 8.7%, or $3.56, to trade at $38.17 per barrel. Oil has been rallying on the back of an uptick in demand paired with record supply cuts, but data on Wednesday from the U.S. Energy Information Administration showed a surprise build in inventory, suggesting that the demand recovery may have stalled. For the week ending June 5, inventory rose by 5.7 million barrels to a record high of 538.1 million barrels. Another key driver of WTI’s recent recovery, which has seen prices jump more than 50% in the last month, has been producers curbing output. Over the weekend, OPEC and its oil-producing allies agreed to extend its record production curb – equivalent to about 10% of pre-coronavirus global demand – through the end of July. In the U.S., production has pulled back from a record of over 13 million barrels per day in March as historically low prices prompted companies to reduce output. But with oil moving higher in recent weeks, some producers have begun to open the taps once again, which could send prices lower. “The higher price levels that we experienced lately have motivated producers to restart some of their shut-down production, in effect reversing a bit the positive price effect that lower production had created,” said Paola Rodriguez Masiu, senior oil markets analyst at Rystad Energy. “How prices develop further will depend a lot [on] how much and how quickly this shut production will come back to business,” she added. “The global economy is still in a precarious position,” noted Cailin Birch, global economist at The Economist Intelligence Unit. “The dip in oil prices in recent days most likely reflects the end of the price boost that came from the initial economic re-opening. The global economy is now settling in for a long, slow recovery process, which we only expect to pick up in late 2021, assuming a Covid-19 vaccine becomes available then,” she added.

Oil prices slump 8% as virus-related demand concerns resurface – (Reuters) – Oil prices tumbled about 8% a barrel on Thursday, fuelled by renewed concerns about demand destruction as new cases of coronavirus tick up globally, while crude inventories hit a record in the United States. U.S. coronavirus cases surpassed 2 million on Wednesday, according to a Reuters tally, and new infections are rising slightly after five weeks of declines. While most states have loosened restrictions on movement that shackled demand, fuel consumption remains 20% below typical levels, as consumers remain cautious. The U.S. Federal Reserve has expressed concern that this will continue, limiting demand. “A series of local spikes could have the effect of undermining people’s confidence in travelling, in restaurants, entertainment,” Fed Chair Jerome Powell said on Wednesday. Brent crude LCOc1 futures fell $3.18, or 7.6%, to settle at $38.55 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 fell $3.26, or 8.2%, to settle at $36.34 a barrel. Brent and WTI posted their worst daily drops since April 21 and 27, respectively. The weakness extended to other asset classes. Equity markets dropped, with the S&P 500 Index down 4% on the day, while U.S. Treasury bonds rallied. Crude futures have gained in recent weeks as government-imposed lockdowns eased, prompting optimism that fuel demand would recover. In parts of Asia and Europe, where the lockdowns were more severe, demand has recovered more sharply.

Oil Falls the Most in Six Weeks, Signaling a Fragile Recovery— Oil fell the most since late April as economic uneasiness iced U.S. stock markets, threatening to spoil crude’s recovery from a historic drop below zero. The market is grappling with record high U.S. oil inventories and an uneven demand rebound as signs mount that a second wave of the pandemic could be taking hold in some states. U.S. jobless claims remained high, underscoring longer-term macroeconomic challenges a day after the Federal Reserve provided a grim outlook for the economy. Oil’s recovery has been driven by production cuts and the easing of pandemic-related lockdowns. “It was very fast, driven by historically unprecedented OPEC+ cuts and central bank and government support on the demand side,” said Bart Melek, head of commodity strategy at Toronto Dominion Bank. “We should not be surprised to see a pullback, following such a violent rally,” he said. On the supply side, higher prices have pushed some producers to turn on the taps. U.S. crude stockpiles rose last week to 538.1 million barrels, according to the Energy Information Administration. That’s the highest level in data compiled by Bloomberg since 1982. “The surprisingly bearish stats, particularly on crude, the relatively dour comments by the Fed yesterday and fears of a resurgence of the coronavirus have all added to the price weakness today,” said Thomas Finlon, of Houston-based GF International. West Texas Intermediate for July delivery fell $3.26 to settle at $36.34 a barrel in New York, the biggest drop since April 27. Brent crude for August delivery dropped $3.18 to close at $38.55 a barrel, the biggest decline since April 21. Crude’s inability to sustain prices over $40 a barrel is leaving many companies across the industry in dire straits. “A couple months ago, the sector was in complete survivor mode, and it still needs to be, quite frankly,” said Jennifer Rowland, an analyst at Edward Jones & Co. “Even at $45, there will be a lot of companies that can’t survive,” she said. “Companies are still going to be bleeding cash at this level.”

