oil prices fall to $0 and beyond; both oil & natural gas rig counts drop to lowest in 44 months

oil prices finished lower for the eighth week ​out of the last nine this past week, but the real oil price story this week was what happened on Monday, when oil prices went to zero and then turned significantly negative, closing down $55.90 at -$37.63 a barrel, the largest price drop in history and the lowest closing price in history, both by a long shot...to set the stage, the last time we talked about oil prices, the contract price of US light sweet crude for May delivery had fallen 19.7% to end the week before Easter at $22.76 per barrel, despite a just completed agreement between OPEC & Russia to cut their oil production by a record amount....then last week, the price of that same May oil contract fell every day to end down an additional 19.7% at an 18 year low of $18.27 a barrel, as fears that the building global oil glut would lead to full storage space with no place to put new oil, which was a prelude to what happened this week..

now, to comprehend what happened Monday, one needs to first understand what we mean when we talk about "the price of oil"...when you see an oil price quote in the business press, that price is referring to the price per barrel of a contract to have 1000 barrels of a light sweet crude oil called West Texas Intermediate (WTI) delivered to Cushing Oklahoma in the "front" month, with the price determined in electronic trading at the New York Mercantile Exchange, or NYMEX...while trading at NYMEX includes monthly contracts at least as far as 20 years into the future, the "front month" is the nearest month to the present for which oil contracts are still trading, or in the case of Monday's "oil price", it was WTI oil for delivery in May...now, for the most part, what’s traded at NYMEX is hypothetical oil; as we've pointed out previously, the amount of oil referenced by trading at NYMEX in any given day is often 100 times the amount of oil that actually exists in the country at the same time, and the number of oil contracts outstanding is usually far more than could ever be physically delivered...however, most of those who are buying and selling oil at NYMEX have no intention of receiving oil nor any intention of delivering oil; they are just speculating on the direction that the price of oil will take, and planning to reverse their position with a profit (or loss) at some time in the future...the problem is that these are still real contracts for real oil, for which trading expires on the 3rd business day prior to the 25th calendar day of the month prior to the contract month, at which time 1000 barrels​ of ​oil ​per contract ​must be either delivered or accepted at Cushing​,​ Oklahoma, depending on whether one is a seller or a buyer..

what precipitated the price drop in the May contract on Monday was that as the expiration of trading in May oil approached on Tuesday, there was no uncommitted storage space left at the Cushing oil depot, the designated place where such WTI ​oil ​contracts are settled...that meant that even if there were potential buyers of oil as its price was falling, there was no place to put the oil when they were expected to take delivery in May...so as those who had bought oil contracts as a speculation with no intention to actually take possession of oil came to the market to close out their positions before the contract expired on Tuesday, there were few potential buyers of that contract who could take possession of the oil those contracts represented....hence,​ as those who didn't want oil delivered attempted to sell,​ the price of that benchmark oil contract fell rapidly throughout the day, falling to $4 a barrel by noon, and then turning negative by one o'clock, at which time buying completely evaporated as the price plummeted to minus $40.32 a barrel... while some buyers came back in later in the day and pushed prices back up to around -$16, prices faded again towards the close and finished the session at minus $37.63 a barrel...

so ​just ​what does a negative oil price of $37.63 a barrel actually mean?  with the main US oil storage depot full, it implies that oil producers with new oil coming out of ground would have to pay someone $37.63 a barrel to haul away and dispose of any excess crude that they had not yet already contracted to deliver to a customer in May....with -$37.63 a barrel as a contract price, it means the seller of an oil contract not only has to supply the buyer 1000 barrels of oil, he also has to pay the buyer $37,630 for taking it....it also means that a hypothetical oil trader who thought he was getting a real bargain by buying 1000 barrels of oil at $1 a barrel in the noon hour probably got a call from their broker later Monday afternoon telling them that they had to put up another $37,630 just to get out of that contract...

however, the real losers Monday were not the oil companies or the professional traders, but those who bought into an ETF (exchange traded fund) or​​ other financial product that purports to track the price of oil...those funds buy the current front month contract, or in this case May, and hold it for a month or less, and then sell that contract as it approaches expiration to then buy into the next month's contract, in this case June...many of those funds were stuck holding May oil when it turned negative, had to take a loss to get out of that contract, then had to buy into June oil at a positive price...in the case of the United States Oil Fund, the largest ETF, their losses were so great they had to execute a one-for-eight reverse share split to ensure their shares would trade high enough to meet the requirements for continued exchange listings; in the case of some Chinese investors in similar financial products based on US oil, they were left owing money to their banks when the price of US crude fell below $0...

however, those negative oil prices only lasted one day, which probably limited the damage, as the May oil contract opened at minus $14 on Tuesday and later turned positive, rising as high as $13.86 before expiring at $10.01 a barrel, $47.64 higher on the day, ironically the largest oil price jump in history..​..​oil prices for the rest of the week were ​just a denouement...the contract price of the US benchmark crude for June delivery, which had fallen $4.60 to $20.43 a barrel on Monday and then dropped another $8.86 to $11.57 a barrel on Tuesday, rebounded $2.21 to $13.78 a barrel on Wednesday after Trump tweeted that he'd “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” and then rose another $2.72 to $16.50 a barrel on Thursday after the commander of Iran's Islamic Revolutionary Guards responded that he had ordered his forces in the Gulf to destroy any vessel or combat unit that threatened the safety of Iranian ships​,​ an exchange ​of threats ​which might have been more about boosting the price of oil rather than any real belligerence...June oil then added another 44 cents finish the week at $16.94 a barrel on Friday, still down more than 32% from the previous Friday's close, despite a nearly 50% price rise over the the prior three days... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 17th indicated that a big decrease in our oil exports and another pullback in our oil refining ​were major ​contributor​s to another big surplus of oil ​being add​ed​ to our stored commercial supplies, the twenty-fourth addition of oil to storage in the past thirty-two weeks....our imports of crude oil fell by an average of 743,000 barrels per day to an average of 4,937,000 barrels per day, after falling by an average of 194,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 546,000 barrels per day to 2,890,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,047,000 barrels of per day during the week ending April 17th, 197,000 fewer 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 12,200,000 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 14,247,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 12,456,000 barrels of crude per day during the week ending April​p;[​ 17th, 209,000 fewer 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 2,146,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at 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 354,000 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 (+354,000) 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 in the industry...(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 5,635,000 barrels per day last week, now 15.0% less than the 6,626,000 barrel per day average that we were importing over the same four-week period last year....the 2,146,000 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 down by 100,000 barrels per day to 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 11,700,000 barrels per day, while a 10,000 barrel per day decrease in Alaska's oil production to 467,000 barrels per day did not impact the rounded national total....last year's US crude oil production for the week ending April 19th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was still roughly the same as that of a year ago, and 44.8% 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 67.6% of their capacity in using 12,456,000 barrels of crude per day during the week ending April 17th, down from 69.1% of capacity during the prior week, and the lowest capacity utilization rate since September 2008, when the aftermath of Hurricane Ike shut down Texas Gulf Coast refining....hence, the 12,456,000 barrels per day of oil that were refined this week were the fewest barrels refined in any week since September 26th 2008, and 24.9% fewer barrels than the 16,583,000 barrels of crude that were being processed daily during the week ending April 19th, 2019, when US refineries were operating at 90.1% of capacity....

even with the decrease in the amount of oil being refined, gasoline output from our refineries was somewhat higher, increasing by 290,000 barrels per day to 6,205,000 barrels per day during the week ending April 10th, after our refineries' gasoline output had increased by 97,000 barrels per day over the prior week....but since the increases of the past two weeks followed two near record drops in gasoline output, our gasoline production this week was still 36.6% lower than the 9,781,000 barrels of gasoline that were being produced daily over the same week of last year....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 80,000 barrels per day to 5,007,000 barrels per day, after our distillates output had decreased by 55,000 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 1.1% less than the 5,064,000 barrels of distillates per day that were being produced during the week ending April 19th, 2019....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 4th week in a row, following 8 weeks of decreases, rising by 1,017,000 barrels to a record 263,234,000 barrels during the week ending April 17th, after our gasoline supplies had increased by 4,914,000 barrels over the prior week...our gasoline supplies increased by less this week because the amount of gasoline supplied to US markets increased by 230,000 barrels per day to 5,331,000 barrels per day, while our exports of gasoline rose by 29,000 barrels per day to 784,000 barrels per day and our imports of gasoline fell by 34,000 barrels per day to 368,000 barrels per day....after this week's inventory increase, our gasoline supplies were 16.6% higher than last April 19th's gasoline inventories of 225,826,000 barrels, and roughly 12% above the five year average of our gasoline supplies for this time of the year...

with the increase in our distillates production, our supplies of distillate fuels increased for the third time in 14 weeks and for the 8th time in 29 weeks, rising by 7,876,000 barrels to 136,880,000 barrels during the week ending April 17th, after our distillates supplies had increased by 6,280,000 barrels over the prior week....our distillates supplies rose by more this week because our exports of distillates fell by 725,000 barrels per day to 860,000 barrels per day and while our imports of distillates fell by 207,000 barrels per day to 106,000 barrels per day, and while the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 371,000 barrels per day to 3,128,000 barrels per day....after this week's big inventory increase, our distillate supplies at the end of the week were 7.8% above the 127,029,000 barrels of distillates that we had stored on April 19th, 2019, but still about 1% below the five year average of distillates stocks for this time of the year...

finally, with lower oil exports and depressed oil refining, our commercial supplies of crude oil in storage rose for the twenty-fifth time in forty-two weeks and for the thirty-third time in the past 52 weeks, increasing by 15,022,000 barrels, from 518,640,000 barrels on April 17th to 503,618,000 barrels on April 10th, the 3rd largest increase on record, beaten only by the increases of the prior two weeks....but even after 13 straight increases and three straight record level increases, our crude oil inventories were just 9% above the five-year average of crude oil supplies for this time of year, but more than 48.8% higher than the prior 5 year (2010 - 2014) average of crude oil stocks as of the third Friday in April, 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 from there....since our crude oil inventories have 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 April 17th were 12.6% above the 460,633,000 barrels of oil we had in commercial storage on April 19th of 2019, and 20.7% above the 429,737,000 barrels of oil that we had in storage on April 20th of 2018, while at the same time remaining 1.9% below the 528,702,000 barrels of oil we had in commercial storage on April 21st of 2017...   

This Week's (and Last Week's) Rig Count

the US rig count fell by 10% or more for the 3rd week in a row during the week ending April 24th, and is now down 57.1% from its interim high at end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 64 rigs to 465 rigs this past week, which was the least rigs deployed since August 8, 2016, and hence is a 44 month low for the US rig count...that total was also down by 420 rigs from the 1022 rigs that were in use as of the April 12th report of 2019, and 1,​4​64 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....during the​ previous​ week ending April 17th, which we did not cover, the US rig count fell by 73 rigs, from 602 rigs to 529 rigs, the largest percentage ​rig ​drop on record....

the number of rigs drilling for oil decreased by 60 rigs to 378 oil rigs this week, after falling by 66 rigs the prior week, leaving oil rig activity at its lowest in 44 months, 427 fewer oil rigs than were running a year ago, and less than a quarter of 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 85 natural gas rigs, after falling by 7 rigs the prior week, leaving the fewest natural gas rigs active since August 26th of 2016, and hence also a new 44 month low for natural gas drilling, down by 101 natural gas rigs from the 186 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..

the Gulf of Mexico rig count was unchanged at 17 rigs this week, with 16 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that's four less than the rig count in the Gulf a year ago, when 18 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, just as it has been since the onset of winter...

the count of active horizontal drilling rigs decreased by 57 rigs to 426 horizontal rigs this week, which was the fewest horizontal rigs active since October 7th, 2016, and hence is a 42 month low for horizontal drilling...it was also 447 fewer horizontal rigs than the 873 horizontal rigs that were in use in the US on April 26th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was down by five to 23 directional rigs this week, and those were also down by 48 from the 71 directional rigs that were operating during the same week of last year....in addition, the vertical rig count was down by 2 to 16 vertical rigs this week, and those were down by 31 from the 47 vertical rigs that were in use on April 16th of 2019...

since we missed last week's report, we'll include herein screenshots ​from both week's rig count summaries pdf from Baker Hughes that give us the details on the weekly changes in drilling activity by state and by major shale basin...

the tables above are for the week ending April 17th, while the tables below are for the week ending 24th, with each set of tables showing first the weekly and year over year rig count changes for the major oil & gas producing states, and then the weekly and year over year rig count changes for the major US geological oil and gas basins...in each of those tables, the first column shows the active rig count as of the ​given reporting week, the second column shows the change in the number of working rigs between the prior week's count and the current week's count, the third column shows the prior week's active rig count, the 4th column shows the change between the number of rigs running at the end of the reporting week 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 for the tables above was the 19th of April, 2019 and for the tables below was the rig count as of April 26th, 2019..

as you can see from the tables from both weeks, the shutdown of drilling activity has been widespread across the major producing states and basins, with no major basin unscathed...the majority of the oil targeting rigs have been pulled out of the Permian basin of western Texas and New Mexico, the Williston shale of North Dakota, and the Eagle Ford shale of southeastern Texas, while the natural gas rig reductions have come from the Haynesville of northwestern Louisiana and adjacent Texas and the Marcellus in West Virginia...with both oil and natural gas prices well below the price needed to even break even, we can expect the rig count to continue falling in the weeks ahead, possibly to record low levels before stabilizing ....

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Appalachian Storage Hub Development Sparks Concerns – The Oberlin Review - Appalachia has been a hub of fossil fuel extraction for over a century, and the Ohio Valley Environmental Coalition has been leading anti-pollution efforts in the region since Dianne Bady founded the organization in 1987. In 2017, months before her death, Bady was sifting through industry magazines and noticed several proposed projects related to plastic production. Slowly, she stitched together a picture of what was to come: a massive petrochemical complex, now known as the Appalachian Storage Hub, spanning Kentucky, Ohio, West Virginia, and Pennsylvania. This facility would store fracked natural gas fluids in underground caverns and process these petrochemicals into the building blocks of plastic.The coal industry has traditionally paid the bills for Appalachian families, but natural gas has been on the rise since the shale boom began in the early 2000s. Fracking projects swept across the region, along with pipelines to transport fracked natural gas — including the NEXUS pipeline that runs through Oberlin. For more on NEXUS, see “Eight Years In, NEXUS Fight Continues” on page 18.  Still, the industry’s future is uncertain; it has expanded rapidly in part thanks to the low market price of natural gas. However, affordability is also one of the industry’s greatest challenges: it has prevented gas companies from generating the profits promised to investors. “There’s just a glut of natural gas, with nowhere to go,” says Dustin White, OVEC’s project coordinator focusing on the Appalachian Storage Hub. Companies are looking for ways to increase demand for their product, and it looks like they may have found one in ASH. “There are no exact numbers except for what is already in place,” White cautions. “Appalachia Development Group has suggested up to five large ethane crackers with the potential of other smaller crackers, several massive underground storage sites, a potential “six-pack” of “thirty-two” inch pipelines running the length of the Ohio River, several thousand miles of feeder pipelines, and hundreds of additional chemical refineries.”Every type of proposed infrastructure and each stage of the petrochemical process can create environmental hazards. White describes this as “cradle-to-grave” environmental damage. “From the moment the natural gas liquids are fracked to the plastic waste that is the end product, there’s no way that it does not harm human health in some way,” he said. “So it’s completely overarching.”

Pennsylvania bet its economic future on fracking, plastics. Was it all a giant scam?- When the global oil giant Royal Dutch Shell finalized its plan for a massive, $6 billion petrochemical plant on the banks of the Ohio River in far western Pennsylvania in the summer of 2016, an ecstatic Gov. Wolf called the scheme “a game-changer” for the state. In a series of interviews, the then-first-term Democrat said he was “elated" at what he called the largest private investment in the Keystone State since World War II and a reversal of fortune for the beleaguered blue-collar workforce in the greater Pittsburgh region. And America’s fifth-largest state was throwing its own weight behind the project, thanks in large part to a massive tax break for then highly profitable Big Oil icon that had been estimated by experts as worth $1.7 billion over 25 years and which had been approved under Wolf’s GOP predecessor Tom Corbett. The state also declared the site a Keystone Opportunity zone — another tax break — and invested in roads, site development and job training. Four years later, the Shell project — seeking to use ethane from fracking sites in Pennsylvania and nearby to make consumer plastics — is pushing forward, but other big petrochemical projects that threatened to make the Ohio Valley look, for better or worse, like Houston, appear to be on hold. The fracking industry is bracing for a wave of bankruptcies. Indeed, the whole fossil-fuel industry was looking bad even before the recent stunning collapse of global energy prices — for a few remarkable hours, the futures price of a barrel of West Texas crudewas less than zero — and that will likely have huge economic consequences for Pennsylvania.  Instead of a “game-changer,” was everything the state experienced over the last decade-plus — including the thousands of ugly fracking rigs that dotted the rural landscape, and the The Graduate-like touting of “one word ... plastics” as our future — really just a shell game? (Pun intended.) And beyond the shaky economics that at its worst reeks of the subprime mortgage crisis, can there be any moral justification in a time of climate change, and when the world is increasingly littered with plastic gunk, for Pennsylvania’s relentless, short-sighted embrace of fossil fuels as its salvation?A report released earlier this month by the Center for International Environmental Law — warning the U.S. government that bailing out Big Oil, Gas and Plastics with coronavirus relief dollars would be “an unfillable sinkhole” — spells out why the pipe dream for state officials of plastics plants using fracked-in-Pa. natural gas lining the banks of the Ohio may be just that, a dream. The report argues that industry estimates of an ever-rising global demand for plastic products like those to be manufactured by the Shell ethane cracker and its competitors were bogus — even before the pandemic crashed the economy.“The whole push to build out this massive infrastructure for new plastic capacity has been driven not by any existing demand for plastics” — either in the U.S. or in international markets, Carroll Muffett, the president and CEO of CIEL, told me in a phone interview. “It’s driven by this flood of very cheap gas. The industry had this massive resource and they needed something to do with it.”

Construction of Southern Reliablity Link pipeline continues during pandemic - Construction on the controversial Southern Reliability Link pipeline is continuing during the ongoing coronavirus pandemic, much to the chagrin of environmental groups opposed to the natural gas infrastructure project. A collection of environmental leaders challenged the reasoning of Gov. Phil Murphy’s executive order suspending construction work but exempting utility projects like the natural gas pipeline during a news conference Tuesday where they blasted the exemption as a concession to the industry that endangers workers and puts the environment and others at risk. New Jersey Natural Gas is currently still finishing a portion of the 30-mile, high-pressure gas line in Monmouth County. Work is already completed in Ocean County and has yet to move into Burlington County, where the line is planned to connect to a new compressor station in Chesterfield. “I think it’s a cave to the fossil fuel industry and some of the labor unions. It makes no sense when you can’t do energy efficiency projects but you can do pipelines and power plants. We’re very concerned by it,” said Jeff Tittel, director of the New Jersey Sierra Club. Murphy indefinitely suspended nonessential construction on April 10, arguing that the restriction was needed to protect construction workers from becoming infected with coronavirus or spreading the disease. His order came weeks after he ordered restaurants and bars to close, along with other nonessential businesses. “No one should be working where social distancing isn’t practiced to its fullest extent,” Murphy said when he announced the construction ban. But his suspension order included several exemptions, among them construction of hospitals and schools, transportation projects and affordable housing projects. Utility projects were also exempted, including “those necessary for energy and electricity production and transmission.”

Keystone XL ruling could further delay Mountain Valley Pipeline permit  - A long-suspended permit for the Mountain Valley Pipeline to cross streams and wetlands could remain on hold even longer as the result of a decision by a federal judge in Montana. Last week, U.S. District Judge Brian Morris vacated a so-called Nationwide Permit 12 issued by the U.S. Army Corps of Engineers for the Keystone XL pipeline. Opponents had said the Corps did not properly evaluate the harm to endangered species from the 1,210-mile pipeline that will transport crude oil from Canada to Nebraska. The ruling prevents other pipelines, including Mountain Valley, from obtaining a similar permit until systemic problems are addressed, according to an attorney involved in the case and others. “This is definitely a game-changer to some degree for the pipelines,” said Jared Margolis, a senior attorney with the Center for Biological Diversity, which joined the Northern Plains Resource Council and other groups in bringing the suit. “Right now, unless the ruling is modified, it does have a nationwide sweeping effect,” said Larry Liebesman, a senior adviser with Dawson & Associates, a Washington, D.C.-based water resources consulting firm. In October 2018, three similar permits for Mountain Valley to cross more than 1,000 streams and wetlands along its path through West Virginia and Virginia were set aside by a ruling from the 4th U.S. Circuit Court of Appeals. Although the appellate court cited different grounds — that the Corps bypassed a requirement that major river crossings in West Virginia be completed within 72 hours — Mountain Valley would still be barred from regaining its permit under the Montana case, Margolis said. Mountain Valley has applied for a new permit from the Corps in hopes of resuming construction later this spring on the often-delayed and increasingly expensive $5.5 billion natural gas pipeline. “We are evaluating any potential impact to the MVP project from this federal court decision and, in doing so, continue to target MVP’s late 2020 in-service date,” MVP spokeswoman Natalie Cox wrote in an email.

VIRGINIA: How a GOP-backed plan threatens the Atlantic Coast pipeline -- Friday, April 24, 2020 -- Virginia recently enacted a Republican-sponsored ratepayer protection measure that may spell trouble for the controversial Atlantic Coast natural gas pipeline.

Baker Says Locals Can Shut Down Weymouth Compressor Construction. But They're Not Sure That's True | Earthwhile -- Local officials can temporarily shut down construction of a natural gas compressor station in Weymouth if they have concerns about social distancing at the site, according to Gov. Charlie Baker.  “We have a set of standards and rules with respect to distancing around construction, and those standards and rules are pretty clear," Baker said at a press conference on Wednesday. "And if locals have issues with those rules, they have the opportunity to either raise it with us or the opportunity to shut it down.” This week, Sens. Edward Markey and Elizabeth Warren called on Enbridge, the parent company responsible for the compressor station construction, to provide copies of its pandemic plan and detail the steps it is taking to protect the health and safety of workers and the surrounding communities. In their letter to Enbridge, the senators, who oppose the project, expressed concern that "ongoing construction could expose work crews and members of the surrounding community to coronavirus-related health and safety risks."  A spokesperson for Enbridge said the company is following guidelines provided by government and public health authorities.

