March 07, 2020 /06:42 AM / By Tom Kool of
Oilprice.com / Header Image Credit: Oilprice
It appears that the OPEC+ alliance may
soon be over as Russia refuses to cut and its oil minister hints at increasing
Friday, March 6th, 2020
Oil prices plunged by more than 8 percent after the OPEC+ meeting broke up with
no deal. Saudi Arabia and Russia negotiated behind closed doors in Vienna, but
Moscow refused to sign on to deeper production cuts. Now there is uncertainty
about whether the OPEC+ alliance will survive. A day earlier, OPEC essentially
issued an ultimatum, calling for 1.5 mb/d of production cuts, but suggested
that no deal would occur without Russia. At the time of this writing, oil
prices were in freefall. WTI was below $43 and Brent near $46.
facing demand "trap". Moscow has balked at deeper
production cuts not only because it has a stronger stomach for lower prices
than Riyadh, but also because the oil market is suffering from a demand trap.
That is, restraining supply may not rescue prices when global oil demand has
fallen so sharply.
next? At the time of this writing, there is some speculation that not only has OPEC+ failed to agree on
additional production cuts, but also that the current OPEC+ agreement - the one
from December - is set to expire in March, after which producers can raise
output. The entire OPEC/non-OPEC alliance is now on the rocks, although the
group pledged to continue to talk going forward.
maintains aggressive spending. Despite pressure from
investors to focus on cash flow and only modest growth, ExxonMobil
(NYSE: XOM) laid out its medium-term corporate strategy in an investor
presentation this week, one that continues to rely heavily on production
growth. Exxon trimmed its spending somewhat, but remains largely unbowed in its
view that heavy spending will pay off. The company's share price fell sharply
on the news. Meanwhile, Chevron (NYSE: CVX) promised to earmark more money for shareholders, pledging
$80 billion in payouts over five years.
and American oil majors diverge. European oil majors have adopted climate targets and have made initial investments
in renewable energy, promising to gradually make a transition to a lower-carbon
portfolio. The American oil majors are largely digging in and rejecting such
Oil demand to fall by most in history. Global oil demand
could fall by as much as 3.8 mb/d in the first quarter, the largest
contraction in history, according to IHS Markit. A growing number of analysts
now see negative oil demand for the full year in 2020.
could lose $113 billion. Airlines could lose as much as $63 to $113 billion this year due to the coronavirus,
according to the International Air Transport Association.
declares force majeure on LNG. CNPC declared force majeure on prompt natural gas imports, the
second Chinese buyer to do so.
industry seeks to block gas bans. A growing number of U.S.
cities are exploring bans on natural gas hookups in new commercial and
residential construction. In response, gas lobbyists are pressing state legislatures to preempt municipal bans.
Arizona recently passed a law blocking cities from banning gas hookups.
falling out of favor with investors. Bloomberg notes that
investors are souring on natural gas, with local gas distributors now trading
for less than electric utilities in relation to projected earnings. "Right now,
anyway you look at it, natural gas is not seen as something that is very
friendly," Shahriar Pourreza, an analyst at Guggenheim Securities LLC, told Bloomberg. The poor performance reflects dim long-term
at U.S. ports down 20 percent. Cargo volumes at U.S. ports
could be down by as much as 20 percent in the first quarter.
use falls fastest in 65 years. U.S. coal consumption fell
by 13 percent in 2019, the fastest decline rate since the 1950s. The EIA expects coal co decline at a similar rate this
loses bid to ship shale oil across tribal land. BNSF
Railway shipments of oil across tribal land in Washington state violated a
right-of-way and easement agreement, according to a ruling from a federal court.
exits DJ Basin. ConocoPhillips (NYSE: COP) agreed to sell its Niobrara assets for an estimated $380
million, exiting the basin.
Buffet bails on Canadian LNG. Warren Buffet's Berkshire
Hathaway decided against investing $4 billion in an LNG and
pipeline project in Quebec.
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