Note: my DSL and landline phone went dead just before 11 AM on Friday morning, and just came back around noon Monday, despite putting in an immediate call to AT&T...that means this post is missing most of the news from last two days of the week ending April 18th..since the weekly oil data was out on Wednesday, i already had a synopsis of that written up when the outage hit, likewise for the DUC well report for March, which was out on Tuesday...the monthly OPEC oil market report was out on Thursday, and since that requires a download to access, i had that and the OPEC reports of previous months available for a rather complete analysis of the March oil supply & demand situation, as well as enough information to forecast the supply & demand situation in the coming months as OPEC"s new production cuts take hold...however, i had not accessed the natural gas storage report nor Baker Hughes's rig count data, so this newsletter does not include coverage of either of those reports...in addition, the oil price information that i had at the time was incomplete, and i decided to forego my usual synopsis of that rather than write something half-assed...the oil story i might have told for last week has already been eclipsed by this morning's events anyhow, which has May oil trading below $0, even as other futures contracts are higher priced...hopefully, by next weekend i'll be able to update you on what's happened with that, as well as the missing rig count and natural gas storage data for both weeks...
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 10th indicated that an increase in our oil exports was not enough to offset a another big pullback in our oil refining, leaving us with an even higher record surplus of oil to add to our stored commercial supplies, the twenty-third addition of oil to storage in the past thirty-one weeks....our imports of crude oil fell by an average of 194,000 barrels per day to an average of 5,680,000 barrels per day, after falling by an average of 173,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 603,000 barrels per day to 3,436,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,244,000 barrels of per day during the week ending April 10th, 797,000 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 12,300,000 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 14,544,000 barrels per day during this reporting week..
meanwhile, US oil refineries reported they were processing 12,665,000 barrels of crude per day during the week ending April 10th, 969,000 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 a record average of 2,750,000 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 871,000 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 (+871,000) 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 5,929,000 barrels per day last week, still 8.4% less than the 6,474,000 barrel per day average that we were importing over the same four-week period last year....the 2,750,000 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 12,300,000 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 11,800,000 barrels per day, while a 4,000 barrel per day decrease in Alaska's oil production to 477,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending April 12th was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was still 1.7% above that of a year ago, and 45.9% 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 69.1% of their capacity in using 12,665,000 barrels of crude per day during the week ending April 10th, down from 75.6% 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 12,665,000 barrels per day of oil that were refined this week were 21.2% fewer barrels than the 16,078,000 barrels of crude that were being processed daily during the week ending April 12th, 2019, when US refineries were operating at 87.7% of capacity, and also the fewest barrels refined in any week since September 26th 2008....
even with the big drop in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 97,000 barrels per day to 5,915,000 barrels per day during the week ending April 10th, after our refineries' gasoline output had decreased by 1,638,000 barrels per day over the prior week....but since that small increase followed two near record drops in gasoline output, our gasoline production this week was 40.4% lower than the 9,917,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 55,000 barrels per day to 4,927,000 barrels per day, after our distillates output had increased by 16,000 barrels per day over the prior week...but even after this week's decrease in distillates output, our distillates' production for the week was still 2.2% more than the 5,038,000 barrels of distillates per day that were being produced during the week ending April 12th, 2019....
with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 3rd week in a row, following 8 weeks of decreases, rising by 4,914,000 barrels to 262,217,000 barrels during the week ending April 10th, after our gasoline supplies had increased by a near record 10,497,000 barrels over the prior week...our gasoline supplies increased this week as the amount of gasoline supplied to US markets increased by 16,000 barrels per day to 5,081,000 barrels per day, while our exports of gasoline fell by 15,000 barrels per day to 755,000 barrels per day and our imports of gasoline fell by 91,000 barrels per day to 402,000 barrels per day....after this week's inventory increase, our gasoline supplies were 15.0% higher than last April 12th's gasoline inventories of 227,955,000 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 second time in 13 weeks and for the 7th time in 28 weeks, rising by 6,280,000 barrels to 129,004,000 barrels during the week ending April 10th, after our distillates supplies had increased by 476,000 barrels over the prior week....our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 1,050,000 barrels per day to a 28 year low of 2,757,000 barrels per day, while our exports of distillates rose by 292,000 barrels per day to 1,585,000 barrels per day and because our imports of distillates rose by 128,000 barrels per day to 313,000 barrels per day....after this week's big inventory increase, our distillate supplies at the end of the week were 1.0% above the 127,691,000 barrels of distillates that we had stored on April 12th, 2019, but still about 7% below the five year average of distillates stocks for this time of the year...
finally, another big pullback in our oil refining, our commercial supplies of crude oil in storage rose for the twenty-fourth time in forty-one weeks and for the thirty-third time in the past 52 weeks, increasing by a record 19,248,000 barrels, from 484,370,000 barrels on April 3rd to 503,618,000 barrels on April 10th, the largest increase on record....but even after 12 straight increases and two straight record increases, our crude oil inventories were just 6% above the five-year average of crude oil supplies for this time of year, but nearly 45% higher than the prior 5 year (2010 - 2014) average of crude oil stocks as of the second 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 10th were 10.6% above the 455,154,000 barrels of oil we had in commercial storage on April 12th of 2019, and 17.8% above the 427,567,000 barrels of oil that we had in storage on April 13th of 2018, while at the same time remaining 5.4% below the 532,343,000 barrels of oil we had in commercial storage on April 14th of 2017...
OPEC's Monthly Oil Market Report
Thursday of this past week saw the release of OPEC's March Oil Market Report, which covers OPEC & global oil data for March, and hence it gives us a picture of the global oil supply & demand situation after the breakdown of OPECs agreement to cut oil production in the first quarter, when Saudi and its allies were engaged in an oil price war against the Russians and US shale, but before last week's agreement to cut production by 9.7 million barrels a day....we should note as a caveat that estimating oil demand while an epidemic is spreading is pretty much a crapshoot, and hence the numbers we'll be reporting this month should be considered having a much larger margin of error than we'd normally expect from this report..
the first table from this monthly report that we'll look at is from the page numbered 45 of that report (pdf page 55), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures...
as we can see from the above table of oil production data, OPEC's oil output jumped by 821,000 barrels per day to 28,612,000 barrels per day in March, from their revised February production total of 27,790,000 barrels per day...however that February output figure was originally reported as 27,772,000 barrels per day, which means that OPEC's February production was revised 18,000 barrels per day higher with this report, and hence March's production was, in effect, an 839,000 barrel per day increase from the previously reported OPEC production figures (for your reference, here is the table of the official February OPEC output figures as reported a month ago, before this month's revisions)...
from that OPEC table, we can also see that increases of 388,000 barrels per day from the Saudis, 386,000 barrels per day from the Emirates, and 170,000 barrels per day from Kuwait were the reason for the March output increase, far outweighing decreases of 100,000 barrels per day from sanctioned Venezuela, 52,000 barrels per day from sanctioned Iran, and 54,000 barrels per day from wartorn Libya ...but except for the increases from the three Saudi allies, it appears that most other OPEC members continued to adhere to the output allocations that were originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers and the additional production cuts of 500,000 barrels per day through to March 2020 that were announced at their December 6th, 2019 meeting..
the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from April 2018 to March 2020, and it comes from page 46 (pdf page 56) of the March OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...
due to the 821,000 barrel per day jump in OPEC's production from what they produced a month ago, OPEC's preliminary estimate indicates that total global oil production increased by a rounded 0.62 million barrels per day to average 99.86 million barrels per day in March, a reported increase which apparently came after February's total global output figure was revised lower by 510,000 barrels per day from the 99.75 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 200,000 barrels per day in March after that revision, with lower oil production from the OECD Americas, Norway, Brazil and Kazakhstan the major reasons for the non-OPEC output decrease in March...with the increase in March's global output, the 99.86 million barrels of oil per day produced globally in March were 1.11 million barrels per day, or 1.1% greater than the revised 98.75 million barrels of oil per day that were being produced globally in March a year ago, the 3rd month of OPECs first round of production cuts (see the April 2019 OPEC report (online pdf) for the originally reported February 2019 details)...with this month's upward revision to and increase in OPEC's output, their March oil production of 28,612,000 barrels per day rose to 28.7% of what was produced globally during the month, up from the 28.1% share OPEC contributed in February, and the 28.3% global share they had in January...OPEC's March 2019 production, which included 524,000 barrels per day from former member Ecuador, was reported at 30,022,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 886,000 fewer barrels per day of oil in March than what they produced a year ago, when they accounted for 30.2% of global output, with a 1,003,000 barrel per day drop in the output from Libya and a 680,000 barrel per day drop in the output from Iran only partially offset by a 392,000 barrel per day increase in the output from the Emirates, a 266,000 barrel per day increase in output from Saudi Arabia, and smaller year over year increases in the output from Kuwait and Nigeria...
with the big jump in OPEC's output that we've seen in this report, there was a substantial surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...
the above table came from page 25 of the April OPEC Monthly Oil Market Report (pdf page 35), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2020 over the rest of the table...on the "Total world" line in the second column, we've circled in blue the figure that's relevant for March, which is their estimate of global oil demand during the first quarter of 2019...
OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe have been using an average of 92.92 million barrels of oil per day, which is a 4.66 million barrel per day downward revision from the 97.58 million barrels of oil per day they were estimating for the 1st quarter a month ago (circled in green), largely reflecting coronavirus related demand destruction....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 99.86 million barrels per day during March, which would imply that there was a surplus of around 6,940,000 barrels per day in global oil production in March when compared to the demand estimated for the month...
however, as we know, most of that downward revision in 1st quarter demand was due to shutdowns and lockdowns imposed worldwide during the month of March, as the economic and fuel consumption impacts during February were mostly limited to China and Korea...that means to get a reasonable idea of what the impact of the reduced demand metric implies, we'll have to recompute the oil production figures for the first quarter as a whole, and then make our own estimates as how those apply to each month, based on what we know about the impact of the coronavirus...
as we saw earlier, February's global oil output was revised lower by 510,000 barrels per day to 99.24 million barrels per day with this report, while January's global oil output was revised to 100.04 million barrels per day with last month's OPEC report...since this month's report indicates that March's global oil output was at 99.86 million barrels per day, that means global oil output for the first quarter averaged 99.724 million barrels per day...given OPEC's global demand estimate of 92.92 million barrels of oil per day, we can therefore estimate with reasonable accuracy that there was a surplus of around 6,800,000 barrels per day in global oil production over the first quarter when compared to the demand estimated for the quarter...
now it gets tricky...since the virus was largely confined to China during January, and Chinese authorities had not even admitted to human to human transmission until January 20th, we can figure the impacts of the virus outbreak on global fuel consumption were negligible during January...hence, we'll take our original estimate of a surplus of 610,000 barrels per day in global oil production during January and adjust it for the revisions to global production reported in February to estimate that there was a global surplus of 690,000 barrels per day in global oil production during January...next, since we have no special information as to the impacts of the virus outbreak in February, we'll use our estimate from last month's OPEC data that there was a surplus of around 2,170,000 barrels per day in global oil production in February, and adjust it with the 510,000 barrels per day downward revision to global output reported this month to estimate that February's surplus oil production was at 1,660,000 barrels per day during the month...then, backing those oil surplus figures for January and February out of the first quarter's oil production surplus of 6,940,000 barrels per day leaves us with nearly 550 million barrels of surplus oil in March, or an average surplus during the month of around 17,718,000 barrels per day...
given that massive surplus for March, what can we expect in the future in light of last week's OPEC pact with Russia and other major producers to cut production by 9.7 barrels per day over May and June? to explain what's in play for the next three months, we'll start by including a table of the production cuts each of the participants in last week's meeting agreed to...
the above table was taken from an article at Zero Hedge, and it shows the oil production baseline in thousands of barrel per day off of which each of the oil producers will cut from in the first column, a number which is based on each of the producer's October 2018 output, ie., a date before the past year's and past quarter's output cuts took effect; the second column shows how much each participant will cut in thousands of barrel per day, which is 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant has agreed to after that 23% cut..
using October 2018 as a basis for their cuts means they're not actually cutting 23% from recent production, because almost all of these producers had higher production back then than they do now...if you simply go back to the first OPEC table we've included here (Table 5-8), you can see that OPEC's production in 2018 was at 31,344,000 barrels per day, 12.8% more than their pre-price war February production of 27,790,000 barrels per day...when we check OPEC's October 2018 production, we find it was the highest of that year, in fact the highest in 3 years, at 32,965,000 barrels per day, so it begins to look like they cherry-picked that baseline to make it seem their new cuts are more than they actually are.....
moreover, Iran, Libya and Venezuela, whose production has already been beaten down, are not even required to make any cuts...if we were to add the October 2018 production from Iran, Libya and Venezuela back to OPEC's "proposed voluntary cut level" of 20,599,000 barrel per day, we'd find that OPEC's May and June production could be as high as 26,185,000 barrels per day, down just 5.8% from their pre-price war production of 27,790,000 barrels per day...so the widely promoted "10 million barrel per day" production cuts are just a deception, designed to underpin oil prices and keep them from falling to a level that would reflect the actual supply demand imbalance....
we find that by excluding whatever Iran, Libya and Venezuela produce, the other OPEC members will be voluntarily reducing their production 15% from their pre-price war levels....then, outside of OPEC, there are really only 3 producers who's cuts have the potential to make a difference on a global scale; Russia, Kazakhstan, and Mexico, so we'll check their recent production to see how much they're really cutting their output...according to page 43 of the April OPEC Monthly Oil Market Report, Russia's crude oil production was at 10.58 million barrels per day in both February and March, so their "proposed voluntary cut level" of 8,492,000 barrels per day is a 19.7% cut from their current production level....next, according to page 44 of the April OPEC Monthly Oil Market Report, Kazakhstan's February production level was at 1.65 million barrels per day (their March output is not given), so their "proposed voluntary cut level" of 1,319,000 barrels per day represents a 20% cut from their February production...and for Mexico, page 44 of the April OPEC Monthly Oil Market Report shows their February production level was at 1.73 million barrels per day (again, March is not given), so their "proposed voluntary cut level" of 1,653,000 barrels per day represents a 5.5% cut from what they were producing in February (note that Mexico is a special case, because they are so heavily hedged by buying oil puts that they stand to make more on their hedges if oil prices fall than they'll lose in selling their oil below cost, so they have no incentive to cut production; hence, OPEC simply had to accept what they offered, or they'd walk away..)
so, given the reality of the much ballyhoo'd production cuts, let's try to estimate what the 2nd quarter supply / demand balance might be...back on Table 4-2, World Oil Demand in 2020, we've also circled in red the figure that's relevant for the 2nd quarter on the "Total world" line in the third column...OPEC has estimated that during the 2nd quarter, global consumption of oil will be at an 86.70 million barrels of oil per day average, which is a 11.50 million barrel per day downward revision from the 98.20 million barrels of oil per day they had estimated or the 2nd quarter a month ago...since April was half gone before the ink was dry on this most recent production cut agreement, we see no reason that OPEC's April production will fall from March levels; indeed, it may even rise, considering that the Saudis, the Emirates, & Kuwait were engaged in an all-out production & price war at the beginning of the month...but we''ll just use March's OPEC output figures for April to simplify our estimate...then we'll also estimate that oil production will fall by 1 million barrels per day for producing countries other than OPEC, largely on cutbacks to expensive US shale and Canadian tar-sands production, due to depressed oil prices...hence, that would leave April's global oil production at 98.86 million barrels per day...then in May, these OPEC+ production cuts that we've been discussing kick in...rather than the advertised 9.7 million barrels per day cut, we've figured that they'll actually be closer to 7.2 million barrels per day lower than what the same countries produced in February (if they meet their "voluntary" targets)...again, generously estimating that oil production will again fall by 1 million barrels per day for other producing countries not included in this pact would leave May's global oil production at 89.86 million barrels per day (temporarily accepting more significant digits than our data warrants)...since we have no special insight into what might happen to oil prices by June, we'll just repeat May's production figure of 89.86 million barrels per day as our estimate for June...that gives us an average oil production figure of 92.86 million barrels per day for the 2nd quarter against OPEC demand estimate of 86.70 million barrels per day, suggesting that even after Russian & OPEC production cuts, 2nd quarter global production will still be 6,160,000 barrels per day greater than demand...
DUC well report for March
Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for April, which includes the EIA's March data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the thirteenth month in a row, this report showed a decrease in uncompleted wells nationally in February, as both the drilling of new wells and completions of drilled wells decreased.....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 79 wells, falling from a revised 7,655 DUC wells in February to 7,576 DUC wells in March, which now is 10.8% fewer DUCs than the 8,489 wells that had been drilled but remained uncompleted as of the end of March of a year ago...this month's DUC decrease occurred as 990 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, down by 24 from the 1,014 wells that were drilled in February and the lowest number of wells drilled since June 2017, while 1,070 wells were completed and brought into production by fracking, a decrease of 12 well completions from the 1,082 completions seen in February, and down from the 1,332 completions seen in March of last year....at the March completion rate, the 7,576 drilled but uncompleted wells left at the end of the month still represents a 7.1 month backlog of wells that have been drilled but are not yet fracked, same as the DUC well backlog of a month ago...
both oil producing and natural gas producing regions saw DUC well decreases in March, even as two of the seven major basins saw modest DUC increases...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 52, falling from 728 at the end of February to 676 DUC wells at the end of March, as 52 wells were drilled into the Anadarko basin during January while 105 Anadarko wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 18, from 1,368 DUC wells at the end of February to 1,350 DUCs at the end of March, as 152 wells were drilled in the Eagle Ford during February, while 170 already drilled Eagle Ford wells were completed....in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 11 to 442, as 130 Niobrara wells were drilled in March while 141 Niobrara wells were completed....on the other hand, DUC wells in the Bakken of North Dakota increased by 12, from 870 DUC wells at the end of February to 882 DUCs at the end of March, as 95 wells were drilled into the Bakken in January, while 83 of the drilled wells in that basin were being fracked...in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells rise by 8, from 3,433 DUC wells at the end of February to 3,441 DUCs at the end of March, as 450 new wells were drilled into the Permian, while 442 wells in the region were being fracked....
among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 18 wells, from 562 DUCs at the end of February to 544 DUCs at the end of March, as 74 wells were drilled into the Marcellus and Utica shales during the month, while 92 of the already drilled wells in the region were fracked....on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region had their uncompleted well inventory remain unchanged at 241, as 36 wells were drilled into the Haynesville during March, while 36 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of March, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 61 wells to 6,791 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 18 wells to 785 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...
