Tuesday, October 27, 2020
/08:22 PM / by Josh Owens of Oilprice.com / Header Image
Today, we will take
a quick look at some of the critical figures and data in the energy markets
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
- The average energy capacity cost of utility-scale battery
storage has declined from $2,152
per kilowatt-hour in 2015 to just $625/kWh in 2018.
- As of the end of 2018, the U.S. had 869 MW of installed
energy storage capacity.
- The U.S. added 152 MW in 2019. In the first 7 months of
2020, the U.S. added 301 MW of energy storage capacity.
- Cenovus Energy (TSE: CVE) and Husky
Energy (TSE: HSE) were upgraded to Buy from Hold at Stifel, after
Cenovus said it would buy Husky (more on that below). Stifel says the deal is a "win-win."
- Energy Transfer (NYSE: ET) fell by nearly 8
percent in pre-market trading on Tuesday after it cut its dividend by 50
- Equinor (NYSE: EQNR) may have to shut its Hammerfest
LNG plant in Norway for up to a year due to fire damage.
Tuesday, October 27, 2020
Oil prices declined on Monday on the worsening pandemic in Europe and the U.S.
Meanwhile, fading hopes of a stimulus and the restart of Libyan oil production
also weighed on the market. "Demand weakness is definitely the biggest worry
and problem in the market right now," said Bjarne Schieldrop,
chief commodities analyst at SEB AB. "Supply is still fairly contained and
controlled even with Libya coming back into the market." Prices were up
slightly in early trading on Tuesday.
Total CEO: Second wave a threat to demand. Total (NYSE:
TOT) CEO Patrick Pouyanne warned that surging coronavirus cases in
much of Europe and the U.S. pose more risks to energy demand. "[G]lobally
speaking, the demand is still weak. I am afraid that with the second wave we
are experiencing in many continents today again, it could be longer [for
demand] to recover like everybody hoped," he said.
OPEC: Recovery taking longer. On Monday, OPEC's
Secretary-General admitted that the
recovery in demand is delayed due to the pandemic. "We were hopeful the second
half of 2020 would begin to see a recovery," Barkindo said. "Unfortunately,
both the economic growth and demand recovery remain anaemic at the moment due
largely to the virus." The outlook may lead to an extension of the
current arrangement, rather than easing off the cuts as scheduled beginning in
U.S. Gulf Coast production cut 16% ahead of storm. Yet
another storm is passing through the Gulf of Mexico, forcing around 16% of
the region's oil production to be temporarily shut in.
Rig count gains again. Baker Hughes reported on Friday that
the number of oil rigs in the United States rose by 6 to 211. The total
number of active oil and gas rigs increased for the week by 5, with oil rigs
rising by 6 and gas rigs falling by 1.
BP swings to third-quarter profit. BP (NYSE: BP) reported
an underlying replacement cost profit of $100 million, beating expectations.
Without any major write-offs, the company's outlook improved. CEO Bernard
Looney said the company is "performing while transforming."
Poland utility announces pivot to renewables. Poland has
often dragged its feet on Europe's attempts to transition to renewables, but
Poland's largest utility just announced that it
would shut its coal assets and switch to renewables in the coming decades.
Currently, more than 80 percent of the utility's generation comes from coal.
Private equity holding back as shale consolidates. Private
equity is remaining on the sidelines as the U.S. shale industry begins to
consolidate. "Everyone is getting into renewables," a top energy private equity
investor told Axios. "It's just a smarter
long-term play, particularly as the macroeconomics of fossil fuels get worse
and the macroeconomics of renewables get better."
Cenovus to buy Husky for $2.9 billion. Cenovus Energy
(TSE: CVE) said it will buy Husky Energy (TSE: HSE) for
$2.9 billion in an all-stock deal. The combined company will become Canada's
third-largest oil and gas producer. The deal would also create a
consolidated refining powerhouse in
the U.S. Midwest. Cenovus may cut up to 25% of the
Oil bankruptcy debt hits high. The associated debt from
North American oil and gas bankruptcies in 2020 has already reached an all-time
high. Although the combined count of Chapter 11 filings from exploration and
production firms (E&Ps) and oilfield service (OFS) companies this year in
North America has so far reached 84, which is still lower than the historical
high of 142 in 2016, the associated debt these companies are carrying is much
higher, at $89 billion so far, some $19 billion more than in 2016, according
to Rystad Energy.