Enbridge moves forward with Line 5 tunnel despite coronavirus lockdown -The owners of the aging Line 5 oil and natural gas pipeline want Michigan regulators to declare that they don’t need state permission to construct a replacement pipeline deep beneath the Straits of Mackinac.The request to the Michigan Public Service Commision is part of a wave of applications that Enbridge, a Canadian conglomerate, has submitted to state and federal regulators in recent weeks to begin construction on the $500 million project next year.  Enbridge spokesperson Ryan Duffy said the applications are “another step in moving forward” and consistent with a timeline laid out in a 2018 agreement with the state.  But pipeline foes contend permitting should be delayed until Michigan’s coronavirus crisis ends to allow citizens to fully engage in the process.“Urgent matters relating to health, safety, financial, or security should receive the state’s full attention rather than unrelated new or pending actions requiring robust public engagement and input,” an opposition group, Oil & Water Don’t Mix, wrote on April 8 to Gov. Gretchen Whitmer.   Enbridge argues the commission’s 1953 approval of the existing pipelines covers its plan to replace the section running under the straits with a 30-inch diameter pipeline running through a concrete-lined tunnel deep beneath the lakebed.In its application to the commision, the company’s lawyers argue the proposed pipeline “involves no more than maintaining and continuing to operate Line 5 by replacing and relocating one approximate four-mile segment of the over 600-mile line.”The company also filed separate permit applications this month with the U.S. Army Corps of Engineers and the Michigan Department of Environment, Great Lakes & Energy to begin constructing the tunnel that would house the pipeline, and with EGLE seeking permission to discharge wastewater during tunnel construction and operation.  The 67-year-old Line 5 transports 540,000 barrels daily of crude oil and natural gas between Wisconsin and Ontario. Propane from Line 5 is an important energy source for many Upper Peninsula residents, but opponents contend the pipeline poses a catastrophic hazard to the Great Lakes.

Michigan commission seeks public comments on Line 5 tunnel project - Enbridge's application to build a tunnel under the Straits of Mackinac to house Line 5 — a 66-year-old oil and natural gas pipeline — has been put on hold by the Michigan Public Service Commission until it takes public comment. The Canadian energy company submitted an application to state and federal regulators earlier this month to secure a permit seeking to begin construction on a roughly 4-mile utility tunnel beneath the Straits of Mackinac. Approval of the permit would green light the Canadian oil pipeline giant to begin construction on the Great Lakes Tunnel Project next year with a target operational date in 2024. The commission is being asked by Enbridge for a "declaratory ruling that it already has the authority to construct the replacement segment based on the Commission’s original 1953 order granting authority for the Line 5 pipeline," according to a Public Service Commission news release. Written or electronic comments will be accepted no later than May 13, officials said. Electronic comments are to be e-mailed to mpscedockets@michigan.gov and should reference case number U-20763. Written comments may be addressed to: Executive Secretary, Michigan Public Service Commission, 7109 W. Saginaw Hwy., Lansing, MI 48917. The tunnel would house Enbridge’s new Line 5 oil pipeline and replace a 67-year-old dual span that transports up to 540,000 barrels a day of natural gas liquids and crude oil along the lake bed between the Upper and Lower peninsulas.

Demand For Oil Has Plummeted, But Industry Keeps Building New Infrastructure Anyway - Oil and gas companies are constructing pipelines and wells amid the pandemic, risking workers’ lives and depleting personal protective gear.In February, CNBC anchor Jim Cramer took aim at the heart of the debate over fossil fuels with a bold declaration on his investment advice show: “I’m done with fossil fuels. They’re done. ... We are in the death knell phase.” That was before the coronavirus pandemic and a price war sent oil prices into a tailspin.  By March, analysts were predicting a “financial bloodbath” for the oil industry. By early April, usually sober economists at commodities trading firms were describing demand for oil like this to The Wall Street Journal: “Since humans started using oil, we have never seen anything like this. There is no guide we are following. This is uncharted.”On Monday, oil prices plunged below $0 as the world ran out of places to store what’s already been pumped.  You’d be forgiven for wondering, then, whether the oil industry exists in a different reality.  Instead of retreating, the American oil and gas sector has plowed ahead at full speed during one of the worst pandemics in a century, even as demand for its product tanked because of the COVID-19 economic downturn. The industry’s efforts continued in no small part because federal and state regulators deemed fossil fuel work “essential” during the pandemic. “Continuing construction of new fossil fuel infrastructure and expanding production during a massive oil supply glut is madness,” Collin Rees, a senior campaigner at the environmental group Oil Change USA, said in an email to HuffPost. “It’s the opposite of ‘essential,’ and it’s unbelievably dangerous to both workers and the communities they’re entering, many of which are already underserved by health services. This is just one more example of the Trump administration bailing out Big Oil and putting the interests of CEOs ahead of working people and communities on the frontlines.”  The industry’s business-as-usual stance in the face of a historic public health catastrophe is only possible because of how politically entrenched the fossil fuel sector remains. It has capitalized on the crisis to further embed itself, risking the lives of workers and their families on projects that have depleted protective gear for little obvious public good.

PIPELINES: Groups launch new legal attack on FERC climate policy -- Wednesday, April 22, 2020 -- Environmental groups yesterday asked a federal appeals court to take a fresh look at energy regulators' duty to expand their consideration of climate change impacts from the projects they authorize.

Democrats call for new gas pipeline moratorium amid pandemic - A group of 29 House Democrats is asking the Federal Energy Regulatory Commission (FERC) to stop approving new natural gas pipeline projects and new liquefied natural gas export facilities amid the coronavirus outbreak.They argued in a Wednesday letter to FERC Chairman Neil Chatterjee that such a moratorium is necessary to make sure the public is included in the process and also to protect the safety of construction crews. “FERC must issue an immediate moratorium on the approval and construction of new shale-gas pipeline projects and Liquid Natural Gas export facilities to protect the public health, our environment, and the American people’s confidence in the integrity of governmental administrative and legal proceedings,” they wrote. The letter was led by Reps. Jamie Raskin (D-Md.), Jim McGovern (D-Mass.) and Ilhan Omar (D-Minn.). Chatterjee, however, expressed resistance to such a pause, arguing that the country’s infrastructure should try to be prepared for a return to normalcy. "It's imperative that the Commission continue to operate as close to normal as possible so that the industries we regulate are well-positioned to contribute to the nation's economic recovery when we all return to work,” he said in a statement to The Hill. “We at FERC will do everything in our power to make sure our energy systems continue to operate and are there when we call upon them once our economy reopens. To shut our door to working on the nation's critical energy infrastructure would be as irresponsible as it is shortsighted," the chairman added. FERC regulates interstate transmission of natural gas, oil a nd electricity as well as natural gas and hydropower projects.Wednesday’s letter follows a decision by FERC earlier this month to relax certain obligations on the companies it regulates due to the virus.

Oil Price Rout to Hit U.S. Regional Economies – WSJ - Tumbling oil prices will have broad regional impacts on the U.S. economy, hitting states far afield from Texas, which was the engine of a national energy boom during the past decade. Wyoming, Alaska, Oklahoma, North Dakota and West Virginia all depend more on mining and energy extraction than the Lone Star state, according to Wall Street Journal calculations of state economic output data. Ohio and Pennsylvania increased their exposures to energy in the past decade, albeit from low levels, as they jumped on the fracking revolution that tapped previously unused shale reserves, primarily for natural gas. The nation already faces historic declines in economic output and employment because of the social-distancing measures and business closures adopted to stem the spread of the novel coronavirus. Like Texas, other energy-driven states now face an added blow from plunging oil prices, one that might outlast the pandemic shock. “It will also remain a headwind going into 2021 as broader economic conditions start to improve,” said Karl Kuykendall, a regional economist with IHS Markit, an economic research firm. The most actively traded U.S. contracts for crude oil—the West Texas Intermediate futures for delivery of petroleum in June—dropped 43% to $11.57 a barrel Tuesday, a day after some contracts for the U.S. crude benchmark dropped below zero for the first time in history. Oil owners were effectively paying others to take it off their hands and store it. Pain in the oil industry will likely ripple through other parts of those state economies. People who lose jobs in energy will spend less, with spillovers on housing markets, service industries and state coffers.

‘We Pulled the Plug’: As Oil Prices Plunge, Drillers in the Gulf of Mexico Shut Off Wells – WSJ - Offshore oil drillers have begun shutting off wells in the U.S. Gulf of Mexico following a collapse in crude prices due to the coronavirus pandemic, and some executives worry that the region’s production may take years to fully recover. A historic decline in energy demand that has led refiners to make less fuel and caused storage tanks to fill up with crude is pushing Gulf Coast producers to shut down high-cost wells in both shallow and deep federal waters. The offshore oil sector last year accounted for about 15% of U.S. production, or nearly two million barrels a day, a record level. Offshore shut-ins and other cost reductions are among the factors pressuring companies such as Schlumberger Ltd., SLB 7.95% Halliburton Co. HAL 6.87% and Baker Hughes Co. BKR 4.00% to lay off the oil-field-service workers that they provide to producers on a contract basis. The Gulf Coast drillers’ response to the crisis is expected to have a longer-lasting regional impact than the pullback in onshore plays like the Permian Basin of West Texas and New Mexico. While offshore companies are accustomed to turning off wells temporarily during hurricanes and other extreme weather, shale oil production is known for shorter cycles from drilling to initial extraction. Older offshore platforms are at risk of being removed, leaving oil and gas underground—and those fields are unlikely to attract investors willing to pay for costly restarts when prices recover. “In offshore, we don’t shut in fields, we shutter them. You begin the process of leaving them forever,” said Tim Duncan, chief executive of offshore producer Talos Energy Inc. TALO 8.60% Offshore producers pay comparatively high costs to produce and transport crude oil to onshore refineries and storage facilities. They typically offset those costs by collecting premium prices for barrels delivered into Gulf Coast trading hubs in Texas and Louisiana, supported by high demand from U.S. refiners. Richard Kirkland, chief executive of shallow-water producer Cantium LLC, ordered his company at around 1 p.m. Monday to shut in all production as U.S. prices fell to a level where producers were effectively paying buyers to take crude off their hands. By 6 a.m. Tuesday, almost all of it was shut. “We pulled the plug,” Mr. Kirkland said. Cantium’s fields, which were producing 20,000 barrels a day, will be shut for at least two months, possibly four. Gulf Coast refiners told Mr. Kirkland they would substitute Gulf crudes with Saudi barrels from two tankers sitting offshore. “This could very well be the peak for years,” Mr. Kirkland said. “We’ve got to survive with our hedge money and cash in the bank. We’re not getting much help from anybody.”

A Decade Later, Gulf Residents Suffer From BP’s Toxic Legacy  - Rick DuFour has worked the most dangerous oil cleanup jobs in the Gulf of Mexico. He was there when the Deepwater Horizon oil rig exploded 40 miles off southeastern Louisiana 10 years ago, killing 11 men and spewing more than 200 million gallons of Louisiana crude out of its well a mile below the sea. Much of it poured onto the shores of four states; DuFour was one of the first in line to clean it up. Over three years, DuFour estimates he worked for 18 different companies, cleaning up a toxic mix of oil and chemical dispersants stuck like peanut butter to the bottoms and bows of ships, picking up oily tar balls on beaches and scraping tar mats as long as football fields from areas they sank just offshore. There wasn’t a cleanup job he didn’t sign up for, working for weeks on end in the blistering 100-degree heat and humidity, sucking in the noxious fumes that permeated the salt air. He saw hundreds of dolphins wash up dead on the barrier islands where he worked, many of them just babies. Sometimes the men had to limit their work to just five minutes out of every hour to avoid heat exhaustion and chemical exposure as the sweat poured off them in buckets. One day, a company chemist approached the workers with a new compound called Chemical 7248, a special degreaser the Coast Guard now warns should be disposed of as hazardous waste. Soon after spraying the chemical, DuFour says one of the workers started screaming and had to be taken to the hospital. DuFour says the skin on his legs blistered with a “thousand ant bites ... it looked like cherry-colored lipstick went around my eyes and went around my nose and it just burned so bad.” DuFour says he soldiered on, determined to finish the job even as people fell sick around him. But oil and chemicals finally took a toxic toll. After three years of working oil cleanup jobs across four states, exposed to countless cleaning compounds, oil dispersants and fumes, DuFour collapsed at home one morning in April 2013. He was rushed to the hospital in Ocean Springs, where he remained in recovery for nearly a year. He was initially diagnosed with a condition similar to Guillain-Barré syndrome, a rare neurological disorder, and he lay mostly paralyzed in a hospital setting during his recovery. He describes the pain coursing through his body like “snakes were crawling up” his legs, torturing him as he was unable to move. DuFour eventually made it back to his trailer, but the pain never went away. He still can’t move well, and he can barely eat or grasp drinks with partially paralyzed hands. His eyes still burn, too, “like there’s tabasco” in them. A decade after the spill, DuFour is broke, nearly paralyzed and mostly homebound.

Oil prices tumble below $0; Louisiana trade group warns of potential halt to operations - A price collapse that sunk May oil prices well below the $0 mark on Monday was a rude awakening to a glut that's straining storage capacity and has the potential to halt much of Louisiana's oil production. Benchmark U.S. crude oil fell $55.90, or more than 300%, to settle at negative $37.63 a barrel Monday. The drop into negative territory was chalked up to technical reasons — the May delivery contract is close to expiring so it was seeing less trading volume, which can exacerbate swings. "For the last few barrels in the May contract, they literally had to pay somebody to take the oil but it didn't impact a huge volume of oil," said Eric Smith, associate director of the Tulane Energy Institute. U.S. crude oil for June delivery shows a more ”normal” price, he said. The June price fell 14.8% to $21.32 per barrel, as factories and automobiles around the world remain idled. Demand for oil has collapsed so much due to the coronavirus pandemic that facilities for storing crude are nearly full. “Many of our members are being told they cannot deliver crude in May due to storage constraints, and as a result have begun planning to shut in 100% of their Louisiana production,” said Gifford Briggs, president of the Louisiana Oil and Gas Association. “It’s an absolute worst-case scenario." The breakeven price for producers is about $37 per barrel, he said. A negative price for May contract oil hit on Monday is unprecedented, and the price has not dropped to single digits since 1973. Big oil producers have announced cutbacks in production in hopes of better balancing supplies with demand, but many analysts say it’s not enough and wells are going to get shut down.

Louisiana faces major budget shortfall as oil markets crash - Thousands of oil and gas jobs in Louisiana are potentially on the chopping block as the price of crude oil continues to tank. The market was already down, with crude oil hovering around $30 to $40 per barrel at the start of 2020, a far cry from the $50 to $60 per barrel at which is was supposed to be priced. But no one predicted the market would depress to historic lows.“We’re down about 30 million barrels per day or more because the global shutdown of the economy,” said Gifford Briggs, president of the Louisiana Oil & Gas Association.The market has been saturated with oil in part because of the lack of demand as Americans are largely under stay-at-home orders.“We need to get our state economy moving again, we need to get our country’s economy moving again, we need the global economy moving again if we’re going to minimize the impacts to the oil and gas industry and ultimately the state,” Briggs said. More so than the potential for job cuts, the crumbling market presents problems for the state. Oil and gas makes up about 10% of Louisiana’s budget. For every dollar oil goes down, Louisiana loses roughly $12 million annually. Loren Scott, a Baton Rouge economist, estimates already, that shapes up to a loss of $20 million per month to the state’s budget.

Coronavirus: Edwards delays severance tax payments to help oil and gas industry - The state is delaying collection of severance taxes, Gov. John Bel Edwards announced Wednesday, a move that will offer relief for Louisiana's oil and gas industry reeling from plummeting prices. The governor's announcement came after the Louisiana Oil and Gas Association and U.S. Rep. Clay Higgins asked Edwards to suspend the tax, which is imposed on all natural resources produced in the state. Louisiana Department of Revenue Secretary Kim Robinson said the governor's new directive will delay collecting the tax for two months until June 25. Legislative action would be required to suspend or forgive the tax permanently. "We are looking at what we can do here in Louisiana," Edwards said Wednesday, noting that a special task force studying business issues in the wake of the coronavirus is considering help for the energy sector. Edwards said more permanent steps to help the industry, like cutting taxes, requires legislative approval “and we’ll discuss that going forward.” Robinson said the state collects about $40 million a month in severance taxes, which includes production of oil, natural gas and timber. All severance tax collections are delayed by the governor's order. “We are grateful that Governor Edwards has recognized the severe crisis that is facing the industry and has heard our calls for severance tax relief,” said Louisiana Oil and Gas Association President Gifford Briggs. “The decision to delay severance tax payments and provide temporary relief to the industry is a welcome first step. "We look forward to continuing to work with the administration and the Louisiana Legislature on additional measures to help small and independent producers, service companies and the thousands of hard working men and women that make up the industry. We need bold, decisive action in order to survive" Robinson said the governor hasn't made a decision on whether he will delay collection of severance taxes beyond June 25. Briggs called on the state to do more.

Forced to Store Fuel at Sea, Oil Refiners at Breaking Point - Oil refiners are hunting for vessels to store jet-fuel and gasoline that nobody is buying, sending freight rates sharply higher, an indication that the global refining system is fast approaching a breaking point. Until now refiners had mostly been storing unwanted product on site, but the latest indication from the tanker market suggests they are now being forced to place their output into ships. With local demand sharply down, if they can’t find storage, they’ll be forced to trim output, or even shut down completely. “The shipping market is now the main bottleneck,” said Torbjorn Tornqvist, head of commodity trading giant Gunvor Group Ltd. “We are fast approaching the crunch point whereby it will be hard to find any ships, and shipping rates are currently stratospheric,” he added in an interview. If the refiners are forced to reduce their processing rates, it would mean even less demand for crude, creating a ricochet effect through the oil market. The sign of a global hunt for tankers to store products is clear in the eye-watering prices traders are paying for the vessels. It now costs more than $8.6 million to haul an 80,000-ton cargo of naphtha, a material used to make gasoline and plastics, to Asia from Europe. Just a few years ago, the same route was paying little more than $1 million. Rates are soaring on all routes and ship sizes, according to the Baltic Exchange in London. 

The oil industry has never been in a crisis quite like this and many producers will not survive - The oil industry is in its worst crisis since at least the Great Depression, according to analysts. There’s too much oil, and nobody wants to buy any more. Planes aren’t flying, shipping has slowed, and U.S. consumers, who use 10% of the world’s oil output in their cars, are now staying at home. The action Monday in the most closely watched energy market in the world was devastating, as the value of the May oil futures contract plummeted 300 percent, flipping into negative territory to end at minus $37.63 per barrel. The price action was unprecedented, and hard to explain but it was also a wake up call for an industry that is likely to see much more pain ahead. 20200420 Oil futures crash One reason the CME’s May contract for West Texas Intermediate plunged was well understood. There is simply a basic lack of storage capacity in the world for crude. As the contract expires, nobody wants to take delivery of the physical product. But that’s not a satisfying explanation for such a bizarre price reaction, and there was speculation it was the result of hedging gone wrong or even some exchange traded funds behind the sell off. The end result is that the industry now has had a warning that it needs to seriously curb drilling and unwinding the supply glut could be more difficult than expected. The May contract, which expires Tuesday, was the only one to trade in such erratic fashion, but the June contract was down 15% and was trading around $21.40 per barrel Monday afternoon. Brent futures, the international benchmark, were trading at about $25.90 per barrel. But in the spot market, North American regional prices reflected the problems producers were having unloading landlocked crude in a market with no buyers. Louisiana light sweet crude was selling for a little over $5 a barrel but crude in the Bakken region in North Dakota was selling for negative $38.63 a barrel.

Hard times ahead for Houston as oil falls to its lowest price in history — Oil has fallen to its lowest price in history. Coronavirus has killed the demand for crude oil, which was already suffering amid an international oversupply. Experts can agree on at least one point: Houston is sure to face some tough days ahead. “We’ve never seen anything like this before, where you see an upswing in production at the same time a decline in demand,” says journalist Evan Mintz. The Texas Monthly writer described the double-hit Texas was about to take earlier this month in a report for the magazine called, "Houston, Meet Cleveland." The title is a reference to other American cities, like Cleveland, that were once one-industry towns. “You can look at Cleveland, you can look at Pittsburgh,” Mintz explains. “These are cities that have had to re-invent themselves. But no one will say they’re the best they’ve ever been. That was in the past, and they have to find a new story for themselves in the future.” Although many describe Houston as having a diversified economy, Mintz disagrees. “We like to think Houston has this big diverse economy,” Mintz said. “But the fact of the matter is we are still an oil and gas city, and we aren’t as diverse as people think we are.” The writer says Houston’s economy is still dependent on oil and gas. When nobody is buying, it’s really bad. “About a third of Houston’s GDP is based on oil and gas,” Mintz said. “If people can’t make money selling oil, that’s really bad. It means we’re going to lose money, we’re going to lose jobs it means we’re losing a major economic engine.” Oil and gas attorney Cliff Vrielink spent Monday on the phone with clients, many of whom own small-scale oil and gas businesses, helping them navigate their next steps. “Right now there’s a lot of crisis management as you could imagine,” Vrielink said. The lawyer is giving advice to clients who are forced to make tough decisions like letting go of workers and trying to survive without any revenue. He is helping one of them close their business. “Trying to sell their assets for whatever they can, talking to the bank,” Vrielink said. “And in their case, they’re just going to have to wrap up the business and close the doors unfortunately.”

Former Dallas Fed President Fisher says Texas has been 'hit hard' by the oil slump - Texas has been slammed by the collapse in oil prices and the recovery ahead for the area and the national economy as a whole will be slow, former Dallas Federal Reserve President Richard Fisher said Tuesday. West Texas Intermediate crude prices plunged into negative territory Monday, the first time that has happened, as slumping demand and oversupply distorted energy market dynamics. Fisher said his state is looking to restart slowly an economy that has been bruised by the oil slump. “We are all, particularly in the Houston area and West Texas, being hit hard by what happens in the energy patch,” Fisher told CNBC’s Rick Santelli during a “Squawk on the Street” interview. Fisher added that he anticipates a slow road ahead as the economy recovers from a coronavirus-induced shutdown. “Texans get things done. The order of difficulty is great,” he said. “We’re in for a long, U-shaped recovery in the United States as a whole. It’s going to take time to patch things back together, to get them up and running, to get the financing for working capital for small- and medium-sized businesses to lift up the economy, bring people back to work and start growing again. It’s going to take quite a while.” Fisher pointed out that it’s not only oil getting hit but also other goods across the commodity spectrum including copper, wheat, soybeans and corn. That all has happened as the dollar has strengthened but government bond yields have remained low. Whereas the benchmark 10-year low normally would average about 4% over time, he added, it’s now closer to 0.5%, which he said sends the message to members of Congress that “you can spend eight times as much” but still have the same financing costs. The U.S. national debt has ballooned to nearly $24.5 trillion and the budget deficit this year is expected to eclipse $3 trillion. Fisher said low rates are making those costs affordable, but also have a downside. “It’s kind of a good thing, but it’s also a dangerous trap,” he said.