Oil prices extend slump as U.S. coronavirus cases climb – Oil prices slid early on Friday, extending heavy overnight losses on a surge in U.S. coronavirus cases this week that has raised the prospect of a second wave of the outbreak slamming demand in the world’s biggest consumer of crude and fuel. West Texas Intermediate was down $1.32, or nearly 4%, at $35.02 a barrel by 0011 GMT, after slumping more than 8% on Thursday. Brent crude was down $1.15, or 3%, at $37.40 a barrel, having dropped nearly 8% the previous session. A rally off April’s lows has come to a shuddering halt this week as the market faced the reality that the coronavirus pandemic may be far from over globally, with cases in the United States alone passing 2 million this week. The oil benchmarks are heading for their first weekly decline in seven, with Brent dropping about 12%, while U.S. crude is heading for a loss of more than 10%. “A sustainable rally needs to include improving gasoline demand, reducing inventories, increasing product margins to the point where refiners kickstart runs,” RBC Capital Markets said, noting that “U.S. driving patterns are far from normal.” While producers have been cutting supply, demand remains constrained by the outbreak, with gasoline stockpiles in the U.S. last week rising more than expected to 258.6 million barrels, according to government data. U.S. crude inventories rose against forecasts by 5.7 million barrels to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country. In the meantime, states including Texas and Arizona are struggling to cope with a rising number of coronavirus patients filling hospital beds. In Houston, Lina Hidalgo, the senior official for the county that includes the city that is the heart of the U.S. oil industry, warned “we may be approaching the precipice of a disaster”. More than 7.43 million people have been infected by the novel coronavirus around the world and more than 400,000 have died, according to a Reuters tally.

Oil prices end slightly lower, post first weekly loss in 7 weeks – Oil futures settled at a modest loss on Friday, with U.S. and global benchmark prices suffering their first weekly decline in seven weeks on worries about oversupply and a resurgence of coronavirus cases in the U.S. Oil is likely to “remain vulnerable and exposed to downside shocks thanks to coronavirus-related concerns,” said Lukman Otunuga, senior research analyst at FXTM. “The possibility of renewed lockdowns and delayed global economic recovery is bad news for oil, which remains one of the biggest causalities of the coronavirus menace,” he told MarketWatch. Although OPEC+ agreed to extend production cuts by another month, in the grand scheme of things this may offer little support to oil, which is in “a losing battle with COVID-19 and world growth fears,” he said. West Texas Intermediate crude for July delivery CL.1, +0.82% CLN20, +0.82%, the U.S. benchmark, fell 8 cents, or 0.2%, to settle at $36.26 a barrel on the New York Mercantile Exchange – the lowest finish for a most-active contract since June 1, according to Dow Jones Market Data. The contract tumbled 8.2% on Thursday to mark the sharpest one-day fall since April 27. Global benchmark Brent oil for August delivery BRNQ20, +0.80%, however, added 18 cents, or 0.5%, to end at $38.73 a barrel on ICE Futures Europe, following a 7.6% plunge Thursday, its steepest such slide since April 21, that took it to its lowest finish since June 1. For the week, WTI marked weekly slide of 8.3%, while Brent saw a decline of 8.4%. That represented the first weekly losses for the two crude benchmarks since the week ended April 24.

OPEC+ mostly met cutting targets in May, but future compliance – and its enforcement – is uncertain – The 23 member states of OPEC+, comprised of OPEC and ten of its oil-producing allies, for the most part delivered on record production cuts agreed to by the alliance through the month of May, a new report shows. “OPEC’s 13 members dropped their output to 24.32 million b/d, for a compliance rate of 82% with their prescribed cuts,” S&P Global Platts found in a survey released Wednesday. The ten non-OPEC members, which include Russia, pumped a combined 13.89 million barrels per day comprising 91% of their cuts, bringing OPEC+’s collective compliance to 85%, Platts reported. Following the coronavirus pandemic-induced plunge in oil prices, OPEC+ embarked on the largest coordinated oil production cut regime in history in May. They agreed to cut 9.7 million bpd in an effort to support the market, amounting to about 10% of global oil supply. In total, Platts found that the coalition managed to reduce its output by a combined 8.28 million bpd for the month. The OPEC+ alliance agreed over the weekend to extend the cuts through July, with Saudi Energy Minister Abdulaziz bin Salman asserting that this time there would be “no room whatsoever for lack of conformity.” But the pacts have traditionally been difficult to enforce, with some members – particularly Iraq and Nigeria – falling behind on their cutting commitments, and OPEC kingpin Saudi Arabia shouldering the overwhelming majority of cuts, often slashing their output by more than their required quota. Iraq, OPEC’s second-largest producer, was the group’s biggest offender, pumping 4.19 million bpd in May – some 600,000 bpd over its agreed limit. Nigeria, Angola and Gabon, as well as non-OPEC states Kazakhstan and Azerbaijan, were among the other laggards. The group’s most recent agreement included a promise by non-compliant countries to compensate for any barrels they didn’t cut in May or June by making deeper reductions between July and September. Iraq’s oil ministry said this week it is “fully committed” to cutting its production from June onward in accordance with the OPEC+ deal.

