oil prices finished lower again this week, but with somewhat less volatility than last week, when we saw price moves as great as 25% in both directions in a matter of hours...after oil prices fell 30% to $22.43 a barrel last week, trading in the contract for US light sweet crude for April delivery, which had been the quoted "price of oil" thru Friday, expired...hence, this week's oil prices are now quoting the the contract price of US light sweet crude for May delivery, which had finished last week down 29.5% at $22.63 a barrel, in trading that was as volatile as that of the April contract...that May contract price had initially fallen as much as 8% in off-market trading over the weekend, but moved higher on Sunday as traders waited on Congress to agree to an economic stimulus and rescue plan...that dynamic repeated in Monday's trading, as prices initially fell to as low as $20.80 a barrel after an attempt to move a coronavirus-related rescue proposal forward was defeated in the Senate, but bounced back later to as high as $24.07 after the Fed announced aggressive asset purchases to support markets, before closing the session 73 cents or 3.2% higher at $23.36 per barrel...oil prices moved between gains and losses early on Tuesday, but soared near the close as the US dollar lost value on the Fed moves, with May oil closing 65 cents higher at $24.01 a barrel...oil prices rose at the open on Wednesday on a Tuesday evening industry report that inventories of crude, gasoline and distillates had fallen, and despite trading lower after the EIA reported a 9th consecutive oil inventory increase, rallied alongside broader financial markets as Congress moved toward approval a massive aid package to stem the economic impact of the coronavirus pandemic, closing 48 cents higher at $24.49 a barrel...but oil prices fell on Thursday following those three days of gains, as the prospect of rapidly dwindling demand due to travel bans and lockdowns more than offset hopes that an emergency stimulus would shore up economic activity, and then plummeted to close $1.89 or 7% lower at $22.60 a barrel after the Department of Energy scrapped a plans to buy crude oil for its Strategic Petroleum Reserve because funding for it was not included in the big stimulus package passed by the Senate...prices attempted a recovery early Friday, rising as much as 3%, until headlines from the Saudis that there are no talks with Russia ongoing sent prices tumbling again, with US crude falling back to $20.88 before closing $1.09 or 5% lower on the day at $21.51 a barrel...May oil prices thus ended the week nearly 5% lower, with the quoted "price of oil" falling over 4% and posting a fifth straight weekly loss, as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world.
natural gas prices, meanwhile, inched up from last week's 24 year low as somewhat cooler forecasts supported prices in the face of falling demand...after falling 14% to a a 24 year low of $1.604 per mmBTU on both Wednesday and Friday of last week, the contract price for natural gas for April delivery opened more than 7 cents lower at a new 25 year intraday low of $1.533 per mmBTU on Monday before clawing back most of that loss to end just two-tenths of a cent lower at $1.602 per mmBTU, still another 24 year closing low, as milder weather forecasts offset a projected increase of flows to LNG export terminals and expectations of cooler weather for the week ahead....natural gas prices rose 5.1 cents to $1.653 on Tuesday on forecasts for cooler weather and higher demand over the next two weeks than was earlier expected, and on an increase in crude prices, and then tacked on another six-tenths of cent on Wednesday before falling back 2.2 cents to $1.637 per mmBTU on Thursday as the near 8% drop in oil prices and forecasts for milder weather and lower heating demand offset a slightly bigger than expected withdraw from storage...natural gas prices were then virtually flat on a colder weather forecast on Friday, ultimately shedding 0.3 cents, as trading in the April contract expired at $1.634 per mmBTU, thus finishing the week 1.9% higher, after it had fallen 14% the prior week...
the natural gas storage report from the EIA on the week ending March 20th indicated that the quantity of natural gas held in underground storage in the US fell by 29 billion cubic feet to 2,005 billion cubic feet by the end of the week, which left our gas supplies 888 billion cubic feet, or 79.5% higher than the 1,117 billion cubic feet that remained in storage on March 20th of last year, and 292 billion cubic feet, or 17.0% above the five-year average of 1,713 billion cubic feet of natural gas that has been in storage as of the 20th of March in recent years....the 29 billion cubic feet that were withdrawn from US natural gas storage this week was a bit above the consensus estimate for a 27 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, but was less than the average 40 billion cubic feet of natural gas that have been pulled from natural gas storage during the third week of March over the past 5 years, and also less than the 39 billion cubic feet withdrawal reported during the corresponding week of 2019..
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending March 20th indicated that a big decrease in our oil imports was more than offset by a big decrease in our oil exports, and hence we were again left with a modest surplus of oil to add to our stored commercial supplies, the twentieth addition of oil to storage in the past twenty-eight weeks....our imports of crude oil fell by an average of 422,000 barrels per day to an average of 6,117,000 barrels per day, after rising by an average of 127,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 528,000 barrels per day to 3,850,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,267,000 barrels of per day during the week ending March 20th, 106,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells fell by 100,000 barrels per day to 13,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,267,000 barrels per day during this reporting week..
meanwhile, US oil refineries reported they were processing 15,838,000 barrels of crude per day during the week ending March 20th, 18,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 232,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at all that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 803,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+803,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,326,000 barrels per day last week, now 7.0% less than the 6,805,000 barrel per day average that we were importing over the same four-week period last year....the 232,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day lower at 13,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 12,500,000 barrels per day, while a 19,000 barrel per day decrease in Alaska's oil production to 459,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 22nd was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was 7.4% above that of a year ago, and 54.2% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 87.3% of their capacity in using 15,838,000 barrels of crude per day during the week ending March 20th, up from 86.4% of capacity during the prior week, and near the recent average refinery capacity utilization for the third week of March, historically the time of year that refineries change over to summer blends and undergo annual maintenance...hence, the 15,838,000 barrels per day of oil that were refined this week were little changed from the 15,831,000 barrels of crude that were being processed daily during the week ending March 22nd, 2019, when US refineries were operating at 86.6% of capacity....
even with little change in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 1,016,000 barrels per day to 8,958,000 barrels per day during the week ending March 20th, after our refineries' gasoline output had increased by 18,000 barrels per day over the prior week...that may be because wholesale gasoline has selling at less than 50 cents per gallon, and refineries are losing up to $17 per barrel on every barrel they process... after this week's drop in gasoline output, our gasoline production was 7.2% lower than the 9,657,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 150,000 barrels per day to 4,838,000 barrels per day, after our distillates output had decreased by 19,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was still 1.8% less than the 4,925,000 barrels of distillates per day that were being produced during the week ending March 22nd, 2019....
with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the eighth week in a row, after twelve consecutive increases, falling by 1,537,000 barrels to 239,282,000 barrels during the week ending March 20th, after our gasoline supplies had decreased by 6,180,000 barrels over the prior week....our gasoline supplies decreased by less this week because the amount of gasoline supplied to US markets decreased by 859,000 barrels per day to 8,837,000 barrels per day, and because our imports of gasoline rose by 146,000 barrels per day to 834,000 barrels per day while our exports of gasoline rose by 232,000 barrels per day to 835,000 barrels per day...but even after this week's inventory decrease, our gasoline supplies were fractionally higher than last March 22nd's gasoline inventories of 238,620,000 barrels, and right at the five year average of our gasoline supplies for the same time of the year...
even with the increase in our distillates production, our supplies of distillate fuels decreased for the 10th week in a row and for the 19th time in 25 weeks, falling by 678,000 barrels to 124,442,000 barrels during the week ending March 20th, after our distillates supplies had decreased by 2,940,000 barrels over the prior week....our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 218,000 barrels per day to 3,795,000 barrels per day, and because our exports of distillates fell by 100,000 barrels per day to 1,256,000 barrels per day, while our imports of distillates fell by 148,000 barrels per day to 115,000 barrels per day....after this week's inventory decrease, our distillate supplies at the end of the week were 4.4% below the 130,167,000 barrels of distillates that we had stored on March 22nd, 2019, and remained about 11% below the five year average of distillates stocks for this time of the year...
finally, with net supply and demand little changed from the prior week, our commercial supplies of crude oil in storage rose for the twenty-second time in thirty-nine weeks and for the thirty-third time in the past 52 weeks, increasing by 1,623,000 barrels, from 453,737,000 barrels on March 13th to 455,360,000 barrels on March 20th....but even after 9 straight increases, our crude oil inventories remained 3% below the five-year average of crude oil supplies for this time of year, but about 27% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the third week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels and continued rising....since our crude oil inventories had generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of March 20th were 3.0% above the 442,283,000 barrels of oil we had in commercial storage on March 22nd of 2019, and 5.9% above the 429,949,000 barrels of oil that we had in storage on March 23rd of 2018, while at the same time remaining 14.7% below the 533,977,000 barrels of oil we had in commercial storage on March 24th of 2017...
This Week's Rig Count
the US rig count decreased for the 23rd time in the past 28 weeks during the week ending March 27th, and is now down by 23.8% from the last rig count of 2018.....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 44 rigs to 728 rigs this past week, which was the least rigs deployed since February 3rd, 2017, and hence a 37 month low...that total was also down by 278 rigs from the 1066 rigs that were in use as of the March 29th report of 2019, and 1,201 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...
the number of rigs drilling for oil decreased by 40 rigs to 624 oil rigs this week, which was the least oil rig activity in 36 months, 192 fewer oil rigs than were running a year ago, and considerably less than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 4 to 102 natural gas rigs, which was the least number of natural gas rigs active since October 7th of 2016, and hence was a new 41 month low for natural gas drilling, down by 80 gas rigs from the 190 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..
with the removal of the lone rig that had been drilling for natural gas offshore from Texas, the rig count in the Gulf of Mexico was down by 1 to 18 rigs this week, with the 18 Gulf rigs remaining all drilling for oil in Louisiana's offshore waters...that's now five less than the number of rigs that were deployed in the Gulf a year ago, when 20 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...in addition to the removal of one Gulf rig, the two rigs that had been deployed on inland waters - one in southern Louisiana and one on a lake on Oklahoma - were both shut down this week, leaving no inland waters rigs active in the US, down from the 2 inland waters rigs deployed in southern Louisiana a year ago..
the count of active horizontal drilling rigs decreased by 43 rigs to 653 horizontal rigs this week, which was the fewest horizontal rigs active since March 10th 2017, and hence a 36 month low for horizontal drilling...it was also 238 fewer horizontal rigs than the 891 horizontal rigs that were in use in the US on March 29th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was down by two to 47 directional rigs this week, and those were also down by 17 from the 64 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was up by 1 to 28 vertical rigs this week, but those were still down by 23 from the 51 vertical rigs that were in use on March 29th of 2019...
the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 27th, the second column shows the change in the number of working rigs between last week's count (March 20th) and this week's (March 27th) count, the third column shows last week's March 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 29th of March, 2019...
once again, the rigs withdrawn from the Permian basin accounted for the majority of this week's rig decline, as well as a fair portion of the horizontal rig pullback...in the Texas Permian, 21 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, and another rig was shut down in Texas Oil District 8A, which corresponds to the northern Permian Midland...however, two rigs were added to those drilling in Texas Oil District 7C, or the southern Permian Midland, which means that the Permian in Texas saw a net reduction of 20 rigs...since the total Permian basin rig count was reduced by a total of 23, we can therefore figure that the 3 rigs that were shut down in New Mexico had been drilling in the western Permian Delaware...elsewhere in Texas, 5 rigs were pulled out of Texas Oil District 1, and 4 more were removed from Texas Oil District 3, which together account for the Eagle Ford shale rig reduction and then some...Texas Oil District 6 was also off a rig, accounting for one of the Haynesville shale losses, with the other two Haynesville rigs coming out of northwest Louisiana, while Texas Oil Districts 2 and 4 both added rigs....the two Williston shale rigs came out of North Dakota, and Oklahoma saw 5 rigs pulled out of the Cana Woodford and one rig pulled out of the Mississippian shale, which suggest that Oklahoma saw two rigs added in basins not tracked separately by Baker Hughes...meanwhile, we've already accounted for all natural gas rig changes that occurred this week in mentioning the 3 rig reduction in the Haynesville and the Gulf of Mexico natural gas rig that was removed from Texas waters..
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Ohio produced record natural gas, oil in 2019 - Ohio produced all-time record volumes of natural gas and crude oil in 2019, according to a new report. The state’s natural gas production in 2019, mostly from the Utica Shale, was 2.882 trillion cubic feet of natural gas, said the Debrosse Memorial Report. The 2019 full-year totals are estimated because final production totals have not yet been submitted to state regulators for the fourth quarter. That natural gas total is up 22% from 2018 totals and is believed to be the highest in Ohio history, said Shumway of Locus Bio-Energy Solutions LLC with offices in Texas and Ohio. Ohio ranks fifth in the U.S. for natural gas production, Kallansh Energy reports. Estimated oil production in Ohio in 2019 is 27.8 million barrels. That tops 2018’s total of 22.7 million barrels and also surpasses the 1896 total of 23.9 million barrels from the Trenton Limestone formation. Of course, the Ohio drilling picture changed dramatically in the last few weeks with the coronavirus and the crude oil price rout resulting from the crude oil war between Russia and Saudi Arabia and its impacts on U.S. shale drillers. The most active operator in Ohio last year was Ascent Resources with 104 new wells, up 49% from 2018. Second was Gulfport Appalachia with 50 additional wells, followed by EAP Ohio (Encino Energy) with 38 wells, Eclipse Resources (now Montage Resources) with 34 wells and Rice Drilling (now part of EQT) with 17 wells. Belmont County was the No. 1 drilling county in Ohio in 2019 with 80 wells drilled. Jefferson and Monroe counties were tied for second, each with 69 wells. Harrison County was fourth with 34 and Guernsey County was fifth with 32. Ohio had 406 well completions in 2019, down two completions from 2018. Ascent Resources drilled 2.2 million feet of laterals and vertical shafts in 2019, more than double second-place Gulfport Appalachia with 1.0 million feet. The rest of the top 5 were Eclipse Resources with 768,269 feet, EAP Ohio with 767,757 feet and Rice Drilling with 347,459 feet. Belmont County was No. 1 for drilled footage with 1.63 million feet, followed by Jefferson with 1.46 million feet and Monroe with 1.41 million feet. Guernsey had 775,218 feet and Harrison had 717,604 linear feet. Statewide, a total of 6.57 million linear feet were drilled in 2019, up slightly from the 6.51 million feet in 2018. In Q4 2019, Ohio had 2,523 Utica wells online. Last year, Ohio had 41 different O&G companies complete wells, up slightly from the 38 operators in 2018. In 2011, the state had 121 producers. Ohio also reported limited drilling in the Clinton (52), Knox (25) and Marcellus (14) formations. Shumway also reported that Ohio’s 225 active injection wells handled less liquid drilling wastes in 2019. The volume injected was 43.372 billion barrels, down 3.5% from the 44.941 billion barrels in 2018. The 2019 total is still the No. 2 highest volume injected ever in the state with 40% of the wastes coming from other states.
Utica Shale well activity as of March 21:
- DRILLED: 145 (164 as of last week)
- DRILLING: 109 (107)
- PERMITTED: 483 (479)
- PRODUCING: 2,478 (2,458)
- TOTAL: 3,215 (3,208)
Seven horizontal permits were issued during the week that ended March 21, and 9 rigs were operating in the Utica Shale.
EXCLUSIVE: EQT temporarily shuts down some field ops after contractor tests positive for COVID-19 - One contractor at a Belmont County site has tested positive for the virus.
EQT Takes Further Actions To Prioritize Debt Repayment Via Dividend Suspension - EQT Corporation today announced that its Board of Directors has elected to suspend the quarterly cash dividend on its common stock, effective immediately, accelerating cash flow to be utilized for EQT's debt reduction strategy. EQT expects this action will result in approximately $30 million per year in retained cash savings, which EQT intends to use to pay down additional near-term debt maturities. President and CEO Toby Rice stated: "The decision to suspend EQT's dividend is another action to display our commitment to our debt reduction strategy, which also includes utilizing substantial near-term free cash flow and asset monetization proceeds to reduce debt. As we enhance our balance sheet and leverage metrics over-time, we will re-visit our shareholder return and dividend policy. These actions will better position EQT's financial framework."EQT Corporation is a natural gas production company with emphasis in the Appalachian Basin and operations throughout Pennsylvania, West Virginia andOhio.
Market headwinds buffet Appalachia’s future as a center for petrochemicals - Less than two years ago, the Trump administration and the chemical industry were promoting the development of a plastics manufacturing center in Appalachia they thought would benefit Ohio, Pennsylvania, West Virginia and Kentucky.IHS Markit, a global information and data company, forecast the potential for as many as five plants that would turn abundant ethane from fracking in the Marcellus and Utica shale regions into ethylene and polyethylene, among the most commonly produced petrochemicals and components of all sorts of plastic products. Now, analysts at IHS Markit have concluded that a proposed $5.7 billion ethane plant in Belmont County, Ohio, may never be constructed because of circumstances that were present even before the coronavirus began to dramatically shrink the economy. And in a new study, analysts at the Institute for Energy Economics and Financial Analysis (IEEFA), a nonprofit think tank that works toward a sustainable energy economy, have found that the plant faces a damaging, cumulative set of risks, all raising doubts about whether it will ever be financed.The plant’s fate is seen by both the IEEFA and IHS Markit as a harbinger of trouble for the broader vision of Appalachia as a major petro-chemical hub. A string of significant setbacks and delays now seem more important amid the coronavirus pandemic, a crashing economy, cratering oil prices, slowing demand for plastics and what could be the final months of a fossil fuel-friendly Trump administration.Activists who have been fighting fracking and the planned petro-chemical boom say they hope the industry’s mounting woes, which are sure to be worsened by a coronavirus-stalled economy, will lead to a long enough pause for leaders to decide whether the nation’s former steel belt should continue to embrace another heavily polluting and fossil-fuel dependent industry.“Too many regulators, too many lawmakers and too many government officials were too eager to sign us up and lock us into a bigger fossil fuel future, and at a time when we don’t need more plastics,” said Lisa Graves-Marcucci, the Pennsylvania community outreach coordinator for the Environmental Integrity Project.