- DRILLED: 154 (144 as of last week)
- DRILLING: 99 (107)
- PERMITTED: 499 (493)
- PRODUCING: 2,481 (2,481)
- TOTAL: 3,233 (3,225)
Six horizontal permits were issued during the week that ended April 11, and 10 rigs were operating in the Utica Shale.
Frack waste recycler wants to install river barge loading facility in Martins Ferry — A facility where waste from the fracking industry is recycled wants to install a barge loading facility along the Ohio River in Martins Ferry.According to a public notice, 4K Industrial Park, Martins Ferry, has applied with the U.S. Army Corps of Engineers for a permit “to construct a barge loading and off-loading waterfront facility. The facility will be receiving fluids from the Gas and Oil markets for processing, to reuse the fluids for drilling operations or to be sent to a disposal facility.”The notice describes the scope of the structure proposed:“ The applicant proposes to secure a 195 foot x 35 foot spud barge approximately 25 feet off the riverbank and will be used for securing tank barges alongside for loading and off-loading operations. The spud barge will be anchored with two, 2′ x 50′ spuds and secured to the riverbank at each end with a 20-inch dead men chains. The total mooring width, from the face of the river bank extending riverward will be approximately 100 feet wide by 200 feet in length. For safety purposes the applicant proposes to place approximately four, 20-inch diameter steel pipe dead men, for barge deflection, to protect the downstream marina. The steel pipes will be placed approximately 80 feet downstream (south end), of the spudded barge and spaced approximately 20 feet from center point to center of each other, extending river ward and will be driven into the river bottom.“On top of the riverbank near the spudded barge, the applicants propose to construct a 240 feet long elevated catwalk. The elevated catwalk will be supported by 24, 12-inch diameter pipe pilings. The catwalk will then support a doubled walled 10-inch diameter pipe coming from the existing water storage area, located approximately 600 feet from the waterfront. After the transiting tank barge is secured to the spudded barge, a transfer hose from the barge is then connected to the 10-inch pipe, along the catwalk, transferring the fluid to the existing water storage area.” George Brkovich, waterways inspector with the Army Corps of Engineers, Pittsburgh, confirmed that the deadline to submit public comments on the application is April 30. The notice also states that a person can request a public hearing be held on the matter.
Pa., Allegheny National Forest face new wave of abandoned oil, gas wells — Ten thousand acres of Pennsylvania’s only national forest have given way, tree by tree, over the last 70 years to an oil drilling operation unique in its scope in the northeastern United States. A network of wells, tanks, pipelines, pump houses and roads grew into the shape of an italic L cut into the Allegheny National Forest in Elk County to harvest $350 million worth of oil. The lower leg is nearly 6 miles long; the upper one roughly 9 miles. The imprint is visible by satellite. What worries state and federal environmental regulators isn’t the project’s growth but its death. Last year, the company that owns the field — Kane-based ARG Resources — quietly shut it down. The company didn’t have the money to run the operation — let alone plug and decommission its 1,600 wells, dozens of buildings and tanks and roughly 150 miles of roads. “There was just one guy left working there, and he wasn’t working there anymore,” said Scott Perry, Pennsylvania’s head oil and gas regulator. Although the ARG Resources’ operation is unusual in many ways, Pennsylvania Department of Environmental Protection officials see it as a harbinger of a troubling trend. Perry calls it “the looming crisis.” A staggering drop in oil prices is threatening to cause a cascade of abandoned wells across Pennsylvania’s traditional oil and gas industry. There are already roughly 200,000 orphaned wells dotting the commonwealth — abandoned by their owners over a century of drilling. For most of that time, fully sealing off expired wells wasn’t required. Each abandoned well is a risk, although the danger depends on age, decay and proximity to people. They can channel gas and oil to the surface, pollute streams and drinking water, create explosion hazards when gas seeps into homes and emit climate-changing gases.Very little money has been allocated for finding and plugging the old wells. Last year, DEP received about $1 million to fund the work. It is sealing abandoned wells at a rate of fewer than a dozen per year. At that pace, it will take 17,500 years and about $6.6 billion.
Wolf's conduct on the pipeline is impossible to explain - The Times of Chester County -It runs like a scar across Chester County, a tear far more than a flesh wound, winding across the middle of the county as a reminder that the rich and the powerful can always buy off government at the expense of the people. It is, of course, the Mariner East II pipeline. It is appears to be back under construction because of a waiver from the Wolf Administration deeming it “life sustaining,” but strangely, no one has been able to confirm the existence of a waiver. Whatever is the truth — something in short supply in the tangled tale of this white elephant project — work resumed in the county on the project by the middle of last week. I know, because I saw it in person. How anyone in their right mind — unless compromised by money — can see this project as “life-sustaining” or “productive” or “sane” needs to have their head examined. This poorly designed, high-pressure mess of a pipeline is years behind schedule because Sunoco/Energy Transfer Partners is the kind of company that could mess up a one-car funeral. It is allegedly designed to carry some sort of petroleum product intended to make plastics to Marcus Hook, where it will go on a large ship and be transported to Europe. Of course, none of that makes any sense, economically, environmentally, or basically on any level. Let’s start with fracking. even if fracking was wildly profitable, it would be problematic at best. But, it’s not. With oil under $25 a barrel, every barrel that comes out of the ground is a big money loser — estimates suggest fracking doesn’t break even unless oil is around $50 a barrel. In short, there’s an oil glut right now. No one wants or needs the product coming out of the fracking sites in Pennsylvania.
Equinor is planning an oil conditioning facility in the Trenton area - Equinor is proposing to build a crude oil conditioning facility that could process up to 40,000 barrels of oil per day on a 5 to 20-acre tract 10 miles southwest of Williston near Trenton. The facility, being less than 50,000 barrels per day, does not require PSC oversight. PSC Commissioner Julie Fedorchak said there are probably many oil conditioning facilities like this in the state, but it’s not known how many, since most of them fall below the 50,000 barrel per day threshold. Whiting has the only proposal for an oil conditioning facility regulated by the PSC. It is not clear if Equinor’s proposed facility will require permits from Williams County. Development Services Director Kameron Hymer said in most cases it would require a zone change to heavy industrial and a CUP, but without a pre-application meeting he is not certain those items would be required. Right now, Equinor is in the middle of seeking a permit to construct the oil conditioning facility under the synthetic minor designation from the North Dakota Department of Environmental Quality. That agency is proposing to issue the facility a permit to construct, and is taking public comments on the matter from April 1 through April 30.
Community Fights Construction of Mountain Valley Pipeline - Drive past small houses and cows on Yellow Finch Road, and blue yard signs line the gravel road. “Stream Crossing” is written in big letters, and the logo of the Mountain Valley Pipeline corporation is tucked in the corner. The signs acknowledge the over 1,000 locations where the Mountain Valley Pipeline crosses water bodies. As the road narrows, handmade fabric banners are hung in trees with messages like “Water Is Life,” a motto of the Standing Rock protests against the Dakota Access Pipeline, and “Solidarity: Defend What You Love” with a drawing of a yellow finch. At around this point in the road, a clear difference appears in the left and right sides of the road. The right side has been clear cut, with netting and fertilizer capsules on top to grow grass, while the left side looks like a healthy forest. On the left, a makeshift staircase has been built into the steep land, leading up to a campsite built among the trees. People of all ages are sitting on benches around a small fire with a tarp hung above them. The camp on its own is remarkable as a communal home in the woods, but the camp isn’t the point. A dozen steps from the camp is an oak tree, and 50 feet up in the oak tree is a person living on a small platform. A few steps further is a white pine with another person living in it. They have been in the trees for more than 500 days as of January, “tree-sitting” to stop the Mountain Valley Pipeline. They have received national media attention and they are far from alone in their actions. In the past six months, a man in Tasmania, Australia was arrested for tree-sitting to prevent the logging of old growth forests, a woman was arrested in Columbia, Missouri, for tree-sitting to prevent the removal of old trees for a new bike trail, and a tree-sitter left a centuries old tree on Rainbow Ridge in Northern California after she successfully prevented a logging company from cutting the tree down. Around the world, pipelines are being protested, including the Coastal GasLink pipeline in the Wet’suwet’en Nation in British Columbia, the Northeast Supply Enhancement Pipeline in North Brooklyn, New York, and the Jordan Cove LNG Project in Oregon—all making news in early February. With the Mountain Valley Pipeline specifically, more than 40 people have been charged in relation to direct action like tree-sitting, as reported by the Roanoke Times.
New Virginia law could be Atlantic Coast Pipeline’s greatest barrier yet - HB 167 requires state regulators to consider whether pipeline capacity is needed for reliability before approving projects. Virginia environmentalists are confident that a bipartisan ratepayer-protection measure championed by a House Republican will spell doom for Dominion Energy’s fiercely debated Atlantic Coast Pipeline. Not surprisingly, however, Dominion is still convinced the $8 billion natural gas pipeline still has a bright future. Democratic Gov. Ralph Northam signed HB 167 into law in early April, barely a month after the General Assembly wrapped up this year’s ambitious session. Both the Senate and the House of Delegates had voted unanimously to pass the legislation, introduced by Del. Lee Ware, R-Powhatan. Briefly, Ware’s measure adds an extra level of scrutiny. It protects customers from paying for large new gas pipelines if utility regulators determine that the capacity of such infrastructure is not necessary for reliability and is not the least-cost way to meet electricity demand. Peter Anderson of Charlottesville, senior program manager for Appalachian Voices in Virginia, applauded Northam and the legislature for ensuring that regulators now have the appropriate tools to prevent electric monopolies from gouging consumers by constructing unnecessary pipelines. He decamped to Richmond in January for several months of hands-on tracking of measures from the smaller-scope HB 167 to the all-encompassing Virginia Clean Economy Act. While Anderson is unsure exactly how the State Corporation Commission might interpret the new law, his layperson translation is this: “In the last fuel factor case, commissioners said Dominion’s existing pipeline portfolio is adequate for the size of its gas-fired power plant fleet. When you add this standard of review to that existing base of facts, unless new gas-fired plants are coming on line … costs for new gas capacity would be unnecessary.”
PIPELINES: Feds tell court to defer to PHMSA on Line 5 spill plans -- Friday, April 10, 2020 -- Pipeline regulators yesterday urged a federal appeals court to overturn a recent ruling requiring a redo of approvals for oil spill response plans for a project that passes below the Straits of Mackinac in Michigan.
Offshore oil and gas platforms release more methane than previously estimated – The Michigan Engineer News Center -Offshore energy producing platforms in U.S. waters of the Gulf of Mexico are emitting twice as much methane, a greenhouse gas, than previously thought, according to a new study from the University of Michigan. Researchers conducted a first-of-its-kind pilot-study sampling air over offshore oil and gas platforms in the Gulf of Mexico. Their findings suggest the federal government’s calculations are too low.U-M’s research found that, for the full U.S. Gulf of Mexico, oil and gas facilities emit approximately one-half a teragram of methane each year, comparable with large emitting oil and gas basins like the Four Corners region in the Southwest US. The effective loss rate of produced gas is roughly 2.9%, similar to large onshore basins primarily focused on oil, and significantly higher than current inventory estimates.Offshore harvesting accounts for roughly one-third of the oil and gas produced worldwide, and these facilities both vent and leak methane. Until now, only a handful of measurements of offshore platforms have been made, and no aircraft studies of methane emissions in normal operation had been conducted. Each year the EPA issues its U.S. Greenhouse Gas Inventory, but its numbers for offshore emissions are not produced via direct sampling. The study identified three reasons for the discrepancy between EPA estimates and their findings:
- Errors in platform counts: Offshore facilities in state waters, of which there are in excess of 1,300, were missing from the U.S. Greenhouse Gas Inventory.
- Persistent emissions from shallow-water facilities, particularly those primarily focused on natural gas, are higher than inventoried.
- Large, older facilities situated in shallow waters tended to produce episodic, disproportionally high spikes of methane emissions. These facilities, which have more than seven platforms apiece, contribute to nearly 40% of emissions, yet consist of less than 1% of total platforms. If this emission process were identified, it could provide an optimal mitigation opportunity, the researchers say.
The findings were published today in Environmental Science and Technology.
Shell, Exxon halt some Gulf of Mexico output due to Exxon pipeline leak - (Reuters) - A leak in a pipeline that carries oil from U.S. Gulf of Mexico offshore facilities has halted production at two fields, Exxon Mobil Corp and Royal Dutch Shell said on Monday. Shell said it temporarily halted production on its 100,000-barrel-per-day deepwater Perdido production hub last Thursday after a subsurface leak was discovered on Exxon’s Hoover Offshore Oil Pipeline System (HOOPS). Production on Exxon’s Hoover platform also was halted because of the leak, Exxon said. The HOOPS pipeline has been closed for repairs, a spokeswoman for Shell said. Exxon has notified government agencies and shippers and has responded to an onshore release of crude oil at a facility in Freeport, Texas, spokesman Todd Spitler said on Monday. “We anticipate resuming flow on the line in a timely manner once it is safe to do so,” he said. Exxon did not say what caused the leak or how much production was affected. HOOPS connects the Exxon-operated Hoover, Marshall and Madison offshore fields, which combined produce about 4,000 barrels of oil per day, according to a 2018 marketing brochure. Shell’s Perdido hub is moored in some 8,000 feet (2,438 m) of water about 200 miles (322 km) south of Galveston, Texas, and is a joint venture among Shell, BP Plc and Chevron Corp. The 153-mile (246-km) HOOPS pipeline brings oil from several offshore oilfields to the Quintana Terminal near Freeport, according to an Exxon website.
BP disaster 10 years later: Lessons learned almost too much to bear amid COVID-19 - April 20 marks the 10th anniversary of the explosion aboard BP’s leased Deepwater Horizon exploratory rig. Ten years since 11 workers were killed, 17 were injured, and oil began gushing from a gash nearly a mile deep in the bottom of the Gulf of Mexico. Oil would spill for 87 days before the hole was sealed, a hole drilled 18,000 feet beneath the sea floor in search of fossil fuel. The entire disaster drew 24/7 news coverage akin to man’s first steps on the moon. An estimated 3.19 million barrels of oil spilled, some of it fouling the coastline of five states – Texas, Louisiana, Mississippi, Alabama, and Florida, according to a report by the National Oceanic and Atmospheric Administration. Five recommendations could prevent another BP type of disaster from damaging the environment, according to a report released Tuesday by Oceana, the international ocean conservation group. For 56 pages, Oceana’s report presents a detailed look at what went wrong, who got hurt, what was damaged, and what’s been learned since the oil rig blew up and sank, two days later. The title is,Hindsight 2020: Lessons We Cannot Ignore from the BP Disaster. “Years later, large swaths of the ocean floor around the wellhead resemble a toxic waste dump, devoid of the kinds of marine life that typically lives there.” It turns out that the efforts of valiant children and adults to save a few critters proved to be in vain. The practice of squirting Dove dish detergent into water to disperse the oil may not have done any good: “So, this study suggests that those chemicals may have been dumped into the Gulf for no benefit at all.” One development is so new that Oceana’s report doesn’t mention it, and it weighs on Alabama’s clean-up efforts: The collapse of the global energy sector has caused a reduction in the credit outlook of BP’s parent company, and with it the outlook on $571 million in bonds sold by Alabama. The credit drop was announced this month. Oceana’s report recommends five measures to prevent a recurrence of the BP disaster. Here they are, verbatim:
- 1) President Trump should halt all efforts to expand offshore drilling to new areas. Expanding offshore drilling to new areas is expanding risk to human health, ecosystems and economies. Tourism, fishing and recreation industries currently contribute millions of jobs and billions in revenue to coastal states. Threatening these with unsafe offshore drilling and its risks is shortsighted and dangerous.
- 2) President Trump should direct BSEE to seek transformative changes to the industry’s safety culture and reverse efforts to weaken safety regulations. Poor safety culture in the oil industry prior to the BP Deepwater Horizon disaster fed the conditions that led to it. Ten years later, little has changed and BSEE gutted the very precautions put in place after the BP disaster. BSEE [Bureau of Safety and Environmental Enforcement, within the Department of the Interior] should restore safety measures it removed from the Production Safety Systems Rule and Well Control Rule. Additionally, the industry needs drastic safety reforms in the drilling operations currently underway that are still resulting in hundreds of oil spills every year.
- 3) President Trump should direct the BOEM to deny all pending geological and geophysical seismic permits for oil and gas in the Atlantic Ocean. Seismic airgun blasting is dangerous and harmful to marine wildlife. Seismic airgun blasting can disrupt, injure or even kill marine animals from the smallest zooplankton to the largest whales. BOEM [Bureau of Ocean Energy Management, within the Department of the Interior] should not issue permits to companies that want to blast the Atlantic Ocean with noise, looking for oil reserves that should never be tapped in the first place.
- 4) Congress should enact a moratorium on expanded offshore drilling. For nearly three decades, Congress restricted spending on outer continental shelf (OCS) oil and gas leasing and drilling activities through moratoria renewed annually in appropriations bills. These restrictions were enacted via the annual appropriations in the Interior-Environment Appropriations bill. Congress should reinstate offshore drilling moratoria once again in the FY 2021 bill [which begins Oct. 1], and continue to do so, as long as permanent protections are not in place.