Mediterranean Oil Tensions Are Boiling Over – Under pressure in Libya – where it’s gone head-to-head with General Haftar in an ongoing battle to decide who gets to ultimately control the country’s oil revenues – and floundering in Syria, Turkey is once again upping the ante in the Mediterranean, this time preparing to issue new oil and gas exploration licenses in direct confrontation with the European Union. It’s not just about Cyprus, anymore. Turkey’s state-run oil and gas company has been given licenses from the Turkish government to explore for oil and gas in 24 locations in the East Mediterranean. Seven of those locations are just off the coast of key Greek islands. It’s a direct provocation that has Greece infuriated, and experts are worried that this could lead to direct clashes once Turkey starts exploration drilling. Last weekend, Turkey released a draft plan for Turkish Petroleum’s exploration license. On Monday, Greek Foreign Minister Nikos Dendias said in a statement that the country “stands ready to deal with this provocation should Turkey decide to implement this decision”. The draft plan explicitly violates Greek sovereignty, and it is designed to take advantage of a new maritime boundary agreement Erdogan wrangled last year with the Government of National Accord (GNA) in Libya. This was the trade-off for Libya’s aid in fighting back General Haftar in his push to take the Libyan capital, Tripoli. The maritime boundary is meant to perform a pincer movement against Cyprus, which is drilling offshore in its EEZ where Turkey has also provocatively deployed drillships. In the Greek Cypriot EEZ alone, there are an estimated 120 billion cubic meters of natural gas, for which drilling began in 2011. The first license here was granted in 2008 to American Noble Energy (the same company behind the massive Israeli discoveries). Erdogan’s desperation is born out of the fact that Turkey is being squeezed out of a role in the oil and gas riches of the Mediterranean, which is arguably the world’s next biggest, untapped oil and gas hotspot. His latest move to issue more exploration licenses, even encroaching on Greek maritime territory, comes after Israel, Greece and Cyprus signed an agreement to build an underwater pipeline to carry Israeli gas to Europe, cutting out Turkey altogether.

Libya’s National Oil Corp declares force majeure on largest oil field after militia shutdown – Libya’s National Oil Corporation has declared force majeure on exports from its largest oil field Tuesday, after a militia group shut it down just days after it resumed production following a six-month blockade. “The armed group, which came from Sebha, stormed the Sharara oil field and pulled their guns on civilian unarmed workers, coercing them to stop production at the field at dawn,” the state oil company said in a statement. Workers at the massive Sharara oil field have shut it down at the demands of the armed group’s leader Mohamed Khalifa, who is linked to the renegade general Khalifa Haftar’s Libyan National Army, the instigator of a violent power struggle with Libya’s UN-recognized government that’s lasted more than a year. Haftar’s forces pulled back in May after a prolonged campaign to capture the capital Tripoli failed. Oil prices saw a slight “last-minute injection of upward buying pressures” Tuesday on the Libya news and worries over its stability, Stephen Brennock, an oil analyst at PVM Oil Associates, wrote Wednesday morning. “A few days after returning from a multi-month shutdown, the Sharara field went offline only to restart and suffer a second stoppage in the space of a few hours.” “Simply put, a sustained recovery in Libya’s oil production is not currently on the cards.” Libya’s southwestern Sharara field previously had a 300,000 barrel per day output, and was resuming production gradually after reopening on Saturday. It’s now in renewed jeopardy after a long period of shutdown that began in January amid fighting that took the majority of the OPEC state’s oil production offline. As warring factions within the country attempted to use the key commodity to seize control, output in Africa’s third-largest oil producing nation plummeted in late January from around 1.2 million bpd to just over 320,000 bpd and is now estimated to be around a mere 90,000 bpd. The crisis exempted Libya from OPEC’s production cut agreement meant to stabilize oil prices. The country’s petroleum sector represents 95% of its export earnings and 60% of its GDP.

