Saturday, July 18, 2020 /07:35 AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Bullish data from the EIA and promises
from OPEC+ to eradicate under-compliance boosted oil markets, but fears of a
second wave of COVID-19 cases are keeping a cap on oil prices.
Friday, July 17th, 2020
The big oil market news of the week was the easing of cuts from OPEC+. The
markets largely welcomed the move, especially since it included pledges by
laggards to temporarily keep some supply off of the market to compensate for
past under-compliance. Meanwhile, bullish EIA data also boosted sentiment.
However, by the end of the week, concerns about slowing oil demand weighed on prices,
keeping them stuck at around $40.
delivers on easing. OPEC+ cut really deep in June, and the
cohesion was maintained as the group moved to ease production cuts from 9.7
mb/d to 7.7 mb/d in August. However, the headline number is mitigated by the
fact that the so-called laggards are supposed to "compensate" for overproducing
in recent months. So, the effective production cuts may only decline to 8.1 to
8.3 mb/d in August instead of 7.7 mb/d.
to increase? Probably. Analysts mostly think that there is room
for OPEC+ to increase production without leading to a slide in prices. After
all, demand apparently outstrips supply at the moment. Saudi Arabia's Energy
Minister Prince Abdulaziz bin Salman said the increase
will be "barely felt." Still, significant downside risk remains, largely
revolving around the potential hit to demand from the coronavirus and renewed
gasoline demand eases back. U.S. gasoline demand fell 5
percent last week, the second consecutive week of declines. "Normally this
two-week period would have been the peak demand period and we didn't get it," said John Kilduff,
partner at Again Capital in New York. "The recovery has been unwinding."
to exit oil refineries. Eni (NYSE: E) said that it would
pivot away from conventional oil refineries and instead invest in greener
biorefineries. "Instead of slowing down, we see COVID as a reason to accelerate
the transition to low-carbon energy," Chief Executive Officer Claudio Descalzi said.
has $42 billion in clean energy debt. China has built solar and
wind so fast that the government owes $42 billion in subsidies for which it has
oil imports may fall back. China imported a record amount of
crude in May, but those oil flows fell back a bit in June, although remained
above year-ago levels. The surge in imports filled up inventories, which may
presage a slowdown in further imports.
subsidies accelerate EV sales in Germany. New subsidies for EVs
in France and Germany have boosted sales. In Germany, an EV fetches a
9,000-euro subsidy. "There are a lot of attractive offers right now because of
higher subsidies, and that's boosting demand," an analyst with BloombergNEF said. "The EU is
pushing toward decarbonizing transport, and the coronavirus crisis has allowed
them to accelerate that."
than 200 Pemex workers die of COVID. Pemex has the highest workplace death toll from Covid-19 than any other company in the world (not just among oil
companies). An estimated 202 have died from the virus, a total that only the UK
National Health Service - which isn't a company - has surpassed.
seeks buyer for North Sea gas pipeline. Total (NYSE: TOT) is
looking to unload its 25.7
percent stake in the Shearwater Elgin Area Line, which it hopes will generate
and other oil giants set carbon target. ExxonMobil (NYSE: XOM),
Saudi Aramco, CNPC, and other oil giants as part of the Oil and Gas Climate
Initiative (OGCI) pledged to lower the
carbon intensity of their operations. However, the target is not an absolute
measurement, so the group in theory could still increase emissions so long as
the carbon intensity per barrel declines.
vacates Trump admin's methane rule rescission. The Bureau of
Land Management's effort at scrapping Obama-era
methane regulations was vacated by a federal judge. The rule limits methane
from oil and gas operations on federal lands. The Obama-era rule will go back
into effect, although the judge agreed to a 90-day stay.
of State Pompeo tightens sanctions on Nord Stream 2. The State
Department closed a loophole in its sanctions policy on the Nord Stream 2
pipeline, subjecting more European companies to the sanctions. "It's a clear
warning to companies aiding and abetting Russia's malign-influence projects it
will not be tolerated," Pompeo said. "Get out
now, or risk the consequences." The pipeline is close to being completed.
identifies 1,000 "shovel-ready" green projects. The EU is
eyeing a 750-billion-euro green stimulus, and there are more than 1,000
specific projects ready to go within two years, according to Reuters. For
instance, one possibility is a gigafactory for lithium-ion batteries in Poland;
another would retrofit buildings in Paris.
Resources files for bankruptcy. California Resources Corp. (NYSE: CRC) filed for Chapter
11 bankruptcy protection.
billion in clean energy investment at risk. A total of 31 GW
and $23 billion worth of investment is at risk of disappearing over the next 18
months due to the pandemic.
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