September 120 2019 /07:47PM / By Tom Kool of
Oilprice.com / Header Image Credit: Oilprice
Following the wildest week oil prices
have seen in recent memory, markets are now on edge as the possibility of an
Iran war increases
Friday, September 20th, 2019
It was the wildest week for oil in recent memory. Prices spiked, fell back
again, and then rose more modestly on Thursday and Friday. There are still
question marks over Saudi Arabia's ability to repair Abqaiq on as quick a
schedule as it claims and Washington and Riyadh are considering their next steps
following the attack, with more military action certainly a possibility.
disruptions negative for gas. If oil prices move higher
because of the outage in Saudi Arabia it could spark a higher rate of drilling
in U.S. shale, but the likely increase in associated natural gas output is
viewed as bearish for gas, according to analysts. "Appalachia producers in
particular need to show restraint in order to keep the market balanced into
2020," Goldman Sachs said in a research note. Natural gas prices have bounced
off of their lows from a few months ago, but many see prices taking another
downturn. A new pipeline from the Permian could capture a lot more gas that is being flared right now.
Moody's cut its medium-term gas price forecast, and downgraded Range
Resources (NYSE: RRC), Antero Resources (NYSE: AR), Gulfport
Energy (NASDAQ: GPOR), and cut EQT's (NYSE: EQT)
outlook to negative.
Sell oil to finance shorts in equities. Citi said that a
supply shock in the oil market, which could push up oil prices, could be
occurring at the same time that equities tumble from their highs. The bank said
that traders should sell their oil positions to finance bearish bets on
equities. "Heightened geopolitics can be simultaneously negative for equity
prices through the growth channel and positive for oil prices through supply
shocks," Citi analysts wrote. "Buy S&P 500 puts financed by oil puts."
interference could mean 15 to 20 percent lost output. Spacing
shale wells too close together could result in 15 to 20 percent less production than forecasted,
according to a new report from Tudor, Pickering, Holt & Co. The parent and
child wells interfere which one another. But one solution might be to frack all
the wells at the same time to avoid lost reservoir pressure.
inventories cover the gapâ€¦for now. Saudi Aramco had roughly
50 million barrels of oil in storage before the Abqaiq
attack, enough to fill in for disrupted production until the end of the month,
when repairs are expected to be completed. However, if the repairs take longer
than expected, it would be much harder to cover the gap. "They probably have
about one month of inventories," said Amrita Sen, chief oil analyst at
consultants Energy Aspects Ltd.
disruption to be felt later. The loss of barrels from
Aramco will take time to work its way through the system. "A lot of October
arrival barrels were already on the water so the hole is going to show up
toward late October," one senior European oil trader told Reuters. "There has been a mad scramble on the paper
markets but the physical scramble will come later."
Arabia pressuring wealthy Saudis to buy Aramco IPO. The
Saudi government is pressuring wealthy Saudi families to buy into the
forthcoming IPO of Aramco. Sources told the FT that the wealthy were being "bullied" and "strong-armed."
rally around the world for climate. Friday marked the global climate strike, with millions of people rallying in
dozens of cities around the globe, calling for an end to fossil fuels.
bets on electric. GM (NYSE: GM) is
betting heavily on electric vehicles, and the company has slashed payroll and
shut factories, leading to labor pressure and the current worker strike.
Meanwhile, analysts wonder whether GM is steaming ahead too quickly with EVs
and autonomous vehicles, according to a profile of CEO Mary Barra in Bloomberg.
corporate renewable deals. Google announced 1.6 GW of new renewable power deals, which it
calls the "biggest corporate purchase of renewable energy in history. Meanwhile, Amazon (NASDAQ: AMZN) announced that it would become
100 percent renewable by 2030 and it also ordered 100,000 electric delivery trucks from
Michigan-based Rivian (in which Amazon is an investor). Meanwhile, the EIA
forecasts that wind installations will surge this year and next, likely breaking records in 2020.
shuts Beaumont refinery. Catastrophic flooding in Houston from Tropical Depression Imelda forced
(NYSE: XOM) to shut its Beaumont refinery. Some called the
flooding as bad as Hurricane Harve
approves offshore wind. Dominion Energy (NYSE: D) announced plans to build a $7.8 billion, 2.6-gigawatt
offshore wind project off the coast of Virginia.
after pause, global renewables accelerate. "After stalling
last year, global capacity additions of renewable power are set to bounce back
with double-digit growth in 2019, driven by solar PV's strong performance," according to new data from the International Energy Agency. Global
renewables are set to grow by 12 percent this year, adding almost 200 GW of
capacity, the fastest pace since 2015. The agency says that the world needs to
add renewables at an annual pace of 300 GW through 2030 to meet climate
Bonny Light on force majeure. Nigeria's Bonny Light have
been under force majeure since last Friday due to the closure
of the Nembe Creek Trunk Line.
production cut as inventories swell. Venezuela's oil inventories
have climbed to more than 38 million barrels as it struggles to find buyers.
Swelling inventories now mean that production needs to be cut, according to Reuters. "Storage is almost at top capacity. We are just
days ahead of being forced to shut production at some eastern oilfields," a
PDVSA executive told Reuters.
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- Oil Hit
Hard As Tariffs Take Effect
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Estimated N33.60 per litre on Petrol Subsidy