AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 172894 times)

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
https://oilprice.com/Energy/Crude-Oil/Fleet-Of-28-Saudi-Oil-Tankers-Could-Send-US-Oil-Prices-Crashing-In-May.html

Fleet Of 28 Saudi Oil Tankers Could Send U.S. Oil Prices Crashing In May


With the Covid-19 pandemic reducing global oil demand by devastating numbers, oil storages are filling quickly in the US, forcing producers to start shutting output in the country and creating a big tanker congestion on its coasts. A Rystad Energy analysis reveals that 28 tankers with Saudi oil, including 14 VLCCs and carrying a total of 43 million barrels, will arrive on the US Gulf and West coasts between 24 April and 24 May.

The Saudi fleet, with oil loaded at Ras Tanura, will join an existing congestion of 76 tankers that are currently waiting to unload in US ports. Most of these tankers are on the West Coast, where 34 tankers are waiting in line to offload about 25 million barrels of crude. In addition, about 31 tankers, carrying a similar load, are waiting for a slot to unload on the US Gulf Coast.

The tanker congestion has spiked in recent days because refiners are canceling or deferring their purchases, as they adjust utilization rates to match the steep fall in demand for road and jet fuels.

“The total volumes booked to arrive from Ras Tanura are four times higher than the previous four-week average of imports from Saudi Arabia. Given the current storage situation and the level of congestion on US coasts, we find it unlikely that all tankers will be able to unload upon arrival. The congestion at US ports has reached new highs,” says Paola Rodriguez-Masiu, Rystad Energy’s Senior Oil Markets analyst.

If all the Saudi tankers unload, the crude they carry will offset during May almost all of the production reductions from March levels, effectively maintaining the current high storage filling rates.

The limited storage is a growing concern in the oil market and among the key reasons why prices have taken a steep downturn in recent weeks, with US WTI crude even trading negative a few days ago.

Before the official stock build data for week 17 (ending on April 24), commercial crude stockpiles stood at 518.6 million barrels, nearly 9% above the five-year average for this time of year, and just 16.9 million barrels away from hitting the record level of 535.5 million barrels reached during the spring of 2017.

“While US refinery demand for crude has dropped over 3.0 million bpd during the last four-week period, the EIA reported that oil production has only decreased by 800,000 bpd. We expect it to drop by another 800,000 bpd in the following weeks. However, crude imports are forecasted to remain at around 5.8 million bpd during the next four weeks due to the Saudi cargos that are fast approaching US shores,“ Rodriguez-Masiu concludes.

US oil production is bracing for a steep decline in May and June as operators shut some of their producing wells due to storage constraints and oil price economics. The operator-communicated shut-ins alone (from six operators) are calculated to reach at least 300,000 barrels per day (bpd) in May and April, Rystad Energy has estimated.

Please note that total shut-ins only account for a portion of the US total production decline since March 2020 as the shut-in figure only includes production losses from producing wells that have been turned offline. It does not include production potentially lost from canceling drilling and completion plans.

By Rystad Energy
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Oil prices drop amid supply glut, fears of 2nd coronavirus wave
« Reply #1036 on: May 11, 2020, 01:42:01 AM »
https://www.cnbc.com/2020/05/11/oil-markets-coronavirus-crude-output-in-focus.html

Oil prices drop amid supply glut, fears of 2nd coronavirus wave
Published Sun, May 10 202010:13 PM EDTUpdated an hour ago

An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.   Mario Tama | Getty Images

Reuters
Key Points

    Brent crude futures were down 29 cents, or 0.9%, at $30.68 a barrel by 0431 GMT.
    U.S. West Texas Intermediate crude futures fell 17 cents, or 0.7%, to $24.57 a barrel.


Oil prices fell on Monday as concern over a persistent glut and economic gloom caused by the coronavirus pandemic combined to cancel out support from supply cuts at some of the world’s top producers.

Brent crude futures were down 29 cents, or 0.9%, at $30.68 a barrel by 0431 GMT, while U.S. West Texas Intermediate crude futures fell 17 cents, or 0.7%, to $24.57 a barrel.

Both benchmarks have notched up gains over the past two weeks as countries have eased business and social lockdowns imposed to cope with the coronavirus and fuel demand has rebounded modestly. Oil production worldwide is also declining.

But possible signs of a second wave of coronavirus infections in northeast China and South Korea worried investors even as more countries started to pivot towards easing pandemic restrictions in moves that could support oil demand.

Goldman Sachs analysts said there was still concern that demand will stay weak in 2021, with worries about a second wave of Covid-19 cases and only a modest increase in personal or corporate travel.

Global oil demand has plummeted by about 30% as the coronavirus pandemic curtailed movement across the world, building up inventories globally.

Fears that the United States is running out of storage space triggered WTI prices crashing into negative territory last month, prompting some U.S. producers to slash output.

In a sign of that impact, the number of operating oil and gas rigs in the world’s largest oil producer fell to 74 in the week to May 8, a record low according to data released on Friday from energy services firm Baker Hughes going back to 1940.

“People are surprised by how quickly the U.S. is shutting in production and that’s exactly what we need in order to support prices,” said Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo.

“There’s another 10 days before the June contract expires ... if the WTI contract can avoid a crash going into expiry, hopefully we’ve seen the bottom.”
Save As Many As You Can

Offline Surly1

  • Master Chef
  • *****
  • Posts: 18654
    • View Profile
    • Doomstead Diner
Re: 🛢️ Oil prices drop amid supply glut, fears of 2nd coronavirus wave
« Reply #1037 on: May 11, 2020, 03:56:32 AM »
https://www.cnbc.com/2020/05/11/oil-markets-coronavirus-crude-output-in-focus.html

Oil prices drop amid supply glut, fears of 2nd coronavirus wave
Published Sun, May 10 202010:13 PM EDTUpdated an hour ago




You Are Here.
"...reprehensible lying communist..."

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Oil Price War Puts Entire Kingdom Of Saudi Arabia At Risk
« Reply #1038 on: May 13, 2020, 06:33:52 AM »
Who cooda node?   ::)

RE

https://oilprice.com/Geopolitics/Middle-East/Oil-Price-War-Puts-Entire-Kingdom-Of-Saudi-Arabia-At-Risk.html

Oil Price War Puts Entire Kingdom Of Saudi Arabia At Risk
By Simon Watkins - May 11, 2020, 7:00 PM CDT


At no time since Ibn Saud first consolidated his Arabian conquests into the Kingdom of Saudi Arabia in 1932 has the ruling Saud dynasty faced such an existential threat to its continued rule over the country.

