Tuesday,
September 08, 2020 /06:40 PM / by Josh Owens of Oilprice.com /
Header Image Credit: Oilprice.
Market Movers
Tuesday, September 8, 2020
Oil prices fell sharply on Tuesday, dragged down
by a broader selloff in tech stocks but also from a darkening demand outlook.
Brent dipped below $40 per barrel for the first time since June. Brent's
three-month timespread has widened to its largest contango since May, a symptom of an
increasingly weak market. "Today's oil-price move is a clear sign that the
market now seriously worries about the future of oil demand," said Paola
Rodriguez-Masiu, an oil market analyst with Rystad Energy.
Saudi Arabia cuts oil prices. Saudi Arabia cut the price for its oil that it ships to Asia, a
closely-watched price marker that often sets the tone for the global market.
Saudi Aramco cut the price for its Arab Light for October delivery by $1.40 per
barrel. The price cut suggests demand is weak. A Bloomberg survey found that
only 4 in 10 refiners in Asia said they were interested in buying more Saudi
crude.
IEA: Oil demand has stalled. The IEA joined the growing chorus of voices who see the oil demand
recovery stalling out. "It doesn't seem like a massive stock draw seems to be
happening yet," Keisuke Sadamori, Director of Energy Markets and Security at
the IEA, told Reuters. "We are not seeing a robust pickup in refining activity,
and jet fuel is the big problem".
Hedge funds turn bearish on oil. Hedge funds and other money managers recently swung in a bearish direction. For the week ending on
September 1, investors sold the equivalent of 40 million barrels in the six
most important petroleum futures and options contracts, according to Reuters.
ExxonMobil's financial pressure mounts. ExxonMobil
(NYSE: XOM) faces a cash shortfall of about $48 billion through 2021, according to a
Reuters analysis. The widening cash flow gap may require deep spending cuts,
asset sales, and/or more debt. Exxon has already added $23 billion in debt this
year. Analysts are even beginning to see the sacrosanct dividend as no longer
untouchable.
Tesla's shares plunge after missing S&P 500. Tesla's
(NASDAQ: TSLA) shares plunged by nearly 20 percent during midday trading on Tuesday
after missing out on being included in the S&P 500. It was the largest
single-day loss since February. As of last week, Tesla's shares likely priced
in the inclusion in the S&P, according to Bloomberg.
ESG scrutiny heightens on metal miners. The ESG (environmental, social, and governance)
investment trend is gaining popularity, but with that comes more scrutiny. Bank
of America estimates that $600 billion in market value was erased from
companies after "ESG controversies," such as revelations on poor labor or
environmental practices. Reuters reports that investment banks and analysts are increasing their
scrutiny on cobalt miners in the Democratic Republic of Congo.
China to fast-track hydrogen cars. China is rolling out a package of policies aimed at boosting sales of
hydrogen fuel cell technologies and developing the supply chain. The strategy
is focused on long-haul trucks.
Shale producers race for permits ahead of elections. U.S. shale companies are racing to scoop up drilling permits on federal land ahead of
the presidential election. Democratic Presidential candidate Joe Biden has said
he would put a halt to new drilling on public lands. Permitting on federal land
has jumped by 80 percent in the Permian in the last three months. Through
August 24, drillers have secured 974 permits on federal land in the Permian
this year, compared to 1,068 permits for all of last year.
LNG investment dries up. No new LNG export projects could be approved this year
for the first time in two decades, according to Reuters. Some analysts say it is possible that one or two projects
go forward, while others say none will receive FID. Before the pandemic,
analysts expected as much as 70 million tonnes per year of new capacity to
receive the go-ahead.
China looks to build an espionage hub in Iran. A 25-year deal between China and Iran will include a large-scale
roll-out of electronic espionage and warfare capabilities focused around the
port of Chabahar. Iran is increasingly becoming a client state of China.
Colombia's oil industry shows signs of recovery. Colombia's oil industry appears to be recovering, posting the third consecutive month of rig count increases,
according to Baker Hughes.
Germany threatens to pull the plug on Nord Stream 2. Germany's foreign minister declined to rule out sanctions on the Nord Stream 2 pipeline if Moscow did not provide
more answers on the poisoning of Russian opposition leader Alexi Navalny. "I
hope...that the Russians do not force us to change our position on Nord Stream," Heiko Maas said.
Credit:
The post Oil Prices Crash on Weak Demand
first appeared in Oilprice.com on September 08, 2020.
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