Saturday, May 23, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil prices are continuously rising despite
the uncertainty surrounding COVID-19, with WTI nearing a two-month high on
For further research, analysis and trade recommendations, make sure you read
this morning's Global Energy Alert newsletter. From an analysis on Saudi
Arabia's current economic crisis to the latest updates on COVID-19, it truly is a must-read.
Friday, May 22nd, 2020
The long rally for oil prices came to a halt on Friday over fears about a
slower-than-expected economic recovery in China. The Chinese government broke
with tradition and declined to set a
growth target for 2020 due to "great uncertainty." Markets were also
disappointed with the tepid size of government stimulus from Beijing.
Meanwhile, rising U.S.-China tension adds to the concerns.
oil imports to rise. Despite questions about economic
growth, China's oil imports are set to rise by about 2
percent this year. In fact, China's oil demand is already back to about 90
percent of pre-pandemic levels.
asks for regulated cuts. Continental Resources (NYSE: CLR)
asked North Dakota
regulators to order mandatory production cuts or flaring limits.
oil field threatened by COVID outbreak. One of the world's
largest oil fields may need to shut down because dozens of workers have been
infected by the coronavirus. The Tengiz oil field, produces 500,000 bpd in Kazakhstan,
faces a potential closure, the government said. Almost 950
workers at the site have tested positive. Chevron (NYSE: CVX) is the lead
on the project.
majors reduce clean energy deals. The oil majors only closed 3 renewable
energy deals in the first quarter, compared to 17 in the same quarter a year
evacuates Iraq staff. Royal Dutch Shell (NYSE: RDS.A)
said that it evacuated around 60
foreign staff from Iraq's Basra Gas Company as a security precaution following
a protest over pay.
oil exploration grinds to a halt. All international
companies operating in Angola - Total (NYSE: TOT), Chevron (NYSE:
CVX), ExxonMobil (NYSE: XOM), BP (NYSE: BP),
(NYSE: E) - have idled or scrapped drilling rigs in the
country, according to Reuters. "We have
suspended all our drilling activities like all other operators in Angola," Total said in a statement. Total makes up half of Angola's output.
sets $45 oil price. The Argentine government fixed domestic oil
prices at $45 per barrel in an attempt to prevent a collapse of its oil
industry. The price would be voided if Brent moves above $45 for 10 days. The
policy will last until the end of 2020, but there are questions about its
efficacy. The collapse in demand means there is already a surplus, leaving
little room for drillers to ramp up. Meanwhile, YPF (NYSE: YPF) said it would
ditch plans to expand LNG exports from the country.
nears battery for 1 million miles. GM (NYSE: GM) said it was "almost there" in developing a battery for electric vehicles that could last
for 1 million miles. The next-generation battery would use zero-cobalt
renewables fall in 2020, rebound next year. The IEA said
that renewable energy installations will decline by 13 percent
compared to 2019 levels, but will rebound to pre-pandemic growth rates in 2021.
At the same time, the pandemic will cut into coal, helping to
speed the clean energy transition.
plans voluntary job cuts. Royal Dutch Shell (NYSE: RDS.A) said it plans to
offer voluntary severance for staff to cut costs.
war shifts against Haftar. The forces of the Government of
National Accord (GNA) have overrun an air base
near Tripoli, beating back the Libyan National Army. The move is a setback to
the warlord Khalifa Haftar, and it could theoretically lead to the restart of
some shuttered oil fields. However, the LNA still controls the main ports of
the country. Libya is only exporting 90,000 bpd, down from 1.2 mb/d last
oil states struggling to repay deals. Some poorer
oil-producing countries that previously made oil prepayment deals - deals that
consist of a payment of cash to the country, repaid by oil exports - are under
serious pressure as they need to diver more oil to satisfy the terms of the
deal. For instance, Kurdistan is struggling to repay a $500 million prepayment deal with Glencore (LON: GLEN).
lose advantage for shale drillers. Hedging future
production is becoming less of an advantage for shale drillers. Oil prices are
too low and also are more costly after a bout of volatility, including negative
prices. "There has been a dearth of opportunities to hedge for 2021, and this
is traditionally the time period when you lean into next year's hedging at more
robust levels," Michael Tran, managing director of global energy strategy at
RBC Capital Markets, told Bloomberg. Roughly half
of U.S. producers tracked by Bloomberg have their production hedged for 2021.
Still, the fact that some are still hedging demonstrates fears that prices
could slide back below $30 per barrel next year.
to unveil Green Deal. The European Union will unveil details on
its Green Deal proposal next week, a $500 billion green stimulus package aimed
at bolstering EVs, renewable energy and other clean energy initiatives.
LNG cancellations rise. About 45 LNG cargoes scheduled to
be exported from U.S. ports in July have been canceled, according to S&P Global Platts. At least half of them are tied to Cheniere Energy's (NYSE: LNG) two
Gulf Coast terminals.
Fed: U.S. economy doesn't benefit from low prices. A new study from the
Dallas Federal Reserve found that the slide in oil prices has been negative for
the U.S. economy, outweighing the benefits to the consumer from lower gasoline
prices. The decline results in lower fixed-investment from the oil industry,
and it also may put stress on the banking system.
Related News - Previous Oilprice Intelligence Report
- The Oil Bulls Are Back - OIR 190520
- A Relentless Oil Price Rally - OIR 150520
- Oil Holds Gains Despite Massive Unemployment - OIR 080520
- The Worst
May Be Over For Oil - OIR 050520
- A Rare Week
of Optimism For Oil Markets - OIR 010520
Season Will Be A Bloodbath For Oil Producers - OIR 280420
- A Very
Brief Oil Price Rebound - OIR 240420
- Oil Price
Mayhem - Is The Market Broken? - OIR 210420
- Oil Prices
Fall Towards $15 for WTI and $25 for Brent As Storage Nears Capacity - OIR
- Oil Prices Crash Towards $30 Despite Historic Cuts - OIR 100420
Related News - Oil and Gas
Oil and Gas Industry Update
Gas: Demand Pressure and Price Plunge hit LNG Revenue
- OMCs to
Resume Importation of Petrol
Litres of PMS Imported Into Nigeria in 2019 - NBS
- Ahead of
Tomorrow on WebTV: Discussions on Post COVID-19; Repositioning The
Nigerian Gas Industry
- OPEC Members Test the Depth of Crude Oil Reserves
- Big Oil,
Little Oil Have Full Lives Ahead - FBNQuest
- Groups Advocate for Reforms in the Downstream Sector of the Oil and
Oil Majors Could Adapt to Low Prices
- Low Oil
Prices, Record Volatility Will Hasten US Energy Defaults