It is true that Saudi Arabia has been able to gain some temporary advantage in key Asian export markets, as its shipments to China more than doubled in April to 2.2 million barrels a day (bpd) and those to India, at 1.1 million bpd, were also the highest in at least three years. This, though, as much as any other factor that might endure, was a product of Saudi slashing its official selling prices (OSPs) for April crude sales to some of the lowest levels in decades, undercutting its rivals, and exactly the same happened again for May crude sales.

Even this very slight victory, though, has already been jeopardised by an indication that the scale of the trouble into which the House of Saud has placed Saudi Arabia is truly monumental. Just last week saw massive economic pressure force the Saudis into increasing the June delivery price for its Arab light crude oil to Asia by US$1.40 per barrel from May, albeit at a discount of US$5.90 to the Oman/Dubai benchmark average. Market expectations were that Saudi would continue to keep OSPs low to hold onto market gains.

Saudi Arabia did this because its finances are in an even worse state now than they were at the end of the Kingdom’s previous attempt to destroy the U.S. shale industry that ran disastrously from 2014 to 2016. Back then, Saudi had a much greater chance of success in destroying the U.S. shale industry than it did this year, for a wide variety of reasons, but even then the effort nearly destroyed the Saudi economy forever.

Back then Saudi had record-high foreign assets reserves of US$737 billion in August 2014, allowing it real room for manoeuvre in sustaining its SAR/US$-currency peg and covering the huge budget deficits that would be caused from the oil price fall caused by overproduction. Despite this relatively positive backdrop to Saudi’s 2014-2016 oil price war against U.S. shale, OPEC member states lost a collective US$450 billion in oil revenues from the lower price environment, according to the IEA.
Related: Oil Is Back In Demand As Drivers Return To The Roads

Saudi Arabia itself moved from a budget surplus to a then-record high deficit in 2015 of US$98 billion and spent at least US$250 billion of its foreign exchange reserves over that period that even senior Saudis have said are lost forever. So bad was Saudi Arabia’s economic and political situation back in 2016 that the country’s deputy economic minister, Mohamed Al Tuwaijri, stated unequivocally (and unprecedentedly for a senior Saudi) in October 2016 that: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” That is to say, that if Saudi kept overproducing to push oil prices down – just as it did this year, yet again - then it would be bankrupt within three to four years.

On the pure economics, some have said that around US$300 billion is sufficient to defend the SAR/US$-peg and that, within those parameters, Saudi Arabia’s current foreign exchange reserves are ample. However, this does not factor into the investment proposition equation the negative market bias that now faces Saudi Arabia, which will adversely affect its ability to raise the sort of debt and equity capital that is required to slow the drawdown rate on these reserves. Even before the reputational damage that Saudi Arabia has suffered as a result of embarking on exactly the same strategy that was so disastrous for its last time – and choosing to do it whilst facing the most dangerous global pandemic since the 1918 Spanish ‘flu - an overhang in its sovereign debt issuance was already building, stretching investor appetite for any more.

Specifically, Saudi Arabia has already tapped international bond markets twice this year and has borrowed a total of US$19 billion from local and international investors. Attracting a new pool of investors onto which to load its now toxic-looking debt will not be helped by the way in which it completely disregarded those trusting souls who bought into the Saudi Aramco IPO, despite there being every indication that the Saudis would indeed violate their minority share holder rights, as analysed in depth in my new book on the global oil market.

In terms of the actual facts that Saudi apologists overlook, in March Saudi Arabia’s central bank depleted its net foreign assets at the fastest rate since at least 2000. In that month alone, according to even the Saudis’ own figures, the Kingdom’s foreign reserves fell by just over SAR100 billion (US$27 billion). This is a full 5 per cent decrease from just the previous month, and the total reserves figure now stands at just US$464 billion, the lowest level since 2011. It leaves only US$164 billion of ‘fighting reserves’ that can be used on everything else that Saudi needs when the US$300 billion needed to keep the economic cornerstone SAR/US$-peg is subtracted. Indeed, if the 5 per cent reserves drop figure is assumed for April and May as well (and it may well have been more) then Saudi’s foreign exchange reserves now are just over US$418 billion.

This figure is set to decrease much further, as lower oil prices endure and the lower oil production targets recently agreed are adhered to by Saudi Arabia. At the same time, the Kingdom slipped into a US$9 billion+ budget deficit in the first quarter and a number of independent analysts are predicting that its overall gross domestic product could shrink by more than 3 per cent this year (the first outright contraction since 2017 and the biggest since 1999), whilst the budget deficit could widen to 15 per cent of economic output.
Related: What’s Behind The Sudden Rally In Natural Gas?

Over and above the sheer stupidity involved in launching a strategy of overproducing oil to push down prices that had already failed before and doing so at a time when it was obvious that the coronavirus would itself annihilate oil demand and pricing, the number one mistake that the al-Sauds made - and for which they will be held personally responsible for by their people in the coming months – is to eradicate all trust in them on the part of the U.S. Everyday Saudis do not, perhaps, care that much for the U.S. certainly, but they do care about the country’s increased political and economic insecurity that has been caused by the latest oil price war, directly and indirectly.

To the U.S. – and this has been reiterated repeatedly to OilPrice.com by various senior sources in the U.S. Presidential Administration over the past few weeks - Saudi Arabia has broken the basic deal (and therefore, trust) established in 1945 between the U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz, in the Great Bitter Lake segment of the Suez Canal that has defined the relationship between the two countries ever since. The deal was that the U.S. would receive all of the oil supplies it needed for as long as Saudi Arabia had oil in place, in return for which the U.S. would guarantee the security of the ruling House of Saud. This has subsequently altered slightly to ensure that Saudi Arabia also allows the U.S. shale industry to continue to function and to grow. If this means that Saudi Arabia loses out to U.S. shale producers by keeping oil prices up but losing out on export opportunities to U.S. firms then that is just the price that the House of Saud must pay for the continued protection of the U.S. - politically, economically, and militarily.

Now that this trust has been broken all options are on the table. U.S. President Donald Trump warned the al-Sauds specifically a while back that: “He [Saudi King Salman] would not last in power for two weeks without the backing of the U.S. military.” According to various sources – and as highlighted in advance by OilPrice.com as a serious option under consideration -  on 2 April, Trump actually told Crown Prince Mohammed bin Salman over the telephone that unless OPEC started cutting oil production he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from the Kingdom.