Refining margins "absolutely terrible." While oil prices
have stabilized around $40 per barrel for the last few months, refining margins
remain "absolutely terrible," according to Totalâ€™s Patrick Pouyanne. Analysts
expect downstream units to weigh heavily on the
earnings of the oil majors.
China hopes to dominate EV production. Chinese EV
manufacturers are expected to start
expanding overseas, while Beijing already controls a large part of the global
EV supply chain, beginning with critical minerals processing.
Canada LNG too expensive to compete. Canadian LNG is
too expensive to be
competitive in the biggest markets, notably the Chinese market. According to
calculations by IEEFA, under the best-case scenario, Canadian LNG would cost
$8.30 per million Btu. The average Chinese price for LNG at the city gate,
however, is $8.23.
Election issues to watch. Aside from the race for president
and control of Congress, some lower-key issues directly
related to the oil and gas industry are at stake in next week's election. A
race for a seat on the Texas Railroad Commission could affect regulation in the
state. Meanwhile, Democrats have a shot at taking at least partial control of
the Texas and Pennsylvania state legislatures, which could have implications
for taxation and regulation of the industry in those states.
Peak natural gas sooner than you think. There are "flashing
signs that the U.S. power sector is approaching peak gas, with demand topping
out decades ahead of schedule," Bloomberg reports.
BNEF: Total oil demand peaks in 2035. BNEF just released its New
Energy Outlook 2020, which finds that energy emissions peaked in 2019.
Renewables and EVs show rapid progress in the coming years, although natural
gas is the only fossil fuel that continues to grow. Total oil demand peaks in
Morgan Stanley: E&Ps to watch. A shift towards "more
returns, less growth" reveals a path forward for some shale drillers. Morgan
Stanley says the best positioned include Cimarex (NYSE: XEC), ConocoPhillips
(NYSE: COP), and Pioneer Natural Resources (NYSE: PXD).
The bank gave Overweight ratings to those companies.
Report: Exxon-Guyana deal raises risk. A new report called into
question the promise for Guyana from its deal with ExxonMobil (NYSE:
XOM). The structure of the contract may leave the Guyanese government on
the hook for payments to the oil producers.
The post Oil Demand In Doubt As COVID Cases Climb first
appeared in Oilprice.com on
October 27, 2020.
News - Previous Oilprice Intelligence Report
1. Oil Back Down As COVID Cases Surge
- OIR 231020
2. Oil Prices Are Going Nowhere Until
Election - OIR 201020
3. COVID Kills Another Oil Rally
- OIR 161020
4. Oil Holds Its Breath As
Presidential Election Approaches - OIR 131020
5. Oil Prices Climb 10% in a Week
- OIR 091020
6. Stimulus Hopes And Hurricane Push
Oil Prices Higher - OIR 061020
7. Oil Tumbles As Trump Tests Positive
- OIR 021020
8. Oil Market Sentiment Suffers as
COVID Uncertainty Grows - OIR 290920
9. Bullish Sentiment Extinguished By
Demand Fears - OIR 250920
10. Oil is Still Stuck at $40 - OIR 220920
News - Oil and Gas
1. NSE Forum: Stakeholders Urge Oil and Gas Companies To Leverage Capital
2. COVID Kills Another Oil Rally - OIR 161020
3. Average Prices of PMS, AGO, HHK and Cooking Gas - September 2020
4. NSE to Host Industry Leaders at Oil and Gas Sector Webinar
5. NOVA Monthly Oil Market Update - Bearish Market Sentiment Takes a Toll on
6. NNPC to End Oil-for-Fuel Swap System
7. OPEC - Compliance or Bust?
8. PIB: Will the Jinx be Broken This Time Around?
9. China Ramps Up U.S. Crude Oil Imports As Elections Near
10. Local Refining: A Panacea for Nigeria's Reliance on Imported Refined