Negative Prices For Crude And Natural Gas Slam Permian Markets --Underlying Monday’s financially driven oil price rout are physical markets that are in extreme turmoil as they contend with severely reduced demand resulting from the COVID lockdowns and rapidly filling storage tanks. In the Permian Basin, the epicenter of U.S. shale oil, the crude benchmark price — WTI at Midland — on Monday crashed to a historical low of negative $13.13/bbl before rebounding to a positive $13.01/bbl Tuesday. The same day, prices at the Permian natural gas benchmark Waha revisited negative territory for the third time this month, with a settle of minus $4.74/MMBtu for Tuesday’s gas day. Negative supply prices aren’t new to Permian producers, at least for gas — Waha settled as low as minus-$5.75/MMBtu in early April 2019. But up until a couple months ago, oil prices were supportive enough to keep producers drilling regardless. Now, that’s all over, at least for a while. What can we expect now that negative oil prices have arrived in the Permian? Today, we’ll dissect the latest bizarre pricing event to rattle the Permian natural gas and oil markets. We said this yesterday in One Way Out, but it bears repeating: the crude oil market entered the twilight zone Monday when WTI at Cushing not only collapsed below zero but went as negative as minus-$40.32/bbl and settled the day at minus-$37.63/bbl. The extent of Monday’s trouncing was shocking and, as we explained yesterday, worsened by a few financial players who got caught having to unwind long positions for May delivery just a day before the May contract was expiring, because they had no way to take physical delivery. To get out of their predicament, they ended up having to pay “buyers” to take them out of their positions. That was Monday. On Tuesday, with the financial trading crisis resolved, the May contract recovered to positive territory to expire at $10.01/bbl, up almost $48/bbl from the previous day. The June contract, which had remained relatively supported Monday near $20/bbl — fell to converge with the expiring May contract, down nearly $9/bbl to $11.57/bbl Tuesday

Oil Producers Will Pay You $54/Barrel To Take South Texas Sour Off Their Hands - All day long we have been told, "ignore the price collapse in the May WTI futures contract," look over here instead at how well stocks have rebounded... Excuses vary from "it's purely technical" to "a fund or twelve probably blew up, it's not fundamental" to "ahh, it's just the roll" but as it becomes clearer and clearer that the world is coming to terms with what Goldman called "The Largest Economic Shock Of Our Lifetimes", and the record surge in excess oil output amounting to a mindblowing 20 million barrels daily or roughly 20% of global demand. Besides that simple supply/demand imbalance, we explained here in great detail exactly what drove today's move:...all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires. Or, put another way, today's negative prices are the reflection of dire market conditions for producers, and as the following price sheet from Plains Marketing LP notes, producers are paying up massively for you to take crude off their hands...As Elisabeth Murphy, an analyst at consultant ESAI Energy previously noted, "these are landlocked crude with just no buyers. In areas where storage is filling up quickly, prices could go negative. Shut-ins are likely to happen by then."And it's not about to get better anytime soon as oil demand has been so battered by global government lockdowns to stop the spread of the coronavirus (that are being reinstated amid secondary waves of infection or delayed for fear of such) that any conceivable oil production cut is a drop in the ocean.Yes, the crude futures curve offers hope but that contango is supported by the ETF as much as anything else and given spot deliverable prices above, rolling down that curve of pain, just as May contract longs did today, to converge with spot will come very soon for June... and as Kyle Bass explained this afternoon, there is little expectation that the Saudis and Russians will take their foot off the throat of US shale anytime soon...

Drowning in crude, U.S. drillers say Trump strategic reserve plan is no lifeline - (Reuters) - President Donald Trump’s plan to fill the U.S. emergency crude oil stockpile has become the centerpiece of his administration’s strategy to shield drillers from a meltdown in energy demand - but company officials and industry groups say the program has been too slow and won’t be enough to save them. Trump announced his intention to fill the U.S. Strategic Petroleum Reserve “to the top” on March 13 as global oil prices went into freefall amid the coronavirus outbreak as governments issued stay-at-home orders that have obliterated fuel demand. But by the time crude oil prices CLc1 hit negative territory for the first time in history this week because of a lack of commercial storage space, the SPR’s sprawling salt caverns had yet to take delivery of a single barrel due to logistical constraints and a lack of funding. Drillers, meanwhile, say they are balking at the government’s offer to take their oil because it is hard for them to move it from inland fields to the SPR delivery sites on the Gulf Coast, and because they worry placing it in the reserve could compromise the oil’s quality. Global oil demand generally averages about 100 million barrels per day, but the pandemic is estimated to have cut that by around 30%. While major oil-producing nations led by Saudi Arabia have cut output and companies are closing wells, the oversupply is projected to linger for months or years leading to waves of bankruptcies in the U.S. energy industry. “I don’t see (the SPR program) providing a significant benefit to the masses in Texas,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association. The administration’s initial idea for the SPR was to purchase 77 million barrels of oil – the amount required to fill all available space in the reserve - directly from small U.S. producers most at risk from the market slump. But after Democratic lawmakers blocked funding for the program in last month’s stimulus package, the administration shifted strategies by offering the initial 30 million barrels of space for lease instead. The Department of Energy said this week it has awarded contracts to store a total of 23 of the 30 million barrels initially offered in the reserve, with deliveries to start as early as this month. A DOE official said it was “not surprising” that some of the offered space was not taken, because the leasing offer required different crude types to be delivered to specific locations on a deadline.

A hunt for any storage space turns urgent as oil glut grows (Reuters) - The telephone lines have been ringing at Adler Tank Rentals in Texas as oil companies found a new use for steel tanks that had been left idle when shale producers stopped drilling - they want to use the tanks to store some of an oil glut that has overwhelmed the market and flipped U.S. crude prices negative for the first time. Hundreds of millions of barrels of crude have gushed into storage worldwide in the past two months as the coronavirus-related lockdowns wiped out around a third of global oil demand. With oil depots that normally store crude oil onshore filling to the brim and supertankers mostly taken, energy companies are desperate for more space. The alternative is to pay buyers to take their U.S. crude after futures plummeted to a negative $37 a barrel on Monday. A topsy-turvy market that has oil prices for October delivery at $31 a barrel has oil firms anxious to sock away millions of barrels now to sell at a profit later. In Cushing, Oklahoma, home to dozens of large tank farms with combined space for about 76 million barrels, operators are fully booked, said traders. Storage there jumped by 5.7 million barrels the week before last, according to the latest U.S. Energy Information Administration (EIA). While the government estimated there is available space, traders said Monday’s market drop indicated any unfilled tanks are under lease, and not available to new renters. “The industry is really scrambling to source viable storage options,” said Stuart Porter, a manager at Adler Tank Rentals (MGRC.O) in Texas, which has shale companies lining up to potentially lease dozens of its 500-barrel steel frac tanks. The tanks can be lined up like dominos and filled at the well site by producers without a home for their oil.Converge Midstream LLC with millions of barrels of storage available in underground salt caverns outside Houston has gone from few takers to requiring one- to two-year contracts. “Quite honestly we were struggling for business. Now that the market has changed, everyone is our friend,” said Dana Grams, chief executive of Converge Midstream. The hunt for storage points to the magnitude of the collapse in demand for U.S. shale and the huge volume of unsold oil to refiners who are cutting purchases. Last month, the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia threw in the towel on four years of self-imposed output curbs that gave U.S. shale a price umbrella. The result was a drop in U.S. oil prices to about $20 a barrel as Saudi Arabia and Russia pledged to pump full bore. For a time, it looked like prices would stabilize after the pair and other nations this month agreed to deepen cuts. But crude stocks in the United States rose by 19 million barrels overall the week before last, the EIA said, the biggest one-week increase in history, setting the stage for Monday’s historic decline. In addition to the onshore glut, there are about 160 million barrels of oil sitting on tankers waiting for buyers. And at least six crude tankers carrying 2 million barrels apiece are en route to the United States from Saudi Arabia, adding to the alarm at the U.S. Gulf Coast. It is not just crude looking for a place to go. State lockdowns have decimated demand for motor fuel. U.S. gasoline demand fell 32% earlier this month compared with the same time a year ago, the EIA said.

US energy firms mull building new crude storage, conversions, more as stocks rise | S&P Global Platts — The North American energy sector is weighing options from building new tanks farms to more extreme alternatives such as temporarily storing crude in rail cars as US commercial crude storage threatens to fill to capacity as soon as May. Oil producers, midstream firms, traders and others are considering all types of storage possibilities to capture contango profits with NYMEX WTI at about $16/b on Thursday after falling into negative territory for the first time ever on Monday. But energy analysts warn the negative-pricing potential threatens to return in the days and weeks ahead as the Cushing storage hub quickly fills to capacity, followed by other regions throughout North America. Some of the options include converting tanks and storage wells into crude storage, utilizing all offshore floating storage, and more. The larger midstream players are deciding whether to build new storage that may not hold long-term value, while other export and refining hubs, such as Corpus Christi, Texas, are better positioned at least in the near term because they already had a wave of storage construction underway. With working US commercial storage more than 60% full and the prominent Cushing hub rising above 76%, energy traders and analysts said all practical options must be on the table. If storage gets too tight, NYMEX WTI and more regional hubs will again see negative crude pricing as markets have seen at times with natural gas in the Permian Basin, he warned. "If there's an opportunity to make money, people are going to do it," said Ernie Barsamian, CEO of midstream logistical firm The Tank Tiger. "Most of the big-chunk stuff got taken up by the big boys, but there's still lots of smaller stuff. And the contango continues to roll from front month to front month [through 2021 and beyond]." The Tank Tiger lists smaller and modest-sized storage opportunities, including caverns in the Permian, rail cars in the Bakken, floating barges off of New Orleans, and more traditional tank storage from Cushing to Brownsville, Texas. There also are options to sign on for tank storage that's currently out of service or eventually rolling off of contracts. After going through the permitting process, it only takes about three months to build new tanks in Cushing, he said, noting that a lot of conversations are ongoing as firms prepare to move quickly. Most of the midstream companies are holding their cards tight as they consider their options and are declining comment for now. But they are expected to reveal more as midstream earnings season picks up next week, analysts said.

One Pipeline Giant Is Looking to Stash the Oil Glut in Its Lines - Energy Transfer LP, the pipeline operator run by billionaire Kelcy Warren, is looking at ways to free up space on its conduits to store more crude as the coronavirus lockdown leaves the world swimming in oil. The company has identified two pipelines in Texas that would provide about 2 million barrels of additional storage, according to a spokeswoman. Energy Transfer is in the process of asking the Texas Railroad Commission for permission to change the method of operation on these lines. Argus Media first reported the plans. “After that it will be a matter of adding pumps, which we can easily achieve,” the spokeswoman said in an email. “We estimate we can be ready by mid-May.” It was just last month that Plains All American Pipeline LP asked oil producers to scale back production as storage started to fill. Now, prices have plunged so low that drillers are being forced to shut in output. Still, the global oil market faces a massive supply glut and rapidly filling tanks. The Texas Railroad Commission is now weighing mandatory oil curtailments, though the oil regulator recently delayed a vote on the matter. Instead, the agency launched a task force led by trade groups meant to come up with ways the state can bolster the industry.

‘I’m Just Living a Nightmare’: Oil Industry Braces for Devastation - NYTimes --Workers at Marathon Petroleum’s refinery in Gallup, N.M., are turning off the valves. Oil companies in West Texas are paying early termination fees to contract employees rather than drill new wells. And in Montana, producers are shutting down wells and slashing salaries and benefits. Just a few months ago, the American oil industry was triumphant in its quest for energy independence, having turned the United States into the world’s biggest petroleum producer for the first time in decades. But that exhilaration has given way to despair as the coronavirus has kneecapped the economy, destroying demand for gasoline, diesel and jet fuel as cars sit parked in driveways and planes are consigned to remote fields and runways. The oil industry has lived through many booms and busts, but never before have prices collapsed as they have this week. On Monday, one closely watched price fell below zero, meaning some traders had to pay others to take crude oil off their hands. That price — for May delivery — recovered on Tuesday, but not nearly to levels where oil companies can make a profit. At the same time, the price of oil for June delivery fell by about half to roughly $10 a barrel. “I’m just living a nightmare,” said Ben Sheppard, president of the Permian Basin Petroleum Association, which represents companies in the area of Texas and New Mexico that became the world’s most productive oil field last year. In Midland, Texas, the epicenter of the oil shale boom over the last decade, parking lots at companies like Chevron, Diamondback and Apache are empty aside from a scattering of pumping trucks. Executives are working from home, huddling with their colleagues and board members to decide how quickly to shut down production and lay off workers. Oil giants like Exxon Mobil have slashed their 2020 exploration and production budgets by nearly a third, and that was before the total oil price collapse at the start of this week. Many smaller oil companies are expected to seek bankruptcy protection in the coming months after having spent years borrowing billions of dollars to extract and move crude. Production companies have $86 billion in debt coming due between 2020 and 2024, and pipeline companies have an additional $123 billion they have to repay or refinance over the same period, according to Moody’s Investors Service.

Would They Actually Pay Refineries To Take Their Oil? - Something happened yesterday that has never happened before and does not even sound like it is based in reality.  The contract for a barrel of West Texas Intermediate crude oil scheduled for delivery in May closed at a negative $37.63 per barrel.Yes, you read that correctly I did not make a mistake. A barrel of oil closed at a negative $37.63 meaning that producers of oil would actually pay traders to take their full barrels off their hands.What is West Texas Intermediate (WTI) crude, according to Investopedea:  West Texas Intermediate (WTI) crude oil is a specific grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. WTI is known as a light sweet oil because it contains 0.24% sulfur, making it "sweet," and has a low density, making it "light." It is the underlying commodity of the New York Mercantile Exchange's (NYMEX) oil futures contract and is considered a high-quality oil that is easily refined.  How can a barrel of oil get to a price in which the producer will actually pay you to take the barrel off their hands? Because no refiner has the ability to even store the oil that has already been extracted from the earth. Thus the oil is worthless to the refineries. This is what the shutdown of our economies has done to our world.  Eventually, many more people will be harmed by this complete economic shutdown rather than a controlled regional shutdown as compared to COVID-19.

2,500 oil and gas workers in Texas lose their jobs in 10-day span -  The oil and natural gas industry shed another 2,500 jobs over the past 10 days, new figures from the Texas Workforce Commission show. Blaming record low oil prices and the coronavirus pandemic hurting demand for their products and services,  13 companies laid off 2,525 people. The service sector, which includes drilling rig operators, hydraulic fracturing crews and manufacturing, took the hardest hit. Houston-based NexTier Oilfield Services reported the highest number of layoffs. It cut 1,041 employees working at its headquarters, another Houston office and field offices in the Permian Basin and Eagle Ford Shale.Midland oil-field service company ProPetro Service announced more job cuts in the Permian Basin where losses now total 584 layoffs. Houston oil-field service company Baker Hughes cut 184 jobs after merging operations at two locations in Houston.Oil Bust: Drilling rig operator braces for 60 percent drop in activityFrac sand companies with operations in the Permian Basin took the next biggest hit, with U.S. Silica laying off 105 people in Midland. Fort Worth-based Black Mountain Sand decided to mothball a plant in Kermit where 87 people were laid off. Ohio-based Covia laid off 82 people at a frac sand mine and plan in Kermit.The offshore industry also took a hit with Diamond Offshore cutting 102 jobs at its Houston headquarters and Enterprise Offshore Drilling eliminating 75 jobs after on its customers halted operations in Gulf of Mexico.

Bankruptcy looms over U.S. energy industry, from oil fields to pipelines - (Reuters) - U.S. shale producers, refiners and pipeline companies are scrambling for cash and face likely restructuring as they struggle under heavy debt loads while engulfed in the worst crisis the oil industry has faced. Fuel demand has tumbled roughly 30% worldwide as the coronavirus pandemic destroys demand for transport, provoking a massive glut of oil that has hammered global prices and left energy companies with no choice but to pump hundreds of millions of barrels into storage. Just as demand plummeted, Saudi Arabia and Russia started an oil price war, and Riyadh flooded the market with even more crude. That left the oil industry facing the prospect of a long period with prices below their production costs. Shale producers came into the crisis with already high debt levels, namely from big investments to increase production across the United States in a bet on higher prices. But in turning the United States into the world’s largest oil producer, the companies became the victims of their own success when the quick rise in supply meant returns were thin. Investors lost patience, tightened credit and pushed shale producers to stop expanding and pay them back. Enter coronavirus. Oil prices have crashed 75% this year, and on Monday, closed at about minus-$38 per barrel. Most U.S. producers have announced one, if not two, rounds of spending and output cuts. But the crash sent prices to levels well below what companies and advisors had modeled in worst-case scenarios, according to energy lawyers. About half of the top 60 independent U.S. oil producers are in danger of restructuring and will need to find ways to boost their cash pile, according to energy lawyers at Haynes and Boone.“The reverberations from this price collapse will be felt throughout the industry and by everyone who provides services to the industry,”

US Fracking Set for Biggest Ever Monthly Drop - The Covid-19 pandemic, coupled with low oil prices, is likely to cause the largest monthly drop in fracking activity ever recorded in the United States, according to a new Rystad Energy analysis. Rystad estimates that the total number of started frac operations will end up below 300 wells in April, comprising close to 200 in the Permian and less than 50 wells each in Bakken and Eagle Ford. This translates into a 60 percent decline in started frac operations between the peak level seen in January-February and April 2020, Rystad outlined. The company said it observed a 30 percent monthly decline in the number of started frac jobs in the Permian, Bakken and Eagle Ford basins in March and added that nationwide fracking activity, on a completed jobs basis, might have already declined by around 20 percent last month. “With such a rapid decline in fracking already visible, very little activity will be happening in the oil basins during the remainder of the second quarter of 2020,” Rystad Energy Head of Shale Research Artem Abramov said in a company statement. “The natural base production decline, which we have seen as an absolute floor for production, therefore becomes an increasingly relevant production scenario,” he added. According to Rystad, if no new horizontal wells are put on production from April onwards, total light tight oil production will decline by 1 million barrels per day (MMbpd) by May, 2MMbpd by July and 3MMbpd by October to November.

As The US Rig Count Collapses Most Since 2014, Will Trump Bail Out Oil Companies? - After a chaotic week in the energy complex and a record plunge in the price of WTI, today's data from Baker Hughes suggests American oil companies are finally starting to draw the line as rig counts collapse to their lowest since July 2016, having plunged at the fastest rate since 2014's crash... The lagged response on production may be imminent:  And pressure is building on the Trump administration to "do something" - even if doing something is the worst thing for a market that needs the pressure of low prices to force restructurings. As Bloomberg reports, a plan being weighed by Treasury Secretary Steven Mnuchin to steer financial aid to beleaguered oil drillers could set up a clash with Democrats who have warned against any bailout for the industry.  As OilPrice.com's Irina Slav notes, the Department of Treasury may set up a lending fund for oil companies, Secretary Steven Mnuchin told Bloomberg this week, adding that there was nothing final yet.“One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin said.“We’re looking at a lot of different options, and we have not made any conclusions.”Besides direct loans - which the Federal Reserve would implement - the federal government may also buy stakes in some oil companies in addition to providing loans. It could also ask these companies to reduce production.The larger oil companies that hold an investment-grade rating would either have to fend for themselves on the debt market or take advantage of the loan program that the Fed has set up for small businesses, even if they are not exactly small businesses. The actual small businesses, in the meantime, are asking the Fed to adjust the rules of the loan program to allow them to use the funds to pay off existing debt. Investment-grade companies have options. In addition to the main street business loan program, they can take part in the Fed’s bond-buying program. Those with lower ratings, however, would need other options that the Treasury is considering in discussions with banks, Mnuchin told Bloomberg. He added that the Fed lending to such higher-risk companies was not an option.

The Democrats Who Want to Bail Out the Oil Industry – With prices of oil futures contracts dropping deep into negative territory on Monday, environmental advocates are calling for the industry to be wound down to facilitate a transition away from fossil fuels. But some Democrats in Congress had a very different response. “Tomorrow, I will file bipartisan, bicameral legislation to appropriate funds to make a Strategic Petroleum Reserve oil purchase, and I urge my colleagues to take it up immediately,” Rep. Lizzie Fletcher (D-Texas) announced on Monday.   Fletcher’s bill is not yet public, but she has previously said she would back legislation authorizing the federal government to purchase $3 billion worth of oil for the strategic reserve. Earlier this month, Fletcher signed onto a letter calling for the oil purchasing funds to be included in the next coronavirus relief package. In March, she was the only Democrat to sign a letter from Rep. Dan Crenshaw (R-Texas) calling on the Interior Department to provide temporary royalty relief for oil and gas companies. Fletcher, a first-term representative, has influence as the chair of the Science Subcommittee on Energy, a position she was elected to in January, and her support for financing oil purchases makes the measure bipartisan, giving it an important boost during the current session of Congress which is divided between Democratic and Republican control. Having prominent Democratic support for these measures could cost Demoratic leadership important leverage in negotiations with Republicans.So far in the 2019-20 election cycle, Fletcher has received $126,917 from the oil and gas industry, the second highest amount among all House Democrats, according to the Center for Responsive Politics. During her 2018 race, Fletcher took $80,381 from the industry.  One of her top donors so far this cycle, with $13,649 contributed, is Plains All American Pipeline, a large oil and gas pipeline company that she defended as an attorney prior to joining Congress. The law firm where Fletcher was a partner, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, lists multiple clients in the oil and gas industry on its website, including Total, Halliburton, Cheron, and Andarko.

A Big Oil Bailout Would Be the Opposite of the Green New Deal We Need --- Alexis Goldstein - It’s been a wild couple of weeks in the oil markets. Following a price war between major petrostates, the price of oil has tanked. Ever since, Donald Trump and congressional Republicans have been desperately trying to save a deeply indebted oil industry. We can all but expect a Trump-led bailout for Big Oil. Instead, our law and policy makers should let the oil producers fail, and devote resources to stave off the next crisis — the climate crisis — before it gets even worse.The ongoing economic fallout of the coronavirus pandemic has caused oil demand to plunge worldwide. On March 6, Russia withdrew from its pact with the Organization of the Petroleum Exporting Countries (OPEC), and began producing more oil, driving the price of oil down even further. Russia may have been motivated, at least in part, by a desire to hurt U.S. shale oil producers. And while some, like Mexico, took steps to protect themselves against just such a price collapse, U.S. oil producers were loaded up with debt and totally vulnerable to a sudden drop in oil prices. By April 1, Whiting Petroleum Corp. became the firstmajor U.S. fracking company to file for bankruptcy since the pandemic began, with many analysts predicting more bankruptcies to come.Trump’s never been shy about his love of oil and gas companies. After all, they were major funders of his inauguration, and continue to be major donors to his campaign. When the oil price war broke out in early March, Trump and congressional Republicans began to talk tough to try and secure the higher oil prices that teetering U.S. oil companies need to survive. GOP Sen. Bill Cassidy introduced a bill to withdraw U.S. troops from Saudi Arabia if the country doesn’t cut oil production, and 48 House Republicans sent a letter threatening to end the U.S.’s economic and military cooperation with Saudi Arabia if the country didn’t cut production. When OPEC+ came to a deal to cut production, Trump openly thanked Saudi Prince Mohammed bin Salman and Russian President Vladimir Putin for their work to “save hundreds of thousands of energy jobs in the U.S.” But while the OPEC+ deal may have bought the over-leveraged U.S. oil producers some time, many analysts are predicting it won’t be enough. There’s been so much overproduction of oil there’s no space to store it — leading to creative and inefficient storage methods, like loading up boats with barrels of oil. It seems that without enormous help, more U.S. shale oil producers will go bankrupt. Perhaps that’s why Trump has been increasingly vocal on Twitter about oil production, sending two market-moving tweets in less than a one-week period. First, it was his misleading tweet promising cuts well before they were negotiated, which pumped oil prices up by nearly 50 percent at the intraday peak. Then, when the OPEC+ deal didn’t seem to move oil prices much higher, Trump tweeted right before the market opened on Monday, April 13, that he thinks OPEC+ is actually going to cut production by 20 million barrels of oil a day, not the 10 million that was reported.Trump is eager to bail out his donors, and protect the interests of vulnerable GOP senators in oil-producing states like Texas. The White House recently hosted nine oil and gas executives for a meeting with Trump administration officials. Which is why, should the OPEC+ deal in fact not be enough, we should expect Trump to come to Congress and ask for a Big Oil bailout.