Doctor: Cracker plant workers make county more vulnerable - Beaver County could be more susceptible to the novel coronavirus due to the region’s strong manufacturing community, according to one health expert. Dr. Stacy Lane, founder of Central Outreach Wellness Center, said Beaver County is more vulnerable to COVID-19 due, in part, to Shell Chemicals’ ethane cracker plant. That plant has brought a significant transient population to the region. “Without blaming any one company directly, Beaver County is a very different place than it used to be,” Lane said. “You have a lot of transient people who are coming and moving here, traveling back and forth from where they came – places like Georgia, Ohio – because it’s such a good job.” Lane said it’s great for the local economy, but having a transient population does mean that germs are more likely to travel across state lines. Lane compared the spread of COVID-19 to what happened when there was a boom in the gas well industry several years ago. “You saw different STDs happening in the region, a lot more cases of STDs happening,” she said. “We’re talking about people moving away from their homes, now living in a hotel during the week, maybe going home on the weekends or on breaks.” Pennsylvania Gov. Tom Wolf mandated thousands of “non-life sustaining” businesses, including building construction, close their physical locations on March 19 to mitigate the spread of COVID-19 – an order that went into effect Monday. Shell Chemicals temporarily suspended construction activities at the $6 billion ethane cracker plant last week following calls from workers, residents and county leaders to halt for the sake of public health. The petrochemical complex will undergo a deep cleaning and leadership will install measures aligned with the U.S. Centers for Disease Control and Prevention guidance. It’s unclear when Wolf’s ban on construction activities will be lifted; Shell’s decision to close came just two days ahead of the order.
IEEFA update: In extremis – crisis continues for Appalachian shale producers - Institute for Energy Economics & Financial Analysis - Another year, another gusher of red ink. Fracking (Exploration & Production) companies in Appalachia have failed to produce positive free cash flow each year for the past decade, according to an IEEFA analysis released today. In a briefing note (In Extremis: Crisis Mounts for Appalachian Shale Producers), IEEFA analysts found that eight of Appalachia’s largest producers collectively spent $73.4 billion more on drilling and other capital expenses than they realized by selling natural gas during the decade. Faced with persistently low gas prices, these eight companies continued to struggle financially in 2019, recording negative cash flows of $427 million in the fourth quarter alone. “The fracking sector as a whole has been struggling mightily throughout the decade to register positive free cash flow but for those based in Appalachia, the numbers have been even more dismal,” said IEEFA financial analyst and briefing note co-author Kathy Hipple. Negative cash flows for the full year, at $466 million, actually represented the decade’s best performance for these companies. Yet only two of the eight firms in the IEEFA sample, Cabot Oil and Gas and EQT, were cash flow positive for the year. Five of the eight companies—Antero Resources, CNX, Chesapeake, Gulfport, and Range Resources—reported negative cash each year throughout the decade. Southwestern’s cash flow was negative in nine of the 10 years, including 2019. “The paradox for the fracking sector is that the oil and gas production bonanza has been a cash flow bust,” said IEEFA energy finance analyst Clark Williams-Derry. “Q4 2019 was no exception.” On an annual basis, U.S. benchmark gas prices peaked in 2008, at $8.86/MMBtu. But prices have dropped dramatically since then, falling to just $2.56/MMBtu on average in 2019, and well below $2.00 more recently.
Pa. DEP revokes permit for Grant Twp. oil and gas waste well - Pennsylvania environmental regulators have canceled a permit for a contentious oil and gas wastewater disposal well in Indiana County, saying the facility would violate a local law that bans underground injection of waste fluids. The Department of Environmental Protection rescinded the permit for the Yanity well in Grant Township on March 19. Attorneys for the township called it an “extraordinary reversal” in the community’s yearslong effort to claim that a robust right to self-government allows it to prohibit a waste facility that state and federal rules would permit. Grant, a community of about 700 residents, adopted a home rule charter in 2015 that bars companies from disposing of oil and gas waste in the township, fearing a failure could endanger its drinking water. Warren-based Pennsylvania General Energy plans to turn a former natural gas production well into an injection well to send waste fluids into a depleted reservoir 7,500 feet underground. State environmental regulators issued the permit in 2017 and sued Grant Township the same day, asking Pennsylvania’s Commonwealth Court to declare that the township cannot prohibit oil and gas activities that are exclusively regulated by state and federal agencies. But in an opinion early this month, Commonwealth Court declined to throw out the contested sections of the charter before a full trial. DEP spokesman Neil Shader said, “DEP considers the home rule charter to be flawed,” but it “remains in effect at this time.” In the letter to Pennsylvania General Energy rescinding the permit, DEP Deputy Secretary Scott Perry said the company can reapply if the township’s charter is changed to allow injection wells or a court rules that the charter cannot prohibit them.
Pennsylvania's orders to stem coronavirus outbreak pause several gas pipeline projects - Pennsylvania's social-distancing orders prompted a temporary halt to construction of several natural gas pipeline projects in the state, but some developers were working to secure waivers to allow more work to continue. The state, with its large shale deposits, also is home to a number of ongoing midstream projects meant to move gas to market. After Pennsylvania Governor Tom Wolf late last week ordered all non-life-sustaining businesses to close, Energy Transfer was halting new construction on the Mariner East 2 project, but has since gained permission for limited activity, such as maintaining the right-of-way and work sites, and securing, stabilizing, and moving equipment. One outstanding question is whether the Pennsylvania projects will secure more waivers to allow construction projects to advance. Energy Transfer spokeswoman Vicki Granado said Wednesday in an email that the company has made several requests to the Pennsylvania Department of Community and Economic Development "related to construction activities we believe have the potential to adversely impact the Commonwealth of Pennsylvania if completely halted for an extended amount of time." Energy Transfer's Mariner East 2 and ME2X are primarily intended to ship propane and butane produced in the Marcellus and Utica shales to the Marcus Hook export terminal. The projects have faced regulatory delays although a scaled-back version of ME2 began service in late 2018, with expansion work still underway. Shell has also paused work on its large-scale plastic and petrochemical facility in Beaver County. Pipeline facilities already in service in the state have been deemed to be life-sustaining activities that can keep operating. Energy Transfer said it is in the process of resuming limited allowed activities while adhering to the state-ordered protocols to ensure safety of workers and the surrounding community. Other Pennsylvania gas projects paused after Wolf's order included the Pennsylvania portion of Dominion Energy's 150 MMcf/d West Loop Project and the Towanda Liquefaction and Storage Facility in Bradford County, designed for truck-loaded LNG. Another project in the state is National Fuel Gas Supply's 205 MMcf/d Empire North pipeline expansion, which entails about 53,000 hp of added compression. National Fuel spokeswoman Karen Merkel field staff have been cut in half, with 50% of the workforce working on opposite weeks to lessen exposure. When tasks require two or more workers in close proximity, proper personal protection equipment is required, she said.
Mariner East construction back on after waiver requests approved --Mariner East pipeline builder Sunoco, a subsidiary of Energy Transfer, will continue construction at 15 separate work sites across the state, including three horizontal directional drilling operations, amid the coronavirus pandemic that has led the state to restrict business activity. Sunoco/Energy Transfer submitted six requests for continued construction on Friday after Gov. Tom Wolf ordered all “non-life sustaining” businesses to suspend operations to help slow the spread of the novel coronavirus. The order includes pipeline construction among its list of hundreds of required closures, but companies can seek waivers. Energy Transfer spokesperson Lisa Coleman said the company received word on Wednesday that all of its requests had been granted. “The waivers were requested to ensure the continued safety, integrity and stabilization of these construction sites,” Coleman wrote in an email. She said the sites include “partially completed horizontal directional drills (HDDs), road bores and open excavation sites.” (Read the waiver requests below). The state said it has fielded about 16,000 requests from businesses so far. Energy Transfer said it had suspended all of its drilling operations by Saturday, but ongoing maintenance and repair work continued after it received a waiver to do so from the Department of Community and Economic Development on Friday.
Equinor halts US shale activity, cuts spending in response to oil price slump — Norway's Equinor is halting activity at its US shale assets as part of measures to slash spending in response to the oil price collapse, the company said Wednesday. All drilling and well completion activities at Equinor's gas-focused US shale assets are being suspended to cut spending and "produce the volumes at a later period", the company said. The majority of Equinor's US shale production comes from the eastern Marcellus gas play which is targeted at consumers in New York State. The move, which followed an announcement to suspend share buybacks, is part of a wider 20% cut in organic capex for 2020 to around $8.5 billion from $10 billion-$11 billion , Equinor said. The company also said it will reduce planned exploration spending this year to $1 billion from around $1.4 billion and cut operating costs by around $700 million compared with original guidance. "Reductions in organic capex are driven by a strict process of prioritization where flexibility of cost and schedule for sanctioned and non-sanctioned projects have been reviewed," the company said. Equinor's US onshore operations in the Bakken and Marcellus/Utica shale plays are its biggest producing upstream assets outside Norway. Before the sale of its Eagle Ford shale assets last December, Equinor's equity production from its US shale business was over 320,000 boe/d, the majority of which came from the Marcellus/Utica play. The gas-focused shale business had already been struggling due to weak prices. In the third quarter last year it took a $2.24 billion impairment related to its US shale assets after reducing its Henry Hub gas price assumptions significantly. The state-controlled major gave no detail on how the shale freeze would affect production volumes this year. Equinor had been expecting to grow its oil and gas production by 7%, boosted by the ramp-up of the giant Johan Sverdrup field off Norway. With the new measures, Equinor said it can be organic cash flow neutral before capital distribution in 2020 with an average oil price around $25/b for the rest of the year. Crude prices have more than halved to below $30/b since the start of the year as a result of the coronavirus demand hit and the breakdown of the OPEC+ supply agreement. Swathes of US shale producers have announced budget reductions over recent weeks with North American producers slashing their 2020 capital spending plans by an average of at least 30% just this month.
With oil price collapse, Pa. industry 'already on its knees' faces a new crisis - The last time oil prices slumped, about four years ago, Mark Cline and his brother took a pay cut to try to avoid having to lay off several employees of their family’s Bradford-based oil production company.It wasn’t enough. Now, the 63-year-old fourth-generation oil man is hoping to avoid a tougher choice.“The next guy to get laid off is my son,” he said.”The dramatic oil-price plunge is the result of collapsing global demand caused by the spread of the novel coronavirus and a price war between Saudi Arabia and Russia that has those countries flooding the global market with oil.Prices of the American oil benchmark, West Texas Intermediate, fell below $21 a barrel Wednesday — a 60% drop from the start of the year.At the two refineries that process Pennsylvania Grade Crude, the best price Wednesday was $19.37 a barrel.“This is monumentally bad,” said Dan Weaver, executive director of the Pennsylvania Independent Oil & Gas Association. “The industry will not look the same coming out of this as they did going in. It just depends on how long it lasts.”Pennsylvania’s traditional oil industry was already precarious. Prices never fully recovered from a low point in early 2016. In the meantime, one of the biggest expenses — wastewater management — has only gotten more costly. Mr. Cline said that in 2010, there were 34 waste treatment facilities in Pennsylvania that could take the produced water, or brine, that gets pumped to the surface along with oil. Now, there are about seven facilities, and that changes depending on the day.“We don’t have enough capacity to clean even a quarter of the water we produce a day,” he said.This is not a normal day. With oil in the $20 range, most operators would lose money if they kept producing, just based on the cost of hauling oil and brine, Mr. Weaver said.Mr. Cline said the conventional oil industry, which is largely clustered in 19 northwestern Pennsylvania counties, needs about $60 a barrel to break even. Whether producers can keep pumping oil amidst the price drop depends to some extent on how much brine their wells produce and whether they have an economic way of dealing with it, said Joe Thompson, whose family owns Devonian Resources, which produces oil, gas and natural gas liquids.
More than two years after order, FERC denies rehearing on Mountaineer XPress project — Two years after environmental groups sought rehearing of an order approving TC Energy's 170-mile, 2.7 Bcf/d Mountaineer XPress natural gas pipeline project, the Federal Energy Regulatory Commission has finally ruled on the merits, voting 2-1 to deny the request. The action allows opponents of the project to head to federal appeals court, but the project has been in full service for a little over a year, diminishing odds of any impact on the project. The Mountaineer XPress project and the Gulf XPress project approved alongside it are Appalachian Basin takeaway pipelines, delivering natural gas to Columbia Gas Transmission's TCO Pool and Columbia's Leach interconnect with Columbia Gulf. The 860 MMcf/d Gulf XPress project comprises seven new compressor stations on Columbia Gulf's system in Kentucky, Tennessee, and Mississippi. The projects were working their way through the FERC process about the same time as other large-scale Appalachian takeaway projects, but did not garner the same breadth of opposition or critical comments in the dockets as did the Atlantic Coast Pipeline and Mountain Valley Pipelines further east. FERC granted a certificate of public convenience and necessity December 29, 2017, and a request for rehearing was filed January 29, 2018, collectively by the Sierra Club, Allegheny Defense Project, and Ohio Valley Environmental Coalition. The extensive critique of FERC's environmental impact statement in their requests covered topics as adequacy of the needs determination, water impact, mitigation of endangered species impact, and failure to calculate greenhouse gas emissions associated with induced natural gas production. In rebutting the arguments on GHG emissions, FERC concluded in the rehearing order "wWe are unable to identify, based on the record, an incremental increase in natural gas production that is causally related to our action in approving the projects." Part of the groups' argument was that FERC failed to follow precedent set in the US Court of Appeals for the District of Columbia Circuit decision in Sierra Club v. FERC that called for further explanation or consideration of downstream GHG emissions. But FERC argued that its order already "went beyond what is required by the National Environmental Policy Act by estimating GHG emissions from downstream consumption of natural gas, an activity that is attenuated and not reasonably foreseeable."
New York State PSC embarks on plan to examine natural gas usage, investments - The New York State Public Service Commission is analyzing natural gas usage and investments in the state to better plan for future energy needs. “Recent events have shown that we need smarter, more comprehensive and more transparent planning by utilities for gas infrastructure and clean energy alternatives,” Commission Chair John Rhodes said. “It is essential for protecting New Yorkers and ensuring they have the infrastructure they need and minimizing what they don’t; it’s critical to ensuring reliability, keeping costs down, and advancing State policies.” The commission will look at constraints that may be caused by a shortage of pipeline supply capacity, an inadequacy of distribution infrastructure to deliver available pipeline supply or a combination of these and other factors. Utilities are being asked to report their analysis of supply and demand balance — current and projected — for each municipality within its territory, including any projects to address the imbalance that are planned or underway. Also, the commission is calling for a comprehensive proposal to modernize gas planning processes for future needs that minimize lifetime costs. In addition, it will look at energy efficiency, electrification, clean demand response, and temporary supply to reduce the need for gas infrastructure and investments. These solutions should be built into the gas utility planning process, using criteria that include reliability, practicality, environmental impact. Also, the commission will look at setting standards to justify a gas moratorium and establish clear steps that must be taken after that, including notification procedures.
Coronavirus: Construction worker tests positive, but North Brooklyn Pipeline proceeds -The coronavirus pandemic has severely disrupted life in Brooklyn and beyond, with residents working from home and others losing their jobs entirely. But for some of the city’s largest utility companies, work has continued as usual — despite employees testing positive for the disease.A Con Edison worker came down with the illness in Queens, according to ABC7, but the company was still sending employees to read gas meters in customers’ homes as of March 17. A spokesperson for Con Edison said home visits have stopped.Similarly, construction on National Grid’s controversial North Brooklyn Pipelinehas proceeded with workers in close contact, despite the city and state’s aggressive social distancing measures, which are now being enforced by the NYPD, and call for at least six feet between people in public.News for those who live, work and play in Brooklyn and beyond The company is currently building an underground gas main underneath Williamsburg and Greenpoint, which residents have opposed, citing risk of explosions, health hazards, higher bills and climate impacts.
Columbia Gas to make payments in May, deadline extended to file a claim – Columbia Gas will be giving out settlement payments to those impacted by the 2018 gas explosions in the Merrimack Valley by mid-May. The first round of lump-sum payments will be sent out to residents of Andover, North Andover, and Lawrence as a result of a class-action lawsuit against the utility company. Those who have not filed a claim yet can do so by March 27, according to law firm Morgan and Morgan. A motion was filed in court by the attorney behind the class action lawsuit to expedite payments “in light of the economic suffering brought on by the coronavirus crisis,” according to a co-lead plaintiff on the case. The judge quickly granted that motion. Columbia Gas was purchased by Eversource late last month after pleading guilty to causing a series of natural gas explosions in Massachusetts that killed one person and damaged dozens of homes. The average family of four impacted by the gas explosions who files a claim could receive approximately $8,000 from the settlement.
Coronavirus slows gas ban momentum, creates obstacles for pipeline opponents The coronavirus pandemic has created new challenges for climate activists, disrupting attempts to limit natural gas use in buildings and forcing pipeline opponents to retrench in the digital realm. Cities, towns and counties have spearheaded recent efforts to ban gas use or require electric heating in new buildings. But COVID-19 response is now consuming local lawmakers' attention, while restrictions on public gatherings hamper meetings required to craft the policies. Meanwhile, environmentalists are scrambling to move meetings and public demonstrations to online venues as states order citizens to remain at home. The groups are simultaneously waging a new battle against oil and gas bailouts and positioning themselves to navigate the post-coronavirus landscape. The states where local gas bans are advancing — California, Massachusetts and Washington — have all taken aggressive measures to stop the spread of COVID-19, slowing the momentum of a climate change policy whose swift and sudden rise caught the gas industry off guard. The Seattle City Council suspended committee meetings shortly after its Sustainability and Renters' Rights Committee agreed to resume work on a gas ban developed in 2019. Committee Chair Kshama Sawant is focused on virus response in the hard-hit Seattle metropolitan area and will likely continue gas ban discussions once meetings resume, the council's press office said. City Council staff in Bellingham, Wash., are similarly focused on emergency response, according to Councilman Michael Lilliquist. He could not tell whether the reprioritization would substantially delay lawmakers from considering an electric heating retrofit requirement. In Cambridge, Mass., the timeline for putting a gas ban in place by Jan. 1, 2021, has not changed, but the situation remains "extremely fluid," according to City Councilmember Quinton Zondervan. The lawmaker has advocated for swift implementation of the ban. In nearby Newton, Mass., City Council work is moving forward through remote video conferencing, said Councilwoman Emily Norton, one of several lawmakers spearheading a gas ban. That included identifying experts who could give presentations and answer questions about the policy before the Public Facilities Committee, she said. The Bay State's first gas ban passed in the 240-member Brookline Town Meeting in November 2019, but just four months later, such a gathering has become virtually unimaginable.
FERC: No rehearing on Potomac pipeline -A federal commission this week turned down a request to rehear its approval for a proposed natural-gas pipeline under the Potomac River. The Federal Energy Regulatory Commission issued the decision Wednesday. Pipeline opponents could appeal that decision to the federal court system. The case is already in the courts. The project is on hold after a federal court in August upheld a denial of a right-of-way permit under the Western Maryland Rail Trail by the Maryland Board of Public Works. Columbia Gas Transmission LLC previously announced plans to appeal that ruling. Columbia Gas Transmission, a subsidiary of TC Energy, has proposed running the 8-inch pipeline approximately 3.37 miles from existing facilities in Pennsylvania to a new Mountaineer Gas Co. pipeline in West Virginia. The pipeline would run through Fulton County, Pa., and Washington County, burrow under the Potomac River and connect with the Mountaineer Eastern Panhandle Expansion Project pipeline in Morgan County, W.Va. On July 19, 2018, FERC issued an order authorizing Columbia Gas Transmission to construct and operate the pipeline. A month later, the Potomac Riverkeeper Network and Chesapeake Climate Action Network asked for the rehearing.
