Saturday, May 09, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil markets are on course
to see their second consecutive weekly gain as the OPEC+ production cut comes
into effect and a wave of shut-ins hit the shale patch.
For further research, analysis and trade recommendations, make sure you read
this morning's Global Energy Alert newsletter. From Saudi Arabia's latest
attack on the U.S. shale patch to what OPEC is going to do next, it truly is a
Friday, May 8th, 2020
The U.S. Labor Department reported a loss of more than 20 million jobs in the
month of April. The unemployment rate surged to 14.7 percent, the highest since
the Great Depression. Still, stocks rose. Investors saw positive news after the
U.S. and China backed away from trade tensions.
rally may be going too far. Oil prices have doubled in
a little more than a week on mounting supply shut-ins and hopes of a demand
rebound. But analysts are warning that the newfound optimism is premature. "Even following a gradual resumption of economic activity, demand may remain
below the 2019 level for years to come," Commerzbank analysts said.
Markit: Oil production to fall 17 mb/d in Q2. IHS
Markit estimates that global oil production will fall by 17 mb/d in the second
quarter, the largest decline in history.
America cuts 1.7 mb/d. U.S. and Canadian oil
production is on track to decline by 1.7 mb/d by the end of June, according
to Reuters. "When prices went negative it really accelerated some of the cuts," Allyson
Cutright, director at Rapidan Energy Group, told Reuters.
says peak demand may arrive sooner. Russell Hardy, the
head of oil trading firm Vitol, suggested in
an interview with Reuters that the pandemic could accelerate the date of peak
demand, due to permanent scars in jet fuel demand and pushes for cleaner air.
But he also suggested that today's downturn will tighten the market in the
years ahead due to supply erosion.
wants to cut debt. Occidental Petroleum (NYSE: OXY) has
hired investment bank Moelis & Co. to help it trim its
$40 billion debt pile. Oxy reported a $2.2 billion loss on Tuesday.
boom ends. The oil industry has funneled billions of
dollars into plastics in recent years, but a lot of projects are now running into trouble.
drillers hint at fracking restart at $30. Diamondback
Energy (NYSE: FANG) and Parsley Energy
(NYSE: PE) suggested that
if WTI moves up to $30 per barrel, they may resume drilling and completion
cuts dividend by 55 percent. Suncor Energy
(NYSE: SU) slashed capex
and also cut its dividend by 55 percent.
still has some interest. The oil majors are cutting
spending and shutting in production around the world, but are still committed
to investing in
large offshore projects in South America.
idled wells easily be restarted? On earnings calls,
multiple oil executives expressed uncertainty about how quickly and pain-free
shuttered oil wells can be restarted. "When you shut in wells, especially for a
long period of time, you have a lot of surprises," Clay Bretches, an executive
vice president at Apache Corp., told analysts
on an earnings call. "Some of them are good and some of them are bad."
East oil producers look to renewables. "Solar power is
the cheapest kilowatt-hour in the Middle East," Benjamin Attia, an analyst at
Wood Mackenzie, told Bloomberg.
Solar can meet most of the electricity demand growth going forward in much of
the Middle East. Globally, renewable deals are still moving forward despite the
crisis in energy markets. The IEA said that renewables will be the only source
of energy to grow this year. "I'm feeling strangely positive because I'm in
renewables. If I was in chemicals or aviation or shipping, then I wouldn't be," Mortimer Menzel, a partner at Augusta and Co, a clean energy advisory firm,
told the FT.
Energy loses $2.8 billion. Devon Energy
(NYSE: DVN) lost $2.8
billion in the first quarter and the driller said its second quarter production
would fall by 10,000 bpd.
oil revenues vanish. Nigeria's oil revenues have
with prices fetched for Nigerian crude falling to $10 per barrel or less. Oil
accounts for half of the country's revenue, and the government is now
collecting very little from oil sales. Nigeria has taken out $3.4 billion in
loans from the IMF.
sand miners hit hard. Frac sand mines are closing
down, laying off workers and cutting output. "The obvious answer," Blake
Gendron, an oilfield analyst with Wolfe Research, told Reuters, "is rapid consolidation."
lays off 1,000 workers. Halliburton
(NYSE: HAL) laid off another
1,000 workers this week, which comes weeks after the company furloughed 3,500
Arabia raises price, but keeps discount. Saudi
Arabia raised the
price of its Arab Light cargoes to Asia to $5.90 below the benchmark price, a
sign that Riyadh is still fighting for market share. But for cargoes to the
U.S., the price traded at a premium, as Saudi Arabia wants to avoid
confrontation with Washington.
Related News - Previous Oilprice Intelligence Report
- 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
- Have Oil Bulls Got It Wrong? - OIR 070420
- Global Oil Production Is Set To Collapse - OIR 310320
- Oil Tumbles Towards $20 As Glut Grows - OIR 270320
- The Oil
Price Rebound Won't Last - OIR 240320
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