Tuesday, February 04, 2020 /06:55
PM / By Tom Kool of Oilprice.com / Header Image Credit: Oilprice
today's newsletter, 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.
- U.S. oil and gas production rose dramatically in 2018, and
the industry did that while also drilling 10 percent fewer wells, according to
- The total number of wells in production declined to 982,000
in 2018, down from a peak of 1,035,000 wells drilled in 2014.
- U.S. production grew from 8.8 mb/d to 10.8
mb/d over that timeframe.
- Tellurian (NASDAQ: TELL) is set
to sign a deal with Petronet LNG
of India during a state visit from President Trump. The $2.5 billion deal would
cover LNG imports from Tellurian's Driftwood LNG project in Louisiana.
- Petrobras (NYSE: PBR) and Chevron (NYSE:
CVX) are looking to sell the Papa Terra
deepwater oil field in Brazil's Campos Basin.
- ExxonMobil's (NYSE: XOM) oil
production contract in Guyana is so heavily weighted in the
company's favor that it will deprive the country of $55 billion over the life
of the agreement, according to Global Witness.
February 4, 2020
WTI fell below $50 per barrel
during intraday trading on Monday, as fears of a major shock to global demand
continue to grow. Bloomberg reported that China's oil
consumption is down by 3 mb/d, or 20 percent, at least as of now. Millions of
people are quarantined and thousands of flights have been cancelled. Oil prices
rebounded on Tuesday as OPEC+ began considering more aggressive action to head
off a disastrous surplus.
considers 500,000 bpd cut. OPEC's Joint Technical Committee
(JTC) is meeting on Tuesday and Wednesday to assess the status of the oil market.
The JTC could recommend deeper production cuts, and the full OPEC+ could hold a
ministerial meeting as soon as the end of next week. The main option under consideration is
additional cuts of 500,000 bpd, although by Tuesday, news reports suggested
they might consider even larger reductions.
refiners slash output. In a sign that the coronavirus is having
a serious impact on the fundamentals of oil supply and demand, China's
independent refiners cut processing by 30 to 50 percent in just over a week due
to the sharp fall in consumption. "The situation is grim - we have gasoline and
diesel demand shrinking on one hand, and fuel logistics stalling on the other
as local governments put in traffic curbs to contain the spread of the virus," a plant executive based in Dongying, a refining and chemicals hub in Shandong,
Brent to $47 in 3 months. Citigroup struck a bearish tone,
raising the possibility that Brent
falls as low as $47 per barrel in the next three months.
faces a crisis. ExxonMobil reported disappointing earnings for
the fourth quarter and continues to cover its dividend by selling off assets
and taking on debt. Goldman Sachs cut its outlook for Exxon
to Sell from Neutral, and the bank raised doubts about Exxon's long-term
returns. Other analysts piled on. "Shareholder returns are poor, and debt is
rising in a way that suggests that attractive dividends yields are
unsustainable," Paul Sankey of Mizuho Securities USA LLC said in a note to
clients. The oil major's share price is at a 10-year low.
earnings fall by 25 percent. BP (NYSE: BP)
reported earnings of $2.6 billion in the fourth quarter, down from $3.5 billion
a year earlier. The company's share price was up nearly 5 percent in early
trading on Tuesday, following a dividend hike. Meanwhile,
the company's CEO Brian Gilvary said that global oil demand growth could fall
by 300,000-500,000 bpd this year because of the coronavirus.
looks to raise $1 billion from royalty deal. EQT (NYSE:
EQT) is hoping to raise $1 billion by selling off some of its
royalty income, according to Reuters. The natural gas
giant has quickly fallen into a crisis with gas prices now well below
flaring rose sharply in 2019. Flaring and venting in the
Permian basin rose to 293.2 billion cubic
feet in 2019, up 7 percent from 2018. Flaring and venting in the Bakken jumped
by 36 percent to 200 Bcf. Together, the volumes burned or released into the air
from the two basins represented more than 5 percent of total gas produced in
Energy credit downgrades accelerated in 4Q. Moody's issued more credit
downgrades than upgrades in the oil and gas sector for the fifth consecutive
quarter in the 4Q2019. The rate of downgrades to upgrades magnified at the end
of last year. "Volatile oil prices throughout 2019 and natural gas prices that
steadily declined in the second half of the year led speculative-grade
investors to shun all but the strongest oil weighted companies, increasing
default risk for companies that already had low ratings," Moody's said in a
index hit all-time low. The Baltic Exchange's capesize index,
which constitutes part of the Baltic Dry Index, fell to an all-time low this
week. The index is a proxy for the world's shipping market, and the collapse in the value of
the index reflects a deep contraction in global shipping activity.
manufacturing rebounds. The Institute for Supply Management's
U.S. factory index rebounded to 50.9 in January, the first time in five months
that the reading was in positive territory. "This data, alongside China's
injection of economic stimulus, cushioned the continuation of virus-related
headlines," Raymond James wrote in a note.
misses on earnings. ConocoPhillips (NYSE: COP) reported
earnings of $720 million in the fourth quarter, down 61 percent from the $1.87
billion profit a year earlier. COP announced a $10 billion increase to its
share buyback program.
shorts lose $8 billion. Tesla's (NASDAQ: TSLA) share price
surge has burned short sellers, who
have lost a combined $8 billion since the start of January. Tesla's gain on
Monday alone translated into losses for short sellers by an estimated $2.5
billion. As of Tuesday, Tesla's share price was trading at about $850, almost
double what it was at the start of the year.
Could Push Global Oil Market into Surplus
- Oil Market
Falls Deeper Into Abyss - OIR 310120
- OPEC Halts
Slide In Oil Prices - OIR 280120
"Twin Threats" Facing Big Oil
- OPEC Mulls
Extending Oil Production Cuts Through End-2020
- Oil Bears
Are Back As Demand Fears Go Viral
Promising Oil Trends To Watch In 2020; Nigeria Giving Majors Some Pushback
- Oil Falls
Despite Major Outage In Libya - 210120
- The Single
Biggest Factor In Oil This Week - OIR 170120
Prices Of PMS, AGO, HHK and Cooking Gas - December 2019
Oil Production Slips for the Third Consecutive Month
- Oil Prices
Trade Close to $70pb, Thanks to Rising Geopolitical Tensions
- Oil Traders
Obsess Over Weak Demand and Oversupply - OIR140120
- Oil Bears
Return With A Bang - OIR 100120
- US, Iran
Hostilities: Chevron Pulls Out Staff From Iraq As Crude Oil Price Drops