The purveyors of death cough up loose change for Yemen – A so-called humanitarian aid conference for Yemen last week raised a paltry $1.35 billion, some $1 billion short of the target and less than half the $3.2 billion raised last year. The Saudi monarchy, which has spent $5 to $6 billion per month for the last five years on a criminal war against Yemen, primarily fought from the air, pledged just $500 million. Riyadh insisted $200 million of its donation would be spent through Saudi aid programmes, not those sanctioned by the United Nations (UN). It later emerged that this was not new money but money that had been pledged earlier and not delivered. The US, UK, Norway and Germany contributed most of the remainder, small change compared to the sales value of their weaponry – supplied to the Saudi Arabian military – that has devastated the Arab world’s poorest country. The United Arab Emirates (UAE), the other major participant in the war, made no commitment to the UN’s aid appeal. Dr. Abdullah al-Rabiah, the head of the King Salman Centre for Relief and Humanitarian Aid in Saudi Arabia that co-hosted the virtual conference, ascribed the shortfall to the impact of coronavirus on national budgets, omitting to say that every one of the participants had made billions available to their own corporations and financial institutions, including their arms manufacturers. Unless more money was raised, said Mark Lowcock, head of the United Nations Office for the Coordination of Humanitarian Affairs, Yemen “will face a horrific outcome at the end of the year”. He added, “Yemen is now on the precipice, right on the cliff edge, below which lies a tragedy of historic proportions.” The irony of appealing to the very forces that had produced this “tragedy of historic proportions” seems to have escaped him and the world’s press reporting on a conference that served to absolve the major participants of their crimes. It came as no surprise that the response to the aid appeal was a noxious combination of hypocrisy, indifference and bullying.

Palestinians come out in force to protest US-backed Israel plan -Hundreds of Palestinians have rallied in the city of Hebron in southern West Bank against a United States-backed Israeli plan to annex huge swathes of the occupied territory. The rallies were held on Friday on the anniversary of Israel’s 1967 occupation of the West Bank and the Gaza Strip. Israel occupied the territories during a Western-backed war that year. It was forced to leave Gaza in 2005 but keeps the coastal sliver under a crippling siege. Across the West Bank, Israel has illegally built over 230 settlements that house more than 600,000 Israelis. The rallies that had been called by West Bank-based Palestinian political factions took place in protest against a plan announced by Israel’s prime minister Benjamin Netanyahu to annex the areas where the settlements have been built and the Jordan Valley. The areas that are targeted by the regime’s scheme comprise 30 percent of the West Bank. Netanyahu announced the plan emboldened by a hugely-controversial plot that was detailed and backed by US President Donald Trump on January 28. The protesters on Friday chanted anti-Israeli and anti-Washington slogans, waved Palestinian flags, and held up banners some of which read, “No to the policy of annexation of the West Bank. No to division of Hebron.” “Today is a day for general mobilization in all of the country’s governorates against the annexation deal, which was announced by Netanyahu, and in rejection to Trump’s ‘deal of the century,’” one demonstrator said, referring to the US plot by the ironic name that has been assigned to it by the US president. If you want to continue to read our work and help us produce more news and reports from Palestine, click here for our fundraising campaign The participants, the protester said, were seeking “to send a message to the world, especially Israel, that the people will not accept any solution less than a Palestinian state on the 1967 borders with Jerusalem to be the capital.” Another participant said the protest was one that “rejects and condemns all Israeli measures and is against the American administration’s bias in favor of Israel.” The US plot also re-endorsed Washington’s incendiary recognition of as Israel’s “capital.” The recognition that came during Trump’s presidency flies in the face of Palestinians’ age-old demand that the city’s eastern part serve as the capital of their future state. Since the US’s unveiling of the plot, Palestinians have stopped recognizing any intermediary role by Washington in the Palestinian-Israeli conflict.

China to cut teapot refining capacity as plans for mega complex (Reuters) – China’s oil hub Shandong has embarked on a plan to shut down capacity of half a million barrels per day shared among small, independent refiners to make way for a giant complex that should spur economic recovery from the coronavirus crisis. Reuters exclusively reported last week that China, the world’s largest oil consumer after the United States, was going ahead with the $20 billion Yulong Petrochemical complex. The planned 400,000 barrel-per-day (bpd) refinery and 3 million tonne-per-year ethylene plant in Yantai, Shandong, the country’s hub for independent refineries, sometimes referred to as teapot refineries, had long failed to get approval as China struggled with excess refining capacity. The drop in demand because of coronavirus lockdowns, as well as expectations climate concerns will reduce conventional motor fuel use, is likely to increase over-supply in the near term. But state approval was granted last week for a new mega refining complex, weighted towards petrochemical production whose demand is expected to be relatively robust. That has prompted Shandong to accelerate a plan dating from 2018 to close 500,000 bpd in capacity over the next two-to-three years, Shandong-based industry officials and consultancies said.That amounts to 20% of Shandong’s capacity, made up of more than 60 small plants.

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