Virus Leads Pipeline Agency to Ease Job Qualification Rules - A federal safety agency is helping hazardous material transporters and pipeline operators prepare for the spread of Covid-19 by easing staff training and qualifications requirements.The Pipeline and Hazardous Materials Safety Administration issued a stay on enforcement March 20, applicable only to requirements for pipeline operator employee qualifications and training. The agency issued a second stay on enforcement Monday on training requirements for hazardous material carriers.The pipeline industry is preparing to operate with a workforce potentially reduced by illness or quarantines, said Bryn Karaus, who focuses on pipeline regulation in her position of counsel for Van Ness Feldman LLP in Washington.Qualified employees are required to conduct specific tasks, like inspecting pipelines for corrosion or leaks. During the pandemic, if training isn’t available, pipeline operators may have to substitute other employees, Karaus said.The agency consulted Karaus, among others, on the pipeline operator memo issued March 20.The March 20 stay on pipeline operations enforcement eases requirements for:
- The minimum qualifications for employees who work on pipeline safety and operations;
- The maximum number of hours control room employees, who monitor remote pipeline operations, are permitted to work; and
- Training for control room employees.
Natural-gas futures touch their lowest level in 25 years, but still outperform oil - Natural-gas prices recently dropped to their lowest level in a quarter-century, but they have managed to outperform oil against a backdrop of declining demand fed by efforts to slow the spread of COVID-19. Natural gas “is the victim of a perfect storm of events—growing supplies, warmer-than-usual weather, and falling demand,” says Gregory Leo, chief investment officer and head of global wealth management at IDB Bank. “The cumulative effect is price levels not seen in 25 years.” The impact of COVID-19 “will not be minimal,” he says. And while “there’s a fair chance that many financial assets have been oversold as we price in worst-case scenarios, natural gas has many headwinds and more than likely is priced where it should be.” U.S. natural-gas futures settled at $1.602 million British thermal units on March 23, the lowest finish since September 1995. Prices edged up to settle at $1.637 on March 26. Prices have declined on the back of mandatory shutdowns for nonessential businesses and shelter-in-place orders for many Americans to prevent the spread of COVID-19. “Lower industrial activity means lower demand for natural gas,” says Noah Barrett, a research analyst at Janus Henderson. The loss for natural-gas prices has paled in comparison with oil’s decline. Natural-gas futures lost 2.8% month to date as of March 26. U.S. oil futures CLK20, +1.53% have dropped nearly 50% for the period, and the $20.37 a barrel settlement on March 18 was the lowest since February 2002. “In a kind of perverse irony, the slowdown in U.S. demand for crude oil has been positive for natural-gas prices,” says Rebecca Babin, senior equity trader at CIBC Private Wealth Management. Natural gas is a byproduct of shale drilling, and as exploration-and-production companies cut capital expenditure and reduce production of oil, they are “also drastically reducing their natural-gas production,” she explains.
U.S. natgas futures rise 3% from 24-year low with oil and cooler forecasts -(Reuters) - U.S. natural gas futures climbed over 3% on Tuesday from a 24-year low in the prior session on forecasts for cooler weather and higher demand over the next two weeks than earlier expected, and an increase in crude prices. Front-month gas futures for April delivery on the New York Mercantile Exchange rose 5.1 cents, or 3.2%, to settle at $1.653 per million British thermal units. On Monday, the contract closed at its lowest since September 1995. The all-time low for gas futures is $1.04 in January 1992. Looking ahead, futures for the balance of the year and calendar 2021 were up even more than the front month on expectations low energy prices will start to boost energy demand later this year. The premium of futures for May over April 2020 NGJ20-K20 rose to its highest since 2008 when the contracts started trading. With slightly cooler weather expected, Refinitiv boosted its demand expectations for the next two weeks. The data provider now projects gas use in the U.S. Lower 48 states, including exports, will slide from an average of 105.6 billion cubic feet per day (bcfd) this week to 101.1 bcfd next week. That compares with Refinitiv's forecast on Monday of 105.4 bcfd this week and 100.1 bcfd next week. The amount of gas flowing to U.S. LNG export plants slid to 8.9 bcfd on Monday from 9.4 bcfd on Sunday due mostly to a decline at Cheniere Energy Inc's Sabine Pass terminal in Louisiana, according to Refinitiv. That compares with an average of 8.1 bcfd last week when fog delayed tanker traffic into Sabine and an all-time daily high of 9.5 bcfd on Jan. 31. Some analysts noted storage at Sabine had reached its maximum capacity. Gas production in the Lower 48 states eased to 93.9 bcfd on Monday from 94.0 bcfd on Sunday, according to Refinitiv. That compares with an average of 94.1 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.
US working natural gas in underground storage decreases 29 Bcf: EIA -- US working gas stocks dipped 29 Bcf last week as one more withdrawal likely remains before the flip to injections. As of yet, the coronavirus outbreak has done little to quell demand despite stay-at-home measures implemented across much of the country. Storage inventories fell to 2.005 Tcf for the week ended March 20, the US Energy Information Administration reported Thursday morning. The pull was slightly above an S&P Global Platts' survey of analysts calling for a 27 Bcf withdrawal, but it was below the 39 Bcf pull reported during the corresponding week in 2019 as well as the five-year average draw of 40 Bcf, according to EIA data. Storage volumes now stand 888 Bcf, or 80%, more than the year-ago level of 1.117 Tcf and 292 Bcf, or 17%, more than the five-year average of 1.713 Tcf. Despite increasingly aggressive measures by US states and the federal government to slow the spread of the coronavirus, demand for the week ended March 20 remained relatively unfazed, according to S&P Global Platts Analytics. Power burn in the US Gulf Coast, and residential/commercial demand in the Midwest and Mountain regions, both increased week on week while cooler weather in the central and western US drove up demand. Texas helped elevate total US production by 0.7 Bcf/d, which is the largest weekly increase since last October. The recent production momentum is unlikely to persist as the collapse in crude oil prices will reduce associated gas coming out of the Permian. The NYMEX Henry Hub April contract slid 3.4 cents to $1.625/MMBtu in trading following the release of the weekly storage report. The market has come down significantly in the past few weeks, with most of the price declines weighted on the front of the forward curve. April Henry Hub has dropped more than 20 cents from two weeks earlier, while the October contract is priced at $2.08/MMBtu, down 8 cents over the same period. Platts Analytics' supply and demand model currently expects a 24 Bcf draw for the week ending March 27, which will likely be the last net withdrawal of the season. US balances are slightly tighter this week despite the massive economic and societal slowdown as much of the country stays home. Production is down 0.5 Bcf/d this week to average 92.2 Bcf/d. A 0.4 Bcf/d increase in net Canadian imports offset most of the decline. Demand increased due to a surge in LNG feedgas deliveries, which rose 1.3 Bcf/d from the week prior.
U.S. natgas futures ease on lower demand forecasts, oil price drop - - U.S. natural gas futures slipped about 1% on Thursday as a near 8% drop in crude prices and forecasts for milder weather and lower heating demand over the next two weeks offset a slightly bigger than expected weekly storage draw. The U.S. Energy Information Administration (EIA) said utilities pulled 29 billion cubic feet (bcf) of gas from storage during the week ended March 20. That was a little more than the 25-bcf draw analysts forecast in a Reuters poll and compares with a decline of 39 bcf during the same week last year and a five-year (2015-19) average reduction of 40 bcf for the period. The decrease for the week ended March 20 reduced stockpiles to 2.005 trillion cubic feet (tcf), 17.0% above the five-year average of 1.713 tcf for this time of year. On its second to last day as the front-month, gas futures for April delivery on the New York Mercantile Exchange fell 2.2 cents, or 1.3%, to settle at $1.637 per million British thermal units (mmBtu). On Monday, the contract closed at its lowest since September 1995. May futures, which will soon be the front-month, also slipped about 1% to $1.69 per mmBtu. With milder spring-like weather coming, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would slide from an average of 105.3 billion cubic feet per day (bcfd) this week to 99.5 bcfd next week. That is lower than Refinitiv's forecast on Wednesday of 105.5 bcfd this week and 100.3 bcfd next week. The amount of gas flowing to U.S. LNG export plants eased to 9.1 bcfd on Wednesday from 9.2 bcfd on Tuesday, according to Refinitiv. That compares with an average of 8.1 bcfd last week when fog delayed tanker traffic to Cheniere Energy Inc's Sabine Pass plant in Louisiana, and an all-time daily high of 9.5 bcfd on Jan. 31. Gas production in the Lower 48 states held at 93.0 bcfd for a second day in a row on Wednesday, according to Refinitiv. That compares with an average of 94.1 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.
U.S. natgas flat as oil slides but colder weather seen in 2 weeks -(Reuters) - U.S. natural gas futures were little changed on Friday, pressured by forecasts for less heating demand next week and a 4% decline in oil prices but supported by an outlook for colder weather in two weeks. On its last day as the front-month, gas futures for April delivery on the New York Mercantile Exchange fell 0.3 cents, or 0.2%, to settle at $1.634 per million British thermal units (mmBtu). That is just about 3 cents over its $1.602 close on Monday, which was its lowest since September 1995. May futures, which will soon be the front-month, settled down about 1% at $1.67 per mmBtu. For the week, the front-month gained about 1% after falling 14% last week. Looking a year ahead, prices in 2021 were mostly trading higher on expectations demand will start to rise again with the return of economic growth as governments loosen travel restrictions after the coronavirus spread slows. The premium of futures for November over October NGV20-X20 rose to its highest since August 2010, while calendar 2021 swung to a premium over calendar 2025 for the first time in at least a year. Even before the coronavirus started to cut global economic growth and demand for energy, gas was already trading near its lowest in years as record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter. With the weather expected to warm next week before cooling again in early April, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would slide from an average of 105.1 billion cubic feet per day (bcfd) this week to 98.2 bcfd next week before rising to 101.9 bcfd in two weeks. That is lower than Refinitiv's forecast on Thursday of 105.3 bcfd this week and 99.5 bcfd next week. The amount of gas flowing to U.S. LNG export plants eased to 9.0 bcfd on Thursday from 9.1 bcfd on Wednesday, according to Refinitiv. That compares with an average of 8.1 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31. Gas production in the Lower 48 states edged up to 93.3 bcfd on Thursday from 93.0 bcfd on Wednesday, according to Refinitiv. That compares with an average of 94.1 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.
Tellurian LNG defers $75M loan until 2021 amid coronavirus spread -- Houston-based Tellurian LNG negotiated new terms for its $75 million loan which was slated to be due in May but now has been extended until November 2021. Tellurian borrowed $60 million initially in May 2019 for the one year loan but borrowed another $15 million in July. The interest rate is 12%, according to U.S. Securities and Exchange Commission records. The global spread of coronavirus has impacted companies around the world, especially those which rely on demand for LNG, as many businesses are idled. "We are making necessary changes amid challenging global conditions," said Meg Gentle, CEO of Tellurian in a news release. "We are working remotely with potential equity partners for the Driftwood project and implementing measures to keep our team safe and productive to regain commercial momentum when the effects of COVID-19 subside.” Tellurian recently restructured the business so it can be in the position to build a $30 billon liquified natural gas export terminal in Calcasieu Parish. The company laid off 40% of its workforce in recent weeks. There is also concern among oil and gas industry experts about the cost competitiveness of U.S. natural gas if the crude oil price collapse leads to lower natural gas prices overseas. But others suggest that long-term demand from China and India means the project is still viable. Tellurian planned to begin exporting 27.6 million tons of LNG by 2023. It expected to draw on more than 10,000 acres in the Haynesville Shale play in addition to assets in the Permian Basin for LNG export.
Energy Transfer's Bayou Bridge pipeline wins court ruling -- U.S. officials adequately studied the potential impacts of Energy Transfer's (ET +0.4%) Bayou Bridge pipeline in Louisiana, says a ruling by the U.S. District Court for the Middle District of Louisiana. The court rejected a challenge from environmental groups who accused the Army Corps of Engineers of violating various federal laws by not adequately studying how pipeline construction and potential oil spills would affect sensitive wetlands in the region. Bayou Bridge is a 162-mile crude oil pipeline that connects Louisiana ports in St. James and Lake Charles to a broader network of pipelines.
How Louisiana’s oil and gas industry uses prison labor - When Rob Martin* was enrolled at the Lafourche Parish Work Release facility while he was incarcerated in southeast Louisiana, his days began at 4 a.m. Each morning, he was ushered into a van and taken to work a 12 to 16-hour shift at a job placement chosen for him by the facility operators. For a while, it was maintenance work for an equipment leasing company that rents pumps and power tools to companies working in the Gulf of Mexico. His first week there, Martin said he worked 50 hours and came back to the facility with just $43. After about a year, he was hired as a maintenance supervisor of dockside operations for a company that recycled and produced drilling fluid for oil and gas companies, Martin said. Oil and gas industry work can be dangerous. Around the time that Martin was in work release, a contract worker was killed while performing routine maintenance on a gas pipeline in Louisiana waters. Martin remembered once using his body to divert a stream of drilling fluid from a ruptured line. “I have no idea how many chemicals got into my body with that,” he said. At the end of the workday, the van picked him up and took him back to the facility. Martin was at Lafourche for the last two years of a 12-year sentence for a murder conviction. He worked every day of the week, and said he didn’t take a single day off until he was released.Louisiana’s Department of Safety and Corrections (DPS&C) bills work release as a way of assisting incarcerated people in the transition from prison back into the workforce during the last six months to four years of a sentence, reducing recidivism in the process. Martin said he was grateful to have spent his days outside a jail cell, acquiring work experience that would be valuable in the post-release world. But he also sees the many ways work release is designed to benefit its operators—parish sheriffs and private contractors, as well as local companies, some of which service the state’s lucrative oil and gas sector—over its participants. In these programs, incarcerated people are sometimes assigned to work in the industries that fuel climate change in places most vulnerable to its effects, like the Gulf Coast and the Deep South, cleaning up oil spills or working in the offshore drilling industry. As natural disasters become more common and intense, prison labor is increasingly being used to help with preparation and recovery.
Whitmer task force lays out energy alternatives to Line 5 for U.P. residents ⋆ After almost 10 months of research, presentations and meetings, Gov. Gretchen Whitmer’s U.P. Energy Task Force has released a draft of its recommendations for the state’s Upper Peninsula to lessen its dependence on propane from the Line 5 pipeline and look at alternative energy solutions for Michigan’s northernmost region. Public comments on the draft recommendations can be sent to EGLE-UPEnergy@Michigan.gov through April 6. Those 14 recommendations, half of which would require action from the state Legislature, are aimed at strengthening the U.P.’s access to propane, while taking into account several different scenarios of supply disruption. About one-quarter of Michiganders living in the U.P. rely heavily on propane to heat their homes, especially during the cold winter months. Much of that propane comes from Line 5, the controversial oil pipeline owned by Canadian company Enbridge. Enbridge is currently embroiled in several legal challenges with the state over Line 5, which runs across the length of the U.P. before stretching for miles under the environmentally-sensitive Straits of Mackinac that connect lakes Michigan and Superior. In response to concerns over the aging pipeline’s structural integrity, Enbridge made a deal with Republican former Gov. Rick Snyder to replace the old Line 5 with a new tunnel-encased dual pipeline under the Straits. The GOP-led Legislature passed legislation in the 2018 Lame Duck session that aimed to tie the hands of the incoming Democratic administration in reversing it. A major disruption in propane supply has the potential to leave many in the U.P. without heat, which has been a sticking point in the debate over whether to decommission Line 5. Gov. Gretchen Whitmer created the U.P. Energy Task Force through executive order in June, after talks with Enbridge over a timeline to decommission the pipeline fell through and Enbridge filed a lawsuit against the state. The task force was charged with assessing the U.P.’s energy needs and formulating alternative solutions to Line 5 propane. The task force is set to meet next month to do a deeper dive on the whole state’s energy needs, and its next report is due next year.
COVID-19 and the crude oil price crash puts the screws on US refiners. The collapse in crude oil prices and COVID-19’s very negative effects on global gasoline, jet fuel and diesel demand are putting an unprecedented squeeze on U.S. refiners. Even before the initial coronavirus outbreak in Wuhan, China, started to grab headlines around New Year’s Day, refineries had already been incentivized to shift their refined products output toward diesel, which can be used to help make IMO 2020-compliant low-sulfur bunker. Now, with the COVID-19 pandemic spreading to Europe and North America and stifling consumer transportation fuel demand, the price signals are even stronger, pushing refineries to do everything they can to minimize their gasoline and jet fuel production and enter what you might call “max diesel mode.” Today, we discuss how there are challenges and limits to what they can do, and a number of refineries may need to shut down due to lower demand, at least temporarily. Last Monday, March 16, grumblings started among commodity traders regarding negative gasoline cracks — cracks being the price of gasoline minus the price of crude — on the NYMEX. By the end of that day’s session, crack spreads for Reformulated Gasoline Blendstock for Oxygenated Blending (RBOB) — the benchmark for gasoline trading — had fallen almost 90% to settle below $1/bbl (blue line, left graph in Figure 1). Gasoline prices crashed another whopping 30% on Monday, March 23rd. Ultra-low-sulfur diesel (ULSD) cracks remained strong at $16/bbl (right graph in Figure 1), but the jet fuel crack spread (not shown), which is usually closely tied to diesel, closed at only $8/bbl. Since then, regional crack spreads for gasoline around the U.S. hovered below $5/bbl and then moved into negative territory. With strong price signals pushing refiners towards diesel production, they would have made immediate adjustments to tweak their refined product yields. However, as we said in our introduction, refiners through the second half of 2019 had already been given strong price signals to produce more diesel heading into the fourth quarter of 2019 and the first quarter of 2020 due to the IMO 2020-related need for low-sulfur bunker. Weekly Energy Information Administration (EIA) data released last Wednesday, March 18, indicated that the current distillate yield (diesel plus jet fuel) at U.S. refineries was around 48%, or three percentage points lower than the 51% peak over the last year. Therefore, the potential to swing from gasoline to distillate is likely limited. The larger swing that could take place would be to blend kerosene used for jet fuel production into diesel — in other words, optimize the two finished transportation fuels within the distillate pool.