Oil, Gas, Petrochemical Financial Woes Predate Pandemic — And Will Continue After, Despite Bailouts, Report Finds - The oil, gas, and petrochemical industries have taken a massive financial blow from the COVID-19 pandemic, a new report from the Center for International Environmental Law (CIEL) concludes, but its financial troubles preexisted the emergence of the novel coronavirus and are likely to extend far into the future, past the end to measures aimed at curbing the spread of the disease.“Oil and gas are among the industries hardest hit by the current economic crisis, with leading companies losing an average of 45 percent of their value since the start of 2020,” the report finds.“These declines touch on nearly every facet of the oil and gas sector’s business, including the petrochemical sector that has been touted in recent years as the primary driver of the industry’s future growth.” That’s to some degree because of the abrupt plunge in demand for oil resulting from shelter-in-place and quarantine measures that, as of early April, applied to over 3 billion of the world’s 7.8 billion people — including 90 percent of the United States. And the United States uses an outsize amount of gasoline — in 2017, the US consumed one fifth of the gasoline used globally, the report notes. Nearly 70 percent of petroleum products are consumed for transportation, the report adds — meaning that the impact on demand resulting from quarantines is enormous.But, before the pandemic, oil, gas, and petrochemical firms “showed clear signs of systemic weakness,” CIEL’s report says, listing factors like the industries’ poor stock market performance, high levels of debt, competition from cheaper renewable energy, slowing growth in demand for plastics, and growing awareness among investors of the impacts that action to slow climate change will have on the sector. CIEL also noted that pension plan managers and other institutional investors have legal duties that may force them to keep an especially close eye on any oil, gas, or petrochemical projects in their portfolios.“Because many investors, including pension funds, which are the largest category of equity investors globally, have fiduciary duties to their beneficiaries, they have legal obligations on top of the financial incentives to maximize profits: they must also reduce risk,” the report says. “As the risks of investing in the oil and gas sector become ever more apparent, more and more investors subject to fiduciary duties will likely choose to steer clear of these companies.”

U.S. oil consumption stabilises but stockpiles continue to swell: Kemp - Chartbook: https://tmsnrt.rs/2VuEGqf  (Reuters) - U.S. petroleum consumption has fallen by a third since the economy went into lockdown in March but showed signs of stabilising last week, according to the latest weekly figures from the U.S. Energy Information Administration. Lockdown has caused the biggest economic interruption since the depression of the 1930s and the largest interruption in oil consumption since the birth of the modern petroleum industry in the 1860s. The challenge now is for domestic oil producers, importers and refiners to adjust to a prolonged period of lower consumption and bring the increase in inventories under control before storage space runs out. The total volume of petroleum products supplied to the domestic market averaged 14.1 million barrels per day (bpd) in the week ending on April 17 (“Weekly petroleum status report”, EIA, April 22). The total volume was essentially the same as a week earlier (13.8 million bpd) but down by around a third compared with five weeks ago before the lockdown began (21.5 million bpd). In response to lower demand, U.S. refiners cut crude processing to 12.5 million bpd last week, down from 15.8 million bpd five weeks ago and 16.5 million bpd at the same point a year ago. U.S. crude imports slowed to just 4.9 million bpd last week from 6.5 million bpd five weeks earlier, one of the fastest declines in the last decade, and were running at the slowest rate since 1992. But the refining system is still struggling to digest the enormous volume of unprocessed crude that has accumulated since the economy went into freefall and to limit the build up of unsold fuels. Total stocks of unrefined crude and products, excluding the strategic petroleum reserve, increased by a further 25.5 million barrels last week and have risen by a total of 109 million barrels in the last five weeks. Last week’s inventory increase was the third-largest since records began in 1990. Four of the six largest weekly stock builds on record have occurred in the last five weeks. In crude alone, stocks rose 15 million barrels last week and are now up 65 million barrels since March 13, rapidly filling storage capacity, albeit from an initially low level. Nationwide, crude storage capacity is now 60% full, up from 50% five weeks ago and 52% at the same point a year ago (https://tmsnrt.rs/2VuEGqf). There is still capacity to store another 262 million barrels, with most of the unused space on the Gulf Coast where there is still room for 156 million barrels. Crude storage space is scarcer around Cushing, Oklahoma, the delivery location for the NYMEX light sweet crude oil contract. Crude stocks at Cushing have risen by 21.3 million barrels over the last five weeks and there is now just over 18 million barrels of unused tank space available in the area.

Super-Polluting Methane Emissions Twice Federal Estimates in Permian Basin, Study Finds  - Methane emissions from the Permian basin of West Texas and southeastern New Mexico, one of the largest oil-producing regions in the world, are more than two times higher than federal estimates, a new study suggests. The findings, published Wednesday in the journal Science Advances, reaffirm the results of a recently released assessment and further call into question the climate benefits of natural gas. Using hydraulic fracturing, energy companies have increased oil production to unprecedented levels in the Permian basin in recent years. Methane, or natural gas, has historically been viewed as an unwanted byproduct to be flared, a practice in which methane is burned instead of emitted into the atmosphere, or vented by oil producers in the region. While new natural gas pipelines are being built to bring the gas to market, pipeline capacity and the low price of natural gas has created little incentive to reduce methane emissions. Daniel Jacob, a professor of atmospheric chemistry and environmental engineering at Harvard University and a co-author of the study, said methane emissions in the Permian are "the largest source ever observed in an oil and gas field." He added, "There has been a big ramp up in oil production in that region and when you don't care too much about recovering the natural gas, it makes for a large emission." As a global oil glut threatens to curtail oil production in the region, it remains unclear if methane emissions from the Permian will diminish, or if emissions will continue to climb, as operators scale back monitoring and maintenance operations during the coronavirus pandemic. "There is going to be a lot less wells being drilled, probably less gas being flared, even wells [that] will [probably] be shut in," said David Lyon, a scientist with the Environmental Defense Fund and a co-author of the study. "If that is done properly, then I think you will have less emissions. At the same time, I wouldn't be surprised if a lot of operators cut back on their environmental staff and they do less leak inspections and other activities that would reduce emissions. They may have less ability to respond to malfunctions and things that cause emissions."

Satellite data show ‘highest emissions ever measured’ from U.S. oil and gas operations  - Findings published today in the journal Science Advancesshow that oil and gas operations in America's sprawling Permian Basin are releasing methane at twice the average rate found in previous studies of 11 other major U.S. oil and gas regions. The new study was authored by scientists from Environmental Defense Fund, Harvard University, Georgia Tech and the SRON Netherlands Institute for Space Research."These are the highest emissions ever measured from a major U.S. oil and gas basin. There's so much methane escaping from Permian oil and gas operations that it nearly triples the 20-year climate impact of burning the gas they're producing," said co-author Dr. Steven Hamburg, chief scientist at EDF. "These findings demonstrate the rapidly growing ability of satellite technology to track emissions like these and to provide the data needed by both companies and regulators to know where emissions reductions are needed."Based on 11 months of satellite data encompassing 200,000 individual readings taken across the 160,000 square-kilometer basin by the European Space Agency'sTROPOMI instrument from May 2018 to March 2019, Permian oil and gas operations are losing methane at a rate equal to 3.7% of their gas production. The wasted methane—which is the main component in natural gas—is enough to supply 2 million U.S. households. Methane is a potent greenhouse gas, anthropogenic emissions of which cause over a quarter of today's warming. Reducing methane from oil and gas operations is the fastest, most cost-effective way to slow the rate of warming, even as the necessary transition to a net-zero carbon economy continues.

Digging blind: Wisconsin allows drillers to flout state law — sometimes with deadly results -  Jim and Calvin Jensen surveyed an intersection for a job installing fiber optic cable in Sun Prairie during the summer of 2018. They did not like what they saw. The dense suburb east of Madison featured older building stock, and paint markings atop the pavement suggested a web of pipelines lurked beneath their feet, Calvin would later tell detectives.   The Jensens, a father-son duo at Jet Underground drilling company, decided they needed a new, more careful plan to drill. But that would add time and dollars to the project.   Calvin, a 15-year veteran of the industry, relayed those conclusions to Bear Communications, the Kansas-based company that hired Jet for the Sun Prairie job. On the morning of July 10, 2018, a Bear employee sent him a text: A competing driller had been hired. The work would be done faster.  In a Kwik Trip parking lot that morning, a Bear field supervisor handed the original drilling plans to Valentin Cociuba, owner of Michigan-based VC Tech. The goal: Complete the job within four days. Cociuba and his wife, Christen, a fellow VC Tech employee, told Bear they would need to locate utilities beneath the intersection, a requirement of state law that would have added at least three days to the project. “Don’t worry about locates,” a Bear employee responded in an email, believing that task was already complete. “They’re good to go.” The underground utilities had not been located, investigators would later determine.  Valentin Cociuba would later acknowledge to the Wisconsin Public Service Commission, which regulates public utilities in energy, gas, telecommunications and water, that he knowingly violated state law by digging without a proper ticket. The decision would prove deadly. Just after 6 p.m. on July 10, a VC Tech directional driller struck an unmarked natural gas lateral, releasing vapors that police described as blurry “like heat waves coming off of asphalt on a hot day.” The gas spewed out of storm sewers in front of a senior living facility, and it flowed into The Barr House, a popular tavern owned by Capt. Cory Barr, a Sun Prairie volunteer firefighter of 15 years, and his wife, Abby. Less than an hour later, the gas ignited near the tavern, leveling the downtown intersection, critically injuring firefighter Ryan Welch and killing Barr, who had also responded to the gas leak although he was off duty. The Pipeline and Hazardous Materials Safety Administration (PHMSA) pegged the economic damage at nearly $21 million.

Bill McKibben, Winona LaDuke: The Fight Against the Line 3 Pipeline - Rolling Stone - In mid-March, as major cities began locking down, environmentalist and Rolling Stone contributor Bill McKibben called activist Winona LaDuke, both in “different corners of rural America with low bandwidth,” to talk aboutclimate change, JPMorgan Chase, and LaDuke’s seven-year effort to stop the construction of an oil pipeline called Line 3.  LaDuke lives on the White Earth reservation, part of the Ojibwe nation in northwestern Minnesota. She’s been a booming voice in Native American land rights for three decades, and in recent years that has intersected directly with campaigns against fossil fuels. She was at the Standing Rock protest against the Dakota Access Pipeline — which she calls the “Selma moment” for a lot of Native activists — and she’s now taken that energy to a lower-profile but equally important fight: stopping the reconstruction of the Enbridge Line 3 pipeline in Minnesota. “We don’t have any oil in Minnesota,” LaDuke points out, but because the nearest port is in Superior, Wisconsin, the state has become a thruway for Canadian oil. “We have six Enbridge pipelines already, and two Koch brothers pipelines,” she says. Enbridge is hoping to reroute Line 3, which was built in 1968 and has started to decay, rather than digging it up and repairing it. But the new route would go directly through land that sustains the Ojibwe nation — it’s the only place in the world where wild rice grows naturally, and it’s a core part of their economy, their culture, and their diet.  McKibben’s most recent writing and organizing efforts have been with a coalition called Stop the Money Pipeline, which focuses on cutting off oil development at the source, by targeting the big banks that fund it. In Rolling Stone’s April climate issue, he detailed how JPMorgan Chase has become the fossil-fuel industry’s biggest lender — $196 billion when it went to press, and that number keeps climbing. And for efforts that help expand the breadth of the industry, like new pipelines, Arctic drilling, and deep-sea exploration, JPMorgan Chase has given 63 percent more than any other bank on Earth. One of those projects is Line 3.  The portions of the pipeline that pass through Canada, Wisconsin, and North Dakota have already been approved, but LaDuke has been effectively stalling the Minnesota section. “For seven years we’ve been fighting them in the courts, in the regulatory process, and in the communities,” LaDuke says. In a massive community-organizing effort, nearly 70,000 individual comments were submitted to the Minnesota Public Utilities Commission, and 94 percent were opposed to the pipeline. But in 2018, after massive spending from Enbridge, the permits were still granted. “Someone needs to explain to us why 94 percent isn’t enough,”

Fire at North Dakota saltwater disposal well spills brine (AP) — A fire at a saltwater disposal well in McKenzie County caused brine to spill, according to the North Dakota Oil and Gas Division. The fire was reported Wednesday at the J.W. Fisketjon 1 saltwater disposal well about four miles northwest of Watford City. BNN North Dakota, LLC reported that an estimated 23,100 gallons of brine were released because of the fire. The cause of the fire has not been determined. The brine was contained on site. A state inspector has been to the location and will monitor response and cleanup. Brine is a byproduct of oil production.

North Dakota searches for oil production salve amid outbreak (AP) — North Dakota’s top oil regulator said Tuesday that nearly a third of the state’s wells have been idled and crude production has slid by more than 20% in recent days amid the COVID-19 outbreak.State Mineral Resources Director Lynn Helms told the North Dakota Industrial Commission some 5,000 wells have been shut down in recent weeks, accounting for about 300,000 barrels of lost oil daily. Helms estimated the state has lost up to 60,000 barrels of oil production in “the last 24 hours” as oil prices crashed and in what Gov. Doug Burgum has called a potential “economic Armageddon for North Dakota.” North Dakota’s coffers had been fatter than projected due strong prices and near-record drilling in its oil patch. The state had forecast about $48 a barrel to craft its current two-year budget. Based on the state’s forecasted price and the loss of barrels in the past day, the state would lose about $288,000 in oil tax revenue in a single day, Tax Commissioner Ryan Rauschenberger said.Burgum called an emergency meeting Tuesday to discuss ways to aid the state’s oil producers that are wracked by falling oil prices due to meager demand amid the coronavirus outbreak.The three-member, all-Republican North Dakota Industrial Commission headed by Burgum took no action but discussed incentives to bring wells back online, including the potential of using federal stimulus money or tax breaks, should oil prices rebound.“We know operators are going to have limited capital,” Burgum said.Helms said a well could cost $50,000 or more to bring it back online and producing.

Friday gas plant hearing to be conducted remotely - A public hearing on a proposed natural gas processing plant in Williams County will be conducted remotely rather than in Williston.The 9 a.m. Friday hearing is on an application by OE2 North LLC to build a plant to process up to 250 million cubic feet of gas per day. The $150 million facility would be about 15 miles west of Williston, on 39 acres of a 143-acre parcel. Processed gas and natural gas liquids would be sold to nearby transmission pipelines. North Dakota's Public Service Commission had planned to hold a hearing in Williston. The hearing now will be conducted remotely to conform with state and federal guidance urging limited public gatherings amid the coronavirus pandemic.

OIL AND GAS: 'A big deal': Keystone XL ruling could threaten other pipelines -- Wednesday, April 22, 2020 -- A sweeping court ruling last week that halted construction of the Keystone XL pipeline through waterways set off alarm bells for some energy industry analysts.

US delays oil pipeline approvals after environmental ruling (AP) — The U.S. Army Corps of Engineers has suspended a nationwide program used to approve oil and gas pipelines, power lines and other utility work, spurred by a court ruling that industry representatives warn could slow or halt numerous infrastructure projects over environmental concerns The directive from Army Corps headquarters, detailed in emails obtained by The Associated Press, comes after a federal court last week threw out a blanket permit that companies and public utilities have used for decades to build projects across streams and wetlands. The Trump administration is expected to challenge the ruling in coming days. For now, officials have put on hold about 360 pending notifications to entities approving their use of the permit, Army Corps spokesman Doug Garman said Thursday. The agency did not provide further details on types of projects or their locations. Pipeline and electric utility industry representatives said the effects could be widespread if the suspension lasts, affecting both construction and maintenance on potentially thousands of projects. That includes major pipelines like TC Energy’s Keystone XL crude oil line from Canada to the U.S. Midwest, the Mountain Valley natural gas pipeline in Virginia and power lines from wind turbines and generating stations in many parts of the U.S. “The economic consequences to individual projects are hard to overstate,” said Ben Cowan, a Houston-based attorney with Locke Lord LLP who represents pipeline and wind energy companies. “It could be fatal to a number of projects under construction if they are forced to stop work for an extended period in order to obtain individual permits.”

Saudi oil official refutes claim that crude exports to the US skyrocketed in the last month - A Saudi Arabian oil official on Saturday refuted the conclusion of an analytics firm that the country’s oil exports to the U.S. dramatically increased in the last month. TankerTrackers.com said on Thursday that Saudi Arabian oil exports to the U.S. more than doubled from February to March as oil prices crashed. The firm said its data indicates that the April export figure is on track to surpass March’s number. An unnamed Saudi oil official who is familiar with the matter denied both conclusions. The official told CNBC that Saudi Arabia’s April allocation for the United States is targeted at around 600,000 barrels per day, a figure which the official said is not a significant increase over the first-quarter monthly average. TankerTrackers, which uses satellite tracking of VLCCs — the vessels that transport crude — says that Saudi crude shipments to American ports went from an average of 366,000 barrels per day (bpd) in February to 829,540 bpd in March — a multiple of 2.27. TankerTrackers said that satellite tracking indicates 1.46 million barrels per day of Saudi oil shipped to the U.S. in the first two weeks of April — a figure that would mark four times February’s daily volume and the highest figure since 2014. According to Saudi state oil producer Aramco’s website, the company was loading 15 tankers for its international customers on April 1 — the day a previous OPEC production cut agreement with its oil-producing allies, OPEC+, expired — supplying the tankers with a record 18.8 million barrels in a single day.

Saudi Arabia may re-route tankers if U.S. imposes crude import ban, sources say - (Reuters) - Saudi Arabia is exploring re-routing millions of barrels of oil onboard tankers sailing to the United States if President Donald Trump decides to block imports of crude from the kingdom, shipping and trade sources say.  Some 40 million barrels of Saudi oil are on their way to the United States and due to arrive in the coming weeks, piling more pressure on markets already struggling to absorb a glut of stocks, according to shipping data and sources. U.S. officials have said in recent days that Washington is considering blocking Saudi shipments of crude oil, or putting tariffs on those shipments, adding to difficulties for the cargoes now on the water. Shipping sources said the kingdom tried to seek storage options for the cargoes from tanker owners when the ships were chartered last month, but many pushed back given booming rates and not wanting tied-up vessels. Two sources said Saudi Arabia was looking into whether it could re-route the cargoes elsewhere if the United States halted imports. Saudi Arabia’s state oil company, Saudi Aramco (2222.SE), said it is committed to its long-term contracts with customers with deliveries of crude shipments for April, May and June. Aramco also “offers its larger customers with refineries in multiple regions of the world optionality to take their crude purchases from Aramco into the region,” the company said in a statement to Reuters. “Changes in ship destinations are routine in the course of our business, particularly in a company of our scale,” it said. Oil traders active in European and Asian markets said there was expectation that the Saudis would look to divert the cargoes to other markets if a ban was imposed, which would then put huge pressure on storage tanks in those two regions. “Europe looks full, but surely if the Saudis offer it at really cheap levels, buyers would take it,” a source with an international trading firm said. “Some still have storage spaces or may agree to float it for some time.”

Negative Oil: Trump Can't Save Prices By Banning Saudi Crude - Banning imports of crude oil from Saudi Arabia is just the sort of gesture that might appeal to President Donald Trump, who has vowed to protect jobs in the U.S. shale patch. But such a move wouldn’t do much to reverse the decline in prices that has seen the May contract for West Texas oil fall below zero. As we speak, there is a small armada of ships full of Saudi crude heading to the U.S. Most of it is scheduled to arrive next month, when storage space is expected to be near full and refiners are highly unlikely to be ramping up processing rates. Bloomberg has identified 20 very large crude carriers, known in the industry as VLCCs, that loaded since the beginning of March, each hauling about 2 million barrels of the kingdom’s crude toward American ports on the Gulf and West coasts. They are due to arrive by the end of May. Several more that aren’t showing a destination could be heading the same way.It's not immediately clear who now owns most of the Saudi crude on those tankers. Traditionally the kingdom sells its oil at its export terminals, meaning that any ban would hit the American refiners who've purchased the cargoes, rather than the Saudis. However, four of the ships that loaded in March are owned by the National Shipping Company of Saudi Arabia, known as Bahri, while eight out of the 10 vessels that have sailed so far in April were chartered by the same company. That suggests that at least some of the crude may not have been sold before it left Saudi Arabia, making it a prime target for import tariffs or an outright ban. It just won’t make much of a difference whether that oil is sold on American shores when it finally arrives, or whether it’s forced to go someplace else, where it will complete with U.S. exports. That’s because the gushing oil glut and dramatic evaporation of demand in a world under lockdown is happening right here and now. And oil prices are responding Yes, Saudi Arabia and other OPEC+ countries are coming under pressure to bring forward their recent, much-lauded output cuts. But for now they aren't due to come into effect until the start of May. And they are starting to look less impressive every day that passes. The deal reached on April 12 after a four-day standoff called for a reduction of a combined 9.7 million barrels a day from baselines mostly reflecting October 2018 production levels. The reference point is crucial because a lot has changed in the 18 months since then, and particularly in the last month since the previous OPEC+ output deal collapsed. In that time, Saudi Arabia and its closest neighbors embarked on a production surge. The kingdom has boosted output by more than 2.5 million barrels a day since February to 12.3 million barrels a day, according to its state-owned oil company Saudi Aramco. The United Arab Emirates is pumping 4.1 million barrels a day, up by around one-third from February, according to the country’s energy minister, Suhail Al-Mazrouei. Kuwait has raised its production by a more modest 500,000 barrels a day, according to the International Energy Agency.

$0 Oil Forces Canada To Shut Down Crude Production -- Canadian oil companies have begun shutting down steam-driven oil sands production projects as prices continue to fall, Reuters reports, noting the move could have dire long-term consequences for the production facilities.Steam-driven oil sands production, also called steam-assisted gravity drainage, involves injecting steam into an oil sands deposit to melt the bitumen and make it flow up the well. To ensure long-term production, the temperature and pressure at such sites must be maintained at a certain level. Disruption, Reuters explains, could result in permanent damage, which would translate into a permanent loss of production.Yet Western Canadian Select, the heavy oil benchmark of Canada, has been trading below $10 for about ten days now, with a temporary spike to $10.13 a barrel last Thursday. At the time of writing, WSC was trading at $-0.01 a barrel. As a result, producers are being forced to cut. Husky Energy cut its oil sands output by 15,000 bpd. Cenovus reduced its production by 45,000 bpd and said it could raise this further to 100,000 bpd, nothing a cut of this size wouldn’t damage the bitumen reservoirs. ConocoPhillips last week said it would cut its oil sands output by as much as 100,000 bpd.Earlier this month, ahead of a meeting between Alberta government officials and OPEC, the chief executive of Enbridge said oil producers in Western Canada could shut down as much as 20-25 percent of production in response to the price slide, brought about by the coronavirus outbreak that exacerbated the situation with the supply overhang. A cut of 20-25 percent translates into 1.1-1.7 million bpd. According to TD Securities, 135,000 bpd of this has already been cut, all in the oil sands, as of April 7. Now, the consultancy says that total production cuts in the oil sands amount to 300,000 bpd and could rise further to 1.5 million bpd.

