Tuesday, September 22, 2020 /07:00
PM / by Josh Owens of Oilprice.com / Header Image Credit: Oilprice
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.
We hope you enjoy.
Chart of the Week
- U.S. crude oil exports hit a record high
in February 2020 at 3.7 mb/d, but declined after that as demand plummeted.
- U.S. oil exports averaged 3.2 mb/d for the first six months
of the year. While down from the February peak, the number was up from 2.9 mb/d
from the first half of 2019.
- After Canada, China was the second-largest buyer of U.S.
crude, averaging 361,000 barrels per day in the first half of 2020. Canada
purchased 389,000 barrels per day.
- GE (NYSE: GE) announced that it
was exiting the coal business. A day later, GE said its wind turbines
would be used in the world's largest offshore wind project.
- Oasis Petroleum (NASDAQ: OAS) missed a debt payment and
has entered a 30-day grace period. The company said it would continue talks
- Sempra Energy's (NYSE: SRE)
Cameron LNG project could remain offline through
October, due to challenges in restoring power after Hurricane Laura hit the
Tuesday, September 22, 2020
Oil prices fell on Monday on renewed concerns of coronavirus-related lockdowns.
Oil edged up slightly on Tuesday. "As any new restrictions will likely be more
localized, the oil demand recovery should still continue, although at a slower the pace with the easiest demand gains behind us," UBS oil analyst Giovanni
Staunovo told Reuters.
sees tough 2H2020 on weak demand and low volatility. Oil
trading firm Vitol sees tepid demand growth and low trading activity in the
short run, making the second half of 2020 rather bleak for traders. "Obviously,
with crude trading, it's difficult to maintain business volumes because there
is less crude to market and trade; there's less being produced," Vitol CEO
Russell Hardy told Reuters.
countries squeezed by prices. Middle Eastern oil producers are
increasingly relying on debt markets to
bridge the gap in government finances. Abu Dhabi just completed a $5 billion,
50-year bond. For now, Gulf States are still in good standing with debt
markets, but with oil prices showing no signs of returning to pre-pandemic
levels, how long can it last?
restarts oil production. Libya's National Oil Corporation will restart production from
certain fields and some exports of crude oil, the company said. The force
majeure will be lifted from fields and ports that are free of the presence of
paramilitary groups and mercenaries, but remain in effect for those where there
are still such groups, which hamper the work of NOC. Libya's National Oil
Corporation (NOC) sees oil production rising
to around 260,000 barrels per day (bpd) next week, up from some 100,000 bpd
before the blockade.
preparing major cost-cutting. Royal Dutch Shell (NYSE: RDS.A)
is preparing a plan to cut 40 percent from the cost of producing oil. As Shell
undergoes its clean energy overhaul, it will focus its oil and gas operations
on a few core areas: Gulf of Mexico, Nigeria and the North Sea. Shell will make
deep cuts to its retail fuel division, its LNG division, according to Reuters. The overhaul will
be Shell's most extensive in modern history and is expected to be completed by
the end of the year.
and currencies hurt if dollar strengthens. The dollar has
strengthened a bit over the past month, putting pressure on a variety of
commodities and currencies. A new study says that the dollar is still undervalued.
has too many pipelines. It wasn't long ago that oil in Midland
traded at a steep discount due to pipeline bottlenecks and surging production.
Now, the Permian is producing 4 mb/d, but has 3 mb/d of excess pipeline
capacity, according to the Wall Street Journal.
Overcapacity was a brewing problem even before the pandemic, but with
production flat-lining, the gap is growing even larger.
tipping point by 2024. Analysts have estimated that battery pack
prices should drop to US$100/kWh so that electric vehicles have a chance to
compete with cost with the internal combustion engine. Automakers and industry
experts believe that the US$100/kWh milestone could be reached as early as in
2024. Others say that threshold will arrive much sooner.
"Battery Day." Tesla (NASDAQ: TSLA) is holding its Battery Day
on Tuesday, and Elon Musk has hinted that he would announce major advancements
in battery technology. The event starts at 4:30 p.m. ET.
Med states establish gas forum. Egypt, Israel, Greece, Cyprus,
Italy and Jordan established the East
Mediterranean Gas Forum (EMGF) as an intergovernmental organization
headquartered in Cairo. The forum will present a united front to gas
development at a time when Turkey has disputed development near its borders.
offshore oil boom still alive. The COVID-19 pandemic and March
2020 oil price collapse did little to slow the oil boom underway in Latin
America's largest economy. Petrobras's second-quarter 2020 commercial oil
output grew 4.1% year over year to almost 2.5 million barrels daily.
asset risk at $40 oil. High-cost oil projects are unprofitable
at $40 per barrel, and if oil remains stuck at that price level, reserves will
be left as "stranded assets." If the world manages to comply with climate
targets limiting warming to 1.5C, more than 80 percent of oil, gas, and
coal assets would be worthless.
of 12 major cities to divest from fossil fuels. 12 cities representing over 36
million residents pledged to divest from fossil fuels. The cities include:
Berlin, Bristol, Cape Town, Durban, London, Los Angeles, Milan, New Orleans,
New York City, Oslo, Pittsburgh and Vancouver.
plans new storage. China is planning new storage hubs
in Zhejiang province for energy and agricultural products.
margins remain weak. Refiners are trimming their production as
margins remain low amid weak demand for fuels. China's refineries are expected
to cut processing in September, Reuters reports.
aims for net-zero by 2060. China will aim to reach a peak in
emissions by 2030 before winding down emissions to reach carbon neutrality by
2060, President Xi Jinping said on Tuesday.
The post Oil is
Still Stuck at $40 first appeared in Oilprice.com on September 22, 2020.
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