Cheap Gasoline Forcing US Refiners to Throttle Back -Oil refiners across the U.S. are being forced to throttle back operations amid a historic plunge in gasoline demand and prices. Plants representing more than 10% of U.S. fuel-making capacity have cut back. Exxon Mobil Corp. has slowed rates at facilities in Texas and Louisiana, while others around Los Angeles and Philadelphia are taking similar action to stem a growing glut of gasoline, diesel and jet fuel. Phillips 66 said Tuesday many of its refineries are processing minimum amounts of crude. Refiners are acutely exposed to the financial impact of the spreading coronavirus. Orders to shelter at home are grounding flights and keeping drivers off the roads, crushing fuel demand and profit margins. Companies delayed planned maintenance to stem the outbreak, adding to the fuel glut, and now are left with little choice but to slow down. “The refiners are struggling mightily, due to the steep drop in demand,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “The poor refining margins will push companies to reduce operating rates further.” Refineries representing over 1.5 million barrels a day of crude processing have delayed maintenance, according to people familiar with the situation. This only exacerbates a growing fuel glut that may further pressure profit margins. Global demand is plunging, with some traders seeing it falling as much as 10 million to 20 million barrels a day at some points this year. California’s lock-down will decimate consumption in a state that accounts for about 10% of U.S. transportation fuel demand. Gasoline futures in New York slid Monday to 41 cents a gallon, the lowest level since 1999, and traded at 48.73 cents on Tuesday at 11:09 a.m. In the Chicago wholesale market, prices were 15 cents on Monday, the lowest in data compiled by Bloomberg going back to 1992. In Europe, prices fell 20% and Exxon said it’s cutting back rates at two refineries in France. Refiners are feeling the pain, with an index of U.S. refiners falling by two-thirds this year. Profit margins to produce gasoline have dropped below zero for the first time since December 2008, during the last recession. “Well, demand is probably down more than 30%, so we as an industry need to run 30% less,”
From Asia to America, fuel prices pummeled by coronavirus fallout - (Reuters) - Prices and profit margins for motor and aviation fuels globally are under severe pressure from a plunge in demand as countries enforce lockdowns and airlines ground planes, forcing more refineries to reduce output. U.S. ultra-low sulfur diesel was the latest product refined from crude oil to take a hit in its cash market last week, after refiners boosted production in a bid to escape the poorer margins for other products harder hit by coronavirus fallout. Refining margins for gasoline and jet fuel have tanked because of decreased demand for transportation fuels, as the disease outbreak has forced businesses to close and governments to push residents to avoid travel and public places. In Asia, profit margins for jet fuel turned negative for the first time in over a decade as global airlines canceled flights. Emirates and Singapore Airlines were the latest carriers to announce huge cuts in their passenger flights. European jet fuel prices plummeted to a near 17-year low last week, and for the past eight trading sessions European refiners have been producing gasoline at a loss. For most of last week, U.S. diesel margins held up relatively well as both trucking and farming, two sectors that rely on diesel, continued operating. But refiners’ moves to divert production capacity previously devoted to other fuels to diesel is starting to cause oversupply in some regions, leading to a drop in cash prices, market participants said. Cash prices for diesel in Chicago ULSD-DIFF-MC slid last week to 34 cents per gallon below the heating oil futures contract HOc1, the lowest seasonally since at least 2011, early Refinitiv Eikon data showed.
US Gasoline Crashes To 50c - Lowest Since 2001 - Amid Unprecedented Demand Collapse - Gasoline futures in New York fell as much as 13% to 50.00 cents a gallon, the lowest level since the current contract started trading in 2005. The previous gasoline contract last traded that low in 2001... All of which means Americans - on average - can expect gas-prices at the pump to plunge below $2/gallon very soon... Energy prices slid toward this multi-decade low on plunging demand due to the economic fallout from the coronavirus crisis, and as prospects for a OPEC-Texas production deal faded. “The government is taking a ‘whatever it takes’ approach,” “That doesn’t change the fact that demand destruction is going to continue. There are still so many unknowns on the demand front. The duration of this economic shutdown is so uncertain that it’s making me believe the bottom may not be in yet.” As Bloomberg notes, the prospects for the oil market remain bleak with more nations going into lockdown to tackle the virus. At the same time, supply is surging. The chance that either Saudi Arabia or Russia will back down from their price war seems remote, with President Vladimir Putin unlikely to submit to what he sees as the kingdom’s oil blackmail, according to Kremlin watchers. Even if crude demand recovers to normal levels by the middle of the year, 2020 is still on course to suffer the biggest decline in consumption since reliable records started in the mid-1960s. “We are now looking at a scale of surplus in the second quarter we probably never have seen before,” Until now, the biggest annual contraction was recorded in 1980, when it tumbled by 2.6 million barrels a day as the global economy reeled under the impact of the second oil crisis.
COVID-19 Could Be a ‘Double Whammy’ for Those in Pollution Hotspots - - Although there have been no large-scale studies of how air pollution can complicate COVID-19, experts say that lung damage caused by poor air quality or smoking could make people particularly vulnerable. “It’s a double-whammy effect,” says Elena Craft, senior director of the Environmental Defense Fund. “Underlying health conditions are exacerbated by pollution hotspots as well as the virus.” Using 2016 data, researchers with Environment Texas found that roughly 20 metropolitan and rural areas in Texas had elevated levels of particulate matter and smog. Prolonged exposure to either can cause a host of health issues, including chronic lung diseases and asthma. The Houston area is a particular hotspot: Brazoria, Chambers, Galveston, Fort Bend, Harris, Liberty, Montgomery, and Waller counties do not meet national air-quality standards. “[Because of] chronic diseases, a lot of immune systems that aren’t where they should be are weakened and are more susceptible to other diseases,” says Brett Perkison, a professor of occupational medicine at the University of Texas School of Public Health. Perkison says that those much-needed defenses are further taxed “by exposure day after day, year after year, to high levels of ozone and nitric oxide.”According to a study conducted by the NAACP and the Clean Air Task Force, some of the nation’s largest African American populations at risk for childhood asthma are in Dallas and Houston. Researchers also found that Texas was one of three states to have the most African Americans living within a half-mile of an oil or natural gas facility. Researchers have already begun looking at neighborhoods that face elevated risks. A team at the University of Texas Health Science Center at Houstonmapped the potential risk of severe COVID-19 hospitalizations and intensive care unit stays in Harris County by identifying residents who are 60 and older and have one or more chronic conditions. Researchers found that the East Little York, Deer Park, Channelview, and East End neighborhoods saw the highest concentration of people over 60 or with chronic disease. These communities have a greater share of residents over the age of 65 with chronic obstructive pulmonary disease, heart disease, or diabetes. Several of these neighborhoods are also in East Houston, home to petrochemical facilities and other industrial polluters.
IEEFA update: Fracking companies’ 2019 performance signals ongoing crisis - ‒ The U.S. fracking industry in 2019 continued its unsuccessful decade-long quest to produce positive free cash flow, according to a briefing note released today by the Institute for Energy Economics and Financial Analysis (IEEFA). Looking at a cross-section of 34 North American shale-focused oil and gas producers, IEEFA analysts found that the companies spent $189 billion more on drilling and other capital expenses over the past decade than they generated from selling oil and gas.These results included a disappointing $2.1 billion in negative free cash flows in 2019. “We have been saying for a long time that Exploration & Production (E&P) companies have created an oil and gas glut that has not been rewarded by anticipated earnings,” said IEEFA financial analyst and briefing note co-author Kathy Hipple. “In what world could this be considered a successful business model?”The sector’s dismal financial performance in 2019 came despite rapid growth in North American production of both oil and gas. The shale revolution has, in fact, propelled the U.S. into becoming the world’s most prolific oil producer. “In financial terms, fracking has been an unrelenting money loser for at least a decade, and investors are taking notice,” said IEEFA analyst and co-author Clark Williams-Derry. “It is getting harder and harder for these companies to raise the capital they need to stay afloat.” The oil and gas industry’s financial underperformance began long before the advent of the coronavirus crisis or the recent Saudi-Russia oil price war. The sector has been facing mounting financial pressures and a deteriorating outlook for most of the last decade. Cash flow losses were just one of many signs of distress among IEEFA’s sample:
- High and rising debt. Total long-term debt rose to $106 billion at the end of 2019, an increase of $1.5 billion from the prior year, and the highest level since 2015. If these companies are unable to produce significant cash flows over the next several years, they may be unable to pay off their debts as they mature—which could trigger debt write-downs or bankruptcies.
- Disappointing revenue. Despite higher production levels, total 2019 revenues among this cross-section of companies fell by $5.6 billion year-over-year.
- Significant net losses. Collectively, these companies reported net losses of $6.7 billion in 2019, largely due to accounting impairments and write-downs of oil and gas assets.
- Declining cash balances. The 34 companies spent down their cash reserves by $14.4 billion from 2016 through the end of 2019. At the end of 2019, cash reserves among these companies were at their lowest level since 2012.
Dallas Fed indicator of Texas oil and gas industry plunges, shows deep energy recession --The Texas oil and gas industry is in a deep recession, one indicator from the Federal Reserve Bank of Dallas shows. The business activity index, a measure of the industry based on surveys of energy executives, has fallen to a historic low, plummeting from -4.2 in the fourth quarter of 2019 to -50.9 in the first quarter of 2020. It's the lowest reading in the survey’s four-year history and "indicative of significant contraction," Dallas Fed analysts write. It's the fourth consecutive quarter indicating negative growth for the industry. On average, respondents to the survey expect West Texas Intermediate oil prices to be $40.50 per barrel by the end of 2020, though responses ranged from $20 to $65 per barrel.
US oil, gas sector sees historic declines, but executives expect a price rebound: Dallas Fed - — The Federal Reserve Bank of Dallas released a quarterly energy survey Wednesday that painted a grim portrait of a US oil and natural gas sector struggling with the demand impact of the coronavirus pandemic and the price war between Russia and Saudi Arabia. "My outlook on the domestic oil and gas industry has never been bleaker," one executive at an exploration-and-production firm wrote to the survey."We are now expecting an almost total stop in business in the coming weeks and months," an executive at an oilfield services company told the Dallas Fed. "It is not a pretty picture." "It is looking to be a bloodbath for most firms," another E&P executive said.While one of the 161 US oil and gas executives surveyed called the impact of the coronavirus "overhyped" and another called the current state of the global energy market "times of opportunities," the survey reported historic declines in activity in the oil and gas sector.In the Dallas Fed's 11th District, which includes Texas and much of New Mexico and Louisiana, a broad measure of business activity by oil and gas firms fell to minus 50.9 in Q1, the lowest point in the survey's four-year history, from minus 4.2 in Q4 2019. The Dallas Fed's oil production index declined 51 points to minus 26.4 in Q1 and its natural gas production index dropped to minus 21.2 in Q1 2020 from 15.6 in Q4 2019.But the majority of survey participants expect oil prices to rebound. According to the survey, 63% of executives polled expect WTI crude oil prices to be above $40/b by the end of 2020, with 19% expecting prices to be $50/b or higher. Only 7% of those surveyed expect WTI prices to be below $30/b by year-end.S&P Global Platts assessed cash WTI crude at $20.76/b Tuesday, up from $20.36/b Monday, but down 65% from January 20, when commodities markets first began reacting to the coronavirus outbreak. Even if WTI prices were to remain below $40/b, 47% of the survey's respondents said their E&P and oilfield services companies would remain solvent for more than four years, although 34% said their firms would be insolvent in less than two years at those prices. Part of this modest optimism in an otherwise pessimistic survey may be declines in breakeven costs, particularly in the Permian and Eagle Ford. According to the survey, E&P companies need WTI prices at an of $23/b to cover operating expenses of existing wells in the Eagle Ford, down from $28/b in the Q1 2019 survey. Operators in the Delaware and Midland portion of the Permian would both need WTI prices of $26/b to cover expenses, down from $35/b and $27/b, respectively, in the Q1 2019 survey.
US oil, gas rig count drops by 47 to 766 on week amid extreme activity cutbacks — The US oil and natural gas rig count dropped by 47 to 766 on the week, according to rig data provider Enverus, as exploration and production operators continued to steeply reduce capital budgets and activity for 2020 owing to both low oil demand and plunging crude prices due to the coronavirus pandemic. The drop was the largest single-week hit since the final week of December 2015, when the rig count fell 77 to 691 while oil prices were in the mid-$30s/b and falling. Crude prices are even lower now. Around 2:40 pm ET Thursday, front-month WTI crude was trading below $23/b. "This [scenario of slashing activity] might be just the beginning, depending on how long lower prices persist," Linda Htein, senior research manager-Lower 48 for energy consultancy Wood Mackenzie, said in a Thursday webinar on the current oil and gas landscape. This past week, 40 of the 47 rigs shed were oil-directed, to drop the total to 627, while rigs chasing gas dropped by seven to 139. Nearly half of the rigs dropped (20) came from the Permian Basin of West Texas/New Mexico, leaving a total of 396. Another five rigs exited in the Denver-Julesburg Basin of Colorado, leaving it with 21, while four more were laid down in the Eagle Ford Shale of South Texas, leaving 68. But gas-weighted rigs were remarkably stable, with both the Marcellus Shale of mostly Pennsylvania and the Utica Shale mostly in Ohio unchanged at 38 and 10 rigs, respectively. Rig counts in each of those basins held steady for the fourth consecutive week. The Haynesville Shale in East Texas/Northwest Louisiana shed one rig, leaving 40 operating. The numbers add up to a discouraging industry prognosis, according to the latest Dallas Fed Energy Survey released Thursday. The local federal reserve called its results the "bleakest" since the poll began in the first quarter of 2016, also a time of falling oil prices and turmoil in the oil patch. "The results suggest profound and difficult changes ahead for the sector," the survey said. "At current price levels, [energy executives' responses] suggest many companies will have difficulty covering operating expenses." The survey, which queried more than 200 industry participants March 11-19, found more than 70% percent of E&P companies have cut expectations for capital spending next year. In the week since then, further reductions followed and some operators made a second rounds of cuts.
Energy companies slash another $19 billion as oil price remain near 20-year lows - Eleven energy companies over the past several days said they would cut a combined $18.6 billion dollars from their budgets as oil prices remain near 20-year lows, setting the stage for tens of thousands additional layoffs.West Texas Intermediate crude closed at $23.36 per barrel Monday, a price not seen since March 2002 as Russia and Saudi Arabia flood global markets and the coronavirus pandemic crushes demand.Energy companies big and small — including Conoco Phillips, Exxon Mobil, Marathon Oil, Hess and Halliburton — have responded by slashing spending for new projects and operations, halting stock buy back programs, putting deals on hold and selling assets. Two more of the world’s largest oil companies announced cutbacks on Monday.Royal Dutch Shell, based in the Hague, said it would cut capital spending by $5 billion and operating costs by $3 billion to $4 billion. The company also said it is suspending a planned stock buyback worth $1 billion and will sell $10 billion in assets.Shell's capital spending budget stands at $20 billion for projects around the globe. The company has tens of thousands of acres of oil leases in the Permian Basin of West Texas and filed for 127 drilling permits in Texas in 2019. Also Monday, French oil major Total said it is slashing $3 billion in capital spending, cutting another $800 million in operating expenses and suspending a $2 billion stock buyback program.Total has thousands of acres of natural gas leases in the Barnett Shale of North Texas and sought six drilling permits in the state in 2019.Meanwhile, Midland oil company Diamondback Energy is cutting $1.2 billion of capital spending, reducing its 2020 budget for drilling and completing new wells to a range of $1.5 billion to $1.9 billion. The company said it would cut more if oil prices continue to fall.Diamondback, the fourth most-active driller in Texas based on drilling permits, ordered its nine hydraulic fracturing crews to take a one-month break. After that break, the company expects to run just three to five crews, depending on oil prices, for the rest of the year. Houston offshore oil company Talos Energy also pledged to cut $170 million from its budget while six pipeline companies said they would cut a combined $1.9 billion from their budgets.Noble Midstream Partners, Rattler Midstream, Targa Resources, EnLink Midstream, Oneok and Pembina Pipeline made the budget cuts over the past two weeks — representing an overall 30 percent cut in planned capital expenditures for new pipeline and storage projects in 2020, according to a report from Houston energy investment banking firm Simmons Energy.Canadian pipeline operator Pembina made the largest cuts of the six companies, slashing nearly $700 million, or 43 percent, of its nearly $1.6 billion budget. The company plans to spend nearly $900 million this year.Houston oil-field service company NexTier Oilfield Solutions on Monday said it is cutting $110 million in capital spending. The company plans to idle more of its hydraulic fracturing fleet and reduce investments in innovation and new technology to focus on projects that directly reduce costs.
Apache, FTS International Add to Oilpatch Layoffs -The wave of rapid cost-cutting and right-sizing in the oilpatch continues with layoff announcements from Houston-based Apache Corp. and Fort Worth, Texas-based FTS International. Both companies filed Worker Adjustment and Retraining Notification Act letters with the state last week. Apache is undergoing a mass layoff at its Midland facility at 303 Veterans Airpark Ln Ste 1000, Midland, TX, 79705. Employment separations began on March 18, 2020, and approximately 85 employees will be affected. No further information surrounding the layoffs was provided in the notice. In a recent earnings call, Apache CEO John Christmann said the company was undergoing a corporate redesign. The process includes right-sizing technical, operational and corporate support functions. “The rightsizing is a recognition that we will not be returning to past levels of capital activity and need to make a permanent reduction in headcount,” Christmann added. Separately, there was a furlough at FTS International Services’ facility at 4700 S. Edgewood Terrace in Fort Worth, effective March 17. It affected 35 workers. “This furlough, resulting from unforeseeable business circumstances will last at least six months and may turn into a permanent separation from employment,” the company’s WARN letter stated. “Just over two weeks ago, our business was growing and we had a full frac calendar,” Michael Doss, Chief Executive Officer, said in a written statement. “However, in response to current conditions, many of our customers have already dropped fleets or will be dropping fleets over the next couple of months. Pressure pumping companies, like FTSI, are also giving price concessions that are expected to significantly reduce margins across the industry. Accordingly, we have initiated aggressive measures to reduce costs and position us for future success.”