- 5) Congress should incentivize investments in clean, renewable energy. We must rapidly end our reliance on fossil fuels and begin the transition to clean, renewable energy like offshore wind and solar power to avert the worst impacts of climate change. Congress should enact incentives for investments in developing clean energy to help reduce our energy-related emissions that fuel climate change.
'Broken' Interior agency struggles 10 years after Gulf spill -- Monday, April 13, 2020 -- Start a free trial - Ten years after the Deepwater Horizon disaster, the Interior Department agency that regulates offshore energy development is fractious, demoralized and riddled with staff distrust toward its leadership, according to multiple accounts from current and former employees.
Trump's offshore drilling plan is still a preventable disaster - Ten years ago, the BP “Deepwater Horizon” rig exploded in the Gulf of Mexico, killing 11 workers and setting off the worst oil spill in U.S. history. More than 200 million gallons of oil gushed into the Gulf unchecked, while BP and its contractors failed to stop the spill for 87 days.Unfortunately, few if any lessons were learned from this unprecedented tragedy, and offshore drilling is no safer today than it was a decade ago. President Trump has rolled back key safety protections put in place to prevent another Deepwater Horizon-scale catastrophe while proposing to radically expand the footprint of offshore drilling at the same time. With more drilling and less safety, the president’s plans are a recipe for disaster. During the crisis, while oil spilled uncontrollably, President Obama created an independent, nonpartisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. They were charged with providing the nation with an impartial analysis, determining the causes and recommending reforms to make offshore drilling safer. Today, the industry, as a whole, has not embraced independent oversight or adequately improved its safety culture. Instead, the industry continues to advocate for regulatory rollbacks — which the president has championed — while claiming publicly; it holds safety as a top priority. Considering the dire consequences of drilling disasters, rigorous, independent oversight should be a minimum prerequisite of doing business. Looking back, while BP was required to formulate a plan for precisely how it would handle an oil spill, the amount of effort involved appeared to rely on copying and pasting abilities. For example, BP’s response plan for Deepwater Horizon named a wildlife expert that died several years before submission of its plan and included mentions of seals and walruses – animals never found in the Gulf of Mexico. Any serious review of this plan should have caught BP’s embarrassing mistakes and revealed that in no way was the company prepared to manage a well blowout, like occurred on April 20, 2010. Blowouts are a known risk associated with offshore drilling and “blowout preventers” are considered the last line of defense against a catastrophic spill. This is the device that failed to prevent the BP Deepwater Horizon blowout and today, the devices remain unreliable and are still not tested under extreme, real-world conditions. In response to the disaster, the Obama administration increased the rigor of testing and government oversight of these safety devices. Still, the Trump administration has drastically undercut these improvements by reducing testing and government review of results. The Trump administration cited that their suite of safety rollbacks will save the offshore industry about $824 million over 10 years. Focusing on industry cost-savings entirely disregards the safety and environmental benefits that the safeguards were intended to provide.
LOGA head says OPEC+ deal won't do enough to help Louisiana oil industry - The Louisiana Oil and Gas Association said the new deal with the Organization of the Petroleum Exporting Countries and other oil producers like Russia, or OPEC+, to reduce oil production does not do enough to help Louisiana producers in a statement issued Monday. The deal, which came after a price war between Saudi Arabia and Russia, reduces production by about 10 million barrels a day beginning in May. The pricing battle between Russia and Saudi Arabia inflated the supply side of the equation, causing prices to plummet. “The OPEC+ deal may eventually help move the needle in the right direction, but the cuts announced Sunday fall far short of the meaningful measures that Louisiana’s independent oil and gas producers need to survive," said LOGA President Gifford Briggs. Briggs has previously called the one-two punch of the price war and COVID-19 a "perfect storm" and the worst crisis the industry has ever faced. Last week, LOGA, citing a "point-in-time" survey with its membership, said the crisis impacting the economy could spell doom for many of these companies, which make up a large part of Acadiana's economic backbone and fuel the state budget. “Our industry is on the verge of collapsing," Briggs said. "This is a time for bold, decisive action, not small steps in the right direction. With tens of thousands of jobs and millions of dollars in tax revenue at risk, it is essential for policymakers at all levels of government to implement aggressive and immediate solutions to offset the expectation of prolonged shut-in wells, a massively oversupplied world oil market and the global shutdown of our economy.” The oil and gas trade group called for the suspension of state severance tax collections for one year, easing Office of Conservation regulations, finding opportunities to expand oil and gas storage capacity at the state and federal levels, and ending coastal lawsuits. “At the federal level, we urge members of Congress to support a temporary elimination of offshore royalties in the Gulf of Mexico to prevent thousands of leases from being shut in,” Briggs said.
Trump to Lease Oil Storage to Nine Companies-- The U.S. Energy Department is negotiating with nine companies to rent about 23 million barrels of oil storage capacity in its Strategic Petroleum Reserve as part of a Trump administration bid to help drain the country’s growing glut of crude. The Energy Department said most of the oil will be delivered in May and June, with the crude distributed into all four of the reserve’s storage sites in Texas and Louisiana. The agency did not say what companies were involved in the deals or detail the terms of their contracts. “When producing oil, you have two options -- you either use it or you store it,” Energy Secretary Dan Brouillette said in a news release. “Providing our storage for these U.S. companies will help alleviate some of the stress on the American energy industry and its incredible workforce.” The Energy Department earlier this month offered to lease as much as 30 million barrels of storage to domestic producers that are struggling to find places to keep excess oil amid an unprecedented collapse in demand caused by the Covid-19 outbreak. Of the original total, 22.8 million barrels were marked for low-sulfur crude, and the rest for high-sulfur oil. The tender offering the storage closed April 9. The final mix and grade of crudes that would be stored under the leasing initiative were not immediately available. The oil earmarked for storage under the program will be aggregated from small, medium and large producers, the Energy Department said. Companies can schedule return of their crude through March 2021, subtracting what the agency said would be “a small amount of oil to cover the SPR’s cost of storage.” President Donald Trump has sought to help America’s shale industry after large swaths of the world shut down to stem the spread of the coronavirus, causing demand to crumble. Trump helped broker a deal among the world’s largest producers to cut crude supplies by 9.7 million barrels a day from May, ending a price war between Saudi Arabia and Russia. The planned oil leasing will consume roughly a third of spare capacity in the Strategic Petroleum Reserve, which was established after the Arab oil embargo in the 1970s to help the U.S. weather supply shocks. The Trump administration is still seeking to fill up the rest of the reserve, including by buying domestic crude for the stockpile. An initial proposal to purchase as much as 77 million barrels of crude for the reserve was blocked by Democrats in Congress, though another purchase plan may be revived as part of the next stimulus package.
One worker injured in fire at Valero's Meraux, Louisiana, refinery - (Reuters) - One worker was injured in a fire at Valero Energy Corp’s 125,000 barrel-per-day Meraux, Louisiana, refinery early Friday morning, a company spokeswoman said. Valero spokeswoman Lillian Riojas said the injured worker was taken to a local hospital. The extent of the person’s injuries was unknown. All other workers at the refinery were accounted for. Energy industry intelligence service Genscape said the refinery was shut at about the time the fire broke out, shortly before 1 a.m. CDT (0600 GMT). The fire broke out in the refinery’s hydrocracker, said sources familiar with plant operations. The hydrocracker converts gas oil into motor fuels, primarily diesel. Riojas said the fire was contained to the area where it broke out.
Crude export terminals weather stormy times, part 3. - U.S. crude oil production is off its historic highs, the rig count is in free-fall, and crude inventories are rising fast, with the Cushing-to-Magellan East Houston price differential drawing oil away from the Gulf Coast and to the Oklahoma storage hub. Oh, and global demand for crude is off by more than 20%. None of this bodes well for U.S. crude exports, which have been at or near record levels the past few months. What seems to be shaping up is a fierce competition among the owners of existing export terminals to offer the most efficient, lowest-cost access to the water. Today, we continue our series with a look at Enterprise Products Partners’ Houston-area crude oil storage, pipelines and docks. When we decided a couple of months ago to take a fresh look at crude export terminals along the Gulf Coast, the market’s concern was that additional loading and dock capacity would be needed soon to keep pace with what had been soaring export volumes. In the first two months of 2020, crude exports from Texas and Louisiana marine terminals averaged 3.2 MMb/d, or nearly 1 MMb/d more than in January/February last year. The expectation was that U.S. crude export volumes would continue rising, probably to at least 5 MMb/d in 2022 and maybe 6 MMb/d in 2024; in response, a number of midstream companies were scrambling to advance offshore facilities capable of fully loading Very Large Crude Carriers (VLCCs). But that was before COVID-19 became a pandemic, and before the OPEC+ alliance collapsed and West Texas Intermediate (WTI) prices fell below $25/bbl. In this new, scarier environment — even with a new agreement by the Saudis, the Russians and others to reduce crude production — the outlook for crude exports is far less clear; in fact, existing marine terminals along the Gulf Coast may well be battling for barrels.
How to Erase a Neighborhood – Texas Monthly - Established in 1930 as the town’s “Negro District,” the East End was the only part of Freeport where Rollerson’s grandmother, Louise Richardson, was allowed to buy property after the city passed a Jim Crow–era segregation ordinance. Though the neighborhood had a view of the water, the homes and businesses were soon dwarfed by the port’s expanse of chemical plants and industrial facilities. When Rollerson was growing up here in the sixties, Freeport’s schools were starting to desegregate, but Rollerson remembers his mother saying the city still felt like a sundown town, a place where white residents could threaten and intimidate African Americans outside after dark. As a child, he and his peers stayed in their corner of the city, especially at night. Rollerson would eventually raise his own children in the East End; his oldest daughter grew up in the blue house, spoiled by her great-grandmother. But the house is long gone—his family had to demolish it in 2002 after, Rollerson says, the city wouldn’t issue him permits to make repairs. In fact, houses have vanished, one by one, all over the East End—and so have churches, schools, the barbershop, and the mom-and-pop stores that served the once-thriving community. Today, only a handful of residents still live in the East End, and weeds cover vacant lots where houses used to stand. Most of the families who used to live here have sold their properties to Port Freeport, which is planning to deepen its ship channels, part of a $295 million program to make Freeport the home of Texas’s deepest port. Alongside that project, the port plans to expand its footprint into the East End, converting the residential neighborhood into a complex of warehouses and U.S. Customs and Border Protection facilities to service the port’s expanded operations. The expansion would allow Port Freeport, which delivers an estimated statewide economic output just shy of $100 billion, to accommodate larger cargo ships in addition to servicing companies like Dow Chemical, Phillips 66, Chiquita, and Dole.Freeport’s local newspaper, the Facts, has aggressively editorialized in favor of the project and suggested that criticism of the demise of the East End is unwarranted. In October, the managing editor of the paper wrote that the “gnarled faces” of residents fighting the port expansion are holding on to memories of a bygone era. “Watching the East End transform from a place for young families into a place for international commerce undoubtedly is painful for many, but the end result will be to the long-term benefit of the city and region.”
Texas Oil Regulators Could Mandate 20% Output Cuts - With crude prices plummeting to 20 year lows and a local industry in shambles,Texas oil regulators are contemplating the unthinkable: cutting statewide oil production for the first time since the 1970s. The Railroad Commission of Texas will hold a meeting on Tuesday that could potentially result in mandated caps on the state's oil output after watching WTI prices collapse by more than 60 percent so far this year. It also comes as domestic oil storage quickly approaches its absolute limit. Ryan Sitton, one of three commissioners at the regulatory body, noted that significant cuts could “stave off a total oil industry meltdown.” Such a radical decision, which needs the authorization of two of the three RCC participants, is being weighed against a backdrop of immense pressure as oil nations come together to attempt to rebalance crude markets before it's too late. Today's decision by the RCC, which has the power to mandate output cuts in the state, could result in a mandate which requires larger oil producers to cut output by 20 percent starting on the first of May. The current decline in oil prices, triggered by a geopolitical spat between two of the world's most influential oil producers, Russia and Saudi Arabia, in addition to the demand destruction sparked by the COVID-19 pandemic, resulted in an unprecedented glut which has Texas regulators weighing the possibility of something that goes against their very grain; meddling in the free market.The meeting will come just after the historic deal reached by the Organization of the Oil Exporting Countries and its allies, referred to as OPEC+, to reduce oil production by 9.7 million barrels daily through April 2022. Exxon is not exactly a fan of the idea, with the company’s shale boss, Staale Gjervik calling the free market “the most efficient means of sorting out the extreme supply and demand imbalances we are now experiencing.” Gjervik also noted that “Proposals to impose quotas or mandatory production cuts will lead to unintended consequences for the state to the benefit of competing states in the U.S. and countries abroad."
Railroad Commission debate creates strange bedfellows - Record low oil prices have created strange bedfellows and triggered an intense debate over whether the Railroad Commission of Texas should order statewide production cuts — a power the agency that regulates the oil and gas industry has not used since the early 1970s. The three-member Railroad Commission will hear testimony from 58 witnesses on both sides of the issue during a Tuesday morning hearing. The proposed production cuts come as the coronavirus pandemic continues to crush global demand even as a monthslong price war ended over the weekend with a deal to cut production. Over the past week, a coalition of oil companies, trade associations, elected officials and others have filed 140 public comments on the topic. As of Monday afternoon, 66 of the comments were against using the power while 58 were in favor. Another 16 comments were unclear or neutral. Some 304 people filed what appeared to be form letters against the proposed state-mandated cuts. With crude oil prices trading around $22 per barrel and storage tanks filling up fast, Irving oil company Pioneer Natural Resources and Austin oil company Parsley Energy asked the panel to hold a special meeting to discuss the issue. Opponents say the agency should allow the free market to determine production.The Railroad Commission of Texas, the state agency that regulates the oil & gas industry, has the authority to order production cuts but has not used that power since the early 1970s. Record low crude oil prices have triggered a debate over whether the agency should do so now. Some 66 oil companies, trade association, politicians filed public comments against using the power while 58 are in favor. Another 16 filed unclear or neutral comments. Another 304 people filed form letters against the state-mandated cuts. Pioneer and Parsley were joined in support by five environmental groups, three former Railroad Commissioners, three trade associations and several smaller oil companies from Midland, San Antonio and Colorado.Chevron, Exxon Mobil, Occidental Petroleum, Diamondback Energy and EOG Resources, some of the most prolific drillers in Texas, were among those opposed to the proposed cuts. Other opponents included 11 elected officials, nine trade associations and Houston pipeline operator Enterprise Products Partners.The public remains divided on the issue as well. Forty percent of Texans said they do not want the cuts while 24 percent said they support them and 36 percent said they are unsure, according to a poll by the Brunswick Group.
Trump All Over The Place On Oil Prices - Indeed, are we surprised? But POTUS has reached a new level of hypocrisy on all this. So a while ago when oil prices began falling sharply, Trump bragged about how much this was going to help consumers, and he should get credit for it, of course. More recently, since WTI crude and even Brent fell below $30 per barrel (with WTI just over 20 right now, and Brent just over 30), he became worried about his pals in the oil patches of Texas, Oklahoma, and North Dakota, with Putin and MbS openly declaring they want to put US frackers out of business, oh dear. So Trump piled in to strong arm Putin and MbS into supposedly making a production cut deal, maybe 10 mbpd, although unclear either of them actually following through solidly (and some others, such as Oman, pumping it up all the way). This got about a day or two’s worth of a blip in the prices. But now we find out that Trump has not agreed to any cuts in US production, and the prices have proceeded to plunge again, for better or worse. This has led to something almost unheard of in more than half a century, the Texas Railroad Commission. It has authority over days oil can be pumped in Texas, and it and its equivalent in Oklahoma are apparently contemplating intervening and on their own reducing production in their states in order to try to prop up prices. There was a time, back in the 1950s, when the Texas RR Commission was effectively OPEC, controlling global marginal production. That has not been the case for many decades, but who knows, maybe they will be back. But then maybe Trump will not like this, given his recent claims about having “absolute authority” over all state entities and actors. As it is, on this, he does not seem to know what he wants. But what can one expect from somebody who one minute is declaring himself free of “all responsibility” but the next is claiming “absolute authority”? - Barkley Rosser
Trump Advances Massive Fracking Expansion on Colorado Federal Lands - The Trump administration on Friday released a new land use plan for southwestern Colorado that community and conservation advocacy groups warn is a "dangerous" pathway towards increased fossil fuel extraction that makes no "climate, ecological, or economic sense." Published officially Friday in the Federal Register, the Bureau of Land Management's "Approved Resource Management Plan" for the Uncompahgre Field Office affects 675,800 acres of public lands and 971,220 acres of federal mineral estate and spans six counties. It gives a 20-year blueprint for how the land can be used for purposes such as oil and gas drilling as well as livestock grazing, and was issued by the Interior Department over objections raised in public comments.The advocacy groups opposed to the plan say that expanding fracking in the region over the next decades will not only add fuel to the planetary climate crisis, but will also adversely impact local organic agriculture and endangered species. "This plan, unconscionable as the connections between fossil fuel emissions and global climate change become clearer every day, has the potential to exponentially increase greenhouse gas pollution in the region over the next decade, when we need to be drastically reducing emissions," said Melissa Hornbein with the Western Environmental Law Center. According to the groups, The plan would allow fracking on more than half of the 675,000 acres of public land and almost a million acres of federal minerals that it covers, and coal extraction on another 371,000 acres. The BLM's environmental impact analysis fails to tally direct and indirect climate pollution that would result from fossil fuel production. The new plan sets up a clash between Colorado's new law calling for a halving of carbon emissions by 2030 and what the advocacy groups say could be a 2,300% increase over the next decade in climate pollution as a result of the BLM's proposal for increased oil and gas extraction. "Ultimately," said Rebecca Fischer, climate and energy program attorney for WildEarth Guardians, "the Trump administration is testing Colorado's commitment to its new climate law, and its success depends on the state stepping up to defend bold climate action."