Oily water spill into Port of Valdez continues days after discovery - Response crews on Saturday have pinpointed the primary entry point of an oily water spill that for several days has seeped into Port Valdez. The source of the leak — a drain area about a quarter-mile uphill from the water — was halted on Monday. It was discovered on April 12. But the oily mix has continued to travel beneath snow and into the water at the Valdez Marine Terminal, where tankers are filled with oil. The cause of the leak remained under investigation on Saturday by the Alaska Department of Environmental Conservation and others. Operations at the terminal have not been affected. More than 230 people locally and around the state are involved in the response, and around 5 miles of oil-containing boom have been deployed on the water, an incident management team said in a prepared statement Saturday evening. The exact amount of oil spilled is unknown. About 720 barrels of oily water mix, or 30,240 gallons, had been collected as of 6 a.m. Saturday. The spill response team on Saturday estimated that about eight barrels of oil, or 315 gallons, have been recovered so far. The oily water’s primary entry point into the port was described as “a rocky area new the low tide line, which indicates a flow path below ground,” the incident management team said. Crews were digging through earth uphill from that point “to create a potential collection point and prevent more oily water from entering the water.” Similar work was being done in other areas, including around the spill’s source.

Hundreds of barrels of oil, water mixture recovered from Valdez spill - Eight days after oil was found in Prince William Sound in Valdez, a citizen oversight group says the initial response to the spill has been positive. "Any amount of oil hitting the water is a big deal. You can never clean up all of the oil once it's been spilled, so we won't know the full impacts of this until it's over with and we can fully determine how much was spilled, how the process went confining and cleaning up, and do more long term monitoring for any lingering oil or impacts," said Brooke Taylor, director of communications for Prince William Sound Regional Citizens Advisory Council. "To date, what we've seen is unified command, and specifically Alyeska as a responsible party, being very prompt and proactive with their response to this. We've seen they put together a great team to really respond to this. We've been very pleased with how well their containment and clean up so far has seemed to go." PWSRCAC was created in the wake up of the Exxon Valdez oil spill to provide a voice for communities impacted by the Alyeska terminal and associated tankers. In addition to long-term environmental monitoring and spill prevention planning, the group monitors spill response training, including training that prepares captains operating fishing vessels to act as first responders to a spill. "They have called out a number of fishing vessels in this response to help setup boom, to help with containment, sensitive area protections," Taylor said. "It’s one of the reasons that this contracted model is something that we’re big advocates for, because it means these people have been trained ahead of time, they know how to use the gear, they are ready to act. And in particular in light of whats happening with COVID-19 right now, it also means that there’s that much less direct interaction that Alyeska staff have to have with these operators because they’ve already been trained." As of Monday afternoon, the unified command for the incident says 798 barrels of water and oil mixture have been recovered. Further analysis shows that the amount of oil recovered from the water so far is approximately 12 barrels, or 511 gallons. An additional 30 gallons has been recovered from land. The area has been boomed since April 12 and the boom has contained the spill.

Oily water cleanup continues at Valdez Marine Terminal - Alyeska Pipeline Service Company and state officials are continuing their investigation of an oil spill sheen near the Valdez Marine Terminal’s small boat harbor first reported on April 12. Early indicators suggested that the crude/water mixture was leaking from a sump that overflowed. As of Tuesday, April 21, additional tests had been performed to verify the integrity of other piping in the area and all tests passed indicating the 58-SU-3 sump was the only source of the incident. The product spilled was primarily a mixture of Alaska North Slope crude with water, DEC officials said. The amount released was unknown and will be estimated based on recovery numbers, the agency said. More than 240 personnel from the pipeline company, U.S. Coast Guard and Alaska Department of Environmental Conservation were engaged in the response effort. Fifteen fishing vessels working to support on-water containment and recovery operations are among the responders, according to ADEC. Boom has been deployed to protect the Solomon Gulch Hatchery, the Valdez Duck Flats, Saw Island and Seal Island. Oil skimming efforts continue, with 35,784 gallons of oil water mixture collected through April 21, and 511 gallons of oil recovered. Officials said the primary containment boom has been adjusted to contain the spill closer to the spill outflow area. The bigger boom still maintained the outer perimeter of the boomed areas, being monitored to ensure adequacy of containment. Response crews were continuing oil skimming operations and use of sorbents for passive recovery. ADEC officials said additional plans were being prepared to address the spill outflow location. The shoreline cleanup plan is already approved for the next stage of nearshore cleanup operations, they said. DEC officials said the oil traveled under the snow-covered surface and came out near the head of Berth 4 into Port Valdez. A tanker was loading at Berth 5 at the time of the spill, but was not affected. Most of the sheen was contained behind the Berth 4 area with sorbent boom and sweeps and two layers of hard yellow boom, according to DEC. Wildlife have been observed near the spill area, including one oiled Kittiwake, one deceased gull and three deceased Kittiwakes.

Tribes Sue to Halt Trump Plan for Channeling Emergency Funds to Alaska Native Corporations Tribal leaders from across the country are calling for the U.S. Departments of Interior and Treasury to halt a proposed plan that could give as much as half of $8 billion in emergency relief funds earmarked for the nation's tribal governments to private Alaska Native Corporations (ANCs). The corporations collectively generate more than $10 billion in revenue from a diverse array of industries, including significant oil and gas developments. Six tribes, including three from Alaska, filed suit against Treasury Secretary Steven Mnuchin on Friday in U.S. District Court in Washington, D.C. to halt the transfer of funds. The suit noted that Alaska's more than 200 regional and village corporations are private, for-profit businesses. The state's 12 regional ANCs own "scores" of corporate subsidiaries operating in all 50 states, as well as foreign countries, and are not tribal governments, according to the suit. The complaint noted that their business holdings include construction, pipeline maintenance, government and military contracting, financial management and aerospace engineering firms. Sign up for InsideClimate News Weekly Our stories. Your inbox. Every weekend. EMAIL SIGN UP I agree to InsideClimate News' Terms of Service and Privacy Policy The Arctic Slope Regional Corporation, the largest ANC, earns nearly half of its $3.4 billion in annual revenue from the oil and gas sector, including company-owned refineries and royalties from North Slope oil and gas leases. The proposed plan for distributing money under the Coronavirus Aid, Relief, and Economic Security Act would keep funding from tribal groups, "who are in dire need of the funds to support the necessary and increased expenditures caused by the Covid-19 pandemic," the tribes said. They include Alaska's Akiak Native Community, the Asa'carsarmiut Tribe and the Aleut Community of St. Paul Island. At a time when trillions of federal dollars are being spent to staunch the economic impacts of Covid-19, tribes worry they could be losing sorely needed aid to privately-held corporations with ties to the oil industry. Leaders of the Cheyenne River Sioux Tribe of South Dakota say they also plan to file suit against the Treasury and Interior Departments if the distribution of funds to the ANCs goes forward. While the exact funding formula hasn't been released, the Interior Department has requested that tribes and ANCs provide data on the size of their land holdings, and the number of their members or shareholders. The 45 million acres held by the 12 regional Alaska Native Corporations nearly equals that of the country's 574 federally recognized tribes. Cheyenne River Sioux Tribe officials say disbursements based on land holdings could result in $3 to $4 billion going to the corporations.

Arctic LNG 2 Contracts Go to CCC - Turbomachinery specialist Compressor Controls Corp. (CCC) reported Wednesday that it has won multiple contracts from Novatek for the Arctic LNG 2 project, located on the Gydan Peninsula in Russia’s Yamal-Nenets Autonomous Region. CCC will oversee the turbomachinery controls and optimization of the centrifugal compressors and expanders of Arctic LNG 2’s three liquefaction trains, the contract recipient noted in a written statement emailed to Rigzone. Each train will boast a capacity of 6.6 million tons per annum (mtpa), and CCC pointed out that it will oversee anti-surge, performance, quench and other advanced controls. It added that it will use specialized local and global teams and collaborate with the field’s leading original equipment manufacturers to execute and deliver control algorithms. According to CCC, the new contracts mark its latest collaboration with Novatek. The firm explained that it had previously provided turbomachinery expertise for the Yamal LNG project. Novatek owns a 60-percent interest in Artic LNG 2, which will monetize resources from the Utrenneye field. Its partners in the development, each of which holds a 10-percent stake, include Total, CNPC, CNOOC Limited and Japan Arctic LNG consortium members Mitsui & Co. and JOGMEC.

Chevron barred from drilling, transporting oil in Venezuela: U.S official - (Reuters) - Chevron Corp (CVX.N) has been banned from drilling or transporting oil in Venezuela and its assets there are “mothballed” as the Trump administration cracks down on money going to the government of socialist President Nicolas Maduro, a senior U.S. official said on Wednesday. The restriction is expected to further reduce Venezuela’s crude output, which has fallen by 20% so far this year due to a collapse in oil prices and intensifying U.S. sanctions. Chevron had already halted many of the activities Washington has now prohibited. Seeking to increase pressure on Maduro, the U.S. Treasury Department late on Tuesday imposed tight new restrictions on Chevron’s joint ventures with Venezuelan state-run oil company PDVSA, which could pave the way for the California-based company’s departure, after operating in Venezuela for about 100 years. The license prohibits Chevron or any American company from drilling, bartering or selling oil or petroleum products with the Maduro government as of Tuesday night, the U.S. official told reporters on a call. Chevron’s assets “are mothballed and essentially it’s ... a de facto wind-down, which allows them to just ensure that their assets remain viable and that the Venezuelan people that work for them are able to continue getting paid during these dire times,” the official added. The license gives Chevron until Dec. 1 to “wind down” operations in Venezuela, an OPEC member, but the license could be renewed at a later date, allowing the company to stay there longer. A second senior U.S. official said the Chevron action, part of U.S. President Donald Trump’s “maximum pressure” strategy aimed at stifling trade in Venezuelan crude, “will further deprive access to financial lifelines” the Venezuelan leader depends on to keep his hold on power.

Oil Giant Slashes Dividend to Weather Crash -- Equinor ASA became the first major oil company to cut its dividend amid an historic market rout. The move by Norway’s biggest crude producer may be a signal of what’s to come from others in the industry, including Royal Dutch Shell Plc and Chevron Corp. They’ve already slashed investments and buybacks, but have so far steered clear of the dividends that shareholders are counting on. Equinor’s decision reflects “unprecedented market conditions and uncertainties,” it said in a statement on Thursday. The stock dropped as much as 2.4% in early Oslo trading, lagging a 1.5% increase in the European Stoxx 600 Oil & Gas index. Since Big Oil announced some initial measures to cope with a market slump driven by the coronavirus pandemic, the situation has worsened. Oil in the U.S. traded at negative prices for the first time ever amid massive oversupply. North Sea’s Brent benchmark dropped to more than 20-year lows. Equinor cut its dividend for the first quarter to 9 cents from 27 cents for the previous three months, marking the first reduction since the company started quarterly payments in 2014 (aside from a so-called scrip program that paid investors in new shares during the previous market slump). Making a straight cut without offering a scrip option “was a bit surprising, but very reasonable,” SpareBank 1 Markets analyst Teodor Sveen Nilsen said in a note to clients. He reduced his estimate for Equinor’s dividend for the rest of the year. The company has already suspended its share-buyback program and launched a $3 billion plan to cut investments and costs, including exploration. It also sold bonds for $5 billion this month.

Efforts To Stem Oil Spill From British WW2 Tanker Wrecked In Seyðisfjörður - The Icelandic government has approved measures to tackle a spillage from a British oil tanker wrecked in Seyðisfjörður in 1944. The project is estimated to cost 38 million ISK.El Grillo, a British oil tanker was attacked by German fighter planes in February 1944 during the Second World War. There were no casualties in the attack, but the ship sustained considerable damage and the captain made the decision to sink the tanker to stop it being a target for German air attacks. An Allied naval base was situated in Seyðisfjörður during the war, whilst Iceland was occupied by Britain and then the U.S., but the nation remained neutral during the conflict. The wrecked ship lies on the bottom of Seyðisfjörður in East Iceland and has been sporadically leaking oil into the fjord from its ruined hull for over 75 years.The Icelandic Parliament approved the Minister for Evironment, Guðmundur Ingi Guðbrandsson’s request for 38 million ISK (€242,737) in order to stem the oil spill on April 17th. A statement on the government website states that the hull will be sealed with concrete to prevent further leakage. A valve will also be fitted so that oil can be extracted in the future. The works are planned to begin in a couple of weeks and the project will be overseen by the Coast Guard. Research shows that higher sea temperatures cause greater amounts of oil to leak so it is imperative that work begins before the summer.Efforts to contain the oil spill have had limited success in the past. In 1952 and again in 2001 engineers attempted to pump oil out of the tanker, but just 60 tonnes of oil were removed and an estimated 10-15 tonnes remain in the tanker. The issue came to the public’s attention once again last October when a routine dive by the Icelandic Coast Guard revealed that El Grillo’s hull had corroded, causing considerable oil leakage into the ocean. The ship is only expected to become more damaged with time so swift action is required to protect the fjord. The Ministry for Environment states that urgent action is required to mitigate the oil leakage’s effect on the environment. The oil is harming birds in the fjord and is damaging local beaches. In an interview with RÚV in August 2019, Rúnar Gunnarsson, chief port security officer explained that the oil was particularly harmful for young birds, including eider ducklings and that many have died.

Qatar Petroleum China LNG Ship Deal Value Could Top $3 Billion - Qatar Petroleum (QP) reported Wednesday that it has entered into an agreement to reserve liquified natural gas (LNG) ship construction capacity in China. QP, which made the deal with Hudong-Zhonghua Shipbuilding Group Co., Ltd., noted that it reserved the shipbuilding capacity for its future LNG carrier fleet requirements – including those tied to its ongoing North Field expansion projects. The agreement covers “a significant portion” of Hudong’s LNG ship construction capacity for QP through 2027, the Qatari state-owned firm added. Hudong, which forged the deal with QP in a virtual signing ceremony, is a wholly owned subsidiary of China State Shipbuilding Corp. Ltd. (CSSC). “Today, we have taken yet another concrete step to reinforce Qatar’s commitment to its global reputation as a safe and reliable LNG producer at all times and under all circumstances,” Sherida Al-Kaabi, Qatar’s minister of state for energy affairs and QP’s president and CEO, remarked in a written statement. “By entering into this agreement to reserve a major portion of Hudong’s LNG ship construction capacity through the year 2027, we are confident that we are on the right track to ensuring that our future LNG fleet requirements will be met in due time to support our increasing LNG production capacity.” QP stated that its North Field expansion projects will raise Qatar’s LNG production capacity from 77 million tons per annum (mtpa) to 126 mtpa. The firm added that its LNG carrier fleet program – the largest such program in the LNG industry’s history – represents a major role in meeting the shipping requirements for QP’s local and international projects and will replace some of Qatar’s existing LNG fleet.

In Rare Development, Oil Majors Are Forced To Cut Output Under OPEC Deal  --A British Petroleum-led project in Azerbaijan will have to cut production in May for the first time as Azerbaijan will need to take drastic measures to meet its new quota under the OPEC production cut deal, three sources told Reuters on Thursday. This is rare for Big Oil, who is typically exempt from such production restrictions because countries need these big oil players in their backyards to develop oil resources. Big Oil has never seen a mandatory production cut in Azerbaijan. But these are unprecedented times, and we are seeing a lot of firsts, including this week the first time that WTI oil futures went deep into negative territory. The most recent production cuts that are set to go into effect on May 1 call for some significant cuts—and Azerbaijan can’t cut enough without enlisting the help of BP and its partners in the project, which include Equinor, Chevron, and ExxonMobil, too. Azerbaijan’s state-run oil company, SOCAR, is also a partner in the project. The project in question is the Azeri-Chirag-Gunashli (ACG) project, which is a $38 billion project that lies 120km off the coast of Azerbaijan. It is thought to hold 5.4 billion barrels of recoverable oil, and was put into production in 1997. It is the largest oilfield in the Azerbaijan part of the Caspian Basin, according to BP’s website. In 2019, the block in question produced an average of 542,000 bpd, according to BP. Under the deal forged with OPEC+ to cut project, Azerbaijan is required to cut its total production by 164,000 bpd—about 75,000 to 80,000 of which would need to come from the ACG project. Azerbaijan’s current average production is 718,000 bpd, according to Reuters.

Russia’s Oil Producers Told by Ministry to Cut Output by Fifth -  Russia’s oil producers have been told by the Energy Ministry to cut their production by about a fifth to comply with the new OPEC+ deal starting May 1, said two people with knowledge of the matter. After days of consultations on how to divide the supply curbs, companies were instructed to split Russia’s 2.5 million barrel-a-day cut proportionally, the people said, asking not to be named because the information wasn’t public. Under those terms, Rosneft PJSC would implement about 40% of the country’s total reduction. During the negotiations Rosneft disagreed with the principle of pro-rata cuts, according to two people familiar with company’s position. The company didn’t respond to a Bloomberg request for comment. Russia agreed a collective 9.7 million barrel-a-day output cut earlier this month with the Organization of Petroleum Exporting Countries and its allies, ending a brief price war with Saudi Arabia. In the next two months Moscow and Riyadh will each cut their crude output by 23%, or 2.5 million barrels a day, from a baseline level of about 11 million barrels a day. In the fourth quarter, Rosneft pumped around 4.67 million barrels of crude oil and condensate a day, or nearly 42% of nation’s daily output, making it the country’s biggest producer. If Russia applies the pro-rata principle under the OPEC+ agreement, the company will need to cut its daily production in May and June by roughly 1 millions barrels a day. Russia’s second biggest oil producer Lukoil PJSC will reduce its output by more than 40,000 tons a day, Interfax reported on Monday, citing Chief Executive Officer Vagit Alekperov. That equates to more than 293,200 barrels a day, according to Bloomberg calculations based on 7.33 barrels-per-ton conversion ration, and accounts for about 12% of Russia’s quota.

Coronavirus harms the oil market more than OPEC friction, oil commodities expert says - The coronavirus pandemic is weighing more on the oil market than the price dispute between OPEC and its allies, RBN Energy CEO Rusty Braziel told CNBC’s Jim Cramer Monday. RBN Energy is a privately held energy commodities analytics company based in Houston that plays a role between physical markets and financial markets. “I would say that, just off the top of my head, 15% of this is Saudi Arabia and Russia and 85% of it is Covid,” he said in a “Mad Money” interview referring to Covid-19, the disease caused by the novel virus that has put the global economy on ice. The comments came after oil futures turned negative for the first time in history. The May futures contract, which expires Tuesday, shred all of its value after the West Texas Intermediate tumbled to negative $37.63 per barrel on Monday. The price of barrels was above $60 at the start of 2020. Crude has taken a hit from both an oil price war and the downturn caused by government efforts to stop the spread of coronavirus, which has become a global pandemic. A disagreement between OPEC and its allies, led by Saudi Arabia and Russia, on oil production levels in March caused a major sell-off in crude. Furthermore, travel restrictions and stay-at-home orders have depleted demand for oil. OPEC and OPEC+ agreed to an historic production of tens of millions of barrels per day earlier this month, but the health crisis still persists. “The entire world is long on crude oil and the entire world is short on storage capacity,” Braziel said. Braziel explained that the phenomenon in the oil market reflects a “paper-market” problem, rather than an issue with physical barrels. Futures contracts trade by the month, and the June WTI contract, which expires about one month from now, remains above $20 per barrel. “It was a squeeze in the futures market,” he said, adding that any company that bought a contract is “obligated to receive physical barrels” on Tuesday “unless they get out of it before the market closes.” “That’s what they call convergence. The future market and the cash market converge on the final day of contract.” If current conditions persist, however, the challenges in the “paper market” can bleed into the physical barrel market, Braziel said.

Whether OPEC+ formally agrees, deeper oil cuts now look inevitable - (Reuters) - Whether or not OPEC+ oil producers formally agree to extra oil output curbs, rapidly filling storage capacity and plummeting demand due to the coronavirus crisis may force them to cut more. With crude consumption collapsing, the Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, is due to implement a deal to cut supply by a record 9.7 million barrels per day (bpd) from May 1. But that unprecedented deal to withdraw about 10% of global supply already looks inadequate when demand has plunged by as much as 30% and the world is possibly just weeks away from running out of storage space for the surplus. Vopak, the world’s biggest independent storage company, said on Tuesday its tanks were almost full. Tanks at Cushing, the delivery point for the U.S. crude futures contract, might not yet be full but any available space was already booked, analysts and traders said. “We have to cut down, ... with or without OPEC output cut deal,” Mele Kyari, the head of Nigeria’s state-owned oil firm NNPC Group, told the African nation’s Premium Times newspaper. He said Nigeria would have to cut production because it was hard to find anywhere to put the oil. An OPEC source told Reuters it was “logical” to expect the market to force more cuts on OPEC+ producers. As much as 17 million bpd of supply could be taken out of the market this spring, estimated Jim Burkhard at IHS Markit, a research firm, due to production cuts and other shutdowns.

Oil plunges to just one cent a barrel - U.S. crude prices plunged to their lowest level in history as traders continue to fret over a slump in demand due to the coronavirus pandemic. West Texas Intermediate crude for May delivery sank to just one cent per barrel, its lowest level on record. The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. There’s little demand for gasoline from refineries, and storage tanks in the U.S. are nearing their limits. The spread between the May and June contracts — known as the front month and second month — is now the widest in history, according to KKM Financial’s Jeff Kilburg. Earlier this month, analysts at Goldman Sachs warned that the coronavirus shock was “extremely negative for oil prices and is sending landlocked crude prices into negative territory.” “The U.S. situation is quite dire,” The coronavirus pandemic has dealt a severe blow to economic activity around the globe and sapped demand for oil. While OPEC and its oil-producing allies finalized a historic agreement earlier this month to cut production by 9.7 million barrels per day beginning May 1, many argue that it still won’t be enough to counter the fall-off in demand. The International Energy Agency, for instance, warned in its closely watched monthly report, that demand in April could be 29 million barrels per day lower than a year ago, hitting a level last seen in 1995. The COVID-19 outbreak has meant countries have effectively had to shut down, with many governments imposing restrictive measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space — both onshore and offshore — quickly filling up. With demand at near-paralysis, oil and fuel tanks around the world are close to brimming. “Going forward, we are going to have to see a lot of declines in production in the U.S. in order to push this thing a little bit higher,” Samir Madani, founder of TankerTrackers.com, told CNBC on Monday. “U.S. energy is very important for global energy security … because if it wasn’t for U.S. energy then prices would be a whole lot higher,” Madani said.

Oil prices dip below zero as producers forced to pay to dispose of excess - US oil prices turned negative for the first time on record on Monday as North America’s oil producers run out of space to store an unprecedented oversupply of crude left by the coronavirus crisis.The price of US crude oil collapsed from $18 a barrel to -$38 in a matter of hours, forcing oil producers to pay buyers to take the glut of crude which they cannot store, as rising stockpiles of crude threaten to overwhelm oil storage facilities. “The problem of the global supply-demand imbalance has started to really manifest itself in prices,” said Bjornar Tonhaugen, head of oil at research firm Rystad Energy. “As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates.” The Guardian reported over the weekend that a record 160m barrels of oil was being stored in “supergiant” oil tankers outside the world’s largest shipping ports, including the US Gulf, following the deepest fall in oil demand in 25 years because of the coronavirus pandemic. The last time floating storage reached levels close to this was in the depths of the financial crisis in 2009, when traders stored more than 100m barrels at sea before offloading stocks when the economy began to recover. The price collapse in US oil market - known in the industry as the West Texas Intermediate price - accelerated because it is the last day oil producers can trade barrels that are scheduled for delivery next month, when oil storage is expected to reach capacity.  The US price for oil delivered in June, which will become the default oil price from tomorrow, is also falling due to the economic gloom caused by the coronavirus, but has managed to remain above $20 a barrel. On Monday the price for brent crude, the most widely used benchmark, fell 8% to $25.79. Global oil prices are expected to begin recovering over the second half of the year as tight restrictions on travel to help curb the spread of the virus are lifted, raising demand for fuels and oil. The world’s largest oil-producing nations have agreed a deal to hold back between 10m to 20m barrels of oil a day from the global market from May, and many oil companies are likely to shut their wells as financial pressures mount. Despite the historic production cuts, most analysts believe that oil prices will fail to reach the same price levels recorded at the beginning of the year before the outbreak. The global oil price, under the brent crude measure, reached highs of almost $69 a barrel in January before plummeting to less than $23 a barrel at the end of March.

