April 21, 2020 / 9:22 PM / by Tom Kool of Oilprice.com /
Header Image Credit: The Hill
Today, 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.
As oil prices collapsed into negative territory for the first time in history -
it is more important than ever to fully understand what that means for traders,
energy professionals, and broader markets. Make sure you have signed up for
your risk-free trial of Global Energy Alert to ensure you
receive Friday's analysis of what this all means for markets.
We hope you enjoy.
- WTI closed at -$37 per barrel
on Monday, the first time it has ever closed in negative territory.
- The development reflects traders trying not to get stuck with physical
delivery for May as the contract expires on Tuesday. But the hot potato chaos
also reflects a fundamental lack of storage.
- June WTI contracts are trading at a more reasonable but still catastrophic
$11.35 per barrel as of midday on Tuesday.
- BP (NYSE: BP) refineries are operating well below normal
rates. Its Toledo, OH refinery is down nearly 30 percent, and its Whiting, IN
refinery is 17 percent below capacity.
- Phillips 66 (NYSE: PSX) was upgraded to Buy by Bank of
America while PBF Energy (NYSE: PBF) was downgraded to Neutral.
- Halliburton (NYSE: HAL) cut spending by $1 billion
and also posted a $1 billion loss for the first quarter.
April 21, 2020
In a historic first, WTI closed in negative territory on Monday, or -$37.63 to
be exact. The decline comes as the WTI contract for May expires on Tuesday.
Analysts differed over the significance of this development since the expiring
contract becomes increasingly irrelevant. But on Tuesday, the June and July
contracts began to collapse as well, deepening the crisis for the oil
calls for bailout. In a tweet on Tuesday, President Trump
said: "We will never let the great U.S. Oil & Gas Industry down. I have
instructed the Secretary of Energy and Secretary of the Treasury to formulate a
plan which will make funds available so that these very important companies and
jobs will be secured long into the future!" For now, it is unclear what form
such government help will take, although a week ago, Bloomberg reported that
the Department of Energy was considering a plan to pay shale drillers not to
Arabia considers cuts sooner. Saudi Arabia may cut as soon
as possible, rather than waiting for May, according to the Wall Street Journal. "Something has to be done about this bloodbath," said a Saudi official familiar
with the matter. "But it might be a little bit too late."
considers halting Saudi imports. The U.S. celebrated the
OPEC+ deal a week ago, but with oil prices collapsing once again, the Trump
administration may consider limits on imports. "We certainly have plenty of
oil, so I'll take a look at it," he said.
wants to fill SPR. On Monday, Trump once again pushed for filling up the
SPR. "This is a great time to buy oil... Nobody's ever heard of negative oil
Investor Alert: These are unprecedented
times for oil markets, which means there will be unprecedented opportunities in
the not-so-distant future. Make sure you are signed up for Global Energy Alert this
Friday when our exclusive report on How To Profit From The Oil Market
Crash is released.
industry lobbying for Fed help. The U.S. oil and gas
industry "has asked the Federal Reserve to change the terms of a $600 billion
lending facility so that oil and gas companies can use the funds to repay their
ballooning debts," Reuters reported.
calls for help. The Canadian government announced a C$2.45 billion
aid package for Canada's energy sector last week. Alberta Premier Jason Kenney
said the province needs more. "More support is needed to deal with the crisis
in Canada's energy sector, but this is a great first step," Kenney said. "Our
energy sector is facing its biggest challenge ever, and we need to be sure that
industry can access the capital it needs to survive and thrive in future
oil stored at sea. At least one in 10 supertankers is
storing oil at sea, and some of those cargoes originated from Saudi Arabia,
according to the Wall Street Journal. "The kingdom is now facing a situation where they may have to shut parts in
their production, likely from Ghawar and others because they don't have
buyers," a senior Aramco executive told the WSJ. "The fact is buyers don't have
storage so regardless of whatever level of output you want, there won't be
storage for it."
cuts steam-driven oil projects. Steam-assisted gravity
drainage (SAGD) oil projects in Canada are facing shut ins and the curtailment
could cause permanent damage. ConocoPhillips
(NYSE: COP) cut output by 100,000 bpd, while Husky Energy
(TSE: HSE) and Cenovus Energy (NYSE: CVE) cut
production by 15,000 bpd and 45,000 bpd, respectively. Total Canadian shut ins
could total 1.5 mb/d, according to TD Bank.
cuts $1 billion. Halliburton is cutting jobs, cutting capex
by $1 billion and warning of a steep downturn. "We expect activity in North
America land to sharply decline during [Q2] and remain depressed through
year-end, impacting all basins," CEO Jeff Miller said. "Activity is in free
fall in North America."
industry loses 51,000 jobs. An estimated 51,000 jobs were
lost in the oil industry in March, a 9 percent reduction that will surely grow
much more severe in the weeks ahead. "We're looking at anywhere between five
and seven years of job growth wiped out in a month," Philip Jordan, VP at BW
Research Partnership, a research consultancy, told Bloomberg. "What makes it
sort of scary is this really is just the beginning. April is not looking good
for oil and gas."
Non-OPEC supply to fall by 4 mb/d by end-2021. Wood
Mackenzie updated its forecast for
supply declines, noting that cut backs are happening faster than the firm
thought just a few weeks ago.
fuel demand plummets by 50%. India's demand for all fuels fell by 50 percent in
orders companies to cut 20 percent. Russia's energy
ministry told domestic oil producers
to cut oil production by 20 percent from February levels, a sign that Moscow
intends to follow through on the OPEC+ deal.
doubles stockpiling. China doubled the fill rate at its strategic
and commercial inventories in Q1 2020, with some 2 mb/d of oil not processed by
refiners in the first quarter.
Petroleum gets delisting warning. Whiting
Petroleum (NYSE: WLL) was given a delisting notice
from the NYSE because its share price is in danger of trading below $1 per
share for a 30-day period. Whiting filed for bankruptcy on April 1.
- A Massive Wave Of Shut-Ins Fails To Halt Oil Price Crash
- Oil Prices
Hit $26.45 for Brent Crude
- Oil Prices
Fall Towards $15 for WTI and $25 for Brent As Storage Nears Capacity - OIR
Bargain Hunters Are Stocking Up On Ultra Cheap Crude Oil
Deal Reduces Downside Risks, Surplus Not Eliminated
Must Deregulate Its Petroleum Sector Post COVID-19 - Boniface Chizea
- IEA: Huge
Oil Build Threatens To Fill Up Global Storage Within Weeks
- Oil Hits
$20 for WTI and $30 for Brent After API Reports Mega Crude Inventory Build
- Oil Falls
As Saudi Arabia Launches New Price War With Record Discounts
- Oil Prices
Plunge On Grim IMF Economic Forecast
Powerless As Oil Prices Near $30
- Oil Supply
Deal: Market Stability Desired
Production Cuts: Implications for Nigeria