Marathon announces 'frac holidays,' Continental suspends dividend - Marathon will take hydraulic fracturing “holidays” and Continental will suspend its quarterly dividend and further cut crude oil production in both its resource plays. The new cuts were announced amid both an international price war between OPEC and Russia and the continuing COVID-19 pandemic. The price war appears to be ending, but demand destruction due to coronavirus continues. More than a quarter of the world’s oil demand has evaporated amid stay-home orders and other steps to curtail spread of the virus. Continental’s dividend will be suspended until further notice. It will also reduce crude oil production by 30 percent, instead of just the 5 percent it had announced in mid-March. In March, Continental had said it would cut capital expenditures by 55 percent, dropping expected capex to $1.2 billion. That program was expected to fund three rigs in the Bakken and four in Oklahoma, and would result in a 5 percent crude oil production drop. “Global crude and product demand is estimated to have been impacted by 30 percent due to COVID-19. Accordingly, we are reducing our production for April and May 2020 in a similar range.” Marathon, meanwhile, is revising its capital spending budget to $1.3 billion or less, a reduction of $1.1 billion from initial 2020 guidance. That is 50 percent below actual capital spending for 2019. In mid-March, the company had announced a 30 percent or $500 million reduction in its planned spending, completely cutting its drilling and completion activity in Oklahoma. Now it will also suspend drilling activity in the Northern Delaware. In the Bakken, it will continue to “optimize” development plans, and likewise the Eagle Ford. Then it will before shift to a lower and more continuous drilling and completion plan for the second half of 2020 in those resource plays.
US Oil Drilling Grinds To A Halt At Key Shale Hotspots - Oil and gas production in the United States has peaked and is already in decline. The latest data from the EIA’s Drilling Productivity Report sees widespread production declines across all major shale basins in the country. The Permian is set to lose 76,000 bpd between April and May, with declines also evident in the Eagle Ford (-35,000 bpd), the Bakken (-28,000 bpd), the Anadarko (-21,000 bpd) and the Niobrara (-20,000 bpd). Natural gas production is also in decline, a reality that occurred prior to the global pandemic but is set to accelerate. The Appalachian basin (Marcellus and Utica shales) are expected to lose 326 million cubic feet per day (mcf/d) in May, a loss of 1 percent of supply. In percentage terms, the Anadarko basin in Oklahoma is expected to see an even larger drop off – 216 mcf/d in May, or a 3 percent decline in production. The sudden declines in production illustrates the fatal flaw in the shale business model. Once drilling slows down, production can immediately go negative due to steep decline rates. Shale E&Ps have to keep running fast on the drilling treadmill in order to keep production aloft. But the meltdown in prices has forced the industry to idle 179 rigs since mid-March. With drilling grinding to a halt, output has slumped as “legacy” production declines take hold. That is, without new wells coming online to offset the declines from existing wells, overall production falls. In specific terms, the Permian, for example, will lose 356,000 bpd from “legacy” wells in May, more than overwhelming the 280,000 bpd in new output from new wells. On a net basis, the Permian is set to lose 76,000 bpd in May. That legacy decline rate has deepened with each passing year, requiring more aggressive drilling each month to keep production on an upward trend. But the treadmill has finally caught up to the industry. The OPEC+ deal won’t rescue a lot of shale companies. The demand destruction is simply too large for the OPEC+ cuts. With WTI at $20 per barrel on Tuesday, Permian drillers are actually receiving quite a bit less than that. “Since humans started using oil, we have never seen anything like this,” Saad Rahim, chief economist at Trafigura Group Pte. Ltd., told the Wall Street Journal. “There is no guide we are following. This is uncharted.” He estimates demand has plunged from 100 million barrels per day (mb/d) to just 65-70 mb/d currently. The WSJ says that oil storage in Cushing, OK could be full by the end of the month, which could abruptly force production shut ins in Oklahoma and Texas. That suggests the EIA estimate for a decline in U.S. shale production of 183,000 bpd in May could be optimistic. Meanwhile, analysts are eyeing a rebound for gas because of the supply curtailments already underway. The shut-ins in the Permian also help balance gas markets because associated gas will decline along with oil.
North America’s Oil Industry Is Shutting Off the Spigot – WSJ - Canceled orders were mounting when Texland Petroleum LP recently decided to shut in each of its 1,211 oil wells to cease production by May. “We’ve never done this before,” said Jim Wilkes, president of the 7,000-barrel-a-day Fort Worth, Texas, firm, which has weathered oil busts since 1973. “We’ve always been able to sell the oil, even at a crappy price.” Now there are no buyers for the crude coming from its wells and no choice but to shut them in. Texland told state regulators its plans and applied for a loan through the Small Business Administration’s Paycheck Protection Program to keep its 73 employees on payroll. From the West Texas desert, where oil is blasted from deep shale formations, to the wilds of western Canada, where multibillion-dollar steam plants bubble thick crude from the earth’s crust, energy producers are resorting to the desperate measure of shutting in productive wells. The sharp drop in fuel consumption caused by the coronavirus pandemic and exacerbated by a feud between the world’s largest producers has limited options for North American oil companies. Pipelines, refiners and storage facilities are filling up. Even when there is somewhere to send oil, low prices mean that many barrels lose money. West Texas Intermediate, the main U.S. price benchmark, ended Thursday at $22.76 a barrel, down 63% since the start of the year. It’s been even worse in Midland, Texas, where a lot of oil extracted from the Permian Basin is priced, and in western Canada, from which most of the country’s output comes. Oil has traded below $10 a barrel in both markets.Since mid-March, producers ranging from Exxon Mobil Co and Royal Dutch Shell to Oklahoma City’s Devon Energy and Cenovus Energy of Calgary, Alberta, collectively have announced spending cuts totaling some $50 billion. The number of rigs drilling in the U.S. has fallen to about 600, down from nearly 800 a month ago, according to Baker Hughes Co. BKR 1.09% Drilling is always down in Canada this time of year, when the spring thaw hinders accessibility, but the 35 rigs operating there are the fewest Baker Hughes has ever counted. It can take months for the flow from new wells to taper off, so production has only begun to reflect the austerity. U.S. production has declined about 5% from March’s record levels, according to the Energy Information Administration.
Rystad Lowers Production Outlook For Shale By 2.15 Million Bpd - Rystad Energy had been projecting an increase in US shale production of 650,000 bpd by the end of this year, but recent developments have caused it to take a more pessimistic view of what’s to come in the shale industry, the Houston Chronicle reported on Thursday.U.S. Shale was pumping 10.4 million bpd in January 2020, and the 650,000 bpd of additional shale production that Rystad was anticipating we’d see by the end of 2020 would have seen U.S. shale produce more than 11 million bpd by the end of this year. But the coronavirus, which stripped away demand, and overzealous production by OPEC have both lowered the price of oil and filled oil storage to the brim.The result? Rystad has lowered its projected change in output for the year by 2.15 million barrels per day. Additionally, it cautioned that this figure may “slide even further”.So instead of shale production increasing by 650,000 bpd, Rystad is now expecting production to decrease by 1.5 million bpd by the end of 2020.Rystad’s projections were released on Thursday and come in the same week as the Energy Information Administration’s Drilling Productivity Report forecast that U.S. shale production in the seven most prolific basins for April is expected to fall by a record amount—193,625 bpd. The EIA expects this production to fall again in May by another 182,673 bpd. According to the EIA’s DPR, U.S. shale production has fallen by 546,622 bpd since December 2019.The largest loss will come from the Permian Basin, the EIA’s report showed. West Texas Intermediate (WTI) was trading below $20 per barrel on Thursday afternoon, down 0.60% at $19.75.
Baker Hughes Takes $15B Charge for Q1 - Baker Hughes Co. reported Monday that it expects to record an approximately $15 billion non-cash goodwill impairment charge for the first quarter of 2020. “The company’s market capitalization declined significantly during the first quarter driven by current macroeconomic and geopolitical conditions inducing the collapse of oil prices driven by both surplus production and supply as well as the decrease of demand caused by the COVID-19 pandemic,” Baker Hughes noted in a written statement emailed to Rigzone. The firm also stated that ongoing uncertainty tied to oil demand is dramatically affecting its primary customers’ investment and operating plans. “Based on these events, Baker Hughes concluded that a triggering event occurred which required the company to perform an interim quantitative impairment test as of March 31, 2020,” the company continued. Baker Hughes added the results of the impairment test led it to conclude that the carrying value of its Oilfield Services and Oilfield Equipment reporting units exceeded the estimated fair value, prompting the goodwill impairment charge. “This charge will not impact the company’s cash flow,” Baker Hughes stated. “This charge is subject to finalization.” In addition to reporting the $15 billion non-cash accounting write-down, Baker Hughes revealed Monday that it has approved a plan for restructuring, impairment and other charges totaling approximately $1.8 billion. It stated that it will record approximately $1.5 billion of the total in the first quarter of this year.
OPEC+ Deal Is “Too Little and Too Late” - “The historic agreement that we saw…is only 10 mb/d. But that is only half of the story,” U.S. Secretary of Energy Dan Brouillette said on Fox Business. “When you add up all of the production cuts around the world, we are going to be much closer to 20 mb/d coming off the market.” After several days of negotiations, OPEC+ pulled off a historic production cut of around 10 million barrels per day. Additional cuts from a series of non-OPEC countries, including the U.S., magnified the headline number, although those cuts are not mandatory. Instead, the market is going to force shut ins, a trend for which the Trump administration is taking credit as a “cut.” Through some optimistic accounting, the Trump administration billed the deal as a cut of nearly 20 mb/d. In reality, the figure will be much smaller. In any event, the drop in global demand exceeds the cuts by so much that oil prices were flat on Monday. That’s not to say the deal will have no effect at all. Instead, it could prevent a more catastrophic meltdown, even if it doesn’t rally prices anytime soon. “Having looked into the abyss three weeks ago, the deal should provide some stability to global oil prices and reduce volatility,” Bank of America Merrill Lynch wrote in a note on Monday. The deal mitigates some of the destruction in the U.S. shale patch. Bank of America predicted that U.S. oil production would have fallen by as much as 3.5 mb/d by the end of next year absent a deal. The cuts announced by OPEC+ could translate into a drop in U.S. production by a more modest 1.8 mb/d instead. Nevertheless, the current meltdown is already having an effect. The North American oil industry has announced roughly $50 billion in spending cuts over the past month, according to the Wall Street Journal. The U.S. and Canada have shelved more than 300 rigs since mid-March.
Oil Deal Will Not Save Weakest Shale Producers-- President Donald Trump said the “big Oil Deal” sealed on Sunday will save hundreds of thousands of American jobs. But the agreement he brokered depends on a sharp downturn in shale that will likely bring about a wave of bankruptcies and job cuts. Days of frantic diplomatic maneuvering culminated in an agreement on Sunday by OPEC+ to pare production by 9.7 million barrels a day, ending a devastating price war between Saudi Arabia and Russia and belatedly tackling a plunge in demand caused by the coronavirus outbreak. The lockdowns enacted across much of the world to slow its spread have caused consumption to crater by as much as 35 million barrels a day. Rather than agree to any formal cuts, Trump is counting on market forces to shave some 2 million barrels a day of overall U.S. output by the end of the year. U.S.-focused oil producers have already slashed more than $27 billion from drilling budgets this year and are starting to shut in production. That could spell the end for some shale explorers drowning in debt. “Trump’s strategy seems to rely on the free market forcing production down and implicit in that is some companies going under,” said Dan Eberhart, a Trump donor and chief executive of drilling services company Canary Drilling Services. Almost 40% of oil and natural gas producers face insolvency within the year if crude prices remain near $30 a barrel, according to a survey by the Federal Reserve Bank of Kansas City. Oil producer Whiting Petroleum Corp. and service provider Hornbeck Offshore Services Inc. filed for bankruptcy last week. Explorers idled 10% of the U.S. oil-drilling fleet, with more than half of the losses in the Permian Basin of West Texas and New Mexico, the heart of America’s shale industry, while Concho Resources Inc. said Friday that it and other producers are shutting in output.
U.S. banks prepare to seize energy assets as shale boom goes bust – (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid losses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters. JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said. The banks did not provide comment in time for publication. Energy companies are suffering through a plunge in oil prices caused by the coronavirus pandemic and a supply glut, with crude prices down more than 60% this year. Although oil prices may gain support from a potential agreement Thursday between Saudi Arabia and Russia to cut production, few believe the curtailment can offset a 30% drop in global fuel demand, as the coronavirus has grounded aircraft, reduced vehicle use and curbed economic activity more broadly. Oil and gas companies working in shale basins from Texas to Wyoming are saddled with debt. The industry is estimated to owe more than $200 billion to lenders through loans backed by oil and gas reserves. As revenue has plummeted and assets have declined in value, some companies are saying they may be unable to repay. Whiting Petroleum Corp became the first producer to file for Chapter 11 bankruptcy on April 1. Others, including Chesapeake Energy Corp, Denbury Resources Inc and Callon Petroleum Co, have also hired debt advisers. If banks do not retain bankrupt assets, they might be forced to sell them for pennies on the dollar at current prices. The companies they are setting up could manage oil and gas assets until conditions improve enough to sell at a meaningful value. Big banks will need to get regulatory waivers to execute their plans, because of limitations on their involvement with physical commodities, sources said. Banks are hoping their planned ownership time frame of a year or so will pass a Federal Reserve requirement that they do not plan to hold assets for a long time. Because lenders would be stepping in to support part of the economy that is important to any potential rebound, and which has not gotten direct bailouts from the federal government, that might help applications, too. For now, the banks are establishing holding companies that can sit above limited liability companies (LLCs) containing seized assets. The LLCs would be owned proportionally by banks participating in the original secured loan. To run the oil-and-gas operations, banks might hire former industry executives or specialty firms that have done so for private equity, sources said. Houston-based EnerVest Operating LLC would be among the most likely operators, sources said.
Fed's Corporate Debt-Buying Could Mean Billion-Dollar Big Oil Bailout - As calls for a People's Bailout in response to the coronavirus pandemic continue to grow across the United States, a new analysis warns that the country's Big Oil companies "stand to reap yet another billion dollar bailout" thanks to the Federal Reserve's plans to buy up to $750 billion in corporate debt. The analysis (pdf), released Wednesday by the advocacy group Friends of the Earth (FOE), explains that this expected bailout for polluters relates to a controversial $500 billion corporate slush fund included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that Congress passed in March. According to FOE's report, The Big Oil Money Pit:Of that amount, Treasury Secretary Steven Mnuchin enjoys direct control over a comparatively small $46 billion reserved for aviation and industries deemed essential to "national security." But the remaining $454 billion went to the Federal Reserve, which will use the money to implement emergency lending programs for corporations and municipalities. Secretary Mnuchin must approve these lending programs and wields considerable power over their design, but the money itself will move through the Fed. After weeks of unprecedented human suffering and an ongoing failure to support frontline workers, the Fed announced on April 9, 2020 how it would spend the first $195 billion of the slush fund. A full $75 billion would go to buy corporate debt. But because the Fed can leverage money appropriated by Congress, the real size of this program is $750 billion. FOE found that the fossil fuel giants ExxonMobil, Chevron, and Conoco "are together eligible for a maximum $19.4 billion in benefits, based on their credit ratings and outstanding long-term debt." The Fed has hired BlackRock, the world's largest asset manager, to administer part of its debt-buying efforts related to the pandemic. "As BlackRock begins purchasing 'high yield' exchange-traded funds (ETFs) to bolster corporate debt markets," FOE warns, "energy companies (predominantly oil and gas) stand to benefit disproportionately as the largest single issuer of junk bonds, at 11% of the entire U.S. market." Other key takeaways from the report include:
- There are 12 fracking-focused oil and gas companies that could potentially qualify for the new program. Together, they may be eligible for over $24.1 billion in potential benefits.
- Major fracking company Continental Resources, whose debt was recently downgraded to below investment grade by S&P, is potentially eligible for as much as $1.5 billion under new, weaker standards announced by the Federal Reserve.
Echoing climate campaigners' after President Donald Trump met with fossil fuel executives at the White House earlier this month, FOE senior policy analyst Lukas Ross said in a statement Wednesday that "oil company bailouts are simply throwing good money after bad." "Congress and the Democrats must stop this endless stream of handouts to an industry that is exploiting a public health crisis for financial gain," Ross declared. "These potential payoffs to major campaign contributors are the least efficient way of re-starting the economy and will just serve to enrich oil executives."
Landlocked natural gas producers look to potential West Coast export terminal for hope - Natural gas producers in Wyoming had already been battling tough market conditions well before the coronavirus outbreak started paralyzing the world’s energy economy. Wyoming boasts 16 of the country’s biggest natural gas fields. But other plays in the Permian Basin, as well as the Marcellus and Utica shale formations in the Northeast, have made competition tight for Wyoming producers. On top of that, wicked-low natural gas prices have been driving Wyoming’s top producers to cut back on production. For years, Wyoming operators have held out hope for accessing international demand for natural gas. Last month, natural gas producers throughout the Rockies scored a small win when the Federal Energy Regulatory Commission, or FERC, gave the green light to the Jordan Cove liquefied natural gas export terminal in Coos Bay, Oregon, along with a corresponding 229-mile pipeline. Landlocked Wyoming could see high returns if the export terminal on the west coast comes to fruition, because it would offer access to markets in Asia, proponents say. Even still, the export terminal has had its fair share of controversy and been in the works for over a decade. For one, it’s hit several roadblocks over the years, particularly from the state’s regulatory bodies. Oregon’s Department of Environmental Quality blocked necessary water quality certificates last year. The project’s owner, Canadian energy company Pembina Pipeline Corp., still needs to obtain an extension for a dredging permit with the Department of State Land, too. In the latest hiccup, Oregon Department of Land Conservation and Development objected to the project, though the energy company is working on an appeal. “As a result of this objection, neither FERC nor (the Army Corps of Engineers) can grant a license or permit for this project unless the U.S. Secretary of Commerce overrides this objection on appeal,” the Department of Land Conservation and Development stated in its objection to the project.The proposed facility has also faced significant protest from several environmental groups for well over a decade. Constructing and operating the facility would damage coastal ecosystems, crucial waterways and the climate, opponents say. Given the steep regulatory hurdles, the federal nod of approval last month gave the project’s supporters a needed boost in the long battle to secure additional natural gas markets.