In Texas, a half-baked plan to save the oil industry from a coronavirus-fueled crash - As oil prices cratered to an 18-year low last week, news leaked that oil and gas producers were asking Texas regulators to mandate a statewide cut in production — a drastic measure that hasn’t been attempted since the 1970s. On Friday, the Wall Street Journal first reported that the Texas Railroad Commission (which, despite its peculiar name, regulates the state’s oil and gas industry) was contemplating instituting production cuts. Other news outlets later confirmed that the agency is studying whether capping the amount of oil produced in the state is practical, and whether it could even do so under existing laws and regulations.If implemented, the measure could have serious economic ramifications for Texas and the rest of the U.S. But without the cooperation of other states, the federal government, and other oil-rich countries, energy experts say that slashing production in Texas alone is unlikely to provide serious relief to domestic oil and gas companies teetering on the edge of financial ruin.The fact that such an extreme step is being considered at all is an indication of the dire predicament facing oil and gas producers. Banks have slashed oil priceoutlooks and now expect that prices will average between $25 and $35 per barrel for most of the year. That’s at least a third lower than projections for 2020 from just a few months ago — projections that were already pretty low to begin with. Market analysts estimate that operators in the Permian Basin in West Texas need around $47 per barrel to break even. Proration, a regulatory term for production limits, could help companies shore up prices by making a dent in the industry’s overabundant supply. But a number of regulatory and practical hurdles remain in the way of implementing caps on oil production. For one, states last ordered companies to cut production almost half a century ago. As a result, regulatory agencies lack the institutional knowledge needed to recreate practical proration programs that can work in an energy landscape that is very different from that of the 1970s. In some cases, states may not be able to devise proration programs without first making regulatory changes, a process too time-consuming to get relief to producers by the time they need it. In New Mexico, for instance, current rules do not allow caps on a subset of wells, and instituting proration will require a rule change.
Kinder Morgan sees Permian Highway gas project on track after court action — A federal district court declined requests to halt work on Kinder Morgan's 2.1 Bcf/d, 430-mile Permian Highway natural gas pipeline project, despite finding evidence related to gaps in Endangered Species Act compliance to be compelling. The decision enables work to continue on the highly anticipated project, which will move gas from the Permian Basin to toward the Gulf Coast, with access to the Katy Hub, LNG exports, and South Texas market, likely bolstering Waha Hub prices. Kinder Morgan, in an emailed statement Monday, welcomed the decision and said it has "implemented measures" to address concerns raised in the case. The project is on track to be in service early in first-quarter 2021, according to the company. "We continue to monitor the coronavirus, and are making adjustments as necessary to create social distancing and limited exposure to one another," said spokeswoman Katherine Hill, but the company is "not expecting [the virus] to impact the construction schedule at this time." Plaintiffs in the case, including the City of Austin and other localities, a water district and landowners, have contended that allowing construction without an incidental take permit under Section 10 of the Endangered Species Act would result in an unlawful taking of species (City of Austin, et al., v. Kinder Morgan Texas Pipeline, et al., 1:20-CV-138). Further, they have argued that Kinder Morgan and the US Fish and Wildlife Service sidestepped requirements for an environmental review under the National Environmental Policy Act. And in seeking a preliminary injunction, plaintiffs argued that Kinder Morgan failed to follow some of the required mitigation steps under its incidental take permit to protect habitat of the golden-cheeked warbler, such as avoiding clearing vegetation after March 1, safeguarding against oak wilt by treating promptly treating freshly cut stumps, and ensuring continuous construction to minimize nest disturbance.
Trump administration continues to sell oil rights amid industry slump The Trump administration is pushing ahead with drilling lease sales as oil prices plummet and amid calls from conservation groups and others to suspend business as usual during the coronavirus outbreak. The Bureau of Land Management (BLM) held lease sales in Wyoming, Montana, Nevada and Colorado on Monday, selling oil rights on parcels of public land covering hundreds of thousands of acres. But taxpayer groups argue the sales come at an inopportune time, as oil prices fall to roughly $23 a barrel, risking generating little income for the treasury. “In this environment, it is impossible for the American taxpayer to expect anywhere near a fair return on oil and gas leases,” Conservatives for Responsible Stewardship and Taxpayers for Common Sense wrote last week, encouraging the administration to suspend lease sales for the rest of the year. The groups’ analysis of lease sales in Utah in mid-March found 90 percent of acres sold received the minimum bid of $2 per acre. BLM did not immediately respond to request for comment from The Hill. However, the agency told Reuters they are “letting free market forces work after the resource is extracted by companies who sell these commodities. Oil and gas lease sales and royalties continue to propel America’s economy and support good-paying energy sector jobs.” Environmental groups say the administration should not continue with a number of activities while a distracted public may be unable to weigh in. “The Trump administration has already gone to extraordinary lengths to stifle and ignore public input to enact its drill everywhere agenda. Ramming through major policies while the country battles a global pandemic would only add to its legacy of corporate charity and environmental destruction,” the Center for Western Priorities said in a statement.
South Dakota governor signs 'riot-boosting' penalties — South Dakota Gov. Kristi Noem signed a bill that revives the state’s criminal and civil penalties for rioting and inciting a riot, the Republican governor’s office said Tuesday. Noem had told lawmakers months before the session began that she would revive the so-called “riot-boosting” penalties. A federal judge found parts of the state’s riot laws unconstitutional last year, in part because they were targeted at opponents to the Keystone XL pipeline. The proposal drew demonstrations from Native American and environmental groups, but did not face any major opposition from Republican legislators. Noem said the bill uses the “narrowest” definitions of rioting and inciting a riot and only goes after people who commit violence or cause damage. But opponents said the bill would have a “chilling effect” on peaceful protests and creates a false narrative that Native American people are violent. The South Dakota Legislature passed a similar law last year aimed at demonstrations against the pipeline. At the time, Noem said it was necessary to have civil penalties for people or groups that fund violent demonstrations, calling the action “riot boosting.” But a federal judge last year found parts of that law, as well as several older laws on the books, to be unconstitutional. Noem asked lawmakers to try again this year to update the state’s criminal and civil penalties for rioting, arguing they are necessary to “protect people and property.” Ahead of the Senate vote, she told reporters that the bill protects free speech and would be used against people who fund demonstrations “only if they’re involved in those protests.”
Produced water spill reported in Billings County - The North Dakota Department of Environmental Quality (NDDEQ) has been notified of a produced water spill on a well pad in Billings County. The well pad is operated by Scout Energy Management, LLC.The incident occurred about 11 miles southwest of Belfield on March 23, and it was reported the next day. The cause of the spill was reported as a valve failure.Scout Energy Management, LLC estimates that approximately 150 barrels of produced water were released and impacted rangeland.Personnel from the NDDEQ are inspecting the site and will continue to monitor the investigation and remediation.
Hess extraction well releases 377 barrels of source water -The North Dakota Department of Environmental Quality (NDDEQ) has been notified of a produced water spill on a well pad in Billings County. The well pad is operated by Scout Energy Management, LLC.The incident occurred about 11 miles southwest of Belfield on March 23, and it was reported the next day. The cause of the spill was reported as a valve failure.Scout Energy Management, LLC estimates that approximately 150 barrels of produced water were released and impacted rangeland. Personnel from the NDDEQ are inspecting the site and will continue to monitor the investigation and remediation.
Standing Rock Sioux Tribe Prevails as Federal Judge Strikes Down DAPL Permits | Earthjustice — A federal court today granted a request by the Standing Rock Sioux Tribe to strike down federal permits for the controversial Dakota Access Pipeline.The Court found the U.S. Army Corps of Engineers violated the National Environmental Policy Act when it affirmed federal permits for the pipeline originally issued in 2016. Specifically, the Court found significant unresolved concerns about the potential impacts of oil spills and the likelihood that one could take place. For example, the Court criticized the Corps for failing to address the Standing Rock Sioux Tribe’s expert criticism of its analysis, citing issues like potential worst case discharge, the difficulty of detecting slow leaks, and responding to spills in winter. Similarly, the Court observed that DAPL’s parent company’s abysmal safety record “does not inspire confidence,” finding that it should have been considered more closely.The Court’s decision relies heavily on the technical analyses conducted by the Tribe’s agency directors and expert consultants, repeatedly citing the Tribe’s evidence that the risk of a spill, and the consequences should one occur, are far more serious than ever recognized. The Court ruling validates the Tribe’s hard work over several years to provide technical input into the remand process. "In this case, the operator's history did not inspire confidence" View the entire document with DocumentCloud The Court ordered the Corps to prepare a full environmental impact statement on the pipeline, something that the Tribe has sought from the beginning of this controversy. The Court asked the parties to submit additional briefing on the question of whether to shut down the pipeline in the interim. “This validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” said Earthjustice attorney Jan Hasselman. “The Obama administration had it right when it moved to deny the permits in 2016, and this is the second time the Court has ruled that the government ran afoul of environmental laws when it permitted this pipeline. We will continue to see this through until DAPL has finally been shut down.”
Federal Judge Tosses Dakota Access Pipeline Permits, Orders Full Environmental Review | DeSmog --Today, a federal judge tossed out federal permits for the Dakota Access pipeline (DAPL), built to carry over half a million barrels of Bakken crude oil a day from North Dakota, and ordered the U.S. Army Corps of Engineers to conduct a full environmental review of the pipeline project. U.S. District Judge James E. Boasberg indicated that he would next consider whether to shut down the current flows of oil through DAPL while the environmental review is in process, ordering both sides to submit briefs on the question. The Dakota Access pipeline has been in service for nearly three years, following battles over the pipeline’s environmental impacts that raged for years. “The many commenters in this case pointed to serious gaps in crucial parts of the Corps’ analysis,” Judge Boasberg wrote in today’s order, “to name a few, that the pipeline’s leak-detection system was unlikely to work, that it was not designed to catch slow spills, that the operator’s serious history of incidents had not been taken into account, and that the worst-case scenario used by the Corps was potentially only a fraction of what a realistic figure would be — and the Corps was not able to fill any of them.”Judge Boasberg cited evidence submitted regarding the safety record of the pipeline’s operator, Energy Transfer (formerly known as Energy Transfer Partners, which merged with Sunoco). “In this case, the operator’s history did not inspire confidence,” the order says. “’[Pipeline and Hazardous Materials Safety Administration] data shows Sunoco has experienced 276 incidents resulting in over $53 million in property damage from 2006-2016,’ which one expert described as ‘one of the lower performing safety records of any operator in the industry for spills and releases.’”“This validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” Earthjustice attorney Jan Hasselman said in a statement. “We will continue to see this through until DAPL has finally been shut down.” Because the pipeline’s effects were “likely to be highly controversial,” the judicial opinion concludes, federal law — specifically the National Environmental Policy Act (NEPA) — requires a more thorough environmental review than was done.
'Huge Victory' for Standing Rock Sioux Tribe as Federal Court Rules DAPL Permits Violated Law - A federal judge handed down a major victory for the Standing Rock Sioux tribe of North Dakota on Wednesday, ruling that the U.S. Army Corps of Engineers violated the National Environmental Policy Act by approving federal permits for the Dakota Access Pipeline.The USACE must complete a full environmental impact study of the pipeline, including full consideration of concerns presented by the Standing Rock Tribe, the judge ruled. The tribe has asked the court to ultimately shut the pipeline down.The court chastised the USACE for moving ahead with affirming the permits in 2016 and allowing the construction of the Dakota Access Pipeline (DAPL) crossing the Missouri River after President Donald Trump assumed office in 2017, without considering the expert analysis put forward by the tribe. The Standing Rock Sioux had raised concerns regarding the likelihood and danger of potential oil spills, DAPL's leak-detection system, and the safety record of Sunoco Logistics, the company behind the pipeline. Sunoco "has experienced 276 incidents resulting in over $53 million in property damage from 2006 to 2016" and has "one of the lowest performing safety records of any operator in the industry," the tribe's experts found.The federal ruling "validates everything the Tribe has been saying all along about the risk of oil spills to the people of Standing Rock," said Earthjustice attorney Jan Hasselman in a statement. "The Obama administration had it right when it moved to deny the permits in 2016, and this is the second time the court has ruled that the government ran afoul of environmental laws when it permitted this pipeline. We will continue to see this through until DAPL has finally been shut down."DAPL and the fight against the pipeline was the subject of international attention in 2016 when thousands of water defenders gathered at camps in North Dakota, facing a highly militarized police force armed with tanks, riot gear, rubber bullets, and other weapons. Since Trump reversed former President Barack Obama's December 2016 order denying the permits and allowed the construction to be completed in June 2017, the tribe haschallenged the permits and demanded the USACE conduct a full environmental analysis. Wednesday's ruling represented a "huge victory" for the tribe, 350.org co-founder Bill McKibben tweeted.
Whiting, Continental Oil announce cost-cutting measures - Continental Resources and Whiting Petroleum Corporation are among the latest operators with Bakken assets announcing sharp drops to capital expenditures in the wake of an ongoing price war between Russia and OPEC. Continental said it will reduce its 2020 capital expenditures by 55 percent, dropping its 2020 capex to $1.2 billion. Whiting will cut capex by 30 percent, or $185 million, dropping its total capital budget to between $400 to $435 million. For Continental, this translates to a reduction of six rigs in the Bakken, dropping it from nine to three for 2020. Continental will also cut rigs in Oklahoma, going from 10.5 to about four rigs there. Whiting, which had already made some cuts last year, said it will drop another rig and another completion crew within the next month. Continental expects the revision to its capex to have slight impact on production statistics. It is projecting the drop in crude oil production will be less than 5 percent. Whiting said its cuts will have “moderate impact” on 2020 crude oil production, but deferred specifics to more formal guidance that it will release during its first quarter earnings call. Continental’s Chief Executive Officer Bill Berry said the company is also looking at cost-saving initiatives across its operations to remain free cash flow positive, and expects to remain cash flow neutral even under $30 per barrel WTI.
Lawsuit accuses Williston-based oilfield services company of massive fraud, racketeering - Oklahoma-based oil company Continental Resources is suing a Williston oilfield company in federal court, claiming it was fraudulently overbilled by more than $2 million. The suit, filed in the U.S. District Court for the Western District of Oklahoma, is against Wolla Oilfield Services and its owner, Jason Wolla. Attorneys for Continental claim that Wolla directed his employees to produce fake invoices and bill Continental for work that was never done. Wolla Oilfield Services started working for Continental in January 2017 and billed the company about $7.7 million between then and December 2019, according to the lawsuit. In September 2019, however, a whistleblower told Continental that Wolla Oilfield was systematically overbilling the company. During an audit, Wolla told Continental employees that he was certain the company had only been billed for work that had actually been done. But, Continental’s attorneys wrote, the audit uncovered that Wolla Oilfield had been submitting fraudulent bills. “The timesheets Wolla Oilfield’s drivers submitted to Wolla Oilfield consistently showed drivers actually worked less than 10 hours a day on average, but that Wolla Oilfield billed Continental for significantly more,” the company’s attorneys wrote in the suit. “In fact, Wolla Oilfield employees would often bill Continental for more than 24 hours of work in a day. For example, one Wolla Oilfield employee billed Continental and other customers for 28 hours on August 5, 2019, and 29.5 hours on August 6, 2019, even though his actual timesheet shows he only worked 12 hours on each of those days.” The company showed drivers how to falsify their timesheets to avoid suspicion, attorneys claimed in the suit.
Plains ordered to pay $60 million for Refugio oil spill- On May 19, 2015, a corroded pipeline owned by Plains All American Pipeline broke north of Refugio Beach, sending more than 100,000 gallons of crude oil into the waters of the Santa Barbara Coast. No corner of our community was left untouched by the devastation: industries like tourism and fishing were hammered, and the local ecosystem, including countless marine mammals and sea birds, were affected. As has been the case on several occasions in our city’s history, the negligence of the oil industry spilled out into the crystalline waters of the Pacific, and the community was left to put things back together. In September 2018, Plains All American Pipeline, a Houston-based energy company, was convicted of fouling state waters and harming local wildlife by a California jury. Now, in a settlement that came last week, Plains has been ordered to pay $60 million for the damages created by what were ruled to be negligent practices that contributed to the spill. However, some environmental organizations are holding back on celebrations. On March 19, the Environmental Defense Center (EDC) put out a statement questioning the wisdom of locking down the amount of Plains’ payment before the public has had the opportunity to review and comment on the damage assessment and draft restoration plan. Linda Krop, chief counsel for the EDC, also expressed concern that the gallon figure of 123,000 gallons may be too low. “There’s a scientific paper from UCSB suggesting that the number of gallons spilled might be as high as 450,000 gallons, so to us it doesn’t make sense to lock in a penalty that may actually be much too low,” said Krop. “This settlement is taking place before the public has an opportunity to comment on the draft assessment of impact to the environment and public recreation.”State Senator Hannah-Beth Jackson, who played a large role in the early days of investigating the incident and was highly critical of Plains’s conduct, expressed similar concerns. “The good news is that they’ll have to adhere to California standards, which they’d previously argued they should be exempt from because they claim to be an inter-state enterprise,” said Jackson. “But this business of making a decision about the dollar amount before the public has all of the information is problematic to me. I’m a little concerned about that.”
Overturned tanker spills 6K gallons oil near California dam (AP) — A tanker truck overturned down an embankment Saturday, spilling more than 6,600 gallons of crude oil into a river that flows into a dam and reservoir near the city of Santa Maria, authorities said. The driver was not injured and the cause of the single-vehicle crash on State Route 166 was under investigation, said Santa Barbara County Fire Capt. Nikki Stevens. He said crews were racing to stop the oil that spilled into the Cuyama River from reaching Twitchell Dam and reservoir, which provides flood control and water conservation to the region on the Central Coast. The spill stretching about 2 miles long was more than 10 miles away from the dam. They constructed dirt berms and threw a boom — essentially a floating fence — into the water to contain the oil. Additionally, Stevens said, they placed large pipes under the berms to keep uncontaminated water flowing to the dam while they use pads to absorb the floating oil slick. Time was of the essence because rain was in the forecast for Sunday. “The dirt berm is not going to withstand running water,” Stevens said. “They’re working as aggressively as they can to clean this up.” Stevens said the cleanup will take several days and water quality tests will be conducted.
Crews work to clean Cuyama River after crash spills 6,000 gallons -Most of the 6,000 gallons of crude oil that was spilled into the Cuyama River in Santa Maria has been contained.The Santa Barbara County Fire Department and California Department Fish and Wildlife worked through Saturday night to build two underflow dams to contain about 4,200 barrels of oil, according to fire Capt. Daniel Bertucelli.A tanker truck carrying more than 6,000 gallons of crude oil overturned and crashed into the Cuyama River east of Santa Maria on Saturday, according to the Santa Barbara County Fire Department. The crash took place on Highway 166, about 20 miles from Santa Maria.Authorities were notified at approximately 6 a.m Saturday and, by 3 p.m. that day, all of the forward flow of oil was stopped at the U.S. National Forest’s Pine Canyon Station.The driver was uninjured in the crash, fire Capt. Nikki Stevens said, but the crude oil began leaking from the tanker and heading downstream toward Twitchell Reservoir.Crews set up a yellow containment boom just below the spill and use heavy equipment to build a dirt berm with two containment underflow dams to allow the water to flow through, according to the Santa Barbara County Fire Department. Absorbent pads were placed downstream of the berm to pick up the rest of the oil.Personnel from multiple agencies — including the CHP, U.S. Fish & Wildlife Service, California Department of Fish and Wildlife, Caltrans, the Santa Maria Valley Water Conservation District, which operates Twitchell Reservoir — assisted on the incident.Pacific Petroleum was at the scene with four vacuum trucks to help clean up spilled oil, according to Bertucelli.The Oiled Wildlife Care Network has been activated and reports of oiled wildlife are being investigated, according to a California Department Fish and Wildlife news release.
