Tuesday, October 13, 2020 /08:35
PM / by Josh Owens of Oilprice.com / Header Image Credit: Brand Spur
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
- Oil production outages have increased in
2020, cutting into global supply.
- In 2020, oil disruptions have averaged 4.6 mb/d, reaching
5.2 mb/d at its deepest point in June. Outages averaged 3.1 mb/d in 2019.
- Much of the increase in outages came from Libya, Venezuela
and Iran. Supply "disruptions" does not include production shuttered because of
- ExxonMobil (NYSE: XOM) was upgraded by Goldman
Sachs to a Neutral rating after the oil major's shares have declined so
significantly. The company's headwinds are now priced in, Goldman says.
- BP (NYSE: BP) launched production from a
giant Oman gas field.
- Hi-Crush (OTCMKTS: HCRSQ), a
prominent frac sand supplier, exited chapter 11
Tuesday, October 13, 2020
Oil prices sank on Monday on concerns of a return of supply from Libya,
although the decline was also a correction after strong gains last week. In
early trading on Tuesday, prices were back up on some positive oil import news
rises on Chinese imports. China's customs data shows monthly
crude imports rose 2.1 percent in September, a stronger figure than expected.
But the data could be less bullish than at first glance as the increase can be
chalked up to the clearing of a shipping bottleneck. Looking forward, analysts
see imports easing. "We find that China's record haul of crude growth is poised
to cease as independent refineries have nearly fully utilized their
state-issued import quotas and companies struggle with extremely high crude
inventories," Rystad Energy said in a statement.
stuck below $43 until the election. The international oil
benchmark Brent Crude will likely range-trade in the
$40 to $43 a barrel band until after the U.S. election on November 3, according
to OCBC Bank.
upgraded on tight winter supply picture. Morgan Stanley upgraded EQT (NYSE:
EQT), the largest natural gas producer in the U.S., noting that
the upcoming winter could create the tightest supply picture in a decade. The
bank upgraded EQT to an Overweight rating.
lowers 2021 demand. OPEC cut its demand forecast for
next year by 80,000 bpd, noting rising coronavirus cases.
Demand hit permanently from COVID. The IEA released its annual
World Energy Outlook, which offers analysis on long-term energy scenarios. One
of the main takeaways is that oil demand suffers a long-lasting hit from the
pandemic. The agency sees demand returning to pre-pandemic levels by 2023 or 2025
in a more delayed scenario, but either way, demand peaks sooner and at lower
levels than previously thought. The most oil-friendly scenario sees demand
plateauing by 2030."The era of global oil demand growth will come to an end in
the next decade," IEA Executive Director Fatih Birol said.
Solar is "king." The agency also said that solar is now cheaper
than coal and natural gas in most parts of the globe. By 2030, renewables will
capture 80 percent of new power generation. "I see solar becoming the new king
of the world's electricity markets," Fatih Birol said.
bans Australian coal imports. Beijing has suspended imports of coal
from Australia as political relations sour.
redeterminations to fall 10-20 percent. A new survey from
Haynes and Boone finds that shale executives expect their credit lines to be
cut by 10 to 20 percent, a light improvement from the spring survey. 17
companies filed for bankruptcy in the third quarter.
returns oil to the market, but risks remain. According to
various oil analysts, Libya's oil output might recover to at least 500,000 bpd
by the end of this year and even to over 1 million bpd shortly after that.
However, geopolitical risk has not diminished, and outside
powers could derail the fragile agreement.
Biden bullish for oil. The conventional wisdom is that a Biden
administration is negative for the oil industry due to promises for clean tech
spending and more regulation. But Goldman Sachs says a Biden win is bullish for prices due to
higher costs on shale supply, including blocking drilling on federal lands. Any
supply impact would push prices up.
move to restore Gulf output. After Hurricane Delta swept
through the Gulf of Mexico and made landfall in Louisiana, energy companies are
now in the process of restoring operations.
Energy: Refining run cuts could persist. Refinery runs have
declined in Europe, which have helped margins rebound to more attractive
levels. However, rising coronavirus cases in Europe has weakened demand, so
refining processing could remain subdued, according to JBC Energy.
pipelines at risk from war. A few long-distance pipelines,
including the Baku-Tbilisi-Ceyhan pipeline, could be at risk from the conflict
between Azerbaijan and Armenia. "The pipelines are laid two meters underground,
so there is protection there from material damage. However, while it is still
too early to forecast possible production disruptions at the offshore ACG and
Shah Deniz fields, any scenario where Armenian forces manage to take over
territory traversed by export pipelines represents a potential threat to oil
and gas exports in the region," says Rystad Energy's upstream analyst Swapnil
criticizes its own U.S. strategy. Equinor
(NYSE: EQNR) says that its U.S. onshore strategy over the past decade
of aggressive growth came at the expense of
"value creation." Between 2007 and 2019, the Norwegian oil company lost $21.5
billion on its U.S. campaign.
binge hurts reserves. The fracking frenzy has permanently hurt
U.S. oil and gas reserves, according to Wil VanLoh, managing director of
Quantum Energy Partners, a private equity firm which, through its holding companies,
is the biggest American driller after ExxonMobil. Too much fracking has
"sterilized a lot of the reservoir" in North America, he said, according to the FT. "That's the dirty
secret of shale."
The post Oil Holds Its Breath as Presidential Election Approaches first appeared in Oilprice.com on October 13, 2020.
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