New hearing ordered over lawyer fees in Keystone XL case (AP) — The Nebraska Supreme Court ordered a new hearing Friday in a dispute over who should pay the lawyer who represented landowners against the developer of the Keystone XL pipeline when the company was trying to gain access to their land. The landowners along the old proposed route have argued that TC Energy, formerly TransCanada, should pay their attorneys’ legal fees. Company officials had tried to invoke eminent domain so they could run the pipeline through the property of 40 Nebraska landowners who objected to the project on their land. Those cases were still pending when the state Supreme Court issued a separate ruling that threw into question whether the company’s planned route through Nebraska was constitutional. In response, TC Energy dropped its eminent domain cases and chose to reapply for a new route, but landowners argued that the company should have to pay the costs of the lawyer who agreed to represent them. An Antelope County judge initially ruled in favor of the landowners and ordered TC Energy to pay their legal fees, but the company appealed. A district court judge who heard the case reversed the decision and sent the case back to the county court for another hearing. Meanwhile, the state Supreme Court ruled in a similar case that TC Energy didn’t have to pay the legal fees of landowners in two other counties. Based on that ruling, the Antelope County judge concluded that a new hearing wasn’t necessary. The landowners appealed that decision to the district court, which again ordered the county court to hold a hearing. TC Energy responded by appealing to the Nebraska Supreme Court to resolve the dispute. “By concluding that the ordered ‘rehearing’ was pointless ... the county court deviated from the district court’s mandates, which it lacked the authority to do,” Justice John Freudenberg wrote in the opinion.
Judge Tosses Major Keystone XL Permit - A federal judge delivered a win to endangered species and a blow to the controversial Keystone XL pipeline on Wednesday when he tossed a crucial permit it needed to cross hundreds of rivers and streams. The ruling marks yet another setback for the 1,200 mile-long fossil fuel project that was first proposed in 2008 but canceled twice during the Obama administration over climate concerns before President Donald Trump resuscitated it in the early days of his administration, The Associated Press Reported. "The court has rightfully ruled against the Trump administration's efforts to fast track this nasty pipeline at any cost," Tamara Toles O'Laughlin of environmental group 350.org said in a statement reported by The Guardian. "We won't allow fossil fuel corporations and backdoor politicians to violate the laws that protect people and the planet." Chief U.S. District Judge Brian Morris ruled in Montana in favor of a coalition of green groups including the Sierra Club, the Center for Biological Diversity and the Natural Resources Defense Council (NRDC) who brought the suit challenging the permit last year, HuffPost reported. He found that the U.S. Army Corps of Engineers did not consider how a 2017 water crossing permit would impact endangered species like pallid sturgeon. While the decision comes less than two weeks after pipeline construction started on the U.S. / Canada border in Montana, it won't immediately halt that construction, The Associated Press reported. However, it could cause major delays going forward. "It creates another significant hurdle for the project," Anthony Swift of NRDC told The Associated Press. "Regardless of whether they have the cross border segment ... Keystone XL has basically lost all of its Clean Water Act permits for water crossings." Pipeline owner TC Energy said it would review the decision but pledged to move ahead. However, the project could face an even more immediate setback. The same judge will hear a case Thursday, April 16 brought by tribal communities seeking an injunction to halt the just-started construction on the border over concerns construction worker could bring the new coronavirus to rural communities there.
Keystone XL Pipeline Permit Canceled Because Of Fish - A Montana judge canceled a vital permit for the controversial Keystone XL oil pipeline with the argument that the U.S. Army Corps of Engineers failed to consider the effects of the pipeline on one fish species present in rivers that the route of the Keystone XL would cross.The cancellation comes just days after work on the construction of the pipeline began after two years of setbacks. Bloomberg reported last week that construction works had started on the Canadian part of the pipeline amid calls from opponents to delay the start because of the coronavirus outbreak.These construction works will not stop due to Judge Brian Morris’s ruling, the AP notes in a report on the news. However, it will delay work on the U.S. side of the border, perhaps indefinitely.“It creates another significant hurdle for the project,” said a representative of one of the organizations opposing the Keystone XL. “Regardless of whether they have the cross border segment ... Keystone XL has basically lost all of its Clean Water Act permits for water crossings.”The Canadian National Energy Board approved the start of preliminary work on the Keystone XL pipeline in January last year, but U.S. opposition has been strong and relentless.The pipeline, vetoed by President Obama and then given the green light by President Trump, was planned to carry heavy oil from Alberta to U.S. refineries. The 830,000 bpd pipeline will run from the Albertan oil sands through Montana and South Dakota, ending in Nebraska, where it will connect to the existing pipeline network that goes on to the Gulf Coast.A lot of the opposition to the project—and the reason President Obama vetoed it—was that it was believed to be unnecessary for the U.S. energy sector. It was, however, vital for the Canadian energy sector, which has been struggling with a pipeline shortage for several years now.
Coleman Oil settles with EPA over spill in river - — Coleman Oil Co. has settled two lawsuits with the federal government over a 2017 biodiesel spill in the Columbia River.A leaking underground pipe spilled 3,800 gallons of biodiesel into the Columbia River from a plant the company was using in Wenatchee. The company came to a consent agreement with the U.S. Environmental Protection Agency on Nov. 22, 2019, and agreed to a $133,200 penalty, according to a news release from the EPA.The company already settled $170,000 in fines with the state Department of Ecology in June 2019.According to the EPA news release, the agency found Coleman Oil facility’s spill-prevention plan had several violations, including:
- Failure to include protective wrapping and coating of buried pipeline
- Failure to conduct integrity and leak testing
- Failure to prevent or detect problems in buried piping
- Failure to come up with prevention measures and discharge or drainage controls for buried piping
As part of the consent agreement, Coleman Oil did not admit or deny the facts of the case. The site has since been decommissioned by Coleman Oil, according to the news release.
State responds to oily water spill at Trans-Alaska Pipeline terminal -- Alaska’s Department of Environmental Conservation is responding to an oil spill at the Marine Terminal in Valdez — at the end of the Trans-Alaska Pipeline. On Sunday, equipment owned by Alyeska Pipeline Service Company malfunctioned and a mixture of North Slope Crude and water spilled under the snow. That mixture traveled over land and into the water in one of the tanker berths. As of 6 a.m. on Tuesday, Alyeska said that approximately 13,692 gallons of oily water had been recovered by an incident management team. Crews under contract with Alyeska have corralled a 30-foot by 30-foot area of oily water with fishing vessels and aircraft contracted to watch for any escapement.
Alyeska Pipeline cleaning up oil spill at Valdez Marine Terminal - Alyeska Pipeline Service Company says that as of Tuesday morning, roughly 326 barrels — 13,692 gallons — of oily water have been recovered at the Valdez Marine Terminal. APSC said in a press release that an oily sheen was noticed on water near the terminal's small boat harbor on Sunday around 8:00 p.m. "Responders were on scene within the hour and continue response activities including deployment of sorbents sweeps, sausage boom and containment boom," the company wrote. "A team of vessels were dispatched and continue deploying current buster boom while another team of responders is performing on-land cleanup." Alyeska Pipeline says an incident management team responded to the terminal Monday night to aid in the investigation and spill management. The company says the cause of the spill and the volume of oil spilled are currently unknown. No injuries have been reported at this time.
Key BP Deal Threatened by Buyer's Financing Snag – WSJ - BP’s sale of its Alaskan business is in jeopardy after a group of banks balked at financing the $5.6 billion deal to buyer Hilcorp Energy Co. amid a historic rout of oil and gas prices, according to people familiar with the deal. A failure to complete the deal would be a blow to BP, which already has the highest debt levels—in relation to its size—among the major oil companies and is counting on the transaction to help reduce its debt. It is the largest deal involving oil and gas production assets globally that has yet to close, according to data provider Dealogic. A group of banks led by JPMorgan Chase & Co. and including Wells Fargo & Co. had earlier discussed providing privately held Hilcorp with a reserve-based lending facility to help finance the deal. The proposed vehicle would essentially be a loan based on the future cash flows from oil and gas assets. But the collapse in oil prices related to the coronavirus pandemic and cratering energy demand has made the banks uncomfortable providing the loan, say the people familiar with the matter. BP declined to comment on the deal. JP Morgan and Wells Fargo also declined to comment. The global benchmark oil price has fallen nearly 60% this year as an unprecedented glut of crude builds while much of the global economy is closed. BP’s shares are down 29% this year, in line with peers such as Chevron Corp. and TotalSA . BP and other large, Western oil companies have been using asset sales to help fund their capital expenses and dividend payments to investors for years. But the market for oil and gas assets has become virtually nonexistent, meaning major oil firms may have to take on more debt to fund their budgets and maintain investor payouts.For BP, the deal with Hilcorp represents a large chunk of the $15 billion asset sales it aims to complete by mid-2021. The divestments should help lower the company’s gearing—the ratio of net debt to the total of net debt and equity—which stood at 35% including leases in the fourth quarter, higher than any of its peers. This is above the company’s long-term target level of between 20% and 30%.
Western Canadian Select Falls Below $5 | OilPrice.com Canadian oil is struggling. And I mean really, really having a tough time. Alberta's benchmark, Western Canadian Select, is now cheaper than a pint of beer. Sitting at $4.71 at the time of writing, WCS is facing a nightmare scenario.Fortunately for Alberta, Canada's Prime Minister Justin Trudeau said this month that the government was scrambling to secure an aid package for the country's oil sector. And though the help has been slow to come, it seems the administration is now closer than ever to providing some relief for the ailing industry. “We recognize that the most important thing from the very beginning was to get help out to Canadians right across the country, regardless of the sectors they’re in, regardless of their situation or their location,” the prime minister said.And some relief has come. Not only have OPEC and a slew of other oil producers across the globe agreed upon a massive 9.7 million barrel per day cut in oil production, but the Canadian government has also been making some attempts to prop up the industry. In Saskatchewan, mineral rights have been extended until 2021, allowing more time for producers to plan since holding onto those titles typically means drilling a well - which in this environment, is currently out of the question. Warren Waldegger, the president and CEO of Fire Sky Energy, noted that “An extra year on some of those leases...hopefully will lead to future drilling activity." Alberta too has seen some relief, with a $100 million loan to the Orphan Well Association to begin the reclamation and abandonment of up to 1000 more wells. Additionally, the government noted that it will enact important reforms under Bill 12 of the Oil & Gas Conservation Act, allowing the Orphan Well Association to sell oil from orphan wells to associated pipelines. But whether or not the government is doing enough to support the industry through this crisis remains unclear. The mega-relief package that Finance Minister Bill Morneau touted was only "hours away" a few weeks ago still hasn't come.
Exploration firm Ascent Resources announces first acquisition in Cuba - Oil and gas exploration and production firm Ascent Resources has announced its first acquisition in Cuba, marking its entry into the Caribbean market. The acquisition includes UK-based Energetical Limited, which has exclusive rights to secure a production sharing contract (PSC) on a producing onshore Cuban oil licence. Energetical delivers exclusive rights to the Block 9B in Cuba. This block contains the onshore Majaguillar and San Anton fields, located on the north coast of Cuba. The block currently produces 190 gross barrels of oil per day (bopd) from three wells. Ascent said it is reviewing potential further acquisitions to develop a wider Cuban portfolio across the oil and gas sector, along with the existing oil and gas asset in Slovenia. Ascent Resources executive chairman James Parsons said: “Cuba is one of the last remaining largely untapped hydrocarbon provinces of scale. “We see here, despite the recent market turmoil and oil price collapse, the unique ingredients for a new, highly material, growth trajectory across oil, gas and mining when the cycle turns.
Brazil Cuts Oil Production On 62 Offshore Platforms - Petrobras has started shutting down production at 62 offshore platforms in the shallow waters off its coast, Reuters reported, adding that the cuts will amount to 23,000 bpd. Petrobras said earlier that as part of a global effort to support oil prices, it would cut some 200,000 bpd from its daily production, an earlier Reuters report said.OPEC+ agreed last week to reduce its combined production by 9.7 million bpd. This was less than most traders expected and a lot less than the slump in demand, which could be as much as 30 million bpd. However, with cuts from non-OPEC+ partners such as Brazil, Norway, Canada, and the United States, the total reduction in supply could reach 20 million bpd.The bad news is this won’t be enough. The International Energy Agency (IEA) said in its latest monthly Oil Market Report that the coronavirus outbreak has so far caused a record drop in oil demand, at 9.3 million bpd from 2019 levels. In April alone, demand fell by 29 million bpd. Over the second quarter, the IEA said, demand would recover somewhat, to 23 million bpd below 2019 levels, and then further down the road, it could recoup most of the losses, ending the year 2.7 million bpd below 2019 levels.It is clear to everyone that the cuts are necessary, but it also seems clear that they will not be enough to offset the demand decline fully. What’s worse is that global oil storage is filling up, and it will continue filling up despite the cuts. This seems to be the only thing that could force additional production cuts from most, if not all, oil producers. Brazil, too, may have to cut deeper. The country was on course to a new oil boom in its presalt zone offshore when the crisis hit and persistently low prices could be the death of this oil boom. Currently, the country is producing around 3 million bpd but had plans to increase this substantially. According to OPEC’s February MOMR, Brazil’s production was expected to grow by 310,000 bpd in 2020.
Ecuador scrambles to contain oil spill in Amazon region (Reuters) - Ecuadorean authorities on Thursday were scrambling to limit the environmental impact of a crude oil spill in the country’s Amazon region, where pipeline bursts prompted by a landslide this week caused crude to enter the Coca river. The Energy Ministry said in a Wednesday evening statement that it had placed barriers around the spill in an area home to several indigenous communities and near the source of drinking water for the city of El Coca, with some 45,000 residents. State-run Petroecuador, which manages the SOTE pipeline, and private Heavy Crude Pipeline (OCP) said they had deployed six teams across several areas to “contain the spill.” Authorities have not yet provided an estimate for how much crude was lost due to the pipeline ruptures. El Coca had preventatively shifted its water supply to another nearby river, the Payamino, due to the spill and had faced some disruption, said Juan Baez, the city’s potable water director. He said normal service would likely be restored by Thursday evening. “This was big, something like this has never happened,” Baez said in a telephone interview. Holger Gallo, the president of the Panduyaku indigenous group in Sucumbios province, said pollution in the river from the spill was visible to members of his community. “Indigenous communities feel affected because our livelihoods come from hunting and fishing,” Gallo told Reuters. “Our way of life will be seriously affected.” The government and OCP said they would assist with potable water supply if it became necessary. Both OCP and Petroecuador said they would begin cleaning the banks of the Quijos and Coca rivers, and were installing temporary pipelines to continue pumping crude until the pipes could be repaired.
Turkish vessels avert tanker accident in Bosphorus -Crude oil tanker M/T Militos was taken under control by tugs, turned around and towed back to Marmara sea after it suffered an engine failure in southern Bosphorus, on April 12 [talasexpresshaber.com] () A possible accident in Bosphorous was averted by Turkish coastal authorities after a Greek-registered oil tanker suffered engine failure causing it to drift in the narrow water channel in Istanbul before being tugged into safety. The 274-metre M/T Militos crude oil tanker suffered engine failure during its journey from the Marmara Sea to the Black Sea. Turkish coastal police teams arrived at scene in less than 10 minutes after the alert was sent. The rescue vessel Mehmetçik and tugboats, which are on stand by 24/7 to respond to any possible call for help in various parts of the Bosphorus, repositioned the tanker and prevented it to drift. Difficult to navigate Bosphorus is one of the most difficult water routes in the world for large ships and vessels. Around 50,000 vessels pass through Istanbul's 30-km and 700 metres wide Bosphorus every year, with some 9,000 vesseles carrying dangerous goods such as crude oil. About 2.4 million barrels of oil passes through Bosphorus every day, and accidents keep occurring in the strait. Some of them have caused major environmental disasters.
China's March crude oil imports rose 4.5% year-on-year on stockpiling - (Reuters) - China’s crude oil imports in March rose 4.5% from a year earlier, according to official customs data, as refiners stocked up on cheaper cargoes despite falling domestic fuel demand and cuts in refining rates caused by the COVID-19 disease outbreak. China, the world’s top crude oil importer, took in 41.1 million tonnes of oil, according to the official data from the General Administration of Customs. That is equal to 9.68 million barrels per day (bpd). The official March figure in bpd compared to an average of 10.47 million bpd for the first two months of the year. Imports in the first quarter rose 5% from a year earlier to 127.19 million tonnes, customs said, equal to 10.2 million bpd. Reuters reported a higher import number earlier for March based on quarterly figures released in a customs statement and data from previous months. In the official data set, the customs department gave a lower figure for the quarterly imports. Refiners, including state majors and private plants, began slashing crude throughput in February as fuel demand collapsed amid a nationwide lockdown to contain the novel coronavirus. But independent plants, also known as “teapots”, started cranking up production rates in March, as a plunge in oil prices triggered by the Saudi-Russia price war boosted margins. “Teapots started to book crude oil from late February when domestic virus transmission was easing. Some of the vessels have arrived in March and more will come in April,” said Li Yan, senior analyst at Longzhong Information Group. Li also expected an increase in oil imports in late April and May as Chinese refineries scrambled to purchase cheap energy after oil prices collapsed.