This, though, is not the end of matters for the U.S. Having already made it plain that any further nonsense from Saudi will not be tolerated by the U.S. from the political perspective, optimism is high amongst senior Democrats, and some Republicans, in both Houses, that Saudi can be made to pay for the economic hardship it has caused the U.S. The mechanism is the ‘No Oil Producing and Exporting Cartels Act’ (NOPEC) Bill, which makes it illegal to artificially cap oil (and gas) production or to set prices, as OPEC, OPEC+, and Saudi Arabia do. The Bill would also immediately remove the sovereign immunity that presently exists in U.S. courts for OPEC as a group and for each and every one of its individual member states. This would leave Saudi Arabia open to being sued under existing U.S. anti-trust legislation, with its total liability being its estimated US$1 trillion of investments in the U.S. alone.

By Simon Watkins for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ U.S. Shale Could Crush The Oil Market Recovery
« Reply #1039 on: May 18, 2020, 12:00:16 AM »
https://oilprice.com/Energy/Crude-Oil/US-Shale-Could-Crush-The-Oil-Market-Recovery.html

U.S. Shale Could Crush The Oil Market Recovery
By Haley Zaremba - May 17, 2020, 2:00 PM CDT


Oil markets have taken a beating around the globe, but nowhere has the pummeling been worse than in the United States shale patch, where the oil price crash plunged the West Texas Intermediate crude benchmark to nearly $40 below zero per barrel last month in a historic rock bottom moment. The oil price crash was the result of a severe decline in international oil demand thanks to the spread of the novel coronavirus, made infinitely worse by an ensuing oil price war between the leading OPEC+ members of Saudi Arabia and Russia. As the two petro-nations duked it out, the global oil glut ballooned to a massive oversupply and oil storage deficiency that persists today.

In the wake of these blows to the global oil markets, the Permian Basin has been swept with a wave of bankruptcies and fired and furloughed workers. “The U.S. rig count has plunged by 62 percent from a year ago,” and is now equal to the number of rigs drilling over a decade ago, in 2009, according to the Houston Chronicle. Across the North American continent, the shutting in of wells and overall oil production has plummeted even faster than analysts predicted, and “the industry is on pace to take about 1.7 million barrels a day of production off the market by the end of June in response to low prices and full storage tanks,” reports Forbes.  The silver lining to this huge halt in production, both in the United States and internationally, is that oil markets are slowly showing some early signs of recuperation. On Monday an announcement from Saudi Arabia, the world’s second-largest oil producer after the U.S., announced that it will impose even more austere production cuts in the coming months, and markets quickly (albeit modestly) rose in response. “Saudi Aramco, the state-controlled oil company, will produce 7.5 million barrels a day in June, down from more than 12 million in April,” reported Barron’s. Kuwait and the United Arab Emirates also announced that they would cut their production levels by even more than they had committed to. This is on top of OPEC’s 9.7 million barrels a day production cut, which began on the first of this month.

Related: Oil Spikes Despite Pandemic Uncertainty

The United States has not imposed nearly such austere measures, for a number of reasons. According to Forbes, it’s because “the United States holds considerable leverage over Saudi Arabia and its OPEC allies in the Mideast because of the security guarantees it provides, so it’s not surprising that Gulf countries would shoulder the lion’s share of the cuts.” But Barron’s points out that the United States, simply by virtue of its structure and decentralized control, can’t start and stop production on a dime the way that authoritarian petro-states like Saudi Arabia and Kuwait can.

With the production cuts from the Middle East and economic slowdown in the U.S. shale play, many analysts are bullish about the future of oil markets, with some even predicting “a massively under-supplied market — to the tune of 5 million barrels a day — by 2025,” according to Forbes in reference of a Rystad Energy press release, and others claiming that $100 barrels are coming down the pike.

“But a big question is whether U.S. shale producers could spoil the party by restarting shut-in production or completing wells the moment that prices rise high to earn any positive cash flow,” writes Forbes. Julian Lee expressed similar concerns in an opinion piece for Bloomberg this week, writing: “There’s a double risk on the horizon: Just as lifting lockdowns too soon could bring a second spike in virus infections and deaths, loosening the hard-fought restraint in oil production too soon risks a second oil-price collapse.” Summing up these sentiments, just this week Oilprice published the rather succinct headline and assessment that “U.S. Shale Needs To Slow Down To Survive”.

But the United States, by leaving most of the production cuts and austere commitments to OPEC countries and the Middle East, is endangering more than just its own oil rebound--it’s endangering the comeback potential for the entire global oil market. “Producers should focus on emerging from the current crisis with a stronger foundation,” writes Forbes, “even if that means fewer players and less production.”

By Haley Zaremba for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Why Saudi Arabia Will Lose The Next Oil Price War
« Reply #1040 on: June 09, 2020, 12:42:12 AM »
https://oilprice.com/Energy/Energy-General/Why-Saudi-Arabia-Will-Lose-The-Next-Oil-Price-War.html

Why Saudi Arabia Will Lose The Next Oil Price War
By Simon Watkins - Jun 08, 2020, 7:00 PM CDT


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$737 billion at the time of launching the first oil war. This allowed it room for manoeuvre in sustaining its economically crucial SAR-US$-currency peg and in covering any budget deficits that would be caused by the oil price fall. At a private meeting in October 2014 in New York between Saudi officials and other senior figures in the global oil industry, the Saudis were ‘extremely confident’ of securing a victory ‘within a matter of months’, a New York-based banker with close knowledge of the meeting told OilPrice.com. This, the Saudis thought, would not only permanently disable the U.S, shale industry but would also impose some supply discipline on other OPEC members.
Related: Will U.S. Shale Ever Return To Its Boom Days?

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. Many of the better operations in the core areas of the Permian and Bakken, in particular, were able to breakeven at price points above US$30 per barrel and to make decent profits at points above US$37 per barrel area, driven in large part through advances in technology and operational agility. 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. In an unprecedented move for a serving senior Saudi politician, the country’s deputy economic minister, Mohamed Al Tuwaijri, stated unequivocally in 2016 that: “If we [Saudi Arabia] don’t take any reform measures, …then we’re doomed to bankruptcy in three to four years.”