An oil futures contract expiring Tuesday went negative in bizarre move showing a demand collapse -  A futures contract for U.S. crude prices dropped more than 100% and turned negative for the first time in history on Monday, showing just how much demand has collapsed due to the coronavirus pandemic. But traders cautioned that this collapse into negative territory was not reflective of the true reality in the beaten-up oil market.. The price of the nearest oil futures contract, which expires Tuesday, detached from later month futures contracts, which continued to trade above $20 per barrel. West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands. This negative price has never happened before for an oil futures contract. Futures contracts trade by the month. The June WTI contract, which expires on May 19, fell about 18% to settle at $20.43 per barrel. This contract, which was more actively traded, is a better reflection of the reality in the oil market. The July contract was roughly 11% lower at $26.18 per barrel. The international benchmark, Brent crude, which has already rolled to the June contract, settled 8.9% lower at $25.57 per barrel. 20200420 Oil futures crash The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But demand has dropped and storage tanks are filled, so they don’t need it. “There is still a lot of crude on the water right now that is going to refineries that do not need it,” Helima Croft, global head of commodities strategy at RBC Capital, said Monday on CNBC’s “Squawk Box”. “Right now we don’t see any near-term relief for this oil market … we remain really concerned for the outlook on oil near-term,” she added.

Anyone who thinks oil has hit a floor is 'playing with fire' — yes, prices can go lower - An oil futures contract in the U.S. made a historic plunge, with West Texas Intermediate crude for May delivery falling below zero for the first time to settle at negative $37.63 per barrel. Monday’s crash shows a stark picture of how demand has been obliterated by the coronavirus pandemic while storage tanks in the U.S. have run out of space — companies are actually paying traders to take the oil off their hands. Eyes are now on the more actively traded June contract for U.S. crude as market players question whether there is a buying opportunity in the coming weeks or whether the commodity has even further to fall. “As the smoke clears, that’s the number one question of the markets today — anyone who thinks that the technicals are behind the pricing yesterday is going to completely miss the point,” Dave Ernsberger, global head of commodities pricing for S&P Global Platts, told CNBC’s “Squawk Box Europe” on Tuesday. “That storage is just as full for June, if not fuller, than it was for May. Already Cushing is 70% or 80% full, and that technically means it’s closed for business. So we could easily see this play into the June contract pretty soon.” Cushing, Oklahoma, is a critical oil storage hub and delivery point for American oil traded on futures markets. WTI is already down a staggering 102% year to date, and Brent is down 65%. The U.S. energy sector is more than 50% below its 52-week closing high. The June contract for WTI was trading at $14.40 by Tuesday afternoon London time, already down 30% from the previous day and fluctuating continuously. The negative May contract — which later turned positive to surpass $2 but fell back to less than negative $3 during London’s morning trading hours — was hit harder as it expires on Tuesday, meaning it’s seeing less trading activity as it’s set for delivery while economies around the world remain in full lockdown mode. The spread between May and June contracts was the largest in history. Still, trying to make money buying into oil businesses on the hopes of improved prices in June is a complete gamble, Ernsberger warned. “There’s an eight-week danger zone here between today and sometime in June — where between now and then, anybody who thinks oil has found a floor is playing with fire and trying to catch the famous falling knife, because it’s almost impossible to call,” he said.

Oil price contracts take historic plunge into negative territory - In a day of chaos in the international oil market yesterday, futures contracts expiring today on US-produced West Texas Intermediate crude dropped to as low as -$40.32 per barrel, meaning that producers were paying buyers to take them off their hands. The price at the close of trading was -$37.63 compared with $18.36 a barrel on Friday. It is the first time in history that oil prices have gone into negative territory. The reason for the collapse is the lack of storage capacity in the US because of the collapse in demand due to the impact of the COVID-19 pandemic and the associated lockdown measures. The main US storage facility is at Cushing, Oklahoma, a town of 10,000 people. The storage hub was at 70 percent capacity last week with traders saying it would be filled within two weeks. This prompted the futures selloff because the holder has to deliver 1000 barrels for every contract they hold to Cushing. Traders in the futures market described the chaos. Phil Flynn, senior market analyst at Price Futures Group, told the New York Times: “We saw a total collapse in the market. There was everybody selling it into the hole with no buyers. They’re going to have to drive down to a price where someone wants to buy it, and no one wants to buy it.” The director of energy futures at Mizuho in New York told the Times: “I’m 55 years old, and I worked on the trading floor in college. I’ve been through the first Gulf War, second Gulf War, World Trade Center, dot-com crisis, and nothing came close to this. It could get worse. This situation we are in is that bad.” Some futures traders are still betting on a revival and so contracts for June remain positive. But an even bigger crash could be in the making when they become due.

Holy WTF Moly: WTI May Contract Collapses to Negative -$37 - Wolf Richter - It’s not often that we’re served up a WTF moment like this. Just about a couple of hours ago, I published my article about US crude-oil benchmark grade West Texas Intermediate (WTI) and how the May futures contract for it collapsed by 45% to $10 a barrel — US Crude Oil Gets Annihilated Under Targeted Saudi Attack — and I pointed at some of the dynamics. But WTI kept plunging.This is the near-month May futures contract, which expires tomorrow. It should normally trade close to the spot market price, but has now divorced from it. It has continued to collapse in a breath-taking pace to $8 a barrel, then $4, then $2, then $0, then below zero, then at -$10 and then… and now settled at negative -$37.63 a barrel:This is obviously completely nuts. Futures contracts that expire the next day should be close to the spot market cash price.But the WTI spot cash price “only” collapsed by 35% today to $11.70 at the moment. And in terms of prices further out, the June futures contract has plunged by 17% to $20.75. So this is a WTI massacre all around, but those prices are still well into positive territory.So the disconnect between the May contract (-$37.63), and the cash spot price ($11.80), and the June contract ($21.77) point at some serious forced selling and a complete blowup in the May contracts.It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.But the market for the May contract today essentially collapsed, as potential buyers faced the same problem. And so in their desperate efforts to get rid of the contracts so they wouldn’t end up with the oil that they couldn’t physically handle, these speculators paid a heavy price. Over the next couple of days, we’ll probably learn who some of those exploded-imploded players might have been. Meanwhile this is a moment for historic reflection and head-shaking.

Oil traders have never seen 'insane' market like this before, fear more declines to negative prices - The oil market is facing uncharted territory as the drop-off in demand, caused by the coronavirus pandemic, combined with rapidly filling storage, sent prices plunging into negative territory for the first time in history. And with only guesswork as to when stay-at-home orders might be lifted and when crude demand might pick up, traders warn that oil could continue to trade at extremely depressed levels. “If we have not recovered from Covid in July so that enough driving has come back and storage is full, then the price of crude oil is going to be zero,” RBN Energy’s Rusty Braziel told CNBC. He called Monday’s trading activity “insane,” and said that in his more than 40 years of trading he had “never seen anything like this.” West Texas Intermediate crude for May delivery fell Monday more than 100% to settle at negative $37.63 per barrel, meaning sellers would effectively pay to have the oil taken off their hands. The contract expires on Tuesday, fueling the wild swing to the downside as traders scrambled to get out of their positions. Longer-term contracts settled above $20 per barrel on Monday, but losses accelerated in overnight trading, suggesting that traders are increasingly concerned about a lack storage will continue in coming months. The contract for June delivery — the most actively traded WTI contract — fell 18.7% to trade at $16.61 per barrel on Tuesday. The July contract was about 10% lower at $23.66 per barrel. Bernadette Johnson, Enverus’ vice president of strategic analytics, noted that the June contract will likely face pressure until demand comes back, and she believes it will “start coming down over the next month.” Some of this view is already reflected with bets in the options market. Scott Nations, president and chief investment officer at NationsShares, noted that June 0.50 puts are currently trading for more than 50 cents, meaning that traders would only turn a profit if the June WTI contract expires in negative territory when accounting for the option premium. In the meantime, Johnson said a lack of storage will force oil companies to halt production. “What we’re into now is shut-in economics,” she told CNBC in an email. “Product demand is off and when product demand is off, you don’t buy crude. If you don’t buy crude, you can’t produce the crude if there’s not a place to store it, and so that’s the problem.”

'Uncharted territory.' Oil prices go negative for 1st time -- Tuesday, April 21, 2020 -- Oil prices took a spectacular tumble yesterday with the benchmark U.S. grade falling into negative territory for the first time on fears the world will run out of storage during the novel coronavirus pandemic. West Texas Intermediate crude, which sold for more than $60 a barrel at the beginning of the year, started the day at just under $18 a barrel and fell 300% to a low of around negative $37 per barrel. The plunge came amid an unprecedented drop in worldwide oil consumption due to widespread travel restrictions and business shutdowns aimed at curbing the spread of COVID-19. The negative price — which roiled markets a week after the Trump administration and the world's crude-producing countries negotiated a highly publicized deal to stabilize them — was likely a quirk of the oil market structure and will be short-lived, analysts said. But it shows that the pandemic's economic effects will continue to hammer oil prices for months, if not longer. "We ought to be a little bit humbled because we're living in completely uncharted territory here," said Mark Finley, a fellow in energy and global oil at Rice University's Baker Institute. The free-falling price is another historic event, coming on the heels of the record-setting drop in oil demand that the virus caused and the international deal by oil-producing countries to slash production, Finley said. Oil typically trades on one-month contracts, and the negative prices only affect oil scheduled for delivery in May. The price for West Texas Intermediate delivered in June is still about $22 a barrel. The sharp drop shows the larger problem with the oil market, according to the data firm Rystad Energy. Demand for crude has fallen by more than one-fourth since the outbreak started, yet production has continued at a breakneck pace because of a price war among Saudi Arabia, Russia and other oil-pumping nations. It was only a matter of time before the supply of oil outstripped the demand from refineries and the capacity of storage facilities to hold it. "And what does that mean? That pricey shut-ins or even bankruptcies could now be cheaper for some operators," the firm's oil market analyst, Louise Dickson, said in a research note.

Why U.S. oil prices fell below zero. - In the latest sign that the world economy is collapsing into a black hole, the price of oil dropped below zero for the first time ever Monday, with futures for U.S. crude delivered in May wrapping up at negative $37.63 per barrel. In practical terms, this means that anybody who is supposed to receive a shipment of American crude but doesn’t want it will have to pay somebody else to take it. How come? Because we are literally running out of places to put all of the extra oil we’re not using, because people have stopped driving, flying, or living any semblance of normal life while the country descends into a state of coronavirus-induced catatonia. As the Wall Street Journal puts it: “The historic low price reflects uncertainty about what buyers would even do with a barrel of crude in the near term. Refineries, storage facilities, pipelines and even ocean tankers have filled up rapidly since billions of people around the world began sheltering in place to slow the spread of the deadly coronavirus.” This is happening despite the deal Donald Trump helped broker between Russia and Saudi Arabia to cut production and stabilize prices. Good try, good effort, I guess. Buyers are still willing to pay positive sums of money for crude delivered later in the year. Contracts for June closed the day above $20 a barrel, which suggests that traders expect the current glut to ease up a bit, either due to further production cuts or because they think the economy will have recovered ever so slightly by then. They just really don’t want to be responsible for dealing with a bunch of hydrocarbons right now. This state of affairs—when a commodity’s price is higher in the future than the present—is known as contango, by the way, and while that little bit of vocab is in no way essential to understanding what’s going on, it is possibly my favorite bit of financial marketese. It’s like a tango, but contagious. The storage problem also appears to be worst in the United States. CNN notes that investors are especially worried that storage is reaching capacity in Cushing, Oklahoma, the domestic industry’s key transit hub. Brent crude, the international benchmark variety that mostly gets shipped out on tankers, is still trading at $25.70, presumably because it has a wider market and there are just more places to stow the stuff.

'This is a great time to buy oil,' Trump says as prices plunge into negative territory  -- After a tumultuous day that saw oil futures falling into negative territory, President Donald Trump suggested the U.S. could either purchase roughly 75 million barrels of oil to add to the country’s Strategic Petroleum Reserve, or rent that spare capacity to oil companies squeezed for storage space due to the glut in the market. “This is a great time to buy oil. We'd get it for the right price," Trump said at a coronavirus task force news briefing on Monday night. "Nobody's ever heard of negative oil before." Lawmakers have discussed providing support to the struggling energy sector, but a plan for the Department of Energy to spend $3 billion purchasing oil for the Strategic Petroleum Reserve was suspended when the money was not included in the stimulus package passed earlier this month.The price for West Texas Intermediate crude contracted for May delivery plunged Monday to negative $37.63 a barrel for contracts expiring Tuesday. In an ordinary market, buyers with such a short horizon would typically be businesses such as airlines or refineries taking delivery of oil right away. But as the COVID-19 pandemic has ravaged economies around the world, would-be buyers literally have no place to warehouse oil, which is amassing in storage facilities, on board tankers and in pipelines around the world. Although the coalition of oil-producing countries referred to colloquially as OPEC+ agreed to shave nearly 10 million barrels a day off their collective output, this cut pales in comparison to the speed with which our collective appetite for oil is evaporating. In today’s moribund market, global demand for oil has plummeted by 25 to 30 million barrels a day, said Tom Kloza, global head of energy analysis for Oil Price Information Service, an IHS Markit company. “Right now we’re at peak demand destruction.” Oil is piling up faster than refiners, airlines, shipping companies and drivers can use it, since no one in the world needs it immediately — an unlikely and unprecedented confluence of circumstances that has distorted the market to such extremes that a seller would, in theory, have to pay a buyer to take oil off their hands.

As crude oil drops to historic lows, chart analyst sees 90-year record for energy stocks - West Texas Intermediate crude for May delivery, a contract expiring Tuesday, fell more than 300% to negative $37.63. It was the first time that crude oil had fallen below zero. Oil has been crushed by Covid-19 disruptions and a price war between Saudi Arabia and Russia. Energy stocks were also hit hard on Monday with the XLE energy ETF falling by 3%. Ari Wald, head of technical analysis at Oppenheimer, says while the drop wasn’t as steep for energy stocks, the group did reach its own historic low. “The sector overall [is] really far from bullish. In fact, the energy sector [is] coming off its lowest level since 1931 versus the S&P. That’s a 90-year relative low. So while some stabilization will be both reasonable and welcome, we see more attractive opportunities for funds elsewhere and stay away,” Wald said on CNBC’s “Trading Nation” on Monday. Wald says it makes sense to either avoid the energy sector or sell on any strength. One group of investors could see opportunity here, though, says Boris Schlossberg, managing director of FX strategy at BK Asset Management. “If you’re a value investor, this is actually the kind of scenario you actually want. Energy was 70% of the S&P at the height when oil was around $100 a barrel. Now it’s only 3% of the S&P. It’s a perfect mean reversion trade,” Schlossberg said during the same segment. Value investors face stocks that trade at a “cheap” valuation relative to the market — this is commonly measured by their price-to-earnings ratios. “Overall, on a long-term basis, I think the easiest play is to simply buy the biggest players in the space — perhaps Exxon and Royal Dutch Shell — because they have the strongest balance sheet, because ultimately what’s going to happen is you’re going to have massive consolidation, they’re going to be able to buy assets incredibly cheap,” said Schlossberg. Exxon Mobil and Royal Dutch Shell are down 41% and 43% year to date, respectively. The XLE ETF is down 45% year to date.

US Oil Fund, popular ETF trading under ticker ‘USO,’ plunges 38%, halted for trading repeatedly -  The United States Oil Fund, a popular exchange-traded security known for its ‘USO’ ticker which is supposed to track the price of oil and is popular with retail investors, plunged nearly 40%. The fund said Tuesday afternoon that it would be changing its structure yet again. This time the fund is requesting to invest in varying oil futures contracts and said it had already moved money into the August crude oil contract. The fund was halted, down 36% to $2.40. IT was repeatedly halted for volatility on Tuesday after USCF, the manager of the fund, said that it was temporarily suspending the issuance of so-called creation baskets. Creation baskets are how an ETF creates new shares to meet demand. The baskets hold the underlying securities which in this case are plummeting oil futures. With the halting of these creation baskets, the ETF will essentially now trade with a fixed number of shares like a closed-end mutual fund. On Friday, USCF changed the structure of the USO fund so that it can hold longer-dated contracts. Per a regulatory filing, around 80% of the fund will be in the front-month contract, with 20% in the second-month contract. That changed again with a new filing Tuesday afternoon. The filing stated: “Commencing on April 22, 2020, USO in response to ongoing extraordinary market conditions in the crude oil markets, including super contango, may invest in the above described crude oil futures contracts on the NYMEX and ICE Futures in any month available or in varying percentages or invest in any other of the permitted investments described below and in its prospectus, without further disclosure. USO intends to attempt to continue tracking USO’s benchmark as closely as possible, however significant tracking deviations may occur above and beyond the differences described herein.”

What plunging crude prices mean for the market's largest oil ETF - It’s been a wild week for the oil market. Oil prices began an unprecedented drop on Monday that saw the West Texas Intermediate May futures contract, which expires on Tuesday, slide into negative territory for the first time ever. The May and June contracts remained under serious pressure Tuesday as the more actively traded June contract fell nearly 25%. In the days leading up to the historic plunge, the United States Oil Fund (USO) — the market’s largest crude oil ETF by assets — saw notably higher trading volumes as short- and long-term buyers sought to express their views on crude, ETF analysts told CNBC on Monday. Some market watchers criticized USO for playing a role in the implosion in oil prices given its sizable, roughly 25% position in the May futures contracts. But Mike Akins, founding partner of ETF Action, told CNBC’s “ETF Edge” on Monday that likely wasn’t the case. “It’s important to note that USO is no longer in the May contract. USO’s methodology is to roll out of their contracts two weeks prior to expiration, so, actually, they rolled out of May into June the week of April 7,” Akins said. “So, with respect to what’s going on currently with ... that huge disconnect between the price of May contracts and June contracts, it is not directly related to USO even though USO ... does own a significant percentage of contracts of the month they’re currently holding.” Akins was more concerned about how buyers might interpret the spike in USO’s trading volumes. The increase was evidenced by higher share creation in the fund, which is when an ETF issues new blocks of shares to sell on the open market. “I think it’s important to point out to the audience that, historically ... the price of USO has been an inverse relationship to the shares outstanding. That meaning that as price goes down, shares outstanding have historically gone up and vice versa. And the rationale for that is because [of] the demand,” Akins said. “As volatility increases in the price of oil, the demand for this product goes up,” he said. “But it’s very important not to use that as a way to assume that people are getting long the price of oil, because these strategies, these are trading tools. They’re not allocation tools alone. And as a result, as you mentioned, flows don’t dictate the position of the actual traders.”

What an Oil ETF Has to Do With Plunging Oil Prices -- The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and helped push crude prices below zero. It grew so huge so quickly that it became a sizable player in the market for West Texas Intermediate, the U.S. benchmark for crude. Investors piled in during March and April, convinced that oil prices that had been falling -- pushed down by a price war between Saudi Arabia and Russia that boosted production just as demand was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened. At different stages, the fund held about a quarter of all May and June contracts for WTI. Unlike shares that can be held as long as an investor chooses, oil futures have finite terms and are agreements to buy or sell a physical product. The May futures contract, for example, expired on April 21. Any holder who had not sold by then would need to take delivery of the oil -- 1,000 U.S. barrels, or 42,000 gallons, for each contract. As a favored investment vehicle for many bullish speculators, the number of shares in the fund ballooned from 145 million at the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI market -– on paper -- came at a time when demand for physical oil was cratering and storage space was becoming harder and more expensive to find. For years, USO was mandated to invest in the most-active WTI contract and to roll it over to the following contract. (Rolling over means selling it and, often simultaneously, buying the following month’s contract.) The flood of money into May contracts earlier had pushed oil prices up; as USO sold its May futures as part of the rollover and bought June and July contracts, prices fell for May and rose for the following months, opening an unusually wide spread. Only a handful of traders remained in the May contract on Monday, when prices plunged well below zero. With USO holding a significant level of June contracts, there are concerns that prices will go negative again and that the whole process might repeat -- or might be worse, if the April 20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of its value in the first three weeks of April, has moved to allocate some holdings to contracts expiring later in the year, since those prices tend to be less volatile. But the fund is adding to pressure on oil prices in other ways.

Retail investors who believed they were investing in crude oil get a rude awakening - “Know what you own” is an old adage when investing, but it is especially important when owning investments that hold futures contracts. Just look at the largest oil ETF, the United States Oil Fund (USO). Many retail investors mistakenly believe this is a proxy for investing in the “spot” (cash) price for oil. But it isn’t, and never has been. The purpose of the fund was to track as closely as possible the front-month oil futures contract, not the spot price. True, the prices for spot oil and USO have been reasonably close — until the oil market imploded. In theory, USO works in a very simple manner. Every month, about two weeks before that “front month” contract expired, USO and similar funds began buying the next futures contract. Sounds like a good way to bet on oil, right? Except it isn’t — because it owns futures contracts, not the spot price of oil. Most futures markets are in “contango” — the price of contracts farther out in time are more expensive than the earlier or “front-month” contracts due to the cost of storing the commodity. That is certainly true of oil. So every month USO and other similarly structured ETFs have to close out their futures positions by buying the next month’s contract, and since it is almost always a higher price an investor over time — many months — will lose money. As the short-term demand for oil has collapsed, the front-month contracts have collapsed, and the “spread” between the front-month contracts and those farther out have gotten huge: the June contract is at $13, the July is at $23. That means that investors — like USO — that will eventually roll over from the June to the July contract are having to pay a huge premium. Investors, in these circumstances, are guaranteed to lose money. A lot of it, especially if it is repeated for several months. What’s the bottom line? These kinds of vehicles are primarily meant to be used by active traders to hedge or short positions. They are not meant as long-term buy and hold vehicles.

