Tuesday, March 31, 2020 /08:59
PM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
we will take a quick look at some of the critical figures and data in the
energy markets this week.
We will then look at some of the key market movers early this week before
providing you with the latest analysis of the top news events taking place in
the global energy complex over the past few days. We hope you enjoy.
Chart of the Week
- The OVX index measures implied volatility of oil prices and is
calculated by using movements in the prices of financial options for WTI.
- The OVX reached 190 on March 20, an
all-time high measurement for the index since it began in 2007.
- Since 1999, daily movements in oil prices remained below 2
percent roughly 70 percent of the time. There have only been a handful of times
in which prices moved by more than 10 percent in a single day in the past 20
years, but that occurred 6 times in March 2020.
- On March 9, prices fell by 25 percent, and on March 18,
prices fell by 24 percent. These were the two largest single-day movements for
WTI in more than 20 years.
- TC Energy (NYSE: TRP) said it would move forward
with the Keystone XL pipeline if the provincial government of Alberta chips in
$1.1 billion in equity.
- Range Resources (NYSE: RRC) to cut 2020 capex by 17
- Valero (NYSE: VLO) said it would curtail
operations at two more refineries, including its St. Charles refinery in
Louisiana and its Port Arthur, TX refinery.
Tuesday March 31, 2020
WTI opened slightly up but, at $20 per barrel, remains stuck at 18-year lows.
There are few reasons to be optimistic, as most analysts see demand destruction
growing by the day. It seems the rebound in oil prices earlier in the month was
only a temporary relief.
destruction to exceed 20 percent. Global oil demand could
fall by more than 20 mb/d, and market forecasts continue to see daily
revisions. "Oil demand is breaking away, probably by much more than the 20% we
have currently in our books for April/May," JBC Energy said.
and Parsley want Texas emergency meeting. Pioneer
Natural Resources (NYSE: PXD) and Parsley Energy
(NYSE: PE) asked Texas oil regulators
for an emergency meeting to consider mandatory production cuts. The American
Petroleum Institute called the idea "shortsighted."
speaks with Putin. President Trump spoke with Russian
President Vladimir Putin on Monday, and they agreed to have their top energy
officials discuss the sliding oil market. Trump is trying to convince Saudi
Arabia and Russia to back off the price war, but has little leverage. "I never
thought I'd be saying that maybe we have to have an oil (price) increase,
because we do," Trump said prior to the call on a Fox News interview. "The
price is so low now they're fighting like crazy over, over distribution and
over how many barrels to let go."
companies tell drillers to cut. Texas pipeline companies
have told shale drillers to cut
upstream production because pipelines and downstream storage and refineries are
reaching capacity. The move is a sign that shut ins are just around the
backs out of LNG project. Royal Dutch Shell (NYSE: RDS.A) withdrew from the proposed
Lake Charles LNG project in Louisiana. Shell's partner, Energy
Transfer Partners (NYSE: ETP), remains in the project, but has
delayed an FID.
Sea platforms hit by coronavirus. The FT reports that more than a
dozen workers at an offshore platform in the North Sea had to be quarantined
from the rest of their crew because of the coronavirus. "Staffing will
really be an issue," one industry executive told the FT. "The reality is that
people working on these sites will get it. You can't have the entire world in
lockdown but keep these projects running just as they have been."
oil producers struggle. Oil producing countries in Africa
will struggle with low prices. Nigeria could see production fall by 35 percent
without offshore investment. The continent could see production fall by 200,000
bpd through 2025, according to Rystad. The downturn threatens government
finances. "This is really different terrain, and these are very vulnerable
economies," Alex Vines, head of the Africa Programme at British think-tank
Chatham House, told Reuters.
gas prices could double in 2021. The sharp drop in
associated natural gas production in the Permian could tighten up natural gas
prices, with analysts seeing prices potentially doubling
mb/d of production to be shut-in. IHS Markit says that 10
mb/d of global production could be shut in between April and June. Other
analysts have smaller numbers. OPEC+ is expected to add 4 mb/d this
year, but total global production could fall by 200,000 bpd, according to
Energy Aspects, which highlights just how much supply needs to contract in
non-OPEC countries. Goldman Sachs puts global decline at 900,000 bpd, "with the
true number likely higher and growing by the hour." Goldman said production
capacity could shrink by 5 mb/d this year.
to finalize weaker fuel economy standards. The Trump
administration is set to announce its final rule for
weaker fuel economy standards on Tuesday. The new rules will allow the U.S.
auto fleet to emit nearly 1 billion tons more of CO2 over their lifetimes than
the Obama-era rules. The old rule would have required automakers to achieve 55
miles per gallon across their fleets by 2025. The Trump rule will lower than to
storage in danger of filling up. The global oil market is "broken," with storage filling up and surplus cargoes selling for steep
discounts, according to Bloomberg. At current
rates, storage could top off in just a few months. "The physical oil market has
seized up," said Gary Ross, chief investment officer of Black Gold Investors
says Sverdrup to beat expectations. Equinor (NYSE:
EQNR) said that its Johan
Sverdrup field could ramp up production faster than expected.
see $34 oil for 2020. A WSJ survey of 11 investment banks predicts an average WTI
price of $34.95 for 2020 and $38.12 for Brent.
blast Trump admin on ethanol. The Trump administration has decided not to appeal a
federal court decision that limited the government's ability to issue waivers
to refiners to allow them to get out of their ethanol blending requirements.
It's the latest twist in a multi-year battle between refiners and the ethanol
industry, and the latest chapter ends in the favor of ethanol. At the same
time, ethanol plants are shutting down because of collapsing demand.
take control of Sanchez Energy. The top lenders of Sanchez Energy
(OTCMKTS: SNECQ) took a majority stake in the company after the
driller was unable to pay back $200 million in bankruptcy loans that have kept
it afloat during the proceedings, according to the Wall Street Journal.
Energy sells assets, sees stock jump. PBF Energy
(NYSE: PBF) saw its stock price jump 20 percent on Monday after
it announced an asset sale and spending cuts. But Bloomberg Energy analyst said the moves won't be
enough and the refiner will need to draw on its credit facility.
Oil to cut spending by C$1 billion. Imperial Oil
(TSE: IMO) will cut capex by C$500 million
and it also said that it will cut opex by C$500 million.
considers pipeline sale. Saudi Aramco (TADAWUL: 2222)
is considering a sale of a stake
in its pipeline unit in an effort to raise cash, and the company thinks it can
raise $10 billion from the sale.
- U.S. Shale
Producers Ask Texas Oil Regulator for an Emergency Meeting to Consider
The Oil Industry Will Never Be The Same After Coronavirus
- Oil Tumbles
Towards $20 As Glut Grows - OIR 270320
- The Hottest
Startup Of 2020 Is Cleaning Up Your Commute
- Cesium -
The Most Important Metal You've Never Heard Of
Gasoline Price Review to N125 and the Pursuit of Fuel Subsidy Removal
- The Oil
Price Rebound Won't Last - OIR 240320
- Crude Oil:
Unsold Cargoes Forces Price Slash
- The Very
Real Prospect Of $5 Oil - OIR 200320
- The Most
Exciting Green Startups To Watch In 2020
of PMS Pump Prices Reduction and Introduction of a Price Modulation
in PMS - A Nod to the Deregulation of the Downstream Sector?
Really Happening In Oil Markets?
Announces Reduction in PMS Pump Price to N125 per Litre