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 has much greater fixed costs attached to its oil sector, regardless of how low market prices go. Before the onset of the latest oil price war, the Kingdom had an official budget breakeven price of US$84 per barrel of Brent but, given the economic damage done by this latest price war folly, it is much higher now. By stark contrast, the U.S. shale sector that Saudi crucially helped to shape in the first oil price war is now so nimble that US$25-30 per barrel of WTI is enough to bring some of the production back on line, as long as operators believe that prices will not fall and hold below the US$20 per barrel level. But, even if prices are below that key US$25-30 per barrel level, it does not matter to the long-term survivability of the U.S. shale sector as the key players are able to shut down wells instantly as and when needed and to start up them up again within a week as demand requires. In sum: in any oil price war, the Saudis simply cannot wait out the U.S. shale sector.

On the other hand, though – in a rising oil price environment - the Saudis are also doomed. This is because the U.S. – even before the latest oil price war – had intimated that it would not tolerate oil prices above around US$70 per barrel of Brent. When the oil price rose last year during the March-October period consistently above US$70 per barrel level, U.S, President Donald Trump Tweeted about Saudi Arabia’s King Salman that: “He would not last in power for two weeks without the backing of the U.S. military.” The US$70 per barrel level is considered one that brings into view oil price levels that might pose problems for the U.S. economy. Specifically, it is estimated that every US$10 per barrel change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline rises, more than US$1 billion per year in consumer spending is lost.
Related: OPEC+ Agrees On Extending Record Output Cuts

Before this latest Saudi-instigated oil price war, the U.S. had little interest in the fact that this US$70 per barrel level was way below Saudi Arabia’s then-budget breakeven oil price. After this latest attack on its strategically vital shale sector, the U.S. has absolutely no interest whatsoever in this budget breakeven fact or indeed in whether Saudi Arabia continues to slowly haemorrhage into bankruptcy in the coming years, according to a number of Washington-based sources close to the U.S. Presidential Administration spoken to by OilPrice.com in the last few weeks. Partly this indifference is due to the perceived ‘betrayal’ of the foundation stone deal that had determined the two countries relationship since 1945. This was that the U.S. would receive all of the oil supplies it needed for as long as Saudi Arabia had oil in place, in return for which the U.S. would guarantee the security of the ruling House of Saud. This altered slightly with the advent of the U.S. shale sector to ensure that Saudi Arabia also allows the U.S. shale industry to continue to function and grow.

Partly as well, this indifference is due to the series of other blunders that senior U.S. politicians believe have been made by Saudi Crown Prince Mohammed bin Salman (MbS), which now make him a liability. This includes – but is not limited to – the Saudi-led war in Yemen, the cosying up of Saudi to Russia in the OPEC+ grouping, Lebanese President Michel Aoun’s allegation in 2017 that then-Prime Minister Saad al Hariri had been kidnapped by the Saudis and forced to resign, and the murder of dissident Saudi journalist, Jamal Khashoggi, which even the CIA concluded was personally ordered by MbS.

These factors culminated in President Trump making his earlier Tweeted implied threat about the fragile hold that the al-Sauds have on power in Saudi Arabia without U.S. assistance into a guaranteed promise during a telephone conversation on 2 April with MbS. During this call, Trump reportedly told MbS that unless OPEC started cutting oil production (with the implication being to push up prices to levels where the U.S. shale producers could start making decent profits) then he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from Saudi Arabia. Shortly thereafter, MbS did what he was told. The change in this rhetoric from implied threat to guaranteed action means that this is now in the fabric of all future U.S. dealings with Saudi Arabia and it brings the Saudis crashing back to the basic problem. That is: economically it cannot afford to continue to crush oil prices for long enough to cause sustained damage to the U.S. shale sector, politically it is not permitted to allow prices to rise high enough to avoid eventual effective bankruptcy, and any pricing in between just allows the U.S. shale sector to make greater profits and grow even more. In this regard, the OPEC+ production cuts are perhaps the cruellest cut of all for the Saudis: the Saudis have to implement them and abide by them because they are needed to keep oil prices high enough to ensure the profitability and growth of the U.S. shale sector but the cuts cannot continue for long enough to allow the Saudis back into an ongoing budget surplus.

Already in this context, March saw Saudi Arabia’s central bank depleted its net foreign assets at the fastest rate since at least 2000, falling by just over SAR100 billion (US$27 billion). This is a full 5 per cent decrease from just the previous month, and the total reserves figure now stands at just US$464 billion, the lowest level since 2011. It leaves only US$164 billion of ‘fighting reserves’ that can be used on everything else that Saudi needs when the US$300 billion that is estimated to be needed to keep the economic cornerstone SAR/US$-peg is subtracted. At the same time, the Kingdom slipped into a US$9 billion+ budget deficit in the first quarter and a number of independent analysts are predicting that its overall gross domestic product could shrink by more than 3 per cent this year (the first outright contraction since 2017 and the biggest since 1999), whilst the budget deficit could widen to 15 per cent of economic output.

By Simon Watkins for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Oil Prices Crash On Second Wave Of COVID-19
« Reply #1041 on: June 13, 2020, 12:44:00 AM »
Who cooda node?  ???   :icon_scratch:

RE

https://oilprice.com/Energy/Oil-Prices/Oil-Prices-Crash-On-Second-Wave-Of-COVID-19.html

Oil Prices Crash On Second Wave Of COVID-19
By Michael Kern - Jun 11, 2020, 9:00 AM CDT


Oil has had a turbulent year. Crude prices went negative for the first time in history, followed by one of the biggest rallies the industry has ever seen. And now, just when the market is starting to seem somewhat stable, COVID-19 strikes again.

A resurgence of COVID cases in the United States and a gloomy economic forecast from Federal Reserve Chair Jerome Powell has investors scrambling, with oil prices on track to hit their biggest daily decline since April 27th. Once again, oversupply and lack of demand have taken center stage.

Yesterday, the EIA reported that U.S. oil inventories rose by 5.7 million barrels, defying predictions of a 1.45 million barrel build. Adding even more pressure to oil prices, the U.S. Federal Reserve noted that unemployment rates were set to settle near 9.3% by the end of the year, adding that it could take years to return to pre-pandemic employment levels.

COVID-19 has been the main culprit in the market collapse. While many states have already reopened with some strict guidelines, things don't seem to be going as planned.

It took the United States nearly three months to hit the 1 million confirmed cases mark, yet it only to six weeks to double it. On Wednesday, the U.S. crossed the 2 million mark, with many states reporting significant spikes following attempts to ease lockdown restrictions.

Related: Bulls Beware: A Dark Cloud Is Forming Over Oil Markets

As of this morning, the U.S. has reported over 113,000 COVID-related deaths, and healthcare experts across the globe are warning that the pandemic is nowhere near over, encouraging individuals to maintain social-distancing practices and to wear face masks in public.