Mexico Ends Oil Standoff With OPEC - Mexican President Andres Manuel Lopez Obrador said Friday that his country will cut its crude oil output by 100,000 barrels per day, joining OPEC and other producers in efforts to stabilize the market. Lopez Obrador, speaking at his daily press briefing, said President Trump “generously” offered for the U.S. to reduce output by an additional 250,000 barrels a day, according to The Wall Street Journal. OPEC was hoping Mexico would lower its output by 400,000 barrels a day, and the country's initial delay in joining the pact had jeopardized the arrangement. "The United States will help Mexico along and they'll reimburse us some time at a later date when they're pepared to do so," Trump said at a press conference on Friday. U.S. producers cannot coordinate to lower output because doing so would run afoul of antitrust laws. Governments on the state or federal level would have to “mandate a production cut,” allowing the market to “answer this from a U.S. perspective,” Stephen Shorck, founder and editor of The Shorck Report, told FOX Business. Ahead of Thursday’s meeting, U.S. producers, including Continental Resources, had already reduced their daily output by a combined 600,000 barrels per day, Shorck said. Still, there has not been an order from the Trump administration to lower production. The apparent end to Mexico’s standoff would potentially cement a deal between OPEC producers and their allies that would reduce global crude oil output by 10 million barrels a day until July, and initiate a ceasefire in the price war that began last month between Saudi Arabia and Russia.
OPEC and allies finalize record oil production cut after days of discussion - OPEC and its oil producing allies on Sunday finalized a historic agreement to cut production by 9.7 million barrels per day, following days of discussions among the world’s largest energy producers. It’s the single largest output cut in history. West Texas Intermediate crude, the U.S. benchmark, was up 0.83% on Monday to $22.95 per barrel. Brent crude was down 0.22% to $31.41. Sunday’s emergency meeting — the second in four days — came as oil-producing nations scrambled to reach an agreement in an effort to prop up falling prices as the coronavirus outbreak hammers demand. The agreement ends a Saudi Arabian-Russian price war that broke out at the beginning of March and had pressured oil prices as each sought to gain market share. On Thursday, OPEC+ proposed cutting production by 10 million barrels per day — amounting to some 10% of global oil supply — but Mexico opposed the amount it was being asked to cut, holding up the final deal. Talks continued on Friday when energy ministers from the Group of 20 major economies met, and while all agreed that stabilization in the market is needed, the group stopped short of discussing specific production numbers. Under OPEC+’s new agreement, Mexico will cut 100,000 bpd, a quarter of what it had been asked to cut on Thursday. The 9.7 million bpd cut will begin on May 1 and will extend through the end of June. The cuts will then taper to 7.7 million bpd from July through the end of 2020, and 5.8 million bpd from January 2021 through April 2022. The 23-nation group will meet again on June 10 to determine if further action is needed. “This is at least a temporary relief for the energy industry and for the global economy,” Rystad Energy’s head of analysis Per Magnus Nysveen told CNBC in an email. “Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided.” President Donald Trump, who has been heavily involved in brokering a Saudi Arabian-Russian price war, said in a tweet that it’s a “great deal for all” that “will save hundreds of thousands of energy jobs in the United States.”
OPEC : The 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting concludes - The 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting was held via videoconference, on Sunday, 12 April 2020, under the Chairmanship of HRH Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, and co-Chair HE Alexander Novak, Minister of Energy of the Russian Federation. The Meeting reaffirmed the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DoC) to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital. The Meeting emphasized the important and responsible decision to adjustment production at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 09/10 April. Furthermore, the Meeting took note of the G20 Extraordinary Energy Ministers Meeting held on April 10, which recognized the commitment of the producers in the OPEC+ group to stabilize energy markets and acknowledged the importance of international cooperation in ensuring the resilience of energy systems. In view of the current fundamentals and the consensus market perspectives, and in line with the decision taken at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, all Participating Countries agreed to:
- Reaffirm the Framework of the DoC, signed on 10 December 2016 and further endorsed in subsequent meetings; as well as the Charter of Cooperation, signed on 2 July 2019.
- Adjust downwards their overall crude oil production by 9.7 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020. For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 7.7 mb/d. It will be followed by a 5.8 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022. The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and The Russian Federation, both with the same baseline level of 11.0 mb/d. The agreement will be valid until 30 April 2022, however, the extension of this agreement will be reviewed during December 2021.
- Call upon all major producers to provide commensurate and timely contributions to the efforts aimed at stabilizing the oil market.
- Reaffirm and extend the mandate of the Joint Ministerial Monitoring Committee and its membership, to closely review general market conditions, oil production levels and the level of conformity with the DoC and this Statement, assisted by the Joint Technical Committee and the OPEC Secretariat.
- Reaffirm that the DoC conformity is to be monitored considering crude oil production, based on the information from secondary sources, according to the methodology applied for OPEC Member Countries.
- Meet on 10 June 2020 via videoconference, to determine further actions, as needed to balance the market.
U.S., Saudi Arabia, Russia Lead Pact for Record Cuts in Oil Output – WSJ - Saudi Arabia, Russia and the U.S. agreed to lead a multinational coalition in major oil-production cuts after a drop in demand due to the coronavirus crisis and a Saudi-Russian feud devastated oil prices. The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact. As part of the agreement, 23 countries committed to withhold collectively 9.7 million barrels a day of oil from global markets. The deal, designed to address a mounting oil glut resulting from the pandemic’s erosion of demand, seeks to withhold a record amount of crude from markets—over 13% of world production. The U.S. has never been so active in forging a pact like this. On a hastily convened conference call with delegates from the 13-nation Organization of the Petroleum Exporting Countries and others, including Russia, participants raced to strike a deal before oil markets opened Monday. They expected prices to crash without an accord. It was a diplomatic victory for Mr. Trump. His allies in the oil industry prodded him to press international rivals to cut supply before it caused a wave of U.S. bankruptcies. Mr. Trump, on Twitter, said the deal will “save hundreds of thousands of energy jobs in the United States,” and he thanked the Russian and Saudi Arabian leaders for their cooperation. Mr. Trump and his representatives weren’t present at Sunday’s meeting. Still, the American president’s presence loomed large, after calling the Saudi leadership and Mexican President Andrés Manuel López Obrador over recent days. Mr. Trump also placed phone calls last month urging the Saudi and Russian leaders to call a cease-fire in their price war against each other. Christi Craddick, a regulator with the Texas Railroad Commission—which regulates oil in the U.S.’s largest oil-producing state—said Mr. Trump’s “aggressive actions and continued engagement to bring Saudi Arabia and Russia to the table to reduce global oil production was crucial to defending the domestic energy industry” and avoiding a downward spiral in oil prices. Investors remain concerned that the cuts might not be enough to support higher prices in the coming weeks as world-wide lockdowns pummel demand for gasoline, diesel and jet fuel.The curbs will mitigate some issues in oil markets, but some analysts said they were too little, too late. Amid travel restrictions and work stoppages, oil consumption is expected to fall by as much as 30 million barrels a day this month. Under the final deal disclosed Sunday, Mexico will cut 100,000 barrels a day of output, some 250,000 barrels fewer than Saudi Arabia initially wanted. The U.S. unlocked the standoff by pledging to compensate for the Mexican amount with 300,000 barrels of reductions of its own, the delegates were told. It couldn’t be determined whether that was in addition to other U.S. cuts, or how the U.S. cuts would be implemented.
OPEC and allies' oil production cut is Trump's 'biggest and most complex' deal ever: Dan Yergin - As the Organization of the Petroleum Exporting Countries and its allies came to an agreement on a record cut in oil production, U.S. President Donald Trump may have struck his “biggest and most complex deal,” according to oil expert Dan Yergin. “What was so interesting — among many, very interesting things in this unprecedented event — was the turnaround, the pivot by Donald Trump,” Yergin, who is vice chairman at IHS Markit, told CNBC’s “Street Signs” on Monday. Just a few weeks ago, Trump had said the early-March plunge in oil prices were “good for the consumer” as it meant lower gasoline prices. That drop in crude prices had been triggered by an oil price war between Saudi Arabia and Russia after Moscow rejected a proposal by OPEC to cut 1.5 million barrels of production per day. The sharp decline in oil prices spurred giant capex and job cuts across the U.S. shale industry, which has some of the highest production costs in the world. But Yergin said: ”(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the U.S. economy … and he just jumped in.” “This must be the biggest and most complex deal (Trump)’s ever made,” Yergin said. “Not only was he a deal maker, but he was also something of a divorce mediator.” It looked like a mission impossible a few weeks ago. Yergin said there were two main factors driving the turnaround to the deal that just six weeks ago “would not have seemed possible.” Firstly, he said, the price of oil was in danger of crashing without a deal as there was limited inventory space left. That would have had “severe repercussions” beyond the oil industry itself and other sectors such as finance. The other driving factor was likely due to a dearth in oil demand, where the “producers found they couldn’t sell their oil.” Crude demand has taken a hit in recent weeks as measures taken by authorities to stem the spread of the coronavirus pandemic have left major economies effectively frozen. “I think all those things came together but then it was this dealmaker ... Donald Trump who got on the phones,” Yergin said. “I would say it looked like a mission impossible a few weeks ago. Turned out, it was mission possible.”
OPEC+ deal saved 'more than 2 million' jobs in the US, says Russia's sovereign wealth fund chief - The OPEC+ deal that’s supporting oil prices could save millions of U.S. jobs, according to the chief executive of Russian sovereign wealth fund RDIF. After days of discussion, OPEC and its allies reached an agreement on Sunday to cut production by a record 9.7 million barrels per day. It will be in effect from May 1 to the end of June, following which restrictions will be loosened. The alliance will also meet on June 10 to reassess the situation. U.S. President Donald Trump, who was involved in the negotiations, said in a tweet that the deal “will save hundreds of thousands of energy jobs in the United States.” Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said Trump was “modest” in saying that. “We believe that more than 2 million jobs in the U.S. will be saved as a result of President Trump’s leadership on this,” he told CNBC’s “Capital Connection” on Monday. “The total number of jobs in the U.S. oil and gas industry is 10 million. But if you count ... other industries affected by this, you’re talking about huge job numbers,” he said, adding that Russian jobs will also be saved. America’s shale patch was seen to be vulnerable when oil prices went into a free fall amid the Russia-Saudi Arabia price war, which was triggered in early March, when Moscow refused to approve a proposal to cut production. Riyadh, in response, offered discounts on oil and prepared to ramp up supply. Analysts said Russia may have taken the action in order to target the U.S., which has higher production costs and struggles to break-even when prices are under $50 a barrel. Oil traded mixed on Monday evening in Asia, with U.S. crude futures up 0.13% at $22.79 and Brent dropped 2.06% to $30.83. While the oil benchmarks are still down by more than 50% from the beginning of the year, RDIF’s Dmitriev said the OPEC+ agreement supports oil prices “dramatically.” “Without this deal, oil prices would have gone a lot below $10 a barrel,” he said. It won’t push prices “exceptionally high,” in part because of demand destruction due to the coronavirus crisis, but does provide a “floor” going forward, he added.
Here Is The Secret Weapon That Allowed Tiny Oil Producer Mexico To Defy Giant Saudi Arabia - After the Saudis and Russia cobbled a historic OPEC+ oil production cut which at 10 million b/d was the biggest ever, and one which received the blessing - if not the participation - of Donald Trump, the rest of OPEC+ was supposed to applaud the two oil exporting giants who agreed to cut 23% of their, and everyone else's output, and fall in line agreeing to the terms that were imposed upon them in hopes of sending the price of oil slightly higher, because as a reminder even the agreed upon 10 million cut would do nothing to balance an oil market crushed by what Trafigura calculates was a record 36 million b/d drop in oil demand. However, that did not happen because one country dared to stand up to not just Saudi Arabia, but also Russia and the rest of the OPEC cartel, and even forced Trump to bend to its will with the US president - desperate to get the price of WTI higher in hopes of avoiding mass defaults for the US shale industry - saying he would be responsible for Mexico's production cut balance. That country is the southern US neighbor, Mexico, which pumps a relatively tiny 1.75 million b/d and which would have been forced to cap its output some 400,000 barrels lower to comply with the deal, however the most Mexico would agree to was a a minuscule 100kb/d cut - a number that is completely meaningless in the grand scheme of the oil market - yet one which openly defies Saudi Arabia which staked its reputation as OPEC's most powerful nation by guaranteeing that every OPEC member would agree to the 23% production cut. But why is Mexico risking the collapse of OPEC, and another sharp plunge in oil prices, by refusing to comply with the deal - after all if Mexico cuts just another 250K barrels in output from its adjusted total it will unlock if not higher prices, then at least avoid an even sharper plunge in the price of oil. Sure, it may not balance the market, and $50 Brent won't come back for a long time, but avoiding another dramatic plunge in oil would be worth the cut, right? Well, no because while that would be the reasonable economic equation for all other OPEC members, Mexico has always had what Bloomberg dubbed a "sector weapon" up its sleeve, one which incentivizes Mexico's president to either get his way, or watch as oil craters... and get paid billions. We are talking of course about Mexico's famous annual oil hedge, which in recent years has manifested itself mostly in the form of billions of dollars spent on oil puts, which we profiled extensively back in 2016 and 2017. As Bloomberg's Javier Blas writes, for the last two decades, Mexico has bought "Asian" style put options from some of the most prominent US investment banks and oil companies, in what’s considered Wall Street’s largest - and most closely guarded - annual oil deal. The options give Mexico the right to sell its oil at a predetermined price. They are the equivalent of an insurance policy: the country banks all gains from higher prices but enjoys the security of a minimum floor. So - unlike all of its OPEC peers - if oil prices remain weak or plunge even further, Mexico will still book higher prices.
G20 Oil Nations Agree To 3.7 Million Bpd Cut -Oil producers from G20 have agreed to reduce their combined crude oil output by 3.7 million bpd, according to Iran’s Oil Minister, Bijan Zanganeh, as quoted by IRNA. G20 met on Friday to discuss oil production, but reports from that day revealed that the group had failed to agree on a specific number.“To underpin global economic recovery and to safeguard our energy markets, we commit to work together to develop collaborative policy responses,” the group’s energy ministers said in an official statement. “We recognize the commitment of some producers to stabilize energy markets. We acknowledge the importance of international cooperation in ensuring the resilience of energy systems.”This is indeed way too vague for anyone’s comfort, although some hailed the G20’s declaration of support for the OPEC+ cuts as a positive development. Such broad support for an oil production-cutting effort is unprecedented, just like the crisis that prompted it. Still, there is a figure for at least one G20 member: the United States.U.S. President Trump spoke with his Mexican counterpart on Friday after Mexico refused to sign up for cuts of 400,000 bpd under the OPEC+ agreement. Following his talks with Trump, Mexico’s Andres Manuel Lopez Obrador said that the U.S. would implement cuts of 250,000 bpd to help Mexico, which will cut 100,000 bpd. Trump confirmed the agreement, saying Mexico will “reimburse” the U.S. when it can.Besides this 250,000 bpd cut, U.S. oil production could be lowered by as much as 2 million bpd by the end of the year, Energy Secretary Dan Brouillette said at the G20 meeting, as quoted by the Financial Times. “This is a time for all nations to seriously examine what each can do to correct the supply/demand imbalance,” Brouillette said in what could be seen as a departure from the official White House position until recently that the U.S. did not need to cut oil production on purpose because low prices would force a decline in production anyway.
Goldman Sachs: Don't Expect Oil Prices To Rise On Historic Oil Deal -- Even though oil producers finally agreed to cut production by nearly 10 million bpd, the deal will fail to support oil prices in the coming weeks as the agreement, albeit historic, is falling short of the enormous demand destruction and expectations, according to Goldman Sachs. The voluntary cuts from the OPEC+ group will be too little to counter a nearly 20 million bpd demand loss this month and next, Goldman said on Sunday, as carried by Reuters. The OPEC and non-OPEC producers known as OPEC+ who had managed their oil supply to prop up prices in the past three years put the Saudi-Russia feud behind and forged on Sunday a new collective deal to respond to U.S. pressure and to the glut threatening to fill up global storage within weeks as demand crashed in the COVID-19 pandemic. After four days of talks and mediation, the OPEC+ countries decided to cut their overall crude oil production by 9.7 million bpd for two months—May and June, before gradually easing the cuts.Still, while OPEC issued a timetable of cuts that would last through 2022, oil prices were barely up on at 7:50 a.m. EDT on Monday, with WTI Crude up 0.13% at $22.79, erasing earlier gains of 5% as the market seems to look at the deal as ‘too little, too late’ as global oil demand tumbles by 20-30 million bpd. The global oil deal would translate into just 4.3 million bpd of actual production reduction from Q1 2020 levels, according to Goldman Sachs, assuming that all major OPEC members comply 100 percent and all other producers comply at 50 percent with the agreement. “Ultimately, this simply reflects that no voluntary cuts could be large enough to offset the 19 million bpd average April-May demand loss due to the coronavirus,” Goldman Sachs said.“[W]hile these cuts are significant, there is still a sizeable surplus expected over the second quarter. Therefore, we still believe that there is downside risk to oil prices from current levels in the short-term,”
Oil Cuts Won't Ease Mideast Storage Crunch-- The coronavirus that’s throttling fuel demand and forcing global producers to make unprecedented output cuts has left markets awash in so much crude that even the Middle East’s main oil-trading hub has run out of room to store unwanted barrels. Terminal operators at Fujairah in the United Arab Emirates say they’re turning down requests from traders and refiners to store crude and refined products, whereas a year ago they had ample space. The port’s 14 million barrels of commercial crude-storage capacity is just a fraction of what Saudi Arabia and Abu Dhabi provide for their state oil companies. Without tanks to lease, traders face costly constraints on their role as matchmakers who link a specific supply here with a willing buyer there. The global oil glut is making it harder for traders to even out imbalances in the market, and the plunge in crude, down about half this year, is making matters worse. “If tanks are leased or blocked, then traders need to push back on taking crude,” said Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai. That, in turn, could force production in some places to halt, he said. Demand for storage, an unglamorous but essential link in the global energy supply chain, is at its highest in years. From Singapore to Cushing, Oklahoma, tanks are brimming with crude, gasoline and other products, nowhere moreso than in Fujairah, a gateway for shipments from the world’s most prolific oil-producing region. “The current capacity isn’t enough, for sure,” said Malek Azizeh, commercial director at Fujairah Oil Terminal FZC. Even a deal between oil producers to trim global output by about a tenth won’t ease the storage crunch at Fujairah. The Organization of Petroleum Exporting Countries and partners such as Russia finally agreed on Sunday, after four days of deliberations, to cut production by 9.7 million barrels a day. Other nations, including the U.S. and Canada, expect to pump less because crude prices are too low for some of their oil companies to make a profit. While a cut of this size would partly offset lost crude demand, it would fall short of OPEC’s own estimate for the drop in consumption. Trafigura Group sees oil use plunging by as much as 35 million barrels daily -- roughly a third of normal global output -- as countries prolong lockdowns over the coronavirus.