Oil Industry Braces for Biggest Idling of Wells in 35 Years - Only the old hands at the Coffeyville oil refinery could remember anything like the prices posted this month. The small Kansas plant in the heart of rural America was offering just $1.75 a barrel for Wyoming sweet crude. With more than two billion people on virus lockdown from India to California, energy demand has plunged. In corners of the U.S., Canada, Russia and China, oil prices at the well-head are collapsing under the weight of an unprecedented glut. And with it, the industry is bracing for something that last happened on this scale 35 years ago: producers shutting down their wells as pumping crude makes no economic sense. “I have never seen anything like this in the markets,” said Torbjorn Tornqvist, the co-founder of Gunvor Group Ltd., a large commodity trading house. “We’ve never seen anything even close to today.” The oil market -- hit by the double blow of a demand slump and a supply surge as Saudi Arabia and Russia wage a price war -- is battling a surplus of as much as 20% of global consumption. The consequences are brutal: prices are now low enough to force a widespread suspension of production, or a shut-in as it’s known in the industry. For those waging the price war, it counts as a victory -- as long as the shut-ins happen elsewhere. Western Canadian Select benchmark crude Brent and West Texas Intermediate, the benchmarks closely followed in Wall Street, are hovering around $25 a barrel. But in the world of physical oil -- where actual barrels change hands -- producers are getting much less. The industry is navigating what Paul Sankey, a veteran oil analyst at Mizuho Bank Ltd, described as “uncharted waters to unknown lands.” Wyoming Sweet, a landlocked crude with few outlets other than American refineries like Coffeyville, is paradigmatic of how the dynamics of the oil market are forcing output cuts. There are others: North Dakota Light Sweet has traded at $9.97 a barrel. Across the border, Western Canadian Select has plunged to $6.45. In Siberia, Russian crude has changed hands for less than $10 and Chinese domestic prices have fallen to single digits. Ultra-low oil prices are starting to work: Petrobras, the Brazilian state-run producer, is cutting output by 100,000 barrels a day from high-cost offshore platforms. Glencore Plc., the commodity giant, is shutting down its oilfields in Chad. In Canada, Suncor Energy Inc. has partially shutdown its Fort Hills oil sands mine. As the pain spreads, industry executives believe many other companies will stem production in the next few days.
Bipartisan lawmakers urge assistance for oil and gas workers -A bipartisan group of lawmakers wrote to congressional leadership asking for assistance for oil and gas industry workers as oil prices have plunged amid the coronavirus pandemic and international disputes. “We write to ask you to help address the unique challenges facing the people who work in the U.S. oil and gas sector,” said the letter, which was signed by seven Democrats and two Republicans. “We know from previous economic aid efforts that any COVID-19 relief package must protect all hard-working Americans. The effects of COVID-19 will be felt across the economy,” it continued. The lawmakers wrote that there have been layoffs in recent weeks linked to the decreasing fuel prices. A Texas oil regulator recently told Bloomberg that tens of thousands of people in the state were being laid off as drilling rigs close down.“As various sector-specific proposals are considered to address the impacts of COVID-19, this sector and the people who work in it must be taken into account,” the legislators wrote. The letter was signed by Reps. Lizzie Fletcher (D-Texas), Xochitl Torres Small (D-N.M.), Vicente Gonzalez (D-Texas), Sylvia Garcia (D-Texas), Michael McCaul (R-Texas), Al Green (D-Texas), Brian Babin (R-Texas), Kendra Horn (D-Okla.), and Marc Veasey (D-Texas.)It comes as Congress weighs certain relief for oil and gas companies. The Energy Department has asked Congress for $3 billion with which to purchase oil to be stored in the Strategic Petroleum Reserve.
$131B Less Could Go to New Upstream Projects This.Year --Sluggish global oil and gas demand amid the COVID-19 virus pandemic and the ongoing price war between Russia and Saudi Arabia could wreak havoc on new oil and gas project development plans in 2020, according to an impact analysis by Rystad Energy. In fact, the consultancy’s study found that exploration and production firms will likely reduce project sanctioning by as much as $131 billion – or roughly 68 percent – year-on-year. “Upstream players will have to take a close look at their cost levels and investment plans to counter the financial impact of lower prices and demand,” Audun Martinsen, head of energy service research for Rystad, commented in a written statement. “Companies have already started reducing their annual capital spending for 2020.” According to Rystad, total onshore and offshore project sanctioning last year amounted to $192 billion. Earlier this year, the firm had forecast that $190 billion in new projects would be approved in 2020. Thanks to recent developments, however, Rystad has dramatically altered its projection. The firm stated that it foresees just $61 billion in total project sanctioning if the Brent crude price averages approximately $30 per barrel this year. It added that the revised estimate assumes $30 billion would go toward onshore projects and $31 billion to offshore. In an approximately $40 average oil price environment, which Rystad contends is “getting more distant by the day,” the consultancy predicts that total sanctioning would hit $82 billion. In that case, the year-on-year decrease would amount to 57 percent, the firm added. “In North America, multi-billion dollar oil projects, including LLOG-operated Shenandoah Phase 1 and the Shell-operated Whale development, could face short-term delays in the offshore sector due to low oil prices, while in the onshore sector operators are expected to wait for the situation to stabilize before committing to new projects,”
Listen: A price collapse breaks a fragile US shale sector can it be fixed? – podcast - As oil prices dipped to levels not seen in nearly two decades, US shale operators slashed budgets and rig counts and braced for a hellish few months, if not years. Is even a modest price rebound possible in the near term? Will Saudi Arabia and Russia return to talks over a new supply cut? Has the price collapse forever altered US oil sanctions policy? On today's Capitol Crude Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, talks about the path forward for US shale, the potential for a US import embargo and why resurrection of a global supply cut may be possible. "The question is: Did the Russians know that they were signing up for the current price environment?" Croft asks.
How Far Will Trump Go To Save U.S. Shale? - The U.S. is today showing signs of increased desperation as oil prices sink to levels that may pose a threat to the energy independence of the United States by kicking U.S. shale out of the market.Several recent actions taken by the United States indicate that it may be attempting to change the current trajectory of the global oil market, including by showing interest in stepping up negotiations with Saudi Arabia, which is spearheading the ongoing market share war that is fostering ultra-low oil prices. The United States is facing a national emergency. The Covid-19 pandemic in the world’s largest oil consumer, The United States, has dented demand to the extent that a couple months ago, no one thought possible. The virus struck—first in the world’s largest oil importer, China–at a time when the oil markets were already concerned about a global oversupply. The virus also struck around the same time that another critical oil-market event took place: the end of the OPEC+ production cut agreement and the start of the oil price war—with Saudi Arabia on one side and Russia on the other.The result is that the U.S. shale industry, often touted as the backbone of the U.S. energy independence movement, has found itself caught in the middle between the oversupplied oil market and severely hampered oil demand.And it looks like the government is getting worried. On Monday evening, the U.S. made the decision to appoint Victoria Coates as special energy representative to Saudi Arabia. While the United States insists that this was in the works for quite some time, even before the oil war began, the timing coincides rather nicely with the shocking price drop for the US crude grade West Texas Intermediate, which is now trading around $23 per barrel, down from $60-something per barrel at the beginning of the year.This $23 per barrel is not sustainable long term—perhaps not even short term—creating a sense of urgency in the United States to address the problem.And who better to address than the perceived perpetrator of the oil price war, Saudi Arabia. Despite the timing, the U.S. is not owning the fact that Coates’ new assignment and the oil price war have any noteworthy link. But the move comes after intense pressure from U.S. lawmakers and others in the industry in recent weeks, some of who have urged President Trump to take the extreme stance ofembargoing Russian and Saudi Arabian oil. Other calls to action include the Texas Railroad Commission’s suggestion to use pro-rationing that would force Texas producers to curb production—something that is unthinkable in America.Mississippi Senator Roger Wicker and Oklahoma Senator Inhofe asked the Department of Commerce to slap a tariff on foreign oil, citing national security reasons. Other ideas include outright conspiring—albeit in a somewhat unofficial capacity—with Saudi Arabia to coordinate production.
Price crash could upend western Canada's propane export outlook - The collapse in crude oil prices has sent shock waves throughout the global energy industry and Canada has been no exception. Sorting through all the impacts will take time, but what’s clear is that any earlier optimism surrounding supply growth in Canada has evaporated, including for propane supply to feed the new propane export terminals on British Columbia’s coastline. Edmonton propane prices fell 58% since the start of March to as low as 10.25 cents per gallon in U.S. dollars on March 23 — the lowest level since April 2016 — and settled yesterday at 13.13 cents per gallon, according to data from our friends at OPIS. A dampened supply outlook means future export expansion plans also are being reconsidered. Today, we explore what the sharp decline in propane prices could mean for the region’s supplies and future propane exports, including from Pembina Pipeline’s nearly completed export terminal in Prince Rupert, BC. The past few weeks have seen many an energy outlook completely overturned. The effects of the huge downturn in crude oil prices have rapidly forced a large majority of producers in the U.S. and Canada to drastically reduce their spending plans for at least the first half of this year, and likely for all of 2020. Our examination of Canadian producers, both large and small, reveals more than C$6 billion ($4.1 billion) of capital spending reductions announced in just the past three weeks, with some producers still to release information on their capex plans. These spending reductions equate to a more than 30% cut versus previously announced capex plans for this year before prices came crashing down. The impacts may soon be seen in the number of drilled and completed crude oil and liquids-rich gas wells across Western Canada, although it may take some time for the supply impacts to be more fully realized. (See Déjà Vu for reasons as to why supply impacts can take time to materialize.) The capital spending cuts have not been confined to just producers, but also have quickly surfaced in the form of capital reductions by major Canadian energy infrastructure companies such as Pembina Pipelines, Inter Pipeline and Keyera Corp.
Federated Cooperatives uses virus to demand concessions from locked-out Saskatchewan refinery workers - In an ominous signpost of the emerging corporate response to the coronavirus crisis and the ensuing stock market meltdown, Federated Cooperatives Limited (FCL) announced Sunday that it has rejected the mediator’s recommendations in the 111-day lockout of 750 oil refinery workers in Regina, Saskatchewan. The company is now demanding even deeper concessions on pensions, work rules, benefits and staffing levels. In a statement, the management of FCL’s Co-op Refinery Complex (CRC) wrote, “We must now consider the stark world developments that are presently unfolding and their impacts to both our business reality and our ever-more critical responsibility to our multiple stakeholders. Global economic circumstances have changed and, with that, we have seen a drastic decline in the consumption of fuel and rapidly declining oil prices that have put the CRC in a more difficult financial position than when negotiations began. Like all businesses, the refinery is now reassessing how to manage through the financial turmoil.” Last week, mediator Vince Ready had tabled his nonbinding recommendations for a resolution of the bitter dispute that has seen FCL deploy a large scab workforce, with the unstinting support of the right-wing Saskatchewan Party government, the capitalist courts, and police. Ready’s report granted virtually all FCL’s initial concession demands. The union, which had already proposed a series of increasingly draconian concessionary climbdowns, accepted the mediator’s recommendations and scheduled a Monday vote advising the workers to accept the rotten deal. Workers, starved out on the picket line and seeing no way forward, voted 98 percent to endorse the Ready recommendations. After the vote, local union President Kevin Bittman told reporters that the mediator’s report, which contained everything the workers had fought against for almost four months, was “a reasonable compromise.” Nevertheless, the lockout continues due to FCL’s refusal to endorse the Ready report. Unifor National President Jerry Dias said prior to Monday’s vote, “To be clear, our committee is not thrilled with the final report and the significant changes that are recommended. We have been trying to find a solution since we were locked out. … It is time to end this dispute and have our members running the refinery in these unprecedented times.”
European natural gas storage inventories are at record-high levels at the end of winter - European natural gas storage inventories as of March 1, 2020, were 60% full—the highest ever recorded level for the start of March, according to Gas Storage Europe’s Aggregated Gas Storage Inventory (AGSI+). European stock levels for both January and February 2020 were the highest ever recorded for those months. Europe’s high levels of natural gas in storage are the result of a mild winter, which limited winter heating demand, and growing natural gas imports by pipeline and as liquefied natural gas (LNG). Relatively mild winter weather across Europe—and especially in northern Europe, where natural gas heating is more common—reduced demand for residential and commercial heating. As a result, natural gas withdrawals from storage were lower than average, resulting in record-high January and February inventory levels. Europe’s natural gas storage capacity utilization for the first day of March has typically been 38%, based on the previous five years; in 2020, natural gas stocks in Europe started March at 60% of capacity. High natural gas stocks were partly the result of record-high deliveries to Europe both by pipeline and as LNG in 2019. LNG imports into Europe had been relatively low between 2012 and mid-2018, but they increased substantially in 2019, averaging 11 billion cubic feet per day (Bcf/d) or almost twice the volume in the two previous years. LNG imports set monthly records of 14 Bcf/d in December 2019 and February 2020 (excluding re-exports, where a country imports and then exports LNG), implying a Europe-wide regasification capacity utilization of almost 60%. Russia and the United States increased LNG exports to Europe last year by an estimated 1.4 Bcf/d and 1.5 Bcf/d, respectively, compared with 2018. The United States has been the largest LNG supplier to Europe since November 2019, and in February 2020, LNG imports from the United States reached a new record high at 5.1 Bcf/d—nearly double the volume of Europe’s second-largest supplier, Qatar. European pipeline import capacity has increased in recent years, including the Trans-Anatolian Pipeline from Azerbaijan. Additional sources of supply into the European market are entering service this year. In January, theTurk Stream pipeline entered service, delivering natural gas under the Black Sea directly to Turkey and Bulgaria. The Trans Adriatic Pipeline, which will deliver natural gas from Azerbaijan to southeast Europe, is currently undergoing commissioning and should be completed in mid-2020.European natural gas prices were at relatively low levels in 2019 and continue at those levels so far in 2020. The spot price of natural gas at the United Kingdom benchmark National Balancing Point (NBP) averaged $3.66 per million British thermal units (MMBtu) in January 2020, an all-time low for the month. Similarly, the price of natural gas at the Title Transfer Facility (TTF) trading hub in the Netherlands averaged $3.62/MMBtu in January, also a record low for the month and less than half of the 2018 average price.
Can the North Sea Survive the Oil Price Crash? -In the short-term, yes. That’s according to Neivan Boroujerdi, a principal analyst in Wood Mackenzie’s (WoodMac) North Sea upstream team. Longer term, however, investment is required to increase production and reduce unit costs, according to WoodMac. If the industry goes into “harvest mode”, a premature end is “inevitable”, the company noted. “Most final investment decisions for 2020 are off the table. At current prices, nearly two-thirds of development spend could be wiped from our forecast over the next five years,” Boroujerdi said. “Annual investment in the UK could fall below $1 billion as early as 2024. The threat of stranded assets is real – we estimate nearly six billion barrels of economically viable resources could be left in the ground, not to mention a further 11 billion of contingent resources,” he added. WoodMac highlighted that the North Sea has weathered several storms in its 50-year existence but noted that the events of the past few weeks mean the sector is entering “uncharted waters”. Last week, industry body Oil & Gas UK (OGUK) warned that the combination of the global economic impact of the continued spread of the coronavirus, the fall in oil price and the halving of gas prices was driving an “increasingly fragile” outlook for the UK’s offshore oil and gas sector. “Severe pressures are already building across the sector’s supply chain, with the pressures expected to significantly undermine the industry’s businesses, jobs and contribution to the economy,” OGUK said in an organization statement. The body said it was working with industry, regulators and government to understand how it can protect supply chain companies and jobs.
More on that oil storage problem - We warned last week that oil has a storage problem, which could translate to permanent production capacity shutdowns. On Thursday, Goldman’s commodities research team, headed by Damien Courvalin, offered some further insight into the issue and the inflationary pressures that are likely to come about as a result. Here are the key pars from their report, with our emphasis: Global isolation measures are leading to an unprecedented collapse in oil demand which we now forecast will fall by 10.5 mb/d in March and by 18.7 mb/d in April (our 2020 yoy demand forecast is now -4.25 mb/d). A demand shock of this magnitude will overwhelm any supply response including any potential core-OPEC output freeze or cut. Such a collapse in demand will be an unprecedented shock for the global refining system with margins simply not low enough given the required level of run cuts. Product storage saturation at refineries is therefore set to occur over the next several weeks. At that point, the product surplus will become a crude one and we expect its unprecedented velocity will create similar logistical crude storage constraints. This is the point at which crude prices will fall below cash-costs to reflect producers having to shut-in production.While seaborne crudes like Brent can remain near $20/bbl in 2Q, many inland crude benchmarks where saturation will prove binding are likely to fall much further (US, Canada, Russia, China). The scale of the demand collapse will require a large amount of production to be shut-in, of potential several million barrels per day. Such a hit on production will not be reversed quickly, however, as shutting-in can often permanently damage reservoirs and conventional producing wells. We therefore increasingly see risks that the rebound in prices will be much sharper than our base-case rally back to $40/bbl Brent by 4Q20, with a normalization in activity increasingly likely to be accompanied by a large inflationary oil shock. And here’s the chart that matters: File under evidence to suggest an inflationary paradigm shift is on the horizon.
Oil giants announce steep cutbacks - Royal Dutch Shell and Total this morning announced plans to sharply cut spending and freeze share buyback plans. The moves signal how cratering demand from COVID-19 and the collapse in prices are upending the outlooks for companies large and small. Shell is cutting planned capital spending this year to $20 billion or lower, compared to the pre-crisis estimate of $25 billion. It also plans to cut operating costs by $3 billion to $4 billion over the next 12 months. Meanwhile, Total said oil at $30 per barrel means a roughly $3 billion hit to capital spending, which means a new target of under $15 billion this year. The France-based multinational also said it can save $800 million in operating costs compared to 2019. They're just the latest in a string of oil companies — including ExxonMobil and a number of independent U.S. shale producers — to unveil deep cuts of late.