Though COVID-19 has taken a clear toll on global economies, some suggest the oil market, in particular, simply rose too quickly.

Jeffrey Halley, senior market analyst, Asia-Pacific at OANDA said "The fall in oil prices is just as much about timing as COVID-19 cases though, coming as both equities and oil were looking overbought on any measure of short-term indicator," adding, "Some sort of correction had been overdue after the massive increase in speculative long positioning, and oil's breath-taking rally over the past month."

By Michael Kern for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Why Big Oil Won’t Be Buying Up Struggling Companies
« Reply #1042 on: June 22, 2020, 04:24:09 AM »
https://oilprice.com/Energy/Energy-General/Why-Big-Oil-Wont-Be-Buying-Up-Struggling-Companies.html

Why Big Oil Won’t Be Buying Up Struggling Companies
By Alex Kimani - Jun 20, 2020, 6:00 PM CDT

    Don't expect the oil price rout to trigger a wave of M&A activity any time soon.
    The last Big Oil M&A wave turned into a disaster for the acquiring companies.
    There's a very real possibility that 2020 could be the slowest in the history of mergers in the sector


Under normal circumstances, energy downturns create a perfect opportunity for deep-pocketed oil and gas heavyweights to land prime assets on the cheap. A good case in point: the last oil bust of 2016 was followed by a sizable number of huge M&A deals in the sector including the $60B tie-up between Royal Dutch Shell (NYSE:RDS.A) and BG Group, Canadian Oil Sands and Suncor EnergyEnergy, as well as a handful that fell through including the proposed merger between Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BKR). But these are hardly normal circumstances and don't expect the oil price rout to trigger a wave of M&A activity any time soon.

That's according to Cowen analysts via Barron's who have said that the majority of Big Oil executives will likely be too gun-shy to pull the trigger on the numerous distressed assets that are becoming available as the downturn drags on.

M&A disaster

The Cowen team, led by Jason Gabelman, has pointed out how the last M&A wave turned into a disaster for the acquiring companies.

In April, Royal Dutch Shell cut its dividend to US$0.16 per ordinary share from US$0.47, for a 66% cut. That marked the first time the company cut the dividend since WWII, a testament of just how severe the oil massacre has been, which is what Shell blamed in its press release. However, another culprit could be to blame for the dramatic cut: the company's 2016 acquisition of BG Group, which set it back $60B.

Related: India Looks To Double Oil Refining Capacity By 2030

Occidental Petroleum's (NYSE:OXY) $55B leveraged purchase of Anadarko has become the poster-child of oil and gas mergers gone bad. The deal has turned into a complete disaster, leaving the company in deep distress over its mountain of debt and water cooler wisecracks of how it could itself get acquired at a fraction of what it paid for Anadarko. Cowen also pointed to BP Plc.'s (NYSE:BP) extremely high debt, though it might have less to do with its 2018 merger with BHP Billiton for $10.5B and more to do with its Deepwater Horizon oil spill which has cost it a staggering $65B in clean-up costs and legal fees over the years.

BP's debt-to-equity ratio of 0.78 is way higher than the oil and gas sector's average of 0.47, and the highest among the oil supermajors. So far, BP has maintained its juicy dividend (fwd yield of 10.64%) but keeps piling on debt after recently taking on $12B in hybrid bonds, thus raising genuine questions about its sustainability.

Source: Y-Charts

Cowen though says that oil majors like Chevron (NYSE:CVX) and Total (NYSE:TOT) with relatively strong balance sheets could go for cheap assets such as GALP Energia (GALP.Portugal) or BP's stake in a gas project in Oman.

Evidence coming from the oil and gas M&A space so far appears to support Cowen's sentiments.

Related: Oil Markets May Not Fully Recover Until 2022

In April, a report by Enverus (formerly DrillingInfo) revealed that U.S. upstream M&A deals for the first quarter only amounted to $770 million, less than 1/10th the average deal amount recorded quarterly over the previous decade.

The largest dollar transaction was a deal by Alpine Energy Capital, which purchased Approach Resources' Midland Basin assets for $193 million. That compares very poorly with the $55 billion Occidental-Anadarko merger or the $9 billion tie-up between Marathon Oil and Andeavor Logistics, both consummated last year.

Further, Enverus said that only ~$4.7B in upstream deals were available in the market by the end of the quarter, the majority of which were located in the Eagle Shale. There's a very real possibility that 2020 could be the slowest in the history of mergers in the sector if the other three quarters track Q1 numbers closely.

Shale opportunities

Instead of mergers, oil and gas companies prefer to maintain the all-important dividend or cut capex in a bid to preserve liquidity. This is a trend we clearly witnessed during the last earnings season.

Not everybody shares Cowen's bearish M&A outlook though. Goldman Sachs analyst Michele DellaVigna has told Barron's that the highly fragmented U.S. shale industry could be a candidate for a spate of consolidations.

DellaVigna, though, has conceded that we are unlikely to see a repeat of the megamergers of the 1990s; however, he says there's a financial case to be made for mergers especially in a sector like U.S. shale that has previously lacked cost discipline:

"The oil industry has delivered its best corporate returns in periods of consolidation, financial tightening and rising barriers to entry. We believe this environment (and shareholder pressure for de-carbonisation) could engender a similar phase of consolidation and capital discipline, as in the late '90s."

By Alex Kimani for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Oil Prices Tumble As API Reports Another Inventory Build
« Reply #1043 on: June 24, 2020, 04:20:39 AM »
https://oilprice.com/Latest-Energy-News/World-News/Oil-Prices-Tumble-As-API-Reports-Another-Inventory-Build.html

Oil Prices Tumble As API Reports Another Inventory Build
By Julianne Geiger - Jun 23, 2020, 4:03 PM CDT


The American Petroleum Institute (API) estimated on Tuesday another build in crude oil inventories, this time of 1.749 million barrels for the week ending June 19.

Analysts had predicted a smaller inventory build of 299,000 barrels.

In the previous week, the API shocked the market with an increase in crude oil inventories of 3.857 million barrels, after analysts had predicted a smaller build.

WTI was trading down on Tuesday afternoon prior to the API’s data release after some confusion about whether the trade deal between the United States and China was dead or whether it was still on.

Oil production in the United States has now fallen from 13.1 million bpd on March 13 to 10.5 million bpd for June 12, according to the Energy Information Administration—a drop of 2.6 million bpd.