Mom and Pop Piled Into Biggest U.S. Oil ETF During Historic Rout -- The historic rout in oil this week has done little to deter mom and pop investors who are convinced they can see a bottom for the beleaguered commodity. The number of investors at retail trading platform Robinhood piling into the biggest oil ETF, the United States Oil Fund LP (USO), spiked to 152,073 at the end of Tuesday, according to Robintrack, a website unaffiliated with the site that uses its data to show trends in positioning. That figure was up more than 50,000 from Monday and 90,000 from the end of last week, making it the most-added security across the trading venue. The demand for the oil ETF came as the price of crude tumbled to historic levels, with retail investors speculating in some instances that oil at $1 a barrel had nowhere to go but higher. But USO isn’t a direct bet on oil prices, and incurs costs from rolling its futures positions that hamper performance when longer-dated contracts cost more than the current one. “There’s a huge cost of carry in the front of the curve and the average Robinhood USO buyer and USO call buyer doesn’t know that, doesn’t understand that, or doesn’t care, and thinks they’re just buying oil at a low price,” said Benn Eifert, chief investment officer at QVR Advisors. relates to Mom and Pop Piled Into Biggest U.S. Oil ETF During Historic Rout USO fell 10% to $2.52 as of 12:54 p.m. in New York, headed for a ninth straight day of losses. It’s down 37% so far in April. With the price so low, the fund announced a one-for-eight reverse share split on Wednesday, a move it said is designed to ensure the shares trade above levels exchanges require for continued listings. It also said the move is “expected to increase the marketability and liquidity” of the shares. Some ETF experts believe the split may be designed to attract more interest from retail investors. “That’s what these things do, as they don’t want it trading less than $1,” Christian Fromhertz, chief executive officer of Tribeca Trade Group in New York. “It’s just making it a higher stock price to suck in more retail.” An email to a Robinhood spokesman was not immediately answered. Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research, said the split, which will increase the price eight-fold, aims to make the ETF more palatable. “Reverse splits are designed to make potential investors believe the security has greater value than before as it is harder to consider buying a low single digit priced fund,” he said. Most of the recent USO buyers now own a product that’s much different than it was a week ago. The ETF used to maintain a position in only the front-month West Texas Intermediate contract, but announced on April 16 a shift to having 20% of its exposures in the second-month. Since then, the fund said it could hold West Texas Intermediate futures at any point in the curve, and now holds 40% in the front month contract, 55% in the second month, and 5% in the third. These tweaks help guard against the possibility that the cumulative value of its holdings could turn negative.

Bank of China sold oil’s May contract into a historic implosion in crude — and retail investors may have gotten crushed -  Chinese banks hawked wealth-management products tracking U.S. oil futures, marketed with flashy labels like “crude oil treasure” to ordinary Chinese. Buyers are now crying foul over the losses as some investors report they now owed money to banks when crude briefly fell below $0 on Monday. Local news reports say these oil-related funds were slammed by the strained liquidity in energy trading this week as banks offering these products needed to sell their soon-to-expire futures for the most recent contract and buy the following month’s futures to maintain exposure to oil markets. But the combination of an oil surplus and winnowing demand saw prices for U.S. benchmark crude futures trade in subzero territory for the first time in history as traders and other speculative investors attempted to avoid taking delivery of physical oil shipments. See: Why oil prices just crashed into negative territory — 4 things investors need to know Bank of China 3988, -0.34% was rolling over West Texas Intermediate U.S. futures for May delivery on Monday, only a day before they were set to expire, unlike other Chinese banks who rolled over their oil futures at earlier dates, reported Caixin, citing traders familiar with the matter. It’s unclear how many May contracts they needed to sell on Monday. The date of the rollover had been pre-arranged, said Caixin, citing sources at the Bank of China. Faced with a glut of oil swirling around the world, Bank of China sold the May contract into a maelstrom of selling, with the now-defunct contract eventually settling at negative-$37.63 a barrel on Monday. Trading was suspended for these Chinese oil funds the following day, the bank said.

Oil for Less Than Nothing? Here’s How That Happened -- April 20, 2020 will go down in oil-market history as the day when the U.S. benchmark price for crude dropped below zero for the first time -- and then kept falling. In a massive and unprecedented swing, the future contracts for May delivery of West Texas Intermediate tumbled to minus $37.63 a barrel. The jaw-dropping development was in no small measure down to an extreme glitch in the way oil futures operate. But it also revealed a fundamental truth about the oil market in the age of coronavirus and the aftermath of a price war: The world’s most important commodity is quickly losing all value as chronic oversupply overwhelms the world’s crude tanks, pipelines and supertankers. Why would anyone pay to sell their oil? For some producers, it may be cheaper in the long run than closing down production or finding a place to store the supply bubbling out of the ground. Many worry that shutting their wells might damage them permanently, rendering them uneconomical in the future. Then there are the traders who buy oil futures contracts as a way of betting on price movements who have no intention of taking delivery of barrels. They can get caught by sharp price drops and face the choice of finding storage or selling at a loss. And the escalating glut of oil has made storage space scarce, and increasingly expensive. Either the pandemic or the price war alone would have rocked energy markets. Together, they have turned them upside down. As the virus started to spread around the globe, it began eating away at oil demand. But just as countries like Italy showed what kind of damage a national lockdown could do economically, Saudi Arabia and Russia, the world’s biggest oil producers, escalated the price war. A pact that had restrained production collapsed and both countries opened their taps to the fullest, releasing record volumes of crude into the market. Wasn’t there a deal on that? Yes, one worked out by OPEC, Russia, the U.S. and the Group of 20 countries. But its call for an overall production cut of roughly 10% proved to be too little, too late. Prices initially turned negative just in obscure corners of the U.S. market such as Wyoming, where storage options are few. Then major hubs began to register negative prices for small streams of selected crudes. And on April 20, prices fell sharply below zero on the NYMEX exchange, which is owned by CME, the world’s largest energy market. The lowest prices came in trades in futures -- contracts in which a buyer locks in a purchase at a stated price at a stated time. Futures are a tool for users of oil to hedge against price swings, but also a means of speculation. The contracts run for a set period, and traders who don’t want to unwind their position or take delivery generally roll over their monthly contracts shortly before expiration to a month further in the future. Contracts for May delivery were due to expire on April 21, putting maximum pressure the day before on traders whose contracts were coming due. For them, selling at a steeply negative price was better than taking delivery of actual oil because nobody needs it and there are fewer and fewer places to put it.

Negative oil prices - James Hamilton - First negative interest rates, and now negative oil prices. Is the world coming to an end? The price of the May crude-oil futures contract closed yesterday at negative $37.63 a barrel. The buyer of that contract is entitled to receive 1000 barrels of oil in Cushing, Oklahoma in May and in addition the buyer is entitled to receive $37,630. Sound like a pretty good deal? A month ago there were around a half million such contracts outstanding, promising delivery of half a billion barrels of oil to Cushing in May. That’s far more than could ever be physically delivered, and it’s perfectly normal. In the vast majority of those contracts, the buyer had no intention of receiving oil and the seller had no intention of delivering oil. The plan of the buyer was to sell the contract to somebody else before time for delivery, and enjoy the gain if they sell for more than they bought. The seller likewise planned later to buy a contract; in effect, their original offer was a short sale, which they later cover by buying. You can think of the second contract that closes each individual’s initial position as between the same two parties as the original contract, so that the two trades exactly cancel. For most of the original contracts, no oil actually changes hands in May.  The anchor for the system is the fact that the buyer has the right to receive physical delivery if they choose to hold the contract to expiry, and could plan to put the oil into storage or ship it immediately into another pipeline. If I can store the oil in Cushing for a cost of a few dollars a barrel, that’s a valid option. But the higher the cost of storage, the bigger problem I’ll have on my hands if I actually take physical delivery.  The May contract expires today, so if you haven’t sold your position now, you better plan on receiving your 1000 barrels of oil. But you can still buy oil for delivery in June, or for delivery in July, or other future months.  There is a basic arbitrage that connects the futures prices in any consecutive months. By buying the July contract you could lock in an option to receive delivery in July at a cost of $26.28 per barrel. You could plan on storing the oil that month and selling in August at a guaranteed price of $28.51. If you expect the cost of storing oil in July to be $2.23 per barrel (28.51 – 26.28 = 2.23), you’ll just break even by buying the July contract and selling the August contract. If you think the price you’d have to pay to store the oil in July would be less than $2.23, you should buy July oil and sell August oil. Arbitrageurs following that trade will drive the July price up and August price down. In equilibrium we’d expect the price differential between months to represent the cost of storage. Applying that interpretation to the above numbers, the cost of storing a barrel right now is imputed to be around $60 a barrel (nobody would do the deal with you yesterday at any reasonable price). The imputed storage cost is about $6 in June. There’s a horrific storage bottleneck in Cushing right now, but traders are betting that it’s going to be more manageable by summer.

Here Is The Full Explanation Behind Today's Unprecedented Negative Oil Price - How did you end up with negative oil prices today? This happens when a physical futures contract find no buyers close to or at expiry. Let me explain what that means: A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May. So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market. This is very rare. It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair. What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract. This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires. The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13. The June contract is not out of the woods either: today’s action indicate that physical oil markets at Cushing are not in good shape and that storage is getting very full. A decline of over 15% in the June contract price points to real worries that the physical stress will continue to reverberate, and will force a lot more production shutdowns during May than the ones announced so far. So today negative prices are the reflection of dire market conditions for producers, with the hope that demand restart before the middle of May and that the June contract does not face the same fate. 

Analyst Who First Predicted Negative Oil Prices Sees Oil Hitting Minus $100 -- Back on March 17, as oil was plunging to levels not seen since the presidency of George W. Bush, we published a shocking forecast by Mizuho’s Paul Sankey who stunned oil traders with what at the time was an insane prediction: "crude prices could go negative - yes, as in you would be paid to take delivery."  According to Sankey, much of the US 4MM bpd in crude exports will be curtailed as prices fall and tanker rates soar. And with US storage roughly 50% full, and able to take another 135MM bbl more, assuming a build rate of 2MM b/d, the US can add 14MM bbl/week for 10 weeks until full.As a result, there is a now race between filling storage and negative pricing "unless U.S. decline rates can outpace inventory builds, which we very much doubt."We concluded our own assessment by saying that "despite its low price, oil may still have at least 100% (or more) to drop."This was proven correct. What also proven correct, just one month later, was Sankey's apocryphal forecast when the May WTI contract crashed to negative $40 when it "suddenly" emerged that there is no place to store the hundreds of thousands of barrels of deliverable oil (held mostly by the USO ETF), something we had cautioned about... repeatedly.Having been proven correct, was Sankey content and does he now think that Monday's insane price action ws the bottom?Oh no, not even close, because while sooner or later oil will soar - just as soon as the oil market shifts to a demand imbalance after millions of bpd in production has been indefinitely shut down and the global economy start to recover - in the meantime there is much more pain to come. "We have clearly gone to a full-scale, day-to-day market management crisis,” said Paul Sankey taking a modest victory lap, and then, talking to Bloomberg, he went a step further on Tuesday, saying: “Will we hit negative $100 a barrel next month? Quite possibly."The reason: the (lack of) oil storage situation is going from bad to worse - something Reuters details so vividly in "Ships, trains, caves: Oil traders chase storage space in world awash with fuel" - as can be seen in the chart below...

Saudi Arabia is the winner from oil's historic price plunge, analysts say - Saudi Arabia will be best positioned to weather the impact of an unprecedented collapse in U.S. oil prices, energy analysts told CNBC on Tuesday.It comes at a time when the market is awash with crude, storage tanks are being filled and the coronavirus crisis continues to ravage global demand.On Monday, the May contract for U.S. West Texas Intermediate futures tumbled into negative territory for the first time ever.The contract, which expires on Tuesday, traded at negative $4 a barrel during afternoon deals. Remarkably, this means traders would effectively have to pay to get the oil taken off their hands. The May contract of WTI had settled at a discount of $37.63 on Monday.The historic collapse in the market for crude oil futures was thought to have been exaggerated by the contract’s imminent expiration. The June contract for WTI, which is much more actively traded and tends to be more indicative of how Wall Street views the price of oil, stood at $15.75 a barrel on Tuesday, around 22% lower.International benchmark Brent crude traded at $20.64 a barrel Tuesday morning, over 19% lower.“Saudi Arabia and Russia have both won here, but it’s a very pyrrhic victory,” Dave Ernsberger, global head of commodities pricing at S&P Global Platts, told CNBC’s “Squawk Box Europe” on Tuesday. Riyadh and Moscow have long had U.S. shale output “in their sights,” Ernsberger continued, but “they need to look over their shoulder because Brent is not far behind, other crude benchmarks are not far behind, and the world is running out of storage.”

Here's The Next Problem: Where Do 100 Million Oil Barrels Get Delivered... And What Happens Next Month? - The entire financial world is watching in stunned amazement as the May WTI contract crashed as low as -$40, an unprecedented - until today - event, and one which is sparking frenzied speculation who will be oil's "Amaranth", the nat-gas trader which remains the best example of how futures-spread positions can go wrong. But sooner or later, investors will ask themselves the next question: where will roughly 100 million barrels of oil be delivered. That is roughly the equivalent of the outstanding May WTI open interest of some 109 thousand contracts. As Bloomberg's Mike McGlone writes, "the greater-than-normal level of open interest in May futures has no place to go but is likely to mark an extreme, if history is a guide." As of April 17, there were over 100,000 open positions in the May contract, well above the five-year average of about 60,000. What is more striking is that while the May position stops trading at 230pm tomorrow, April 21, only about 2,000 contracts are usually delivered. This time we are looking at 100,000 contracts, or about 100 million barrels of oil. The question, of course, is where does all this oil get delivered in a world where commercial storage is expected to run out as soon as next month? And let's say the May contract somehow finds enough space - this brings up the June contract, which is trading at around $21.51 because somehow traders believe that some magical solution will present itself in the next 4 weeks (spoiler alert: it won't). The open interest for June is 538K contract, or the equivalent of over half a billion barrels of. While much of this will be rolled up the contago-ing curve, this still means that the world is looking at hundreds of thousands of oil barrels to be delivered next month, and the question again: where will all this oil be delivered, and what happens to the price of WTI next month? And what about July... and August... And September? As prominent squawker Yogi Chan put it best, "Back of the fag box: Take all WTI contracts from May 2020 through to Dec 2021 (covers 93% of all OI). Average price weighted by open interest? $43.48/bbl" (editor's note: in the UK "fag" means cigarette)

June oil futures contract loses half its value as crude continues unprecedented sell-off - West Texas Intermediate crude futures for May delivery pared losses to trade in positive territory on Tuesday, one day after plunging below zero for the first time in history. The contract expires today, which means that thin trading volume has contributed to the wild price action. The massive selling gripping the oil market is now spreading to more futures contracts, worrying investors about the deep economic damage being done by the coronavirus shutdowns. The contract for June delivery, which is the more actively traded contract and therefore a better indication of how Wall Street views the price of oil, slipped 50% to $10.12 per barrel. Earlier it fell more than 60% to trade under $7 per barrel. The contract for July delivery fell roughly 27% to $19.04. The May contract stood at $10.21 per barrel after previously trading in negative territory, which means sellers would effectively pay buyers to take the oil off their hands. On Monday it fell below zero for the first time in history. However, as contracts approach expiration, trading volume is typically thin. The front part of the oil futures ‘curve,’ which is the May contract that expires today, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But demand has dropped and storage tanks are filled, so they don’t need it. Futures contracts trade by month with expiration dates. Toward the end of their expiration, speculators usually trade out of the contract and then buyers who will accept physical delivery of the commodity remain. Meanwhile, in another bearish sign, international benchmark Brent crude traded 28% lower at $18.29 per barrel. Earlier in the session Brent fell to $18.10, its lowest level since Dec. 2001, before paring some of those losses.

Can Brent Crude Oil Follow WTI Into Negative Territory? You Bet - Monday’s plunge in U.S. crude futures into negative territory has raised an obvious question in the oil market: can the global Brent marker do the same? The answer is yes. ICE Futures Europe Ltd. confirmed on Tuesday night that it’s preparing various Brent prices for just that possibility if there’s demand to do so -- even if there’s still a long way to go before that happens, since June contracts are trading at about $20 a barrel. Beyond the mechanistic side of negative pricing there’s also market reality: the world’s storage sites are filling with crude fast -- the precise concern that caused West Texas Intermediate to turn negative. “In the North Sea, the ships operate as a pipeline, so are there enough vessels to enable the flow of oil?” said Jorge Montepeque, president of General Index and the man who helped shape the way oil prices are assessed globally when he was a boss at S&P Global Platts. “If there isn’t, you will need to pay ever increasing prices for the ships, which results in a lower and lower price of the oil.” That pressure on the tanker fleet is building right now. Well over 100 million barrels of oil is now being held in floating storage -- by another estimate more than twice that. According to Belgian vessel owner Euronav NV, one of the world’s largest, the dynamic is driving freight rates ever higher -- a trend the firm doesn’t see reversing any time soon. Places to keep supplies are diminishing globally. With on-land sites either completely booked up or filling fast, there’s still pressure on Brent, even if it’s more dispersed than for WTI. Barrels may keep flowing for longer than they should, too, because stopping and starting wells is no easy task. “If there is a technical reason why you cannot shut in the well, then the oil production that you have to sell will have to clear in the market, which can be a negative price,” Montepeque said. There’s another important difference between the two contracts. While the Brent futures contract is cash settled against the value of the Brent index price, the WTI contract is physically settled, meaning a trader must take delivery of barrels of oil at Cushing in Oklahoma, hundreds of miles from the coast. While this means that WTI can become pressured if there’s perceived strain on storage at the U.S. hub, there’s also a fast-building glut in the rest of the world. So Brent can, in theory at least, go negative. The real question is whether production will be scaled back sufficiently before that possibility becomes a probability.

Goldman Sees Global Oil Storage Full In 3-4 Weeks; Expects Another Oil Price Crash - While it may be tempting to argue that the worst is behind us for oil price given the historic collapse in WTI which crashed to negative $40 on Monday as holders of May WTI futures panicked to sell their holdings at any price - even paying the "buyer" for taking possession of the deliverable barrels - Goldman's chief commodity strategist Jeffrey Currie reminds us that it is important to remember that unlike bonds and stocks, "commodities are spot assets, not anticipatory assets and must clear current supply and demand, which still remain extremely out of balance in all markets." And since oil supply remains vastly greater than demand, we are merely in the eye of the hurricane at least until the June WTI maturity in one month, with Goldman expecting the market to test global storage capacity in the next 3-4 weeks - unlike WTI which was merely a Cushing event - which will likely create substantial volatility with more spikes to the downside until supply finally equals demand, as with nowhere to store the oil, supply has no other option but to be shut-in down in-line with the expected demand losses. Alternatively, we could see another "Monday massacre" with producers of oil willing to pay buyers to take physical possession right around the time all global capacity is full, unless of course US shale producers drastically cut output in the coming days, not weeks. That's the bad news: the good news is that slowly the market is rebalancing, and once production is well and truly shuttered, there is a potential for a violent price reversal - but remember, one can't just "price it in" as commodities have to reprice through the spot, not forward channel. As Currie notes, "we have now entered the inflection phase where the rebalancing has started, but this period could take 4-8 weeks to resolve before we can comfortably argue a bottom has been carved out." This timeline assumes that peak demand loss was likely last week with nascent restarts in Europe now underway, but as Goldman concedes substantial uncertainty still remains. In conclusion, "while acknowledging that a balanced market is in eyesight, more forward-looking assets like equities can look past the next several weeks and begin to price a recovery; however, commodities simply do not have that luxury."

Can Oil Prices Get Back To $100?  Three weeks ago, on April 1, CNBC published a report titled “Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn,“ which predicted exactly what is happening now. “Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output.”  While the situation is totally unprecedented it’s impossible to say what will happen next for oil markets, some experts think that oil is poised for a major comeback.  Even though oil prices are lower than they have ever been, “one energy fund thinks $100 a barrel is achievable,” reported the Midland Reporter-Telegram earlier this week. At the time of the report, oil was only at an 18-year low rather than an all-time low. The article intro continued:  “But first, prices need to fall even further.” Well, they got their wish.  As oil prices have tanked over the past two months, “Westbeck Capital Management’s Energy Opportunity Fund climbed 20.2 percent in March after declines in the first two months of the year, according to an investor letter. That puts the commodities-focused fund up 3.7 percent in the first quarter after U.S. oil futures cratered 66 percent -- their worst quarter ever,” reports the Midland Reporter Telegram. “The fund, which gained 40 percent last year shorting U.S. shale companies, has turned its attention to oil tanks filling up at various points around the world, particularly at the biggest U.S. hub in Cushing, Oklahoma. With too much oil and not enough places to put it, Cushing may reach storage limits by mid-May, a market dislocation that could portend the next leg of a price rout.” This all points to a huge comeback for oil prices. As the world rushes to scale back oil production, they are setting up a bull market for the future.

The Worst Is Yet To Come for Oil Prices - Dashing hopes for some oil producers who may have thought negative prices were a weird quirk, the June WTI contract fell sharply on Tuesday.  During intraday trading June contracts collapsed by more than 45 percent, falling close to $11 per barrel. The selloff demonstrated that the ruinous supply glut is not going away, and that the meltdown for the May contract was not just a bizarre anomaly, but representative of an acute state of oversupply in North America.In fact, there could be a rerun of negative prices in a month’s time, according to several analysts. “We believe prices are likely to remain at basement levels in the short-term with further shut-ins forthcoming – expect late-May to bring similar price movements as the June contract rolls over,” Raymond James wrote in a note on Tuesday.The malaise bled over into Brent prices, which collapsed below $20 per barrel by midday Tuesday, down more than 25 percent.While forecasts have suggested that U.S. oil production could fall by 1 or 2 or 3 million barrels per day (mb/d) by the end of 2021, depending on who you ask, the lack of storage and collapsing prices means that shut ins could begin to mount very quickly. “[T]he physical reality of a still massively oversupplied oil market will likely exert downward pressure on the June WTI contract,” Goldman Sachs analysts wrote on Tuesday. “But with ultimately a finite amount of storage left to fill, production will soon need to fall sizeably to bring the market into balance, finally setting the stage for higher prices once demand gradually recovers.”“This inflection will play out in a matter of weeks, not months, with the market likely forced to balance before June,” Goldman analysts warned. In other words, the U.S. oil industry could lose several million barrels per day in the next few weeks in what Goldman analysts called a “violent rebalancing.” The crisis for the industry has entered a new phase, which will surely provoke more twists and turns. The Trump administration, flailing about, is trying to come up with ways to bailout the industry. On Monday, President Trump suggested that he would consider halting imports of oil from Saudi Arabia (“We’ll look at it”), while also reiterating his plan to fill up the strategic petroleum reserve with 75 million barrels of oil.Also on Tuesday, the Texas Railroad Commission punted on the idea of mandating production cuts. Two of the three commissioners were uneasy with the idea of voting on the proposal. Ryan Sitton, the one commissioner in favor of requiring a 20 percent cut in the state’s production, argued that not voting was itself a decision, allowing the market to mete out production cuts in a disorderly fashion. “I don’t believe that inaction on our part is acceptable,” Sitton said. Meanwhile, there are other ideas for government intervention. The oil and gas industry is lobbying the Federal Reserve to loosen its $600 billion lending facility to allow drillers to use funds to repay debt, according to Reuters.

"A Recipe For Disaster" - WTI Holds Huge Gains Despite Inventory Surge - More crude chaos overnight (with AsiaPac oil ETFs trading at "crazy premiums" and Asian oil futures tumbling) has been over-ruled this morning as long-squeezes have morphed into a short-squeeze after Trump ordered the US Navy to "shoot down and destroy any and all Iranian gunboats if they harass our ships at sea", sending June WTI soaring 40% to $16 before fading modestly into the official inventory data from DOE. “There’s no way you can predict [it] right now,” Michael Cuggino, portfolio manager at Pacific Heights Asset Management LLC, said on Bloomberg TV.“It’s virtually impossible until we have more visibility with respect to how to world comes out of the coronavirus on the other side.” Still, we suspect inventories will be a catalyst for the next leg in these chaotic paper oil markets...  DOE

• Crude +15.022mm (+13.8mm exp)
• Cushing +4.776mm (+14mm exp)
• Gasoline +1.017mm (+4.4mm exp)
• Distillates +7.8765mm (+3.9mm exp)

This is the 13th weekly rise in crude inventories... Source: Bloomberg Crude stocks soared to their highest since May 2017 (this is the highest level of crude inventory for this time of year ever aside from 2017)... Source: Bloomberg Bloomberg Intelligence energy analyst Fernando Valle warns that the roll of WTI contracts showed that all remaining storage at Cushing is booked, even if not yet full... but demand has collapsed... Source: Bloomberg Refineries slowed to 67% of utilization last in the previous week, the lowest since 2008. As Bloomberg Intelligence senior energy analyst Vince Piazza notes, "U.S. crude storage capacity has about three months to go before it’s filled, as demand falls faster than production is declining." Following a collapse in US oil rig counts, US oil production is fading back to its lowest since June 2019...

