Saturday, September 26, 2020 /07:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
With oil prices having
rebounded above $40 last week on the back of inventory draws and hurricane
outages, bearish sentiment returned to markets this week due to a second wave
of COVID-19 threatening to shut down European economies once again.
Friday, September 25th,
Oil prices continue to exhibit a familiar trading pattern, bouncing around in a
narrow range. EIA data was bullish last week, showing inventory declines. But
that optimism has been offset by concerns about the coronavirus and new
restrictions in Europe.
to ban ICE vehicles by 2035. Still reeling from historic
wildfires, California Governor Gavin Newsom is seeking to end the
internal-combustion engine. Governor Newsom ordered state regulators to come up with rules to phase out the sale of
new gasoline or diesel vehicles by 2035. The move will have a dramatic impact
on in-state refiners and oil producers, but because California consumes nearly
1 mb/d of oil, the impact will be felt globally. However, successful
implementation is uncertain as it relates to ongoing legal battles, the makeup
of the Supreme Court and the outcome of the presidential election.
to bring forward ICE ban. The UK is aiming to bring
forward its ban on gasoline and diesel vehicles from 2040 to 2030. Prime Minister
Boris Johnson is expected to roll out the announcement this autumn in an effort
to accelerate the transition to electric vehicles.
Fed survey: 75% of oil executives say U.S. oil peaked. Three
out of four oil executives surveyed by the Dallas Federal Reserve believe that U.S. oil production has
already hit a peak. The Fed survey also shows business activity rebounding a
bit from a low point in the second quarter, but nearly half of the respondents
said that WTI would need to rise to $51-$55 for drilling activity to
accelerate. Another third said WTI would need to increase to $56-$60, while 15
percent of respondents said it would require WTI above $60.
prices rise on inventory draw. The EIA reported a crude
stock draw of 1.6 million barrels for the week ending on September 18.
Notably, distillate stocks also declined, falling by 3.4 million barrels. A
glut of diesel had become a particular concern in recent weeks, so the drawdown
was positive news for oil markets.
disappoints on Battery Day. Tesla's
(NASDAQ: TSLA) market cap fell by $50 billion after its highly-anticipated "Battery Day" disappointed.
Elon Musk promised to manufacture an autonomous EV at a $25,000 price point
within three years. The announcement was light on details and also echoed past
promises to build a cheaper EV. "Nothing Musk discussed about batteries is a
done deal," said Roth Capital Partners analyst Craig Irwin. "There was nothing
lithium mining plan raises questions. Elon Musk said that
Tesla would produce lithium in Nevada near its Gigafactory, but the technology
needed to produce lithium from clay is unproven, according to Reuters. "This
plan from Tesla brings up a lot more questions than it answers," Chris Berry,
an independent lithium industry consultant, told Reuters. "Are we just supposed to take Elon Musk's word for it that the cost
will be lower than existing lithium projects?"
lines up bidders for North Sea assets. ExxonMobil
(NYSE: XOM) is looking to sell its aging North Sea assets and exit the region, with several
bidders already lined up.
Oil market can't handle OPEC+ increase. The oil market
won't be able to handle the scheduled increase in OPEC+ production at the start
of 2021, according to Marco Dunand, CEO of Mercuria. "We see a fair amount of
oil going into ships, into floating storage, now," he said. "We are filling up
both tankers as floating storage and onshore tanks in September," he said. "We
do not need the extra oil," he said, referring to OPEC+'s plans to taper the collective cuts at the start
of the New Year.
insurers will not cover ships linked to Nord Stream 2. The
world's largest group of shipping insurance companies will not provide insurance for any vessels linked to the Nord Stream 2 pipeline or
the TurkStream pipeline due to U.S. sanctions.
International files for bankruptcy. Texas-based
fracking-services company FTS International filed for chapter 11 bankruptcy protection after reaching an agreement
with creditors on a debt-for-equity swap.
gas sank, then exploded. It has been a wild ride for
natural gas over the past week. After plunging below $1.90/MMBtu earlier in the
week, gas prices rallied from a seven-week low, rising more than 15% on Wednesday afternoon
as the demand outlook for natural gas improved.
Arabia putting OPEC cohesion at risk. OPEC's 60th
birthday should have been reason for celebration, but its largest producer
Saudi Arabia is increasingly putting its own interests before the cartel's objectives and has put
the very existence of OPEC at stake on a number of occasions.
Climate targets impossible without carbon capture. The
IEA said that carbon capture, utilization and storage (CCUS) technology
will be necessary to hit net-zero emissions targets. The agency said that the
amount of CO2 captured must rise from 40 million tonnes today to at least 800
million tonnes by 2030, and investment will need to increase to $160 billion by
to convert refinery to biofuels. Total SA
(NYSE: TOT) said it would spend 500 million euros to convert one of its refineries
in France to produce biofuels and bioplastics.
denies deal to increase oil exports. Iraq's oil
ministry denied reports that it made an agreement with OPEC+ to increase oil
exports. Iraq reiterated its commitment to the OPEC+ deal.
The post Bullish Sentiment Extinguished By Demand Fears first appeared in Oilprice.com on September 25, 2020.
Related News - Previous
Oilprice Intelligence Report
- Oil is Still Stuck at $40 - OIR 220920
- Oil Bulls
Return As OPECplus Reassures Markets - OIR 180920
Outrages Provide Temporary Relief For Oil Markets - OIR 150920
- Oil Prices Creep Higher Despite Bearish Sentiment - OIR 110920
- Oil Prices
Crash on Weak Demand - OIR 080920
- Oil Prices Fall
Below $43 on Demand Concerns - OIR 040920
- Oil Prices Could Rise to $65 -
- Oil Prices Fall As Hurricane
Fears Subside - OIR 280820
- Gulf Of Mexico Storms Push Oil
Prices Higher - OIR 250820
- Oil Tumbles On
Shaky Recovery Prospects - OIR 210820
Related News - Oil and Gas
Refining: A Panacea for Nigeria's Reliance on Imported Refined Products
- PIB Will Be
An Enabler For Increased Investments In The Oil and Gas Sector - Bambo
Concerns on Crude Oil Price Dents Economic Recovery
Prices of PMS, AGO, HHK and Cooking Gas - August 2020
- FG: Dangote Refinery Will Sell Petrol
at International Price
- NOVA Monthly Oil Market Update:
Production Scale Back Pressured Prices
- Effective Gas Utilization Will
Guarantee Energy Security For Africa - Austin Avuru
- Petrol: An End to the Subsidy
- Towards a Comfort Zone for the
- PPMC Increases Ex-depot Price of
PMS to N151.56 per Litre