It is the lowest production level in years, and yet inventories keep rising as demand remains at low levels given the pandemic and the resulting lockdown.

At 3:43 pm EDT on Tuesday the WTI benchmark was trading down on the day by $0.48 (-1.18%) at $40.25. The price of a Brent barrel was trading down on Tuesday as well, by $0.57 (-1.32%), at $42.51—both benchmarks are trading up on the week.

Related: Why The $17.5 Billion Write-Down Is Just The Beginning For BP

The API also reported a draw of 3.856 million barrels of gasoline for week ending June 19—compared to last week’s 4.267-barrel build. This week’s large draw compares to analyst expectations for a 1.304-million-barrel draw for the week.

Distillate inventories were down by 2.605-million barrels for the week, compared to last week’s 919,000-barrel build, while Cushing inventories saw a draw of 325,000 barrels.

At 4:36 pm EDT, WTI was trading at $40.20 while Brent was trading at $42.43.

By Julianne Geiger for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Natural Gas Drops To 25-Year Low As Demand Disintegrates
« Reply #1044 on: June 26, 2020, 07:33:12 AM »
https://oilprice.com/Energy/Gas-Prices/Natural-Gas-Drops-To-25-Year-Low-As-Demand-Disintegrates.html

Natural Gas Drops To 25-Year Low As Demand Disintegrates
By ZeroHedge - Jun 25, 2020, 10:00 AM CDT

    Natural gas prices near a 25-year low on Thursday morning as fundamentals are turning bearish.
    August NatGas futures slid 2% to 1.612 MMBtu on Thursday morning, weighed down by the lack of heat-driven demand and continued LNG weakness.


Natural gas prices near a 25-year low on Thursday morning as the summer heat has yet to materialize, and oversupplied conditions persist.

August NatGas futures slid 2% to 1.612 MMBtu on Thursday morning, weighed down by the lack of heat-driven demand and continued LNG weakness.

The summer heat has taken hold across most of the Lower 48, leading to stronger power burns. But futures markets have looked for indications of extreme temperatures to drive lofty cooling demand and offset the shocks of the coronavirus pandemic and the global recession it induced.

Weather models have, so far this week, instead produced modestly cooler outlooks than what forecasters had projected over last weekend, leaving markets to focus on simmering LNG challenges and the effects of overall demand destruction inflicted by the pandemic despite governments lifting restrictions on businesses and consumers.

"After cooler trends the past few days for early next week, the data was back a little hotter, but still with several weather systems preventing impressive or widespread heat," NatGasWeather said in a Wednesday afternoon forecast. Data also "trended cooler for the Fourth of July weekend" with weather systems over the eastern U.S. set to prevent upper high pressure "from getting quite as strong as previous runs." - Reuters Commodity Desk

US Lower 48 - 45-day cooling degree day

Related: The War On Gold Has Begun


A NatGas analysis of Bloomberg data showed gas production increased over 87 Bcf/d this week amid reports of production returning as oil drilling resumed. The data also showed the U.S. crude production hit 10.5 million b/d on June 12, has since rebounded to 11.0 million b/d on June 19. The all-time-high in production was reached on March 13 at 13.1 million b/d. The virus-related downturn in the economy has led to a collapse in energy product demand, resulting in a historic drop in oil rigs shuttering operations.

As for LNG exports, here's what Reuters said:

At the same time, LNG export levels hover near 4.0 Bcf/d, up from recent lows but still soft, as demand from formerly reliable destinations in Europe and Asia remains anemic due to slow economic recoveries and modest industrial energy needs. The threat of a virus resurgence also weighs on demand. In the United States, the rate of increases in Covid-19 cases has accelerated in June amid the reopening of local economies, with several states, including Texas and Arizona, reporting daily record highs this month, according to Johns Hopkins University data.

"While further progress on treatments and vaccines for Covid-19 could lead to added confidence on lifting of lockdowns … these are unpredictable times," shipbroker Fearnleys AS said. As such, LNG sentiment remains "flat."

Expectations for today's U.S. Energy Information Administration (EIA) NatGas report will likely result in continued builds for the week ending June 19.

The U.S. Energy Information Administration (EIA) on Thursday is set to issue its storage report for the week ended June 19. A Bloomberg poll found injection estimates ranging from 100 Bcf to 114 Bcf, with a median of 108 Bcf. A Wall Street Journal survey produced an average build expectation of 105 Bcf, while a Reuters survey of 17 analysts produced a 90 Bcf to 115 Bcf injection range and a median 106 Bcf injection. NGI estimated a 116 Bcf build. - Reuters

To offset coronavirus demand loss - extreme heat in the US Lower 48 is needed this summer- if that doesn't happen - NatGas prices will continue moving lower.

By Zerohedge.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Natural Gas Price Plunge Could Soon Lead To Shut-Ins
« Reply #1045 on: June 29, 2020, 05:16:12 AM »
https://oilprice.com/Energy/Natural-Gas/Natural-Gas-Price-Plunge-Could-Soon-Lead-To-Shut-Ins.html

Natural Gas Price Plunge Could Soon Lead To Shut-Ins
By Nick Cunningham - Jun 28, 2020, 6:00 PM CDT


Natural gas prices plunged to new lows this week, falling below $1.50/MMBtu, a catastrophically low price for U.S. gas drillers.  The factors afflicting the gas market are multiple. Prices had already fallen below $2/MMBtu at the start of 2020, weighed down by oversupply. But it wasn’t a problem confined to the U.S. There was also a global glut of LNG due to a wave of capacity additions in 2019. 

That was the situation heading into 2020. But just as the Covid-19 pandemic tore apart the oil market, natural gas also went into a tailspin. Global gas demand is expected to fall by 4 percent this year, “largest recorded demand shock” in history, according to the International Energy Agency.

Buyers of U.S. LNG are now cancelling shipments at a rapid clip. U.S. LNG exports have declined by more than half compared to pre-pandemic levels.

“There would have been too much LNG in the world even without Covid-19,” Ben Chu, a director at Wood Mackenzie’s Genscape service, said in a statement. “Covid-19 has made it worse.”

Buyers abroad are willing to pay a cancellation fee instead of receiving shipment from U.S. exporters, a sign of how badly the market has deteriorated. For August delivery, between 40 and 45 cargoes have been cancelled, nearly double the rate of cancellation in June.