The Sad Truth About The OPEC+ Production Cut - Quite aside from the subtler elements of the oil deal announced late last week that are likely to undermine its ability to stave off further oil price lows in the coming weeks, the basic facts of the deal are sufficient to do so: global supply is to be cut by (sort of) 10 million barrels per day (bpd) whilst global demand has fallen by around 30 million bpd. That is really all anyone needs to know and is the key reason why oil prices are likely to continue to test the downside of recent lows and to surpass them over time. Terrible though these raw figures look, the overall deal itself is much worse the more that it is examined in depth, as it is below. […] Aside from fundamental mathematical failure of the oil deal, then, what else is wrong with it? For a start, there is the usual nonsense of the ‘baseline levels’ from which production is judged to have been cut. Both Saudi Arabia and Russia are to ‘cut’ around 2.5 million bpd each but only from the production baseline level of about 11 million, according to the OPEC statement last week. However, Saudi has never recorded sustained actual oil production of more than 10.5 million bpd for more than a brief period. The recent often-quoted ‘supply highs’ of over 12 million bpd are not – repeat not – actual production but rather production plus the use of oil inventory. To put it into historical – and real – terms, the average Saudi production from 1973 to the beginning of this year was 8.15 million barrels per day. This means that the Saudis are not in reality cutting production at all, it is just going to cut back on the use of its oil inventory, which it cannot afford to keep squandering at such low prices anyway. Russia, in the meantime, is geared up to produce around 11 million bpd anyhow – the baseline figure – so again this effectively means no cut, and even if the baseline figure was lower, Russia would take no notice and produce whatever it wanted, as it has done for every OPEC+ deal with which it has been involved, since the first agreed cut in December 2016. The third key failure of this deal is that the prospect of failure is explicitly built into it, in the form of a sliding scale of production reductions that are to be reviewed on a rolling basis as the market moves forward. Specifically, OPEC+’s tentative plan would see the output curbs dramatically reduced after two months, depending on the evolution of the coronavirus, with the 10 million-barrel-a-day cut liable to be reduced to 8 million a day from July and then to 6 million a day from January 2021 to April 2022, according to the OPEC statement. The group is planning another videoconference 10 June to discuss what additional measures need to be taken, which means that any slim optimism that may have supported oil prices has immediately been undermined with the prospect of a complete change to the parameters of the deal so quickly. With this prospect of reducing production quotas so close, it is also not unreasonable to expect the OPEC and OPEC+ producers to take a less than stringent approach to the absolute level of their oil production or exports, of course, although in the case of Saudi Arabia and Russia, the quotas, as mentioned, are meaningless.
Oil trims early gains despite deal between Saudi Arabia, Russia - The world’s biggest oil producers on Sunday agreed to historic production cuts, representing almost 10 percent of global supply, putting an end to a price war between Saudi Arabia and Russia. West Texas Intermediate, the U.S. benchmark, was up 0.22 percent at $22.81 a barrel on Monday, after being up as much as 5 percent overnight. Brent crude, the international benchmark, turned lower by 0.4 percent at $31.35. “We took the responsive and responsible action to focus on adjusting crude oil production by 10 mb/d beginning on 1 May 2020, for an initial period of two months; then by 8 mb/d from July to December 2020; and by 6 mb/d for the period of January 2021 to April 2022, in the interests of producers, consumers, and the global economy,” OPEC Secretary General Mohammad Barkindo said Sunday in a statement. The so-called OPEC+ group, which consists of Saudi Arabia, Russia and their allies, agreed to a 9.7 million barrel per day cut after four days of negotiations and pressure from President Trump, who came to the defense of the battered U.S. shale industry. The U.S., Canada and Brazil will lower their output by about 3.7 million barrels per day, but some of that could come in the form of market-driven losses, according to The Wall Street Journal. Mexico, will lower its production by 100,000 barrels per day – less than the 400,000 that Saudi Arabia was originally seeking. “The big Oil Deal with OPEC Plus is done,” Trump tweeted Sunday afternoon. “This will save hundreds of thousands of energy jobs in the United States.”
Record oil output cuts fail to make waves in coronavirus-hit market - (Reuters) - The minimal impact on oil prices from a global deal for record output cuts showed that oil producers have a mountain to climb if they are to restore market balance as the coronavirus shreds demand and sends stockpiles soaring, industry watchers said. After several days of discussions, oil producing and consuming countries aim to remove nearly 20 million barrels per day (bpd) or 20% of global supply from the market, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday. The oil market has barely shrugged, however: Brent crude gained 1.5% on Monday, while U.S. crude ended the day lower. The move underscores what both investors and producers already understand - that the monumental deal to cut supply in face of a 30% drop in demand could only accomplish so much initially. The Saudi energy minister downplayed the move in oil prices on Monday, saying anticipation of the cuts was the reason for a rally in oil prices before the meeting. Since dipping below $22 a barrel two weeks ago, Brent has rebounded by roughly 48%. “It’s the typical deal, you know: buy the rumour, and sell the news,” Prince Abdulaziz bin Salman said. The minister added on Monday that effective global oil supply cuts would amount to around 19.5 million barrels per day, taking into account the reduction pact agreed by OPEC+, pledges by other G20 nations and oil purchases into reserves. The Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, are cutting 9.7 million bpd in supply. Other major producers like the United States and Canada gave indirect commitments to cuts as well, playing up forecasts for drastic production declines in coming months due to the free-fall in prices. He said that G20 nations had pledged to cut about 3.7 million bpd and that strategic reserves purchases would reach roughly 200 million barrels over the next couple of months. Both Brent LCOc1 and WTI CLc1 have lost more than half of their value this year.
Oil Suffers on Demand Loss Despite OPEC+ Output Cuts-- Oil in London eked out a modest gain on Monday as investors weighed whether an unprecedented deal by the world’s biggest producers to cut output could stabilize the market reeling from the coronavirus pandemic. Futures rose less than 1% after earlier surging 8% following the OPEC+ alliance agreement to slash production by 9.7 million barrels a day starting in May. West Texas Intermediate fell 1.5%, and the May-June timespread moved deeper into contango, indicating that traders see the physical glut worsening even with the output cuts. The group reached the deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday. While the OPEC+ deal amounts to the largest coordinated cut in history, it’s dwarfed by the estimated 20 million barrels a day or greater decline in oil consumption as a result of the coronavirus pandemic. The U.S., Brazil and Canada will contribute an additional 3.7 million barrels in nominal production reductions as their output declines, and other Group of 20 nations will cut 1.3 million more. The G-20 numbers don’t represent real voluntary cuts but rather the impact that low prices have already had on output, and they would need months, or perhaps more than a year, to take effect. The OPEC+ deal came after days of brokering by U.S. President Donald Trump, who spoke by phone to Mexican President Andres Manuel Lopez Obrador, followed by a three-way conference call with Russian President Vladimir Putin and King Salman of Saudi Arabia. The Saudis are ready to cut oil production further if needed when the OPEC+ alliance meets again in June, Prince Abdulaziz bin Salman, the oil minister, told reporters on a conference call on Monday. Trump on Monday morning asserted in a tweet that the cut would be closer to 20 million barrels per day, without getting into specifics. West Texas Intermediate for May delivery fell 35 cents to close at $22.41 a barrel on the New York Mercantile Exchange. May’s discount to June settled at $6.85 a barrel, the biggest it’s been since 2009. Brent for June delivery gained 26 cents to close at $31.74 a barrel on the ICE Futures Europe exchange. Saudi Aramco reduced pricing for all its grades to Asia, signaling the state company’s intention to defend sales in its biggest market even while paring output.
Oil Tumbles After IMF Slashes Global Growth Forecast - As if oil prices needed any more help on their downward spiral towards the teens, The IMF just slashed global growth to the worst since the '30s.“This crisis is like no other,” Gita Gopinath, the IMF’s chief economist, wrote in a foreword to its semi-annual report.“Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”As Bloomberg notes, The International Monetary Fund predicted the “Great Lockdown” recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns.In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated on Tuesday that global gross domestic product will shrink 3% this year. That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. Of course, there is the hockey-stick recovery with IMF anticipating growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks lay to the downside.
Oil prices may now be at a bottom after historic OPEC deal, US energy secretary says - The historic deal reached by OPEC and its oil-producing allies to cut production has worked to “stem the tide, stem the damage that was being done to the market,” since the onset of the coronavirus pandemic and the Saudi Arabia-Russia oil price war, U.S. Energy Secretary Dan Brouillette told CNBC. Oil prices are down more than 55% year-to-date, having experienced the worst price plunges in nearly two decades in the face of record supply, disappearing storage space and global demand eviscerated by coronavirus lockdowns around the world. But they would be even lower if no agreement had been reached, Brouillette told CNBC’s Hadley Gamble via phone interview Tuesday. “Think about what would have happened in the alternative had there been instead of a cut of 10 million on the part of OPEC and OPEC+, what if that number had been zero, what would we be looking at today suggests that it’s probably something much lower than where we are,” he said. “And I think we may be at a floor. I think the intent of this conversation with OPEC and the rest of the G-20 countries is simply to do exactly that, to mitigate.” An early victim of the oil price crash has been the U.S. shale industry, which is now hemorrhaging jobs as highly-indebted oil producers in the U.S. begin filing for bankruptcy. Up to 240,000 oil-related jobs in the U.S. will be lost this year, according to consultancy firm Rystad Energy. Saudi Arabia slashed its oil selling prices and increased production after Russia refused to join its plan to further cut output and boost prices in early March. With the two countries reversing course on oil policy in order to pursue greater market share, many suspected the moves were targeting U.S. shale, whose production would largely cease to be economically viable once prices fell below around $50 per barrel. U.S. benchmark West Texas Intermediate is now trading at less than $20 per barrel.
Oil drops more than 10% as producer cuts fail to banish demand fears - Oil prices shed more than 10% on Tuesday, with investors apparently unconvinced that record supply cuts could soon balance markets pummeled by the coronavirus pandemic, though a predicted plunge in U.S. shale output provided some support. U.S. West Texas Intermediate crude fell 10.26% to settle at $20.11 per barrel, having dropped 1.5% in the previous session. Brent futures fell $2.14, or 6.7%, to $29.60 per barrel after settling up 0.8% on Monday. Global oil producers worldwide are expected to cut overall output by roughly 19.5 million barrels per day, or nearly 20% of world supply. However, those commitments - which include voluntary cuts that will happen gradually in places like the United States - will not be enough to reduce the growing worldwide supply glut. Oil prices remain more than 50% down this year. “With demand destruction forecasts ranging from 15 million to 22 million bpd in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term,” said Nitesh Shah, director of research at New York-based WisdomTree Investments. The bulk of the mandated reductions come from the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+. That group agreed this weekend to cut output by 9.7 million bpd in May and June. The rest from the United States, Canada and others, will come as a result of weak pricing and happen over time. As a result, physical markets where crude is traded, such as in Houston or London, suggest prices will not recover for a while as storage fills.
Oil Tumbles As Saudis Quietly Launch New Price War With Record Discounts - This weekend's 11th hour decision to cut OPEC oil output by 23% was supposed to end the oil price war between Saudi Arabia and the rest of OPEC+, but it appears Saudi Arabia did not get the memo. While oil production may (or may not) be cut by 9.7mmb/d on May 1, Riyadh remembered that to capture market share one can manipulate volumes, which are now set as per this weekend's OPEC+ agreement or one can adjust price discounts, which are not. And as the kingdom faces stiff competition from rival suppliers for market share in the prized Asian market (or at least what's left of it after India cut demand by 70%), the OPEC leader slashed its official selling prices to Asian customers for May by larger-than-expected margins this week, while keeping prices flat for Europe and raising them for the United States.On Monday, Saudi Arabia’s oil giant Aramco set the May price for its Arab light crude oil to Asia at a discount of $7.3 to the Oman/Dubai average, down $4.2 a barrel from April, according to a document seen by Reuters.Asian refiners had called on Saudi Arabia to slash its crude OSPs for a third straight month in May after Middle East benchmarks and refining margins dropped amid ample supplies and lower demand due to the coronavirus. Overnight, China’s customs bureau reported that overseas energy purchases weakened in March as demand from the top importer took a hit from the coronavirus pandemic. Crude oil imports fell to the equivalent of about 9.72 million barrels a day, the least since July. While Aramco cut Asian prices in hopes of beating Russia, Iran and other producers to the punch, it raised the May OSP of its Arab light crude oil to the United States to a discount of $0.75 per barrel versus the Argus Sour Crude Index (ASCI), up $3 a barrel from April, according to the document. Aramco left its OSP for Arab light crude oil to Northwestern Europe unchanged from April at a discount of $10.25 per barrel to ICE Brent. Then on Tuesday morning, Saudi Aramco again cut official selling prices of all four grades to new record lows from Egyptian port of Sidi Kerir for May, in line with big cuts in prices for other customer regions, with some grades sold at a discount of as much as $10.95/bbl:
- Arab Light OSP set at $9.85 discount to ICE Brent, vs -$8.40 for April
- Arab Extra Light also at -$9.85/bbl vs -$5.60/bbl
- Arab Medium -$10.95/bbl vs -$10.20/bbl
- Arab Heavy -$10.95/bbl vs - $10.50/bbl
Prices of all four crude grades from Sidi Kerir are 45c higher than those shipped from Ras Tanura in Persian Gulf for customers in Mediterranean, compared with 20c higher in April’s price list. And so, between the IMF's warning earlier today, and Saudi Arabia's quiet restart of the oil price war, Brent tumbled by over 5.5% this morning, sliding below $30, after hitting a high over $36 just two trading days ago as the unprecedented chaos in the energy market continues.
Oil Glut May Overwhelm Storage Tanks in Weeks-- Global oil demand will plunge by a record 9% this year due to coronavirus lockdowns, thwarting efforts by OPEC+ to contain the resulting glut of crude, the International Energy Agency said. A decade of demand growth will be wiped out in 2020, when consumption will slump by just over 9 million barrels a day, the agency said in its monthly report. April will suffer the hardest hit, with fuel use contracting by almost a third to the lowest level since 1995. While production cuts agreed the OPEC cartel and its partners at the weekend will bring about an unprecedented pullback in supply next month, facilities for storing the remaining surplus could be exhausted by the middle of the year. “Never before has the oil industry come this close to testing its logistics capacity to the limit,” said the Paris-based IEA, which advises most major economies on energy policy. The collapse in demand is prompting a similarly sharp pullback in supply. Saudi Arabia, Russia and other exporter in the OPEC+ coalition announced that they will collectively slash output by just under 10 million barrels a day over the next two months. This “should help bring the oil industry back from the brink of an even more serious situation than it currently faces,” the IEA said. Despite the efforts of OPEC+, global inventories will still accumulate by 12 million barrels a day in the first half of the year, according to the agency. The glut “threatens to overwhelm the logistics of the oil industry – ships, pipelines and storage tanks – in the coming weeks,” it warned.
"We're Crippled At $30" - Oil Prices Hold Big Losses After Massive Crude Build - Oil prices cratered today - completely shrugging off the OPEC+ deal as if it never happened - following IMF slashing global growth expectations and the Saudis launching a price war (heavily discounting crude). WTI broke below $20 and Brent below $30, and a key gauge of the oil market’s health is at its weakest in more than a decade as supplies build and futures contracts roll over. West Texas Intermediate crude for May delivery traded at more than $7 a barrel below its June contract on Tuesday, the deepest contango since 2009. The May contract is nearing expiration and exchange-traded funds, including the United States Oil Fund, have been selling front-month contracts and buying second-month futures. Simply put, this is an indication of extreme oversupply.“At least over the next month or so, before these cuts have an opportunity to kick in, we are going to be very stressed on inventories,” And so all eyes are once again on the inventories for any positive signs...API:
- Crude +13.143mm (+10.1mm exp)
- Cushing +5.361mm
- Gasoline +2.226mm (+7.1mm exp)
- Distillates +5.64mm (+1.8mm exp)
This is the 12th weekly build in crude stocks and follows two weeks of massive build in all oil products.
