Tuesday, August 25, 2020 /06:45
PM / by Josh Owens of Oilprice.com / Header Image Credit: FX Empire
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.
Chart of the Week
- Between January and July 2020, roughly 5 billion cubic feet per
day (Bcf/d) of new natural gas pipeline capacity entered service in the
United States, according to the EIA.
- These projects included a project connecting Colorado gas
to the Cheyenne hub in Wyoming; a Cheniere (NYSE: LNG) pipeline
bringing SCOOP/STACK natural gas to a hub on the Oklahoma-Texas border; and
several pipelines in the Waha hub in the Permian.
- Meanwhile, roughly 8.7 Bcf/d of proposed pipeline capacity
has been canceled so far in 2020.
- The United States Oil Fund ETF (NYSEARCA: USO)
reported its largest
single-day inflow since April last week, even after the SEC recommended
enforcement action against the fund.
- Valero (NYSE: VLO) said it would shut its Port Arthur
refinery ahead of two tropical storms (and potential hurricanes) heading for
Texas and Louisiana.
- The energy sector (XLE) led the S&P sector
leaderboard on Monday, gaining 2.5 percent. Threats of supply curtailment from
the Gulf storms pushed prices up.
Tuesday, August 25, 2020
Oil prices rose on Monday as more than 1.5 mb/d of U.S. offshore oil production
was temporarily taken offline
due to storms in the Gulf of Mexico. On Tuesday, prices inched up a bit
further. But the impact cuts both ways - significant outages at Gulf Coast
refineries could depress upstream prices in the Permian. However, either way,
the effects are likely to be transitory.
than half of Gulf Coast oil and gas production shut in. Ahead
of two major storms, hundreds of offshore oil and gas platforms have been
idled. As of midday on Monday, 281 platforms, or 43 percent, had suspended
work. U.S. government data estimates that 82.4 percent
of offshore oil production has been shut-in, and 56 percent of its gas
production. Companies that have shut down production include Chevron (NYSE:
CVX), Murphy Oil (NYSE: MUR), BHP (NYSE:
BHP), BP (NYSE: BP) and Royal Dutch
Shell (NYSE: RDS.A), among others.
than 118,000 oil, gas and coal jobs lost. Since the start of
the pandemic, more than 118,000 jobs in oil, natural gas, and coal production
have been eliminated, according to a new report.
Energy files for bankruptcy. Texas-based Arena Energy, which
had operations in the Gulf of Mexico, filed for chapter 11 bankruptcy on Thursday,
affecting $1 billion in debt.
limits output in Guyana due to gas issues. ExxonMobil
(NYSE: XOM) said it is limiting output
at its offshore oil project in Guyana to 100,000 bpd because of mechanical
issues with gas compressing equipment, which prevents it from reinjecting gas
produced. Instead of flaring, Exxon has decided to limit production.
prices face bearish forces. Slow demand and some potential
return of global oil supply could weigh on crude prices. The oil market has to
reckon with the possibility of more oil returning to the
market from Libya, Iran, and the United States. Calendar spreads have fallen
into a stronger contango, with Brent five-week spreads falling to the lowest
since early June.
Oil market tightening. While the market faces potential bearish
winds, others see the upside. SEB chief commodities analysts Bjarne Schieldrop
sees demand rising, U.S. oil production trending lower and OPEC+ staying the
course. Brent has been stuck at $45 per barrel but could soon break free and "we think the direction then is up rather than down," Schieldrop said.
knocked out of Dow Jones. ExxonMobil (NYSE: XOM)
was kicked out of the Dow Jones
Industrial Average, making way for Salesforce.com, Amgen Inc. and Honeywell
International. As recently as 2011, Exxon was the worldâ€™s largest company, but
its swift fall is emblematic of the turmoil in the energy industry. "Those changes
are a sign of the times - out with energy and in with cloud," said Chris
Zaccarelli, chief investment officer for Independent Advisor Alliance,
according to Bloomberg. Exxon was worth $525 billion in 2007, and is now only
worth about $180 billion.
Oil demand to plateau below pre-pandemic levels. "Global crude
demand surged from May to July with the easing of some COVID-19 restrictions
and now rests at 89% of prior-year levels--compared to being at 78% in April," IHS wrote in a report. "IHS Markit expects demand growth to wane and plateau at
92-95 mbd (or roughly 92-95% of prior-year levels) through the first quarter of
2021." The reason demand does not bounce back to pre-pandemic levels is because
of reduced air travel.
shale job losses. Pioneer Natural Resources (NYSE: PXD)
Energy (NYSE: PE) are planning to announce job cuts in the
coming days, according to Reuters.
gas prices shoot up. U.S. natural gas prices have climbed to
their highest levels since late 2019, pushed higher by ongoing hot weather and
absolute declines in production. The tightness is global - JKM prices for LNG
could rise to $6/MMBtu by December, according to a report from Bank of America
Merrill Lynch. That opens up exports for U.S. LNG again. [T]he world will call
on all US export capacity this winter, in our view," the bank said.
adds 26 oilfields to sale list. Brazilâ€™s Petrobras
(NYSE: PBR) has initiated the sale process for a group of 26
onshore and shallow water oilfields and a small nearby refinery in the
northeastern part of the country, according to Reuters.
oil and gas at risk. Indigenous protests have taken over Peru,
threatening to undermine the Latin American nationâ€™s burgeoning upstream
industry. Peru has become a battlefield between
economic interests and social rights.
The post Gulf Of
Mexico Storms Push Oil Prices Higher first appeared in Oilprice.com on August 25, 2020.
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