Typically, cheaper gas can stimulate demand, particularly in the electric power sector. But that outlet is not as large as it may have been in the past, not least because gas has already been cheap for quite some time. Thus, the coal-to-gas option is limited. Without an export route, and without larger uptake from utilities, the gas glut has deepened.

“As a result, we see US gas production shut-ins, which we had been discussing as a risk, as now part of our base case for this summer,” Goldman Sachs warned in its report. The bank sees roughly 2 Bcf/d of shut in gas supply for about two months in order to head off storage congestion.

The shut-in process can be thought of as “the last shoe to drop in a global gas rebalancing process,” Goldman added. The logic goes something like this: the LNG market was oversupplied, Asian LNG prices fell, more LNG was routed to Europe, that pushed European gas prices down, which then led to the closure of the economic window for sending American gas abroad.

Related: China’s Oil Imports From Saudi Arabia Jump To Record High

Worse, for American shale gas drillers, backed up LNG cargoes will exacerbate the glut within the United States. By the end of the summer, the volume of cancelled gas could add more than 760 billion cubic feet of gas to storage, according to Goldman Sachs.

As a result, Goldman Sachs slashed its pricing forecast for natural gas prices to $1.40/MMBtu for October, down from $1.75/MMBtu previously. However, the investment bank reiterated the tightening of the market in 2021, in large part because of this year’s supply declines. Goldman stuck with its price forecast of $3.25/MMBtu for next summer, and U.S. LNG exports are also expected to rebound as the market gradually tightens.

Looking forward, the business case for U.S. LNG may not suffer permanent scars. The U.S. tends to shoulder the worst of the rebalancing burden, as contract terms are the most flexible. When the market sours, like it has, U.S. LNG bears the brunt of the cancellations. But that flexibility can be sold as an advantage to would-be buyers, Wood Mackenzie says, reducing their risk. That works in favor of potential U.S. LNG projects.

Still, others say the outlook is more negative, even in the medium-term. The pandemic, weaker demand and the shock to capital budgets make it unlikely that any additional North American LNG project goes forward in the next five years, according to S&P Global Platts Analytics.

Either way, upstream, there is little sign that the shale gas industry can turn things around. The industry succeeded in dramatically ratcheting up supply over the past decade, “[y]et in financial terms, the gas production boom has been an unmitigated financial bust,” according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

Many companies weren’t earning positive cash flow even when prices were higher. But gas priced below $1.50/MMBtu is a disaster.

By Nick Cunningham of Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
https://oilprice.com/Energy/Energy-General/North-American-Oil-And-Gas-Companies-Continue-To-Go-Bankrupt-At-40-Oil.html

North American Oil And Gas Companies Continue To Go Bankrupt At $40 Oil
By Julianne Geiger - Jul 09, 2020, 2:00 PM CDT


The rash of oil and gas bankruptcies in North America is set to continue for the remainder of 2020, a report by Haynes and Boone cited by Reuters shows.

After the coronavirus pandemic and oil price war set in at the end of the first quarter, the second quarter began with a wave of bankruptcies in the oil and gas sector in North America, according to the report.

There have been more than 18 producer bankruptcies in Q2 alone, according to Haynes and Boone—it is the highest quarterly figure since 2016 during the previous oil price crash. So far this year, 41 oil producers and oilfield service firms have sought bankruptcy protection.

Even without the coronavirus pandemic or the oil price war, the flurry of bankruptcies were to be expected, with companies holding junk-rated bonds defaulting on interest payments at record levels even in 2019, with more distressed companies in the energy sector than in any other, Michael Bradley, energy strategist with Tudor, Pickering, Holt said at the end of last year.

Of course, these distressed companies were all holding out hope that oil prices would recover in 2020.

Nothing could have been further from how this year is playing out.

This year has seen Chesapeake Energy, Diamond Offshore Drilling, Whiting Petroleum,

And even while prices have rebounded, the $40 per barrel oil price right now will not be sufficient to stave off doom for the debt-laden shale producer, Haynes and Boone said. $40 oil will not be enough for shale companies to make good on their hefty debt obligations.

Rystad Energy in April warned that as many as 530 U.S. oil companies could file for bankruptcy protection if oil had stayed at $20 per barrel.

By Julianne Geiger for Oiprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Could Oil Prices Go To $0 Again?
« Reply #1047 on: July 15, 2020, 01:41:41 AM »
https://www.forbes.com/sites/greatspeculations/2020/07/14/could-oil-prices-go-to-0-again/#35fb4bb054f0

5,305 views|Jul 14, 2020,09:51am EDT
Could Oil Prices Go To $0 Again?
Great Speculations
Trefis TeamContributor
Great SpeculationsContributor Group
Markets


The drillship Pacific Bora, operated by Pacific Drilling SA, centre, supported by the stimulation ...
  • © 2015 Bloomberg Finance LP
  • [7/14/2020] Impact Of Surging Covid-19 Cases On Oil Prices

    Oil prices have rebounded sharply from their April 2020 lows. WTI crude oil was trading close to $40 per barrel as of July 13th, driven by supply cuts by OPEC and Russia (together known as OPEC+). In addition, of course, prices are helped in big part by a gradual recovery in demand, with Covid-19 lockdowns being eased. That said, the memory of April’s negative prices driven by lack of storage capacity and insufficient oil demand is likely fresh in minds of oil speculators. If Covid-19 cases continue to climb and lockdowns are brought back, while traders and speculators will be more cautious and prices won’t likely drop to $0, we do see substantial risks over the near-term.

    Specifically, Covid-19 cases have been soaring globally. The United States has been adding around 60k cases per day over the last few days - 2x the average rate that was seen in April - led by a surge in infections in the U.S. South and West. Other large oil consumers such as India and Brazil are also seeing cases increase. If cases continue to rise at this pace, another round of shelter in place orders could come into place hurting oil demand. This could significantly dampen oil demand from the transportation sector which accounted for roughly 69% of U.S. oil consumption or roughly 14.16 million barrels per day. [1]

    Again, let that important number sink in: 69%. In other words, more than two-thirds of total demand is from transportation alone. Much of this could be at risk again if cases continue to climb near-term. No amount of federal stimulus can make people drive to work.
    Most Popular In: Markets

        Russia Completes Human Trials Of Covid-19 Vaccine
        What To Expect From NFLX Earnings? Investors Wait For New Subscriber Numbers, Content Update
        Square Stock: Too High, Too Fast?

    Our analysis U.S Oil Consumption by Sector shows underlying numbers across residential, commercial compared to transportation and industrial consumption.

