Saturday, August 04 2020 /07:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil spiked on a larger
than expected inventory draw this week, but fears of a second wave of COVID
have caused crude prices to retreat.
Friday, August 7th, 2020
Oil prices rallied to multi-month highs mid-week on stronger EIA data. But the
market narrative remains the same - tightening fundamentals set against a weak
macro backdrop has kept oil prices stuck in a narrow trading range. On Friday,
prices fell back, erasing some gains.
divestment to help transform the company. BP (NYSE: BP) announced
more details earlier this week on how it plans on transitioning into a low
carbon energy company, which notably included an expected 40 percent decline in
production by 2030, or 1 mb/d. However, the plan apparently relies heavily on
selling assets. "It is a simple calculation of natural production decline and
planned divestment," a BP source told Reuters.
warns 20 percent of reserves in danger. In a
securities filing, ExxonMobil (NYSE: XOM) said
that 20 percent of
its oil and gas reserves are at risk of getting wiped off the books because of
low oil prices, although the company won't offer an update until the end of the
year. Exxon singled out its Kearl oil sands project in Canada.
demand takes a hit. At least three major Asian
refiners are planning to buy less oil from Saudi Aramco in September, potentially a sign of softer
shale on hold for the rest of the year. U.S. shale
drillers are not prepared to add rigs back into the field for the remainder of the year, and
will likely use any increase in cash flow to repair balance sheets rather than
return to growth.
price squeeze threatens EV boom. Prices of cobalt, a
key element in EV batteries, have lately been surging as
Covid-19 lockdowns in southern Africa have created severe supply chain
ships oil to Saudi Arabia. In a bizarre turn of
events, the U.S. sent its
first oil shipment to Saudi Arabia in June, although the shipment could have
been heading for another destination.
gas use to bounce back. Global natural gas consumption grew
by more than 2 percent in 2019 and is expected to fall by 4 percent this year.
However, cheap prices and a coal-to-gas switching should lead to a rebound. LNG
use expanded by 13 percent in 2019 and will dip this year by 4 percent, but
should surpass pre-pandemic
levels in 2021.
may need to shut Gorgon LNG for maintenance. The
Western Australian government has ordered an
urgent inspection of Chevron's (NYSE: CVX) Gorgon
LNG plant. The facility may need to shut down temporarily.
explores diversifying. Transocean Ltd. (NYSE: RIG) hired Lazard
Freres & Co. to explore strategic alternatives as the offshore rig market
has collapsed. Transocean has $9 billion in debt and is looking for ways to
ease the burden.
halts employee match retirement plan. ExxonMobil
(NYSE: XOM) suspended its employee matching retirement savings plan for its employees in a bid
to save cash. "Given the current business environment, the corporation is
taking steps to reduce costs," says Exxon's message, seen by Reuters. Notably,
Exxon is cutting costs in order to maintain its dividend to shareholders.
service giants look international. As U.S. shale
drilling collapsed, oilfield services giants Schlumberger
(NYSE: SLB), Halliburton (NYSE: HAL) and Baker Hughes
(NYSE: BKR) are looking for international work as hopes of
a rebound in shale drilling dim. "North America is going to be a changed market
moving forward," said Lance Loeffler, CFO of Halliburton, according to the FT. "Our
view is that the international markets will take share back from a supply
perspective... and we need to be prepared for that."
only buys 5% of promised U.S. energy. China only
fulfilled 5 percent of the targeted $25.3 billion in energy products from the
U.S. in the first six months of 2020. "China is unlikely to fulfil its Phase 1
commitments as they were overly ambitious to begin with," Michal Meidan, a
director at the Oxford Institute for Energy Studies, told Reuters.
growth over for now. An array of Permian shale
drillers said that growth was not coming back for a while. "Certainly we're not
seeing any signals that growth is needed," Travis Stice, CEO of Diamondback
Energy (NYSE: FANG), said during a conference call. "Growth in
today's world is pretty much off the table." Concho
Resources (NYSE: CXO) voiced a similar outlook on its
RRC announces draft flaring plan. The Texas Railroad
Commission announced a draft plan on gas flaring, which includes requiring companies to
detail more information when they want to flare or vent. RRC Chairman called it
a "first step." Environmental groups said the plan is inadequate.
Access wins temporary reprieve. A U.S. appeals court
on Wednesday said the
Dakota Access Pipeline (DAPL) does not have to be shut and drained, a temporary
win for the project. However, a legal battle will still continue and,
ultimately, the pipeline will need to undergo an environmental impact statement
in order to continue operating.
says it will cut deeper. Iraq said it will comply 100
percent with the OPEC+ deal this month and next, and that it would make additional cuts of 400,000 bpd in August to compensate for past
posts quarterly loss. Marathon Oil (NYSE: MRO) reported a
$750 million loss in the second quarter, down from a $161 million profit a year
The post COVID
Fears Cause Oil To Fall Back After A Brief Rally first appeared in Oilprice.com on August 07, 2020.
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