October 20, 2020 /9:04 PM / by Josh Owens of Oilprice.com /
Header Image Credit: Oilprice
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
- Natural gas accounted for 39% of U.S
electricity generation in 2019, with nameplate capacity accounting for 43% of
- Every state except for Vermont and Hawaii has at least one
natural gas-fired power plant.
- Texas, Florida, and California each have more than 35 GW of
- Halliburton (NYSE: HAL) said that U.S. shale
drilling activity has bottomed out and could be staging a rebound.
- Transocean (NYSE: RIG) received a notice from the
New York Stock Exchange of non-compliance with continued listing standards.
- EOG Resources (NYSE: EOG) saw its
share price jump last week on speculation that a "major
company" is considering a bid to take over EOG.
Tuesday, October 20, 2020
Oil remains anchored at around $40 per barrel, awaiting new direction.
Coronavirus cases are on the rise and raise new concerns about demand as travel
restrictions begin to increase. In the U.S., the market is hoping for federal
stimulus but odds look remote until after the election.
ConocoPhillips confirms takeover plan for Concho. ConocoPhillips (NYSE: COP) has agreed to purchase Concho Resources (NYSE: CXO) for $9.7 billion, setting up the largest U.S.
oil deal since the onset of the global pandemic. Combined, the company would be
the largest U.S. independent, and its Permian output would only trail Occidental Petroleum (NYSE: OXY).
Halliburton posts fourth straight loss. Halliburton (NYSE: HAL) reported its
fourth straight quarterly loss on Monday, although the company still beat
analysts' estimates. Halliburton struck an optimistic tone. "The pace of
activity declines in the international markets is slowing, while the North
America industry structure continues to improve, and activity is stabilizing," Chief Executive Officer Jeff Miller said in a statement.
Rig count jumps by most since January. The U.S. rig
count rose by 13 (12 oil rigs, 1 for natural gas), the largest weekly increase
since January. The increase also adds some evidence to the notion that drilling
has bottomed out and could be in recovery mode.
Refiners turn to biofuels. U.S. and
European oil refiners facing the prospect of closure are switching to biofuels. BP (NYSE: BP), Total (NYSE: TOT) and Eni (NYSE: E) have
all recently announced plans to convert aging refineries to handle biofuels.
The strategy "allows plans to play a role in the energy transition, creates
long-term value and mitigates the costs of a full shutdown and site cleanup," Rob Turner, partner at PWC, told Reuters.
IMF: Oil at $40-$50 in 2021. Oil
prices are not expected to rise much next year, and will stay in the $40-50 a
barrel range, the IMF said.
Refinery glut persists for years. Refinery
margins remain close to zero across most regions, and utilization is down 10
percent from year-ago levels, according to Bank of America Merrill Lynch. At
the same time, new greenfield refineries are set to come online, adding 6 mb/d
of new capacity between 2021 and 2023. That is unless other refineries shut
Wind and solar cheapest power in most places. Wind and
solar power are the cheapest forms of new electricity in most of the
world today, according to Bloomberg New Energy Finance. A separate study from Lazard finds that the levelized cost
of electricity for solar and wind is lower than existing gas and coal when
subsidies are included.
Aramco scales back $20 billion chemical plant. Saudi Aramco (TADAWUL: 2222) has scaled
back plans for its $20
billion oil-to-chemicals plant as it hopes to shore up its finances.
OPEC+ on brink of crisis. The OPEC+
member countries are on the brink
of a financial crisis if the
latest assessments of the International Monetary Fund (IMF) are accurate. The
IMF has presented a very bleak outlook for an economic recovery in the Middle
East and Central Asia, predicting a 4.1% contraction for the region.
Global finance turns against fossil fuels. Fifty
globally significant financial institutions have introduced policies
restricting oil sands and/or oil and gas drilling in the Arctic including 23 to
date this year, according to a new
report. "Over 140 global
financial institutions have already restricted thermal coal financing,
insurance and/or investment and we are now seeing a similar accelerating shift
of capital away from oil and gas exploration," the report's author said.
OPEC+ discusses demand outlook. OPEC+'s
monitoring committee met on Monday to assess the status of the oil
market, which faces demand concerns due to rising covid-19 infections as well
as the return of Libyan supply.
NJ calls for 100% EVs by 2035. New Jersey
has proposed a ban on gasoline vehicles by 2035, the
only state so far to follow in California's footsteps.
ISIS calls for attacks on Saudi oil industry. The Islamic
State has called on its members to start targeting Saudi Arabia oil
infrastructure as punishment for the Kingdom warming up to Israel. "Targets are
plentyâ€¦Start by hitting and destroying oil pipelines, factories, and facilities
which are the source (of income) of the tyrant government," a spokesman for
Morgan Stanley: low bar for "outperformance" for E&Ps. Shale
E&Ps did so poorly in the third quarter relative to crude oil that their
stocks now look cheap, according to Morgan Stanley. "We see a low bar for
outperformance and tilt positive into the quarter," the bank said in a note.
Other positive trends include improved valuations, a strategic shift from
growth to free cash flow, and consolidation, all of which create "an improving
North Dakota oil output increases. North
Dakota's oil production rose about 12% to 1.16 mb/d in August.
Diamondback: Shale shouldn't grow. Diamondback Energy (NYSE: FANG) provided an
operational update on Monday, in which the company said it
would keep production flat going forward. Also, CEO Travis Stice warned against
others trying to grow. "Our industry... must acknowledge two fundamental truths:
we have a significant influence on the global oil market, and today that market
is oversupplied," Stice said. "As such, if North American producers decide to
grow again, even at mid-single-digit rates, we will magnify the issues our
industry is fighting today and face repercussions from other global producers".
Automation sweeping over oil industry. Automation is
growing in offshore oil drilling. Reuters looks at how Equinor (NYSE: EQNR) is using automation and the role that
played in a recent workers' strike.
Pioneer Natural Resources in talks with Parsley Energy. Pioneer Natural Resources (NYSE: PXD) is in
talks with Parsley Energy (NYSE: PE) about
a tie-up. The companies' executives - Scott Sheffield and Bryan Sheffield - are father and son.
The post Oil Prices Are Going Nowhere Until Election first appeared in Oilprice.com on October 20, 2020.
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