OPEC daily basket price drops to 12.22 USD per barrel (Xinhua) -- The Organization of the Petroleum Exporting Countries (OPEC) daily basket price dropped to 12.22 U.S. dollars a barrel on Wednesday, compared with 14.63 dollars on Tuesday, according to OPEC Secretariat calculations released on Thursday. Also known as the OPEC reference basket of crude oil, the OPEC basket, a weighted average of oil prices from different OPEC members around the world, is used as an important benchmark for crude oil prices. It currently averages the oil prices of 13 countries, namely Algeria, Angola, the Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela. Enditem

Oil Edges Higher on Slower Production in Wake of Sluggish Demand - Oil advanced as traders eye a production slowdown that has resulted from the coronavirus-led weaker demand environment. Futures in New York rose as much as 33% on Thursday. With crude trading below $20-a-barrel, U.S. production has declined rapidly, now at the lowest since last July. Operators in the U.S. have also started to shut in old wells and halt new drilling, actions that could reduce output by 20%. Plus, the number of new wells being brought online is forecast to plunge almost 90% by the end of the year, according to IHS Markit Ltd. “Cash market prices have recovered. There is a sense that the market is starting to clear itself,” said John Kilduff, a partner at hedge fund Again Capital LLC. The decline in production and rig count in the U.S. is “obviously supportive.” OPEC and its allies have also reacted to the low-price environment. The coalition agreed earlier this month to slash daily production by about 10 million barrels a day starting in May. Kuwait said it has already started cutting output, the first major producer in the Persian Gulf, the world’s most prolific oil-producing region, to announce that it’s pumping less oil ahead of schedule. Algeria also told OPEC its cuts would begin immediately. West Texas Intermediate crude for June delivery advanced $3.86 to $17.64 a barrel at 12:32 p.m. on the New York Mercantile Exchange. WTI’s June-July spread rose $1.88 to -$5.03 a barrel. Brent crude for June settlement climbed $1.93 to $22.30 a barrel on the ICE Futures Europe exchange. Still, the U.S. benchmark crude has plummeted about 70% so far this year as the coronavirus pandemic shutters economies and keeps drivers off the road. The World Bank says global commodities markets will face lasting disruption because of the outbreak. Oil markets are also having to grapple with a wave of volatility spurred by exchange-traded funds. The United States Oil Fund may roll more of its WTI contracts forward due to extraordinary market conditions, while at least two brokerages, including INTL FCStone Financial Inc., are limiting the ability of some clients to enter into new trades in the most active oil benchmarks. Even with production slowing, crude stockpiles in the U.S. are still at the highest level since May 2017, according to the Energy Information Administration. Inventories at the nation’s key storage hub in Cushing, Oklahoma, increased each week since early March and are inching closer to a maximum capacity of around 76 million barrels.

Oil Gains on Slower Production in Wake of Demand Drop -- Oil advanced as traders eye a production slowdown that has resulted from the coronavirus-led weaker demand environment.Futures gained 20% in New York on Thursday. With crude trading below $20-a-barrel, U.S. production has declined rapidly, now at the lowest since last July. Operators in the U.S. have also started to shut in old wells and halt new drilling, actions that could reduce output by 20%. Plus, the number of new wells being brought online is forecast to plunge almost 90% by the end of the year, according to IHS Markit Ltd.“Cash market prices have recovered. There is a sense that the market is starting to clear itself,” said John Kilduff, a partner at hedge fund Again Capital LLC. The decline in production and rig count in the U.S. is “obviously supportive.”OPEC and its allies have also reacted to the low-price environment. The coalition agreed earlier this month to slash daily production by about 10 million barrels a day starting in May. Iraq’s Oil Minister Thamir Ghadhban said oil prices will improve once the deal kicks off.Kuwait said it has already started cutting output, the first major producer in the Persian Gulf, the world’s most prolific oil-producing region, to announce that it’s pumping less oil ahead of schedule. Algeria also told OPEC its cuts would begin immediately. Prices:

• West Texas Intermediate crude for June delivery advanced $2.72 to settle at $16.50 a barrel on the New York Mercantile Exchange.
• WTI’s June-July spread rose $1.97 to settle at -$4.94 a barrel.
• Brent crude for June settlement climbed 96 cents to end the session at $21.33 a barrel on the ICE Futures Europe exchange.

Still, the U.S. benchmark crude has plummeted more than 70% so far this year as the coronavirus pandemic shutters economies and keeps drivers off the road. The World Bank says global commodities markets will face lasting disruption because of the outbreak. Oil markets are also having to grapple with a wave of volatility spurred by exchange-traded funds. The United States Oil Fund may roll more of its WTI contracts forward due to extraordinary market conditions, while at least two brokerages, including INTL FCStone Financial Inc., are limiting the ability of some clients to enter into new trades in the most active oil benchmarks.

Oil bounces after Trump uses the 'oldest Middle East oil trick in the book' to kickstart prices   - Oil prices recovered on Thursday, after a bellicose Wednesday tweet from US President Donald Trump sparked fears about oil supply in the Middle East.US crude-oil prices rose 20% to $16.65 a barrel in early US morning time. Brentcrude oil, the global benchmark equivalent, advanced 8.6% to $22.16 a barrel.Earlier in the week, Brent crude dropped to a two-decade low and US oil fell intonegative territory for the first time in history.The rebound in oil prices followed a fresh prospect of US-Iran tension as President Trump said on Wednesday he instructed the US Navy to "shoot down and destroy" Iranian gunboats that "harass our ships at sea."  Trump's tweet said: "I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea." "It is perhaps the oldest Middle East oil trick in the book: you want higher oil prices, threaten to start breaking things," analysts at Rabobank said in a morning note. Tensions in the Middle East can lead to crude oil price increases as that would indicate a potential disruption to oil shipments around the world and cause possible supply shortages.

Oil rises, but ends wild week lower as coronavirus slashes fuel demand -  (Reuters) - Oil prices rose on Friday, bringing an end to another week of losses that featured the U.S. contract plunging to minus $40 a barrel, as global production cuts could not keep pace with the collapse in demand caused by the coronavirus pandemic. Oil trading was extremely volatile all week, in an extension of the selling that has dominated trading since early March as demand collapsed 30% due to the pandemic. While certain fundamental factors, such as a sharp fall in active drilling rigs in the United States, were nominally bullish for oil prices, the positive effects of those moves are months down the road. Brent futures LCOc1 rose 11 cents, or 0.5%, to settle at $21.44 a barrel, while U.S. West Texas Intermediate crude CLc1 rose 44 cents, or 2.7%, to close at $16.94. Oil futures marked their third straight week of losses, with Brent ending down 24% and WTI off around 7%. Traders expect demand to fall short of supply for months due to the economic disruption caused by the pandemic. Producers may not be slashing output quickly or deeply enough to buoy prices, especially when global economic output is expected to contract by 2% this year, worse than the financial crisis. “The efforts to curtail supply just struggle to even come close to matching coronavirus demand destruction,” John Kilduff, partner at hedge fund Again Capital LLC in New York, said. After trading near unchanged for most of the day, the benchmarks rebounded in the afternoon after energy services firm Baker Hughes Co (BKR.N) said producers in April cut the number of active U.S. oil rigs by the most in a month since 2015. In Canada, drillers slashed the number of oil and natural gas rigs to a record low. “The rig count was another stunner. These are meaningful cuts and they have come at a rapid pace,” Kilduff said. Storage is quickly filling worldwide, which could necessitate more production cuts, even after the Organization of the Petroleum Exporting Countries and allies including Russia agreed this month to cut output by 9.7 million barrels per day. “Despite the measures taken by OPEC, oil producers in various countries should be aware that they may be called to take more drastic measures,” Diamantino Azevedo, Angola’s resources and petroleum minister, told state news agency ANGOP on Friday. Angola is a member of OPEC. Russia plans to halve oil exports from its Baltic and Black Sea ports in May, according to the first loading schedule for crude shipments since it agreed to cut output. Still, onshore oil storage is currently filled to nearly 85% capacity, according to energy research firm Kpler.

Oil futures mark a third straight gain, but post a record 32% weekly drop - Oil futures on Friday finished higher for a third straight session, but U.S. prices posted a record weekly loss of more than 32%, as commodity investors attempted to take stock of a historic collapse in prices that cast a spotlight on problems of oversupply and dwindling storage in the energy complex. After the now-expired May Nymex contract on Monday fell into negative territory for the first time ever, meaning that sellers had to pay buyers to take crude off their hands, market participants have been struggling to manage the unprecedented volatility. ReadSinking oil demand, drop in oil prices put U.S. fracking activity on track for a record monthly decline: report “Any meaningful recovery in oil prices is unlikely to last after the utter chaos witnessed earlier this week,” said Lukman Otunuga, senior research analyst at FXTM. “Oil weakness is set to remain a major theme in Q2 given the overwhelming drop in demand, fears around slowing global growth and lack of storage space.” “At this point, anything and everything is on the cards for both WTI & Brent, and this sentiment will most likely be reflected in price action moving forward,” he told MarketWatch. June West Texas Intermediate crude CLM20, +1.41%, the U.S. benchmark grade, gained 44 cents, or 2.7%, to settle at $16.94 a barrel, but the contract traded as low as $15.64 in the overnight session. On Thursday, WTI surged nearly 20%. Gains on Friday marked a third straight advance for the international and U.S. grade oils—the longest such streak of gains since a similar stretch ended March 25. Despite those outsize gains, WTI still saw a 32.3% decline for the week, based on the June contract. That was the biggest weekly percentage loss on record, according to Dow Jones Market Data. 

COLUMN-Is the WTI crude fiasco relevant to Asia? Not yet, but risks loom: Russell - (Reuters) - The unprecedented collapse in U.S. oil futures into negative territory is an event that has little direct relevance for the industry in Asia, but still holds vast significance for the world’s biggest crude-importing region. The immediate fallout from the dramatic plunge into negative pricing for the front-month West Texas Intermediate (WTI) futures was largely a result of the design of the contract, which requires physical delivery to the storage hub at Cushing, Oklahoma, that is already near full. The contract dropped to as low as minus $40.32 a barrel on April 20, the day prior to expiry, as investors unable to secure physical storage had to exit positions at any cost. The dramatic swings in U.S. oil prices in recent days has been viewed by Asia’s trading community as fascinating, but not really relevant given that the vast majority of crude traded in the region is priced off Brent futures, or a combination of the Dubai Mercantile Exchange’s Oman contract and Middle East assessments by price reporting agencies. While these benchmarks have dropped sharply, they are still fulfilling their price discovery functions, and it would be hard to argue that the market for crude in Asia is currently dysfunctional, even if prices are extremely low, and in the case of the DME contract, near the weakest since its 2007 launch. The DME contract is physically settled, but delivery is at a port and is therefore unlikely to suffer from the same constraints as the landlocked delivery point for WTI. But what the fiasco in WTI futures does show is that the crude market is capable of becoming disorderly and unruly under exceptional circumstances, and Asia’s traders would be wise to be cautious. For example, the deal to cut output by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, by 9.7 million barrels per day (bpd) has largely passed by Asia, with exporting countries still appearing to compete hard on winning or keeping market share. In the wake of the deal being agreed on April 12, Saudi Arabia’s state-controlled oil company released its official selling prices for May, which raised prices for the United States, kept them flat for Europe, but cut them for Asia. Saudi Aramco’s benchmark Arab Light grade was set at discount of $7.30 to the Oman/Dubai average for Asian refiners for May loading cargoes, a steeper discount than the $4.20 for April.

Video shows Russian fighter's 'unsafe' intercept of US Navy aircraft - For the second time in four days, a Russian fighter jet conducted an "unsafe" intercept of a US aircraft over the Mediterranean Sea, the US Navy said on Sunday.  The Navy said in a press release that over roughly an hour and a half on Sunday, a Russian Su-35 fighter twice intercepted a US Navy P-8A Poseidon maritime patrol and reconnaissance aircraft operating in international airspace over the Mediterranean. While the first intercept was acceptable, the Navy considered the second "unsafe and unprofessional." During the risky intercept, the Russian fighter executed a "high-speed, high-powered maneuver that decreased aircraft separation to within 25 feet, directly in front of the P-8A, exposing the US aircraft to wake turbulence and jet exhaust," the Navy said. The P-8A descended to create space between it and the Russian fighter jet.The Navy accused the Russian pilot of "seriously jeopardizing the safety of flight of both aircraft."The service captured the incident on video. Sunday's intercept followed a similar incident on Wednesday, when a Russian Su-35 intercepted a P-8A over the Mediterranean, conducting "a high-speed, inverted maneuver, 25 ft. directly in front of the mission aircraft," the Navy said in a statement at the time.The Navy said the Russian aircraft's actions were "irresponsible" and accused Russia of putting "our pilots and crew at risk."   The US is battling a serious coronavirus outbreak, but US adversaries continue to cause headaches for the military. On Wednesday, 11 Iranian vessels "conducted dangerous and harassing approaches" against US Navy and Coast Guard vessels operating in the Persian Gulf, repeatedly crossing the bows and sterns of the US ships and at one point coming within 10 yards of a US vessel, the Navy said.

Donald Trump Threatens to 'Shoot Down and Destroy' Iran Ships Amid Tensions in Persian Gulf -- President Donald Trump has instructed the U.S. military to use force against armed Iranian vessels that have recently engaged in tensions with the Navy's Fifth Fleet in the Persian Gulf. "I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea," Trump tweeted Wednesday. The tweet came one week after as many as 11 fast-attack craft of Iran's Revolutionary Guard appeared to approach and circle a group of U.S. warships including the USS Lewis B. Puller expeditionary mobile base vessel and Island-class USCGS patrol boat Maui as they transited the Persian Gulf. The Fifth Fleet accused the Revolutionary Guard of conducting "unsafe and unprofessional actions," while the elite Iranian force argued it was the U.S. Navy that was responsible for "illegal, unprofessional, dangerous and even adventurist behavior" both during the April 15 and in allegedly blocking its Shahid Siyavoshi ship in separate encounters a week before. Trump's tweet sparked anger among Iranian officials, especially as both Washington and Tehran battled the novel coronavirus disease known as COVID-19. "In the midst of a global coronavirus pandemic when all attentions worldwide is to combat this menace, the question is what the US military is doing in Persian Gulf waters, 7000 miles from home," Iranian mission to the United Nations spokesperson Alireza Miryousefi told Newsweek. "Iran has proven that it will not succumb to intimidation and threats, nor will it hesitate to defend its territory, in accordance with international law, from any and all aggressions."

Iran-US tensions rise on Trump threat, Iran satellite launch - (AP) — Tensions between Washington and Tehran flared anew Wednesday as Iran’s Revolutionary Guard conducted a space launch that could advance the country’s long-range missile program and President Donald Trump threatened to “shoot down and destroy” any Iranian gunboats that harass Navy ships. The launch was a first for the Guard, revealing what experts described as a secret military space program that could accelerate Iran’s ballistic missile development. American officials said it was too early to know whether an operational Iranian satellite was successfully placed into orbit. Trump’s top diplomat accused Iran of violating U.N. resolutions. After Iran’s announcement, Trump wrote on Twitter, without citing any specific incident, “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” Last Wednesday, the U.S. Navy reported that 11 Guard naval gunboats had carried out “dangerous and harassing approaches” to American Navy and Coast Guard vessels in the Persian Gulf. The Americans used a variety of nonlethal means to warn off the Iranian boats, and they eventually left. Such encounters were relatively common several years ago, but have been rare recently. “We don’t want their gunboats surrounding our boats, and traveling around our boats and having a good time,” Trump told reporters Wednesday evening at the White House. “We’re not going to stand for it. ... They’ll shoot them out of the water.” Iran said the U.S. was to blame for last week’s incident. Conflict between Iran and the U.S. escalated after the Trump administration withdrew from the international nuclear deal between Tehran and world powers in 2018 and reimposed crippling sanctions. Last May, the U.S. sent thousands more troops, including long-range bombers and an aircraft carrier, to the Middle East in response to what it called a growing threat of Iranian attacks on U.S. interests in the region. The tensions spiked when U.S. forces killed Iran’s most powerful general, Qassem Soleimani, in January. Iran responded with a ballistic missile attack on a base in western Iraq where U.S. troops were present. No Americans were killed but more than 100 suffered mild traumatic brain injuries from the blasts.

Iran Vows to Destroy Any Threatening U.S. Forces in the Persian Gulf Following Trump Threat - The commander of Iran's Islamic Revolutionary Guards Corps (IRGC) has warned that his forces will respond to any perceived threat in the Persian Gulf, after President Donald Trump ordered U.S. forces to sink Iranian vessels harassing American ships. Hossein Salami, the IRGC commander-in-chief, said Thursday he had ordered his forces in the Gulf to destroy any vessel or combat unit that threatened the safety of Iranian ships, according to the Iranian Young Journalists Club news agency. Salami specifically referred to "any American terrorist force" posing a threat. The COVID-19 coronavirus pandemic has overshadowed continued tensions between the U.S. and Iran in recent months, but the animosity between Washington and Tehran has resurfaced in recent days. Last week, as many as 11 fast-attack IRGC ships encircled a group of U.S. warships in the Gulf. The U.S. Fifth Fleet said the move was "unsafe and unprofessional," while the IRGC said the American ships were engaged in "illegal, unprofessional, dangerous and even adventurist behavior" in the area. Then on Wednesday, Iran successfully launched a military satellite into orbit for the first time. The successful launch could have implications for the country's intercontinental ballistic missile program, which is one of the grievances that prompted Trump to withdraw from the Joint Comprehensive Plan of Action in 2018. Iran has denied that the satellite launch is connected to its ICBM program. Hours after the launch, Trump said he had ordered military units in the Gulf region to respond aggressively to any perceived Iranian threat. "I have instructed the United States Navy to if they harass our ships at sea," Trump tweeted.

ISIS Has Nothing Over Saudi Arabia - Kingdom Reaches 800 Beheadings Under Salman - Another grim milestone was reached this week, but not on the COVID-19 front. Human rights monitors have recorded that Saudi Arabia has carried out its 800th execution since King Salman bin Abdulaziz (and by extension MbS) began his rule five years ago — most being in the form of the kingdom's 'favored' beheadings. The British nonprofit Reprieve said the kingdom's rate of execution in Saudi Arabia has doubled since 2015 when King Salman took over following the death of his half-brother, King Abdullah. Of course, as Salman's health was reportedly increasingly fragile from the start of his rule, it's widely believed crown prince Mohammed bin Salman (MbS) has remained the true power and day-to-day decision maker. MbS was widely hailed as a 'reformer' - among other things promising to greatly reduce the number of annual executions, which include the ghastly methods of beheading and crucifixion. But this is nowhere near the reality. So much for empty talk of 'reform', 'modernization' and 'progress' - as Middle East Eye reports of Reprieve's findings: By comparison, Saudi authorities executed 423 people between 2009 and 2014.Currently, there are at least 13 juvenile defendants on death row - including Ali al-Nimr, Dawood al-Marhoon and Abdullah al-Zaher - who are “at imminent risk of execution”, Reprieve and the European Saudi Organisation for Human Rights said.Saudi Arabia executed six young men last year who were children at the time of their alleged offences, in a mass execution of 37 people.  Riyadh's concerns no doubt now lie far elsewhere regarding the prior MbS rhetoric of reform, given the kingdom is now scrambling to bring oil prices back up after the historic global price crash this week.  Reform vs. Reality — public beheadings as a form of political suppression:  Apparently 'Chop Chop Square' was busy as usual even amid the more pressing crisis of the accelerating oil glut. As of only last week, Amnesty International recorded 789 executions under the king, which only days later grew to 800.

Middle East Not Even Worth Invading Now Oil Is Worthless - US MILITARY generals and private contractors were said to be inconsolable at the news that international and as well as home produced oil is now worth as little as minus $36 a barrel, scuppering any motivation for haphazardly pointing at a random Middle Eastern nation on a map and saying ‘invasion time’.Crude oil, once the most sought after commodity in the world is now, by the barrel load, worth less than non-brand toilet roll, a price drop which has left many war fans devastated.“Aw man, I hate this pandemic,” remarked a sulking Republican politician who had his heart set on a decades long war in Iran or some such oil plenty country that could create the sort of needless casualty numbers that inspired him to become a war mongering politician in the first place.With the price collapse rendering oil less than worthless, many are contemplating if Middle Eastern countries and their citizens are even worth destroying.“I’m just sad for all the locals won’t get jobs rebuilding the schools we arbitrarily drone bombed into oblivion,” confirmed one private contractor, who feared proxy wars would actually have to take place on home soil. “What do you expect me to do now, go to the Middle East as a civilian tourist and experience the differing cultures, languages and history, and leave with just a fridge magnet having not committed a massacre? Are you fucking nuts?” confirmed one military man with an itchy trigger finger.

US Ramps Up War in Somalia, Killing More Civilians --While much of the world tries to fight a global pandemic that has already killed thousands, the U.S. military has been secretly stepping up its war in Somalia, killing civilians in the process.Soon after President Donald Trump took office in 2017, U.S. Africa Command (AFRICOM) began ramping up its air war. Since then, it’s only increased its tempo. In the first few months of 2020, the U.S. has already conducted at least 39 airstrikes in Somalia. To put that in perspective, AFRICOM carried out 63 air strikes during the entirety of 2019.The U.S. says these airstrikes are to assist the government of Somalia in its war against the non-state armed group al-Shabaab and “increase the security of the Somali people as these terrorists indiscriminately attack and extort innocent civilians.” Yet the increase in strike activity has not fulfilled its purpose on the ground. Al-Shabaab was driven out of the Somali capital, Mogadishu, by a multinational force led by the African Union Mission to Somalia, or AMISOM, in 2011, but still controls vast swaths of the Somali countryside. Even if al-Shabaab was pushed out of this territory, the government of Somalia appears to be incapable of securing and governing those parts of the country. On top of that, al-Shabaab’s lethal attacks on civilians in Somalia have only increased even as the U.S. ramps up its bombing.In the meantime, the U.S. continues to kill a growing number of civilians with these airstrikes, without acknowledgement or accountability. A year ago, Amnesty International — where I work — reported the deaths of 14 civilians in just five air strikes that it was able to investigate. The U.S., at that point, had acknowledged 131 lethal air strikes in Somalia since early 2017, but claimed that all of those killed were “terrorists.” AFRICOM says it investigates claims of civilian casualties, but it does not contact witnesses, family or community members to determine who the victims were. In the past year, the U.S. has acknowledged civilian deaths occurred in two cases, but even then, it never contacted the family or offered them assistance.