    There are some risks on the supply side as well. While OPEC+ cut output by a record 9.7 million barrels per day through the end of July, helping to support oil prices, the cartel is expected to recommend an easing in supply cuts to around 7.7 million barrels per day when it meets this Wednesday. This could put some pressure on prices. Separately, Libya is also expected to resume crude oil exports, after several months of the blockade at the country’s ports. As Libya is exempt from the OPEC+ production cuts agreement, an incremental supply from the country could impact prices.

    PROMOTED
    Civic Nation BrandVoice | Paid Program
    How Student Civic Leaders Across The Country Are Preparing For An Unprecedented Semester
    Grads of Life BrandVoice | Paid Program
    Putting People First To Rebuild A Stronger Economy: A Conversation With Ochsner Health
    UNICEF USA BrandVoice | Paid Program
    Talking To My Black Kids About The Protests

    On the flip side, electric vehicle bellwether Tesla has seen its stock soar 3x this year, despite depressed oil prices – typically a deterrent to EV adoption – and growing Covid-19 infections. We think it’s because of one unique and important Tesla metric.

    [4/21/2020] How Transportation Demand Impacts Oil Prices

    Benchmark U.S. crude oil prices dived into negative territory on Monday, due to a collapse in demand caused by the Coronavirus pandemic and a lack of storage capacity for excess supply. While June futures contracts for WTI crude and prices for Brent crude remain positive at levels of over $20 per barrel, the pain for the oil prices may be far from over, given that transportation and industrial activity, which together account for more than 90% of crude oil demand, are likely to remain depressed in the near-term. Our analysis U.S Oil Consumption by Sector shows underlying numbers across residential, commercial compared to transportation and industrial consumption.

    Transportation & Industrial Demand (>90% Of Consumption) Collapse

    Transportation of all forms accounts for roughly 69% of U.S. oil consumption or roughly 14.16 million barrels per day. This demand is set to plunge, as millions of Americans continue to work from home and are unlikely to drive to vacations till the pandemic eases or a vaccine is developed and deployed. For instance, overall daily national traffic volume for consumers, local fleets, and long-haul trucks were down 38% for the period between March 21 and 27, compared to Feb. 22 and 28, per Transportation data provider INRIX and it is likely that traffic has only declined further over April. Although oil consumption and miles driven often picks up as prices decline (drop in oil prices in 2015 was associated with vehicle-miles growth rates around 2%) things are likely to be different this time around as the pandemic restricts activity.

    The demand for air travel has also plunged. According to the U.S. Transportation Security Administration, passenger screenings at airports have dropped by roughly 95% in the month of April, compared to early March. Just about 105k passengers were screened across U.S. airports on April 19th, versus about 2.2 million on March 1. Industrial demand for oil is also likely to take a big hit, as the economy enters what is likely to be a deep recession. The industrial sector accounts for 25% of U.S. consumption or roughly 5.1 million barrels per day.
    uncaptioned

    Production Declines Will Eventually Support WTI Prices

    U.S. drilling activity has dropped significantly, with the number of oil rigs operational down to 438 in mid-April from 825 a year ago, per Baker Hughes, and this number is only likely to drop further in the coming weeks with the current price rout. Close to two-thirds of the oil produced in the U.S. comes from shale oil wells, which typically have shorter product life cycles, with fast decline rates. This means that the weaker drilling activity, coupled with natural declines in production rates for wells, could start to reduce supply, helping prices. This is possibly a reason why June futures prices for WTI crude are holding up a little better with contracts being priced at a little over $20 per barrel as of Monday. However, this may not hold true if there is persistent reduced demand from both transportation and industrial use.
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Nat Gas Prices Crash As U.S. Exports Fall
« Reply #1048 on: July 21, 2020, 01:27:53 AM »
https://oilprice.com/Energy/Natural-Gas/Nat-Gas-Prices-Crash-As-US-Exports-Fall.html

Nat Gas Prices Crash As U.S. Exports Fall
By Julianne Geiger - Jul 20, 2020, 3:00 PM CDT


The price of natural gas fell nearly 5% on Monday, as lower U.S. LNG exports threaten to exacerbate inventories, which are already significantly higher than the five-year average.

The price of natural gas was just $1.636 as of 4:27pm EDT, a drop pf $0.082 or 4.77%.

The EIA reported that U.S. LNG exports fell week over week for the week ending July 15, with just four vessels with a combined carrying capacity of 15 Bcf leaving the United States that week. This is the lowest volume since the end of 2016—a time when the Sabine Pass LNG was the only LNG export facility in the United States, according to FX Empire.

Last year at this time, natural gas deliveries to U.S. LNG export facilities were setting records, according to the EIA. This year, the pandemic is cramping the style for the cleaner fuel, and inventories are well above the five-year average, at 3.178 billion cubic feet as of July 10. That compares to the year ago levels of 2.515 Bcf, and the five-year average of 2.742 Bcf.

But the low prices did little to assuage Chevron’s appetite for Houston-based energy producer Noble Energy, who is embedded with natural gas in a major Israeli gas project, Leviathan.

Chevron’s CEO sees the near-term oil market as “cloudy”.

“The crystal ball is cloudy right now. There’s so much uncertainty on the trajectory of the pandemic, the rate of development of effective vaccines and government policy interventions to try to manage risk between here and there. It’s a fluid environment. We expect choppy economic and price activity,” Chevron CEO Mike Wirth said in an interview with Reuters.

Chevron does see long-term demand growth for natural gas, however, largely from population growth and the push to lower greenhouse gas emissions.

By Julianne Geiger for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 41846
    • View Profile
🛢️ Exxon, Chevron lose billions on price war, virus
« Reply #1049 on: August 01, 2020, 12:04:24 AM »
You gotta know the TBTF Banks will still loan them Funny Monet though.   ::)

RE

<a href="http://www.youtube.com/v/n7uRlvnfBpA" target="_blank" class="new_win">http://www.youtube.com/v/n7uRlvnfBpA</a>
Save As Many As You Can

 

Related Topics

  Subject / Started by Replies Last post
Oil Price Crash!!!

Started by RE « 1 2 ... 10 11 » Podcasts

162 Replies
44330 Views
Last post January 15, 2015, 05:57:20 AM
by MKing
1 Replies
1995 Views
Last post December 15, 2014, 05:33:25 AM
by MKing
The Crash of 2015: Day 29-30

Started by Thomas Lewis Energy

0 Replies
1422 Views
Last post February 03, 2015, 01:08:53 AM
by Thomas Lewis