Shell cuts 2020 spending by $5 billion, suspends share buyback - (Reuters) - Royal Dutch Shell will lower spending by $5 billion and suspended its vast $25 billion share buyback plan in an effort to weather the recent collapse in oil prices, it said on Monday. The Anglo-Dutch oil major said it would reduce capital expenditure to $20 billion or below from a planned level of about $25 billion while seeking to reduce operating costs by an additional $3 billion to $4 billion over the next 12 months. The cuts are expected to boost Shell’s cash generation by between $8 billion and $9 billion on a pretax basis. Shell’s shares were down 3.5% in early London trading, against a 3% for the broader European energy sector .SXEP Oil prices have crashed by more than 60% since January, hit by global demand destruction because of the coronavirus pandemic and a price war between top producers Saudi Arabia and Russia after this month’s collapse of a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and its allies.[O/R] The Shell cuts mirror moves by rivals such as Exxon Mobil (XOM.N), Chevron (CVX.N), BP (BP.L) and France’s Total (TOTF.PA), who have all announced plans for sharp reductions in spending.
Coronavirus could slash 1 million oil jobs – report -- Thursday, March 26, 2020 -- The global oil industry could see over 1 million jobs slashed this year because of the ongoing coronavirus pandemic and oil price war, according to a new report.
Exclusive - Coronavirus, gas slump put brakes on Exxon's giant Mozambique LNG plan - (Reuters) - Exxon Mobil is likely to delay the greenlighting of its $30 billion (26 billion pounds) liquefied natural gas (LNG) project in Mozambique as the coronavirus disrupts early works and a depressed gas market makes investors wary, six sources told Reuters. Top U.S. oil and gas company Exxon said on Tuesday it was evaluating “significant” cuts to capital spending and operating expenses. Energy firms worldwide have slashed spending this month as oil prices plummeted to 18-year lows after global travel curbs and reduced economic activity destroyed demand. The coronavirus pandemic is forcing delays to projects worldwide. Qatar, the world’s largest producer of liquefied natural gas (LNG), is delaying a big expansion in which Exxon is a major partner. The Rovuma LNG project, which will produce from a deepwater block off Mozambique containing more than 85 trillion cubic feet of natural gas, was expected to get the go-ahead in the first half of 2020. But three sources familiar with the project told Reuters that Exxon’s partners want to push back a final investment decision (FID). A further three sources said the pandemic is disrupting work on the project to such a degree that FID before the second half is unlikely. Any delay would leave Exxon’s project further behind rival Total (TOTF.PA), which took FID last June on its neighbouring project. Exxon might be left with no choice. “COVID-19 is affecting guys going into Mozambique, it’s affecting Chinese and Korean financiers, and clearly you’ve had the arse drop out of the oil market,” said a source with knowledge of the project. The pandemic is causing delays to the financing needed for the project, the source added. Rovuma LNG is managed by Mozambique Rovuma Venture, a joint venture owned 35.7% each by Exxon and Eni (ENI.MI) with the remaining stake of 28.6% held by China National Petroleum Corporation (CNPC). LNG prices LNG-AS hit a record low of $2.7 per million British thermal units (mmBtu) last month, and Rovuma requires an average price of $7 per mmBtu throughout its life to be profitable, according to Bernstein analysts. Another source with knowledge of internal discussions said with the energy outlook uncertain and LNG supplies set to rise sharply by 2025, some of the project partners want to “cool Exxon’s heels” and delay.
Jet fuel refining profits disappear as airlines ground fleets - (Reuters) - Asian jet fuel refining margins have turned negative for the first time in over a decade as airlines continue to ground flights on international and domestic routes amid stringent travel restrictions to contain the coronavirus pandemic. The already-battered profit margins are expected to come under further pressure as there is no concrete recovery timeframe in sight, trade sources said. “Global air traffic is down by about 40-45% at present, according to flight tracking sources, with further deterioration expected over the coming weeks as more flight restrictions and airline capacity reductions take effect,” said Richard Gorry, managing director at JBC Energy Asia. “We expect global jet/kero demand to fall by 4.3 million barrels per day (bpd) quarter-on quarter in Q2-2020 to just 2.5 million bpd, representing a year-on-year decline of 5.6 million bpd (-70%) as air passenger travel activity is reduced to a minimum.” Refining margins for jet fuel plunged to minus 7 cents per barrel over Dubai crude on Monday, a level not seen in the last 11 years, according to Refinitiv Eikon data that goes back as far as March 2009. Also known as cracks, refining margins are the difference in value between the raw material, crude oil, and the products churned out by refineries. A negative jet fuel refinery margin means refiners would lose money by producing the aviation fuel at current prices, indicating they will either reduce jet fuel output or lower overall refinery throughput. (GRAPHIC: Asia jet fuel margins dive into the red for the first time in 10+ years amid global lockdown - here)
China’s crude oil imports surpassed 10 million barrels per day in 2019 - Today in Energy - U.S. Energy Information Administration (EIA) China’s annual crude oil imports in 2019 increased to an average of 10.1 million barrels per day (b/d), an increase of 0.9 million b/d from the 2018 average. China remains the world’s top crude oil importer, surpassing the United States in 2017. China’s new refinery capacity and strategic inventory stockpiling, combined with flat domestic oil production, were the major factors contributing to the increase in China’s crude oil imports in 2019.In 2019, 55% of China’s crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), the smallest share since at least 2005. China’s crude oil imports from Saudi Arabia increased by more than 0.5 million b/d in 2019 to 1.7 million b/d, or 16% of total crude oil imports.From 2017 until earlier this year, OPEC members and other partner countries had been voluntarily reducing crude oil production, which resulted in some non-OPEC producers increasing their shares of China’s crude oil imports in recent years. In addition, in 2019, sanctions were placed on Iran and Venezuela that significantly affected their ability to export oil, reducing their shares of imports.Russia remained the largest non-OPEC source of China’s crude oil imports in 2019, averaging 1.6 million b/d, or 15% of total crude oil imports. Brazil overtook Oman as the second-highest non-OPEC source of China’s crude oil imports, increasing by less than 0.2 million b/d to average 0.8 million b/d for the year. China’s crude oil imports from the United States declined in 2019, primarily as a result of trade negotiations that imposed tariffs on many U.S. goods, including crude oil. Several factors contributed to China’s increase in crude oil imports in recent years. Although China’s domestic crude oil production increased 0.1 million b/d in 2019—averaging 4.9 million b/d—it has remained essentially flat since 2012, ranging between 4.8 million b/d and 5.2 million b/d. In contrast, the U.S. Energy Information Administration (EIA) estimates China’s consumption of petroleum and other liquids grew 0.5 million b/d in 2019 to 14.5 million b/d, and China’s net imports for crude oil and other liquids grew 0.4 million b/d to 9.6 million b/d in 2019. China’s crude oil imports also grew in 2019 because of strategic stockpiling of crude oil and increases in commercial crude oil inventories following refinery expansions, which require increases in storage as refineries begin operations. Last year, China’s refinery capacity increased by 1.0 million b/d, primarily because two new refining and petrochemical complexes came online with capacities of 0.4 million b/d each. As a result, the country’s refinery processing also increased to an all-time high in 2019, averaging 13.0 million b/d for the year.
In oil market standoff with Saudi Arabia, weakened rouble helps Russia - (Reuters) - In Russia’s battle for oil market share with Saudi Arabia, a sharp fall in the rouble has handed the Russians one advantage - they can now produce cheaper than the Saudis, according to Reuters calculations. The Russian currency has lost nearly a fifth of its value against the U.S. dollar - the currency of oil - since their talks on coordinated output cuts collapsed on March 6. Brent crude futures have fallen by nearly 50% to about $26 a barrel and that has knocked the rouble, which is down more than 15% to 80 per dollar, its weakest level since early 2016. In contrast, Saudi Arabia’s riyal is pegged to the dollar at a rate of 3.75 riyals. Russian producer Rosneft’s lifting costs last year averaged 199 rubles per barrel of oil equivalent, or $3.10, versus Saudi Aramco’s at 10.6 riyals or $2.80, financial reports from the two firms show. Rosneft’s costs have now fallen to $2.50, below Aramco’s, according to Reuters calculations based on the current rouble rate against the dollar. Rosneft did not reply to a Reuters request regarding how the ruble’s recent fall had affected its costs. Aramco has said it will be supplying, both domestically and for export, a record high 12.3 million barrels of oil per day (bpd) for the next few months starting from April. Russia’s production is currently 11.30 million bpd, led by state-run Rosneft. Russia may add up to 500,000 bpd in a matter of months, officials have said.
The Oil Price War - One consequence of the emerging global Covid-19 recession has been that it has helped push world oil prices down from the $60.77 per barrel range near the beginning of 2020 to $23.12 for West Texas Crude and $29.00 for Brent Crude, levels not seen since the end of 2008. But part of why that decline has been so sharp and deep has been thet Saudi Arabia has increased production while Russia has kept up production, despite the Saudis demanding that they cut production. So there is an oil price war going on. Of course this will tend to cushion the recession for oil consumers. But the US has become a small net oil exporter, and reports have it that a subsidiary reason for the Saudis and Russians getting into this price war has been to tank the US fracking industry in oil and natural gas, which by most reports cannot survive if prices remain as low as they are now. So while US oil products buyers may be better off, the recession in oil producing parts of the US will be made worse. It should be kept in mind that a non-trivial part of the US economic growh in 2017 was a major increase in fracking activity, with half the increase in capital investment coming from that sector alone. The damage to oil production in the US will probably exceed the benefits from lower prices at the pump in the US. A curious corollary to this is that the leaders of both Russia and Saudi Arabia have made serious moves to enhance and expand their own power. In Russia, Putin has moved to change the constitution so that instead of having to step down as president, he can run again twice more, keeping him still in as late as 2036, by which time he will be 84. This still needs to pass a referendum, but few doubt that it will fail to do so, despite reported declines in Putin’s popularity. In Saudi Arabia, Crown Prince Mohammed bin Salman (MbS) has had several rivals arrested on charges of treason, which can bring the death penalty. One arrested is the former crown prince, Mohammed bin Nayef, whom MbS forcibly removed in a coup supported by Trump. Another is an uncle of his, Ahmed bin Abdulaziz, one of the few remaining brothers of MbS’s father, with the line of succession having previously gone through them. The charges are clearly trumped up, with Mohammed bin Nayef having been under house arrest since he was removed from power, and Ahmed bin Abdulaaziz having been very careful to avoid any public criticism of MbS. But not good enough, they both need to be decapitated.
Oil drops as much as 8%, extending declines after worst week since 1991 // Oil turns positive, snapping back from worst week since 1991 - Oil prices moved higher on Sunday, snapping back from a week of steep declines that saw U.S. West Texas Intermediate crude post its worst week since 1991. Investors are waiting on Washington to agree to an economic stimulus and rescue plan.WTI rose 0.6% to trade at $22.77 per barrel, erasing early losses that had sent the contract tumbling more than 8%. International benchmark Brent crude shed 2.7% to trade at $26.25 per barrel.Prices have dropped as the coronavirus outbreak has slowed worldwide travel and business activity, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production.The rapid decline in crude prices is wreaking havoc on the financial markets, forcing investors to sell other assets such as Treasuries or equities indiscriminately to cover the losses in their energy positions. WTI crude futures have been cut in half this month.The Dow Jones Industrial Average and S&P 500 are now trading in bear market territory as the coronavirus hits the airline and hospitality industries the hardest.The government has said it is prepared to step in, and on Saturday National Economic Council Director Larry Kudlow said an economic stimulus package will total more than $2 trillion, noting it will be equal to roughly 10% of U.S. economic output. If the bill, which was brought before the Senate on Sunday night passes, oil prices could turn a corner.As traders attempt to quantify what increasingly strict travel restrictions and stay-at-home mandates will mean for longer-term crude demand, prices have swung in either direction. On Wednesday WTI dropped 24.4% to a more than 18-year low, in its third worst day on record. One day later, prices snapped back, surging 23.8% for the largest percentage gain in history. Given WTI’s 60% decline this year, a smaller gain, of course, now accounts for a much larger percentage move. But the volatile swings are notable.
Oil prices drop as US economic package stumbles in Senate - Oil prices fell at the open in Asia on Monday after a trillion-dollar Senate proposal to help the coronavirus-hit American economy was defeated and death tolls soared across Europe and the US. Brent crude futures fell $1.09, or 4 percent, to $25.89 a barrel by 0209 GMT. West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7 percent, at $22.48 a barrel. Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory. The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. Prices have fallen to multi-year lows in recent weeks as lockdowns and travel restrictions to fight the virus hit demand, and top producers Saudi Arabia and Russia engage in a price war. The latest drop came after a trillion-dollar Senate proposal to rescue the US economy was defeated after receiving zero support from Democrats, and with five Republicans absent from the chamber because of virus-related quarantines. The measure faltered after it failed to get the necessary 60 votes in the 100-member chamber to clear a procedural hurdle after days of negotiations, with 47 senators voting in favour and 47 opposed. US Senate Majority Leader Mitch McConnell, frustrated over the deadlock on a major coronavirus response bill, late on Sunday announced a procedural vote will be held early on Monday on a bill that senators already rejected. McConnell, a Republican, said that unless a bipartisan deal is reached before 9.45am Monday (1345 GMT), he will force a second vote on a bill Democrats opposed.
Oil markets slump amid coronavirus chaos - Oil prices fell on Monday as governments escalated lockdowns to curb the spread of the global coronavirus outbreak that has slashed the demand outlook for oil and threatened a global economic contraction. Brent crude futures fell $1.09, or 4%, to $25.89 a barrel by 0209 GMT. West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7%, at $22.48 a barrel. Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory. The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month. The current production cut deal expires March 31. Almost a third of Americans are now under orders to stay at home as states took extra measures to stem the rising numbers of cases in the world’s biggest economy, while in New Zealand Prime Minister Jacinda Adern said all non-essential services and business are to be shut down. Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10% of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader. Goldman Sachs estimated demand loss could total 8 million bpd, brought about by countries slowing economic activity to combat the coronavirus outbreak. Oil refiners worldwide are slashing production or considering cuts as the pandemic causes the evaporation of fuel demand.
Oil prices wallow near 20-year lows amid coronavirus price war - Oil prices came close to hitting 20-year lows today, as Brent crude and West Texas Intermediate (WTI) dropped under the growing coronavirus economic panic.Brent crude fell as low as $25 a barrel before falling 2.2 per cent down at $26.40. That is still a level not seen since 2003. WTI, a US oil benchmark, eked out a 0.4 per cent increase to $22.72 per barrel. However, this is still one of its lowest levels since 1999.Oil prices began their steep fall by crashing around 21 per cent earlier this month when Saudi Arabia and Russia started a price war.Russia refused to countenance more production cuts to prop up the price of oil as the world’s coronavirus crisis led to global travel bans.Saudi Arabia then flooded the market with cheap oil to safeguard its market share, a move later followed by the United Arab Emirates.The fall in oil prices has been rapid, with Brent crude’s price having halved from $50 since February. And analysts have warned the price could fall further.As a result, major oil producing companies have announced plans to reduce spending.Royal Dutch Shell today said it will cut its full year capital expenditure by $5bn (£4.34bn) and suspend the next tranche of its share buyback plan. Similarly, Total will cut its capital expenditure by 20 per cent and find additional cost savings of around $400m this year.
What Happens If Oil Prices Go Negative? - Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, “Oil prices can go negative.” That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply.In reality, inventory levels are already rising.CNN quotes Sankey, who said global oil demand is only around 100 million barrels per day.However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent.This would create a 20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity – hence, in effect, negative oil prices. The American government plans to purchase a total of 77 million barrels of oil starting within weeks the article states, but according to Sankey, this can only be done at a rate of 2 million barrels per day, leaving a massive excess that will be looking for a home.Brent oil prices have already fallen to the lowest level for 17 years. The consequences for the U.S. oil industry if a coronavirus-induced recession drives down demand could be catastrophic.West Texas Intermediate crude (WTI) collapsed by a staggering 19.2 percent to $22 while the Mexican Basket is down 22.4 percent.For a short while, hedges will protect producers and they will continue to pump oil. While that will protect producers for a while, it encourages counter-cyclical practices; producers should be cutting back but instead will probably continue to pump and ship into store.Francisco Blanch, a commodity strategist at Bank of America, warns in a Fox Business report that the demand destruction caused by the COVID-19 virus and the price war between Saudi Arabia and Russia could cause inventories to swell by 900 million barrels in the second quarter alone. He estimates the world currently has about 1.5 billion barrels of available storage.Storage, however, is regional and may not match neatly with excess supply.China continues to build storage capacity, having traditionally been short of space, but is now in a better position to take advantage of ultra-low prices. “In a severe scenario, if the market struggles to find a home for surplus barrels, then oil prices might have to trade down into the teens,” Blanch suggests. That would leave U.S. and Canadian producers deeply in the red when hedges run out. Weaker OPEC countries, like Iraq, Iran, Venezuela, and Nigeria, could see their economies collapse, while all offshore production would be loss-making if oil prices remain suppressed into the teens over the long term.
Oil jumps 3% in volatile session as Fed promises aggressive asset purchases to support markets - Oil jumped more than 3% on Monday as the Federal Reserved announced aggressive asset purchases to support markets. The move higher was a reversal from last week’s steep declines, which saw U.S. West Texas Intermediate crude post its worst week since 1991. In a volatile session that saw oil alternate between gains and losses, WTI gained 3.23% to settle at $23.36 per barrel. Earlier, prices fell as much as 6%. International benchmark Brent crude traded 0.6% higher at $27.18 per barrel. The COVID-19 outbreak and subsequent business slowdown has pressured oil prices and sent the Dow Jones Industrial Average and S&P 500 tumbling into bear market territory. On Monday, the Federal Reserve announced a new round of measures aimed at propping up the economy. The central bank said it will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions. Traders are hoping that this additional support will put a floor under oil prices, which have been hit especially hard by the coronavirus outbreak. WTI crude futures have been cut in half this month as a travel slowdown eats into crude demand, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production. The rapid decline in prices has wreaked havoc in other areas of the financial markets, as investors have been forced to sell other other assets such as Treasuries or equities indiscriminately to cover losses in their energy positions. Ed Morse, Citi’s global head of commodity research, believes there’s more downside ahead. He’s forecasting crude below $20 per barrel for much of the second quarter. “I think it can go much lower,” he said Monday on CNBC’s “Squawk Alley.” “We don’t think the one-two punch is over, particularly on the demand side where the impact on transportation fuels in Europe and the U.S. is just beginning.”