Oil Weighed Down by Lingering Demand Fears- Oil was anchored near $20 a barrel after tumbling 10% on Tuesday as concerns over virus-driven demand destruction overshadowed a historic deal by the world’s biggest producers slash output. While Saudi Arabia and other Gulf producers have pledged to cut supply starting next month, they continue to flood the market, swelling global stockpiles and testing capacity limits. The world is still choking on too much oil and will run out of places to store it within a month, according to trader Gunvor Group Ltd. In the U.S., industry data indicated American crude stockpiles rose by more than 13 million barrels last week, while a key timespread for New York futures moved deeper into contango, signaling an expanding physical glut. Oil has lost around two-thirds of its value this year after the coronavirus prompted lockdowns across the world to stem its spread, vaporizing consumption for everything from crude to fuels. The International Monetary Fund estimated that global gross domestic product will shrink 3% in 2020, a signal that energy demand may remain weak longer than anticipated. “This is a demand driven market at the moment and clearly lockdown measures across most of the world are keeping that under pressure,” said Daniel Hynes, an analyst at Australia & New Zealand Banking Group Ltd. in Sydney. “We expect to see prices remain relatively volatile.” West Texas Intermediate crude for May fell 1 cent to $20.10 a barrel on the New York Mercantile Exchange as of 7:53 a.m. London time after rising as much as 3.9% earlier. The contract has lost almost 20% in the past three sessions. Brent for June delivery dropped 1.6% to $29.13 on London’s ICE Futures Europe exchange after closing 6.7% lower Tuesday. Dated Brent, the benchmark for two-thirds of the world’s physical supply, was assessed at $20.66 on Tuesday, compared with $23.73 on Thursday.
U.S. Oil Crashes Below $20 On Record Demand Plunge - WTI Crude prices tumbled early on Wednesday to below $20 a barrel, after the International Energy Agency warned of a record oil demand slump this year, adding additional bearish tilt to the market which is already digesting huge U.S. inventory builds and too-little-too-late OPEC++ actions to support prices. At 8:55 a.m. EDT on Wednesday, WTI Crude was trading down 1.59 percent at $19.77 and Brent Crude was tumbling to below $30 a barrel—down by 3.72 percent on the day to $28.60. Following the Easter holiday weekend, oil prices were volatile on Monday as the market seemed to think that Sunday’s OPEC+ decision to cut 9.7 million bpd in May and June would not go far to prevent a huge global inventory build amid crashing oil demand in the COVID-19 pandemic. On Tuesday, oil prices were pressured again, by a report from the International Monetary Fund (IMF) saying that the global economy will likely contract by 3 percent in 2020, due to the coronavirus outbreak and the following “Great Lockdown” which will plunge many economies into recession.Later on Tuesday came the report of the American Petroleum Institute (API), which estimated another large crude oil inventory build of 13.143 million barrels for the week ending April 10 as demand destruction stemming from the coronavirus wears on. On Wednesday, oil prices crumbled after the IEA issued its monthly report, saying that it expects global oil demand to plunge by a record 9.3 million barrels per day (bpd) in 2020 compared to last year. Even if travel restrictions are lifted in the second half of this year, demand for the whole 2020 would drop by a record level of 9.3 million bpd, “erasing almost a decade of growth,” said the agency, also warning that the historic OPEC++ deal may not be able to prevent global storage from overflowing within weeks. Three days after the global oil deal—described as historic by OPEC+ and the U.S.—the market has already forgotten the calculations of v oluntary and forced cuts and has turned its attention again to the massive demand loss in the pandemic.
WTI Extends Losses Below $20 After Record Surge In Crude Inventories - WTI crashed below $20 (tagging $19.20) overnight after API reported huge inventory builds and was not helped by comments from the International Energy Agency that a historic production cut deal won’t be enough to counter a record demand slump this year.This appears to confirm a key gauge of the oil market’s health which is at its weakest in more than a decade as supplies build and futures contracts roll over. West Texas Intermediate crude for May delivery traded at more than $7 a barrel below its June contract on Tuesday, the deepest contango since 2009. The May contract is nearing expiration and exchange-traded funds, including the United States Oil Fund, have been selling front-month contracts and buying second-month futures. Simply put, this is an indication of extreme oversupply. “At least over the next month or so, before these cuts have an opportunity to kick in, we are going to be very stressed on inventories,” Bart Melek, head of commodity strategy at TD Securities, said by telephone. And so all eyes are once again on the inventories for any positive signs... DOE
- Crude +19.25mm (+10.1mm exp)
- Cushing +5.724mm
- Gasoline +4.914mm (+7.1mm exp)
- Distillates +6.28mm (+1.8mm exp)
Everything is significantly worse than expected with record breaking builds in crude and gasoline and at Cushing...Total US Crude stocks are now at their highest since June 2017... And Gasoline stocks are at record highs... ...as Gasoline demand collapsed to series lows... US production continued to slide (with U.S. Refineries running at the lowest rates since 2008)... Source of graphs: Bloomberg. WTI crashed back below $20 after ramping up before the DOE data...
Coronavirus crisis will erase nearly a decade of oil demand growth this year, IEA says - The International Energy Agency (IEA) said Wednesday that it expects the coronavirus crisis to erase almost a decade of oil demand growth in 2020, with countries around the world effectively having to shut down in response to the pandemic. A public health crisis has prompted governments to impose draconian measures on the lives of billions of people. It has created an unprecedented demand shock in energy markets, with mobility brought close to a standstill. Activity in the transportation sector has fallen dramatically almost everywhere, the IEA said, noting that confinement measures had been implemented in 187 countries and territories in response to the Covid-19 outbreak. “Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3 million barrels a day versus 2019, erasing almost a decade of growth.” In its closely-watched monthly report, the Paris-based agency said demand in April is estimated to be 29 million barrels per day lower than a year ago, hitting a level last seen in 1995. For the second quarter of the year, oil demand is expected to be 23.1 million barrels per day below year-ago levels. Yet, while a recovery is forecast to be underway in the second half of the year, the IEA said it expects this to be gradual and, in December, demand will still be down 2.7 million barrels per day year-on-year. Oil prices, which were already trading slightly lower Wednesday morning, extended their losses shortly after the report was published.
Oil drops to more than 18-year low on inventory build, supply concerns - Oil dropped to its lowest level in more than 18 years on Wednesday amid reports suggesting persistent oversupply and collapsing demand due to global coronavirus-related lockdowns could continue to hammer prices. The International Energy Agency (IEA) on Wednesday forecast a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years and said no output cut could fully offset the near-term falls facing the market. Brent crude fell $1.91, or 6.45%, to settle at $27.69, giving up an earlier gain. U.S. West Texas Intermediate crude fell 24 cents, or 1.19%, to settle at $19.87 per barrel, its lowest settle since Feb. 2002. According to data from the U.S. Energy Information Administration, for the week ending April 10 inventory increased by 19.2 million barrels. Analysts polled by FactSet had been expecting a rise of 12.02 million barrels. “There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report. “However, the past week’s achievements are a solid start.” The drop in prices and demand has pushed global producers to agree unprecedented supply cuts. The Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other producer - a grouping known as OPEC+ - has partnered with other oil-pumping nations, such as the United States, in the record global supply pact. Officials and sources from OPEC+ states indicated the IEA, the energy watchdog for the world’s most industrialised nations, could announce purchases of oil for storage of up to several million barrels to buoy the deal. But as of Wednesday, no such IEA purchases had materialised. The agency, in its report, said it was “still waiting for more details on some planned production cuts and proposals to use strategic storage.” The United States, India, China and South Korea have either offered or are considering such purchases, the IEA added. Some analysts said they expect more downward pressure on the market without a demand recovery. “The slow implementation of the agreement, the risk of non-compliance and no firm commitment from others to follow suit could see the market remain under pressure until the pandemic loosens its grip to let fuel demand recover,”
Oil prices hold at 18-year low on demand concerns amid coronavirus shutdowns- Oil prices held steady at a 18-year low on Thursday after OPEC lowered its global oil demand forecast due to the “historic shock” delivered by the coronavirus outbreak. Before the Organization of the Petroleum Exporting Countries released its latest forecast, global benchmark Brent futures were up over $1 a barrel as investors hoped record builds in U.S. inventories would prompt producers there to cut output quickly. West Texas Intermediate crude settled unchanged at $19.87 per barrel, the lowest level since February 2002. Brent crude settled up 13 cents, or 0.47%, at $27.82 per barrel. OPEC said in a monthly report it now expects global demand to contract by 6.9 million barrels per day (bpd), or 6.9%, in 2020, and noted the reduction may not be the last. Last month, OPEC projected a small increase in demand of 60,000 bpd. OPEC and its allies, including Russia - a group known as OPEC+ - agreed over the weekend to reduce output by 9.7 million bpd for May and June. Russian energy firms have already significantly revised down their plans for oil exports in May following the OPEC+ deal, three company sources and two traders told Reuters on Thursday. “Low prices are here to stay until there is some clarity on when and by how much non-OPEC+ countries will chip in with additional production cuts,” analysts at Rystad Energy said. Hoped-for cuts of another 10 million bpd from other countries, including the United States, could lower production by around 20 million bpd, although some analysts have questioned that number. “Oil prices must remain depressed to force shut-ins among non-cartelised producers,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer, referring to producers such as the United States, where a lot of production is unprofitable at current prices. Some countries have also committed to increasing purchases of oil for their strategic stockpiles, but there are limits to how much oil can be bought and the extent of global coordination. Speaking of U.S. strategic reserve buying, Commerzbank analysts said that “this would accommodate 23 million barrels, which would normally constitute a massive additional reserve but these days would only just be enough to cope with one weekly increase in stocks.”
Oil mixed as shrinking China economy overshadows Trump plan to ease US coronavirus lockdown - Oil prices were mixed on Friday after the weakest Chinese economic data in decades showed the impact of the coronavirus pandemic, offsetting some earlier gains on optimism for President Donald Trump’s early plans to revive the U.S. economy. Brent was up by 55 cents, or 2%, at $28.37 a barrel by 0406 GMT, while U.S. crude for May delivery, which expires on April 21, was down 13 cents, or 0.7%, at $19.74 a barrel. The more active June contract was up $1, or 4%, at $26.53. China’s economy shrank for the first time since at least 1992 in the first quarter, as the coronavirus outbreak paralysed production and spending and punched a huge hole in global demand for crude and refined products. That data was released after Trump laid out a three-stage process for ending lockdowns to stop the spread of the coronavirus that has now killed more than 32,000 Americans and nearly 140,000 worldwide. “Oil markets found baseline support from President Trump’s U.S. reopening plan,” said Stephen Innes, market strategist at AxiTrader. Still, downside risk remains the dominant factor, he said. Both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil around 18-year lows: Analysts have slashed forecasts for prices and demand due to the spread of the coronavirus and oversupply concerns. The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for 2020 global oil demand and warned it may not be the last revision downward. OPEC now sees a contraction of global demand of 6.9 million barrels per day (bpd), compared with a small increase predicted last month, due to the coronavirus outbreak. “Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast. OPEC and other producers including Russia, in a grouping known as OPEC+, over the weekend agreed on production cuts of nearly 10 million bpd, after an earlier cooperation agreement collapsed. ConocoPhillips said on Thursday it will reduce planned North American output by 225,000 bpd, the largest cut so far by a major shale oil producer to deal with the unprecedented drop in demand. “This highlights that the market will see meaningful cuts from outside the OPEC+ group without the need for mandated cuts,” said ING bank in a note on Friday. “Instead, market forces will do the job, with the low price environment forcing producers to cut back.”
Demand For OPEC Oil Falls To 30-Year Low - The sharp contraction in global oil demand amid lockdowns and stalled industrial activity will lead to the lowest demand for OPEC crude in more than thirty years this quarter. Global oil demand in Q2 is set to be at around 86 million bpd, down by 12 million bpd year on year, OPEC said in its closely watched Monthly Oil Market Report on Thursday. In the second quarter, the call on OPEC crude will be 19.73 million bpd, down by 9.6 million bpd from the demand for OPEC’s oil in Q2 2019.The fewer-than-20-million-bpd demand for OPEC crude in Q2 2020 would be the lowest since 1989, the last time OPEC pumped so little crude oil, according to Bloomberg estimates.Even with the historic OPEC+ agreement to remove 9.7 million bpd from the market in May and June, OPEC alone is faced with a gaping hole between crashing demand for its oil (and for any other oil, for that matter) and still persistent oversupply, even if all OPEC members were to comply fully with their cuts—something never seen in the industry before.In the unlikely event of all OPEC members fully complying with the cuts, demand for OPEC crude in Q2 at just below 20 million bpd would still be much lower than OPEC’s potential all-members-complying-100-percent production of 23.4 million bpd, according to Bloomberg estimates. For the full-year 2020, OPEC expects demand for its crude at 24.5 million bpd, down by 5.4 million bpd compared to 2019. When compared with the same quarters in 2019, demand for OPEC crude in Q1 2020 and Q2 2020 is expected to be 8.2 million bpd and 9.6 million bpd lower, respectively, the cartel said in its monthly report. Those projections, however, remain “heavily subject to uncertainty surrounding current market conditions,” OPEC said. As far as the entire global oil demand is concerned, OPEC expects it to drop by 6.8 million bpd this year, as “The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale.”
IMF warns 'vulnerabilities high' in the Middle East hit with dual shock of coronavirus and oil plunge - The International Monetary Fund forecasts a dramatic contraction for Middle Eastern and North African economies this year, predicting a worse outlook for the region than for the global economy as a whole in its latest regional economic report. The IMF expects the MENA region to contract by 3.3% in 2020, compared to last year’s projected growth of 0.3%. That’s worse than the Fund’s forecast for the world economy, which is expected to contract by 3% this year. “Vulnerabilities are high in certain countries, especially those with high levels of unemployment and low growth,” the IMF’s Middle East and Central Asia Director Jihad Azour told CNBC on Tuesday. He acknowledged the possibility of civil unrest as the region’s economies face strains caused by the “dual shock” of coronavirus and low oil prices. The IMF expects growth in Lebanon to decline by 12% in 2020. The small Mediterranean country has the third-highest debt-to-GDP ratio in the world and was facing an economic crisis long before the coronavirus pandemic set in. Egypt is the only country in the MENA region the IMF expects to grow in 2020, by 2%. Lebanon’s ailing economy — forecast to have contracted by 6.5% in 2019 — with governance issues and rampant corruption resulted in mass demonstrations last year, and ultimately forced former Prime Minister Saad Hariri’s government to resign. The structural reforms required of an IMF bailout could have deeper social and economic repercussions, however, and push the government to look elsewhere for funds. Both Lebanon and Iraq have explored further funding from the IMF, Azour confirmed to CNBC, as the Fund responds to an unprecedented demand for emergency assistance. The Washington-based organization provides financing to members and has $1 trillion in lending capacity.
Something Good From The Pandemic? Maybe A Cease Fire In Yemen - Barkley Rosser - Yes, in the midst of deaths and deep recession there may be someting good that may come from this pandemic. Saudi Arabia’s leaders have announced a cease fire in Yemen after five years of war, one also accepted by its ally, the recognized government there. Unfortunately so far the Houthi enemies of the Saudis and the recognized government have not so far accepted this proposed cease fire, and in fact it is not the first time the Saudis have called for one, with the previous efforts having failed. However, this time maybe it will stick. So far there are no officially recognized cases of covid-19 in Yemen. But tens of thousands of Yemenis are returning home from KSA, thrown out as low oil prices have strained the Saudi economy, with the numerous Yemeni guest workers taking the hit, Yemenis being the only non-Saudis allowed to come and go without getting visas, so easy come and easy go. In KSA there are now over 3,000 recognized cases while in Yemen more than half the health infrastructure has been destroyed by the Saudis in the war. Yemen is facing a potentially disastrous situation. A further aspect of this on the Saudi side is that 150 members of the Saudi royal family have apparently become infected. Most of these are in the lesser branches, with the family now ridiculously large at about 15,000, of whom about 2,000 are “core.” But in fact some serious “senior” members have fallen ill, with perhaps the most prominent (and seriously ill) is the powerful governor of Riyadh province, which contains the capital city, Faisal bin Bandar bin Abdulaziz, a nephew of King Salman, who is reportedly hiding on an island in the Red Sea, with de factoo ruler Crown Prince MbS also in seclusion somewhere. This seems to have spooked the Saudi leadership so that even if the Houthis do not like what is being offered, the Saudis may simply stand down. The virus may be bringing about peace in a long-suffering nation. Let us hope so.
Chinese Oil Giant Helps Kuwait Turn Refinery Project Into Hospital - China Petroleum & Chemical Corporation, or Sinopec, is helping Kuwait to remodel a camp at a refinery into a hospital to treat the rising number of coronavirus patients in one of OPEC’s core oil producers. Sinopec’s unit Sinopec Fifth Construction Co is helping Kuwait to turn the living quarters of construction workers at the Al-Zour New Refinery Project (NRP) into a makeshift hospital, Sinopec, one of China’s biggest oil and petrochemical firms, told Chinese publication the Global Times on Tuesday.As of early Tuesday, April 14, Kuwait had 1,355 confirmed coronavirus cases and 3 deaths, with a growing curve of daily COVID-19 cases.“The Kuwaiti government chose our camp because it is in the desert, a good place for isolation. With its existing facilities, it can be converted into a makeshift hospital with little modification,” a Sinopec Fifth Construction employee told the Global Times.Last month, Sinopec launched two production lines for N95 respirators and surgical masks in response to a shortage created by the coronavirus pandemic.While life in China begins to return to normal after a two-month lockdown, the coronavirus is spreading to nearly all other countries in the world. Globally, as of 2:00 a.m. CEST on April 14, there have been 1,812,734 confirmed cases of COVID-19, including 113,675 deaths, reported to the World Health Organization (WHO).In the Middle East, the countries including Kuwait are being directly hit by the pandemic and by the indirect hit from the colossal oil demand loss that has been weighing on the price of oil and consequently, on the oil revenues of the oil-exporting nations in the region. Some Middle Eastern producers, such as Qatar and Abu Dhabi, have tapped the international debt markets in the past week amid growing fiscal pressures on their economies and wealth funds in the oil price crash and the coronavirus pandemic.