Oil struggles to hold gains as US ramps up economic support measures - Oil prices moved between gains and losses on Tuesday, boosted by hopes that the United States will soon reach a deal on a $2 trillion coronavirus aid package that could blunt the economic impact of the outbreak and in turn support oil demand. But gains were capped as demand continues to decline. Brent crude oil futures for May delivery gained 33 cents to trade at $27.36 per barrel, while West Texas Intermediate crude futures gained 5 cents to trade at $23.41 per barrel. “Oil is clawing its way higher, mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” said Edward Moya, senior market analyst at broker OANDA. “WTI crude volatility will remain high and traders should not be surprised if this rally eventually gets faded.” The U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from restrictions on commerce that scientists say are needed to slow the coronavirus pandemic. While a $2 trillion coronavirus economic stimulus package remained stalled in the U.S. Senate on Monday as lawmakers haggled over its provisions, U.S. Treasury Secretary Steven Mnuchin voiced confidence that a deal would be reached soon. The expected stimulus pushed the U.S. dollar lower as it will increase the cash supply. The dollar index, which measures the greenback against six major currencies, fell 0.5% on Tuesday. A weaker greenback boosts dollar-denominated oil prices since buyers paying in other currencies will pay less for their crude. Still, the overall crude demand outlook remains low as long as travel restrictions are in place and governments curtail commercial activities to prevent the coronavirus spread.
The Oil Price Rebound Won't Last - Oil showed some signs of life at the start of Tuesday trading due to progress in Washington on a stimulus package, but analysts still think that the next major move for prices is down.. Multiple reports from analysts and investment banks see further room to fall for oil because of fears over a lack of adequate storage. “Any traders with the capacity to store oil are probably putting their hands up, looking at the contango,” Stephen Innes, chief Asia market strategist at Axicorp Ltd., told Bloomberg. “Oil could head to $10 to $15 a barrel very quickly” if OPEC and Texas can’t reach an agreement on cutting production. OPEC Secretary-General Mohammed Barkindo spoke with Texas Railroad Commissioner Ryan Sitton, raising speculation about mandatory cuts in Texas. “Just got off the phone with OPEC SG Moh[ammed] Barkindo. Great conversation on global supply and demand,” Sitton said on Twitter. “We all agree an international deal must get done to ensure economic stability as we recover from COVID-19.“ The Texan official said the OPEC chief had invited him to the next meeting of the organization in June. Most analysts see such a Texas-OPEC deal as highly unlikely. The Trump administration will appoint Victoria Coates as a special envoy to Saudi Arabia on energy issues, in an effort to negotiate an end to the price war. Russia’s currency has lost 20 percent of its value in the past three weeks, a trend that cushions the blow for Russian oil producers as it deflates costs. Saudi Arabia has to defend a fixed exchange rate. According to the Wall Street Journal, major U.S. airlines are “drafting plans for a potential voluntary shutdown of virtually all passenger flights across the U.S.” No decisions have been made. Royal Dutch Shell, Total and Chevron all said they would cut capex by roughly 20 percent each, while also suspending share buybacks. Chevron said it would cut spending in the Permian in half, which would translate into 125,000 bpd less by the end of this year than previously expected. With analysts predicting $10 oil, more cuts are expected.
Oil Prices Soar As Dollar Extends Slide On Fed Stimulus - Oil prices soared on Tuesday and the dollar fell for a second day running after the U.S. Federal Reserve unveiled fresh measures to supply precious liquidity into funding markets. Meanwhile, if media reports are to be believed, U.S. Senate leaders and the Trump administration appear closer to reaching bipartisan agreement on a stimulus bill that would inject nearly $2 trillion into the economy. Benchmark Brent crude surged 5.9 percent to $28.62 a barrel, while West Texas Intermediate (WTI) crude futures were up as much as 7.4 percent at $25.09. Global risk sentiment improved after the Fed said it would go beyond the $700 billion in asset purchases announced last week. The Fed proposed to buy a wide range of investments, including corporate bonds for the first time, to improve trading in markets that help home buyers finance the purchase of houses, state and local governments borrow and businesses get enough short-term cash to make payroll. Investors also monitored news headlines on the coronavirus, which infected more than 350,000 people worldwide so far. Britain went into lockdown late Monday while Italy reported a smaller increase in coronavirus cases for the second consecutive day. Spain imposed an Italy-style lockdown in a bid to contain the spread of the virus. There is lockdown in most parts of India to deal with the novel coronavirus threat.
WTI Extends "Hope For More Stimulus" Gains On Surprise Crude Draw - Oil prices rallied along with the rest of the markets today on hope The Fed's buying will work and optimism that US Congress will agree a bigly Stimulus Bill.Notwithstanding today's gains, there are still concerns about the outlook for near term energy demand."It is highly questionable whether the good mood will continue on the oil market, however. Not only is there a daily stream of bad news on the demand front; the unprecedented price war between oil producers is also continuing despite the unprecedented demand weakness," said Eugen Weinberg, analyst at Commerzbank, in a note.So all eyes are once again on the inventory data for signals of extremes from the global demand collapse. API:
- Crude -1.25mm (+2.5mm exp)
- Cushing +1.066mm
- Gasoline -2.622mm (-2.4mm exp)
- Distillates -1.901mm (-1.6mm exp)
Crude inventories were expected to rise for the 9th week in a row (and distillates draw down for the 11th week in a row) but API reported a surprise crude draw of 1.25mm barrels (ending the streak)... Source: Bloomberg"It remains to be seen whether the recovery in equity markets can hold up, but the number of coronavirus cases has yet to peak and the worst of it has yet to visit most of the country," said Marshall Steeves, energy markets analyst at IHS Markit."Thus, the extent of demand destruction remains unknown." The "risks remain to the downside and WTI could plunge below $20," he told MarketWatch. WTI managed gains today and hovered around $24 ahead of the inventory data and extended gains after the print...
WTI Erases Overnight Gains On Demand Fears, Crude Inventory Build - Oil prices extended gains overnight, along with the rest of the markets, on hope The Fed's buying will work and optimism that US Congress will agree a bigly Stimulus Bill and helped by a surprise crude draw reported by API.But early on this morning that all started to fall apart and WTI plunged back to a $23 handle after the boss of Vitol Group said demand is down about 15 million to 20 million barrels a day and will shrink further with India’s decision to go into lockdown.“The hope for more stimulus is giving a short-term boost,” said Josh Graves, market strategist at RJ O’Brien & Associates LLC.“From a fundamentals standpoint, we’re still looking at two cataclysmic supply and demand shocks. Those need to be addressed before we see any sustained rally.”So once again, all eyes are on the official inventory data...as road and airline traffic has collapsed.Bloomberg Intelligence's senior energy analyst Vince Piazza warns:"Near-term crude builds are likely with refining runs cut back as demand downstream demand weakens. The price war and downdraft in consumption from the virus is a double hit to domestic producers, as export volume will retract on narrower differentials and cash flow will degrade. Look for floating storage levels to rise across the globe as arbitrage is once again profitable." DOE:
- Crude +1.62mm (+2.5mm exp)
- Cushing +858k
- Gasoline -1.537mm (-2.4mm exp)
- Distillates -678k (-1.6mm exp)
After last night's surprise crude draw (reported by API), official government data showed a build (though smaller than expected). This is the 9th straight week of crude builds, 8th straight week of gasoline draws, and 10th straight week of distillate draws...
Oil jumps 2%, extending gains as optimism over US stimulus lifts markets - Oil prices extended gains for a third session on Wednesday, rising alongside broader financial markets as the United States is expected to approve a massive aid package to stem the economic impact of the coronavirus pandemic. Demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to stop the spread of coronavirus. Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed. U.S. weekly gasoline product supplied - a proxy for demand - dropped 859,000 barrels per day (bpd) to 8.8 million bpd last week, the biggest decline since September 2019, according to the U.S. Energy Information Administration. Overall fuel demand fell by nearly 2.1 million bpd. Brent crude gained 29 cents, or 1%, to trade at $27.44 per barrel. U.S. crude futures gained 48 cents, or 2%, to settle at $24.49 per barrel. Both contracts had posted strong gains of more than $1 a barrel earlier in the session. Crude inventories rose by 1.6 million barrels in the most recent week. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity. The U.S. energy sector is slashing capital spending and jobs as business activity plunged and the outlook has turned “extremely pessimistic” amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday. “All indexes pointed to worsening conditions among oilfield services firms,” the Fed said in its report, noting that the business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey’s four-year history. U.S. senators and Trump administration officials have reached an agreement on a $2 trillion stimulus bill that congress was expected to pass on Wednesday. Oil prices have fallen by more than 45% this month after OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, failed to agree on extending output cuts. Although oil futures received a “sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a ‘nowhere to hide’ situation very soon”,
Oil prices fall as demand continues to shrink - Oil prices fell on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity. West Texas Intermediate (WTI) crude futures slipped $1.04, or 4.25%, to trade at $23.45 per barrel, while Brent crude futures fell 44 cents, or 1.6%, to trade at $26.97 per barrel. “With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note. The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May. “Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said. U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases. Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.
Oil sheds more than $1 as weakening demand outweighs stimulus hopes - (Reuters) - Oil prices dropped more than $1 a barrel on Thursday as a growing number of virus-related restrictions on travel slashed global fuel demand, overshadowing expectations that a $2 trillion U.S. stimulus package will bolster economic activity. The head of the International Energy Agency said worldwide oil demand could drop as much as 20 million barrels per day, or 20% of total demand, as 3 billion people are currently under stay-at-home orders due to the novel coronavirus outbreak. West Texas Intermediate (WTI) crude CLc1 futures settled at $22.60 a barrel, falling $1.89, or 7.7%. Brent crude LCOc1 futures settled at $26.34 a barrel, shedding $1.05, or 3.8%. Both contracts are down about 60% this year. The twin shocks of the coronavirus pandemic and the supply surge from Saudi Arabia and Russia after the two nations failed to come to an agreement to limit supply has roiled crude markets, which have lost about half their value in March. “With demand down 20% or more globally, it’s two Saudi Arabias-worth of production that would need to be cut out to try to even attempt to balance this market,” said John Kilduff, a partner at Again Capital in New York. U.S. futures were notably weaker than international benchmark Brent crude. The U.S. Department of Energy scrapped a plan to purchase domestic crude oil for its Strategic Petroleum Reserve (SPR) after funding was not included in the broader stimulus package. “There was a certain assumption that it was going to happen so you had that backstop, to a certain degree, (for WTI) that didn’t exist for the international benchmark,”
WTI Tumbles To $21 Handle After Saudis Crush Hopes Of Russia Detente - While oil prices were already sliding, headlines from the Saudis that there are no talks with Russia ongoing sent prices tumbling with WTI back to a $21 handle...“There have been no contacts between Saudi Arabia and Russia energy ministers over any increase in the number of OPEC+ countries, nor any discussion of a joint agreement to balance oil markets,” the Saudi Ministry of Energy said in a statement.Not pretty... The last three months have been quite a ride for crude... Maybe The Bank of Canada and The Fed should start buying (and storing) oil?
Oil Tumbles Towards $20 As Glut Grows - Markets rallied this week as the U.S. Congress appears poised to pass a $2 trillion stimulus plan. Jobless claims in the U.S. topped 3 million, with economists seeing unemployment nearing Great Depression levels in the coming months. Meanwhile, despite the rally for equities, oil prices did not hold up, with WTI back down close to $20 per barrel as the historic glut continues to worsen. The U.S. Department of Energy withdrew its plan to buy 77 million barrels of oil for the strategic petroleum reserve (SPR) after funding for the plan was removed from the $2 trillion stimulus plan. The top five oil majors added $25 billion in debt last year, while hiking dividends. Now, on the ropes with oil in the mid-$20s, debt will accumulate much faster. More investors are calling for a cut to dividends. “Long term, it is appropriate to cut the dividend. We are not in favor of raising debt to support the dividend,” Jeffrey Germain, a director at Brandes Investment Partners, told Reuters. “Latin America’s flowing production is over 7 million barrels per day. At current prices, we estimate that half is non-economic, taking into account all costs, including transportation and taxes,” Ruaraidh Montgomery from oil research firm Welligence, told Reuters. As of March 1, storage for gas in Europe was 60 percent full, the highest ever recorded at the start of March. Secretary of State Mike Pompeo spoke with Saudi Crown Prince Mohammed bin Salman by phone this week, asking for the Saudis to pull back from the price war. Pompeo urged Riyadh to “rise to the occasion and reassure” energy markets at a time of economic uncertainty. A group of Republican senators sent Sec. of State Mike Pompeo a letter, accusing Saudi Arabia of economic warfare because of Riyadh’s decision to increase oil production. The letter said the U.S. could explore antitrust authority as well as revisit support for the war in Yemen, a clear threat to Saudi Arabia. Saudi Arabia is struggling to find buyers for extra oil as demand collapses. Royal Dutch Shell, China’s Unipec, Finland’s Neste, some Indian refiners and other U.S. refiners are taking less crude from Saudi Arabia, according to Reuters. Taken together, the inability to find buyers reduces the odds of Saudi Arabia ramping up production aggressively to over 12 mb/d.
Oil plunges posting fifth straight weekly loss despite stimulus efforts -(Reuters) - Oil prices plunged 5% on Friday and posted a fifth straight weekly loss as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world. Both contracts are down nearly two thirds this year and the coronavirus-related slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies. Brent crude settled down $1.41, or 5.35% at $24.93 a barrel. The contract fell about 8% on the week. U.S. crude settled down $1.09, or 4.82% at $21.51 a barrel. During the week, U.S. crude fell more than 3%. “We ran out of ammunition to support the market,” said Bob Yawger, director of energy futures at Mizuho in New York. “The government used up all their bullets this week - next week the market is on its own.” Physical crude oil traders said they expect Permian basin prices to slide by as much as another $10 a barrel by May, when tanks in the region as well as across the country are seen hitting maximum capacity. That would leave the price of a barrel of oil pumped from the Permian - where nearly 5 million barrels are extracted every day - in the single digits. With 3 billion people in lockdown, global oil demand could be cut by a fifth, International Energy Agency head Fatih Birol said as he called on major producers such as Saudi Arabia to help to stabilise oil markets. The calls may not be enough to bring the market back into balance. “We have our doubts about whether Saudi Arabia will allow itself to be persuaded so easily to return from the path of revenge that it only recently embarked upon,” said Commerzbank analyst Eugen Weinberg, referring to the price war being waged between Russia and Saudi Arabia. The Group of 20 major economies on Thursday pledged to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”. Leaders of the U.S. House of Representatives are determined to pass a $2.2 trillion coronavirus relief bill by Saturday at the latest, hoping to provide quick help as deaths mount and the economy reels.
U.S. to send envoy to Saudi Arabia; Texas suggests oil output cuts - (Reuters) - The Trump administration plans to send a special energy envoy to Saudi Arabia to work with the kingdom on stabilizing the global oil market, officials said on Friday, as the U.S. scrambles to deal with a price crash so deep that regulators in Texas considered curbing production there for the first time in nearly 50 years. The crash has shocked the oil industry as a pact among OPEC and non-OPEC producers to cooperate imploded, triggering a production free-for-all. The United States is sending a special representative to negotiate with Saudi Arabia, officials said Friday, after the kingdom unleashed production following years of touting its role as a stabilizing force for markets. Saudi Arabia and Russia are locked in a war for global oil market share after their three-year deal to restrain output collapsed this month. The kingdom has vowed to increase production to a record 12.3 million barrels per day, and has chartered numerous tankers to ship oil around the world, pushing prices to near 20-year lows this week. U.S. officials believe Saudi Arabia’s move to flood oil markets compounds the global economic crash during a crisis caused by the pandemic. A senior Energy Department official will be sent to Riyadh for months at least to work closely with State Department officials and the existing energy attache, the senior U.S. officials said, on condition of anonymity. Trump administration officials said Saudi Arabia has for decades been a steadfast leader of stability in the global oil market. The energy representative would help the countries return to a path of stability, they said. The price crash is also devastating to U.S. oil producers, some of which have already begun putting employees on furlough.
US urges Saudi Arabia to ‘rise to the occasion’ and end its oil price war with Russia - The U.S. has called on OPEC kingpin Saudi Arabia to put a stop to its ongoing oil price war with non-OPEC leader Russia. In a statement released by the U.S. State Department Wednesday, a spokesperson confirmed that Secretary Mike Pompeo had spoken with Saudi Crown Prince Mohammed bin Salman on Tuesday. “Secretary Pompeo and the Crown Prince focused on the need to maintain stability in global energy markets amid the worldwide response,” the statement said. “The Secretary stressed that as a leader of the G-20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty,” it added. Pompeo and bin Salman expressed their “deep concern” over the coronavirus pandemic and underlined the need for all countries to work together to contain the outbreak, according to the statement. International benchmark Brent crude traded at $26.46 a barrel Wednesday afternoon, down 2.5%, while U.S. West Texas Intermediate (WTI) stood at $23.47, more than 2.2% lower. Oil prices have more than halved since climbing to a peak in January, with analysts warning crude futures could soon plunge into the teens over the coming weeks. It comes as the coronavirus pandemic continues to crush oil demand worldwide and with no end in sight to the ongoing price war between Riyadh and Moscow. Earlier this month, the OPEC group of oil producers and its non-OPEC allies — sometimes referred to as OPEC+ — failed to agree on extending oil supply cuts beyond March 31. This has led to heightened concerns of a supply surge from April 1, with Saudi Arabia and the United Arab Emirates both pledging to ramp up production.
Nearly 1,600 Trees Vandalised by Israel Settlers in the West Bank Since Start of 2020 - Nearly 1,600 olive trees have been vandalised by Israeli settlers in the occupied West Bank since the start of 2020, according to UN OCHA.According to the agency’s latest fortnightly report, during the period 3-16 March, Israeli settlers vandalised at least 385 Palestinian-owned trees and vehicles in the West Bank.Three such attacks involved settlers cutting down or uprooting some 200 olive trees and 150 grape vines “belonging to farmers from Al Khader and Khallet Sakariya villages that are planted next to the Gush Etzion settlement area (Bethlehem), and 35 olive trees next to Bruchin settlement (Salfit)”.Meanwhile, five additional attacks in the Nablus governorate “involved slashing the tires of 11 vehicles in Huwwara town, stoning and damaging two houses and four vehicles in ‘Einabus village, and vandalising an uninhabited house in Burin village.”In addition, UN OCHA stated, Palestinian residents of the ‘Ein ar Rashash herding community near Ramallah reported 25 lambs “stolen by a settler residing in an adjacent settlement outpost”. On top of the numerous incidents of attacks on Palestinian-owned property and livestock, Israeli settlers “physically assaulted and injured three Palestinians”, including a woman, in three separate incidents in Al Auja town and the Israeli-controlled area of Hebron city (H2). “Additional settler attacks not resulting in injuries or damage were reported in the H2 area on 10 and 11 March, during celebrations of a Jewish holiday (Purim),” the UN OCHA report added. Over the reporting period, UN OCHA documented the punitive demolition of two homes, as well as the demolition or seizing of an additional 14 Palestinian-owned structures on the grounds of a lack of building permits, displacing 29 people and affecting around 60 others.
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