Saturday, June 27, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil prices have fallen below $40 as the U.S. sees a record spike in
COVID-19 cases and fears of demand weakness increase.
June 26th, 2020
The two-month oil rally has stalled, with WTI falling back to $38 per barrel.
The resurgence of Covid-19 across the U.S. has halted the market's positive
momentum. In many ways, the rally was already overdone.
spread a big oil risk. Texas Governor Greg Abbott ordered bars to shut
down on Friday as the spread of the coronavirus continues to accelerate. With
several states - and the U.S. as a whole - setting new daily records for
positive cases, fuel demand faces enormous downside risk in the weeks ahead.
For instance, Texas gasoline demand on June 24 was 17.8 percent lower than on June
new zero-emissions truck rule. California regulators approved a new rule
requiring more than half of all trucks sold to be zero-emissions by 2035, with
incremental targets beginning in 2024. The rule is estimated to lower the
state's greenhouse gas emissions by 17 million metric tons, and save truck
operators $6 billion on fuel costs. It is also expected to spur manufacturing
for electric heavy-duty trucks.
shuts down Line 5. A federal judge ordered Enbridge
(NYSE: ENB) to temporarily shut down the aging Line 5 pipeline after an anchor support of the pipeline
recently shifted. The judge will hold a hearing on Tuesday to weigh the state
of Michigan's request to keep the pipeline closed indefinitely. The pipeline
carries 540,000 bpd of light crude and natural gas liquids from Alberta through
Wisconsin, Michigan and then back into Canada at the oil hub of Sarnia,
and Minnesota file lawsuits against Exxon, API, Koch. Washington
DC and Minnesota each announced separate lawsuits against the oil industry this
week. The DC attorney general sued ExxonMobil
(NYSE: XOM), BP (NYSE: BP), Royal Dutch
Shell (NYSE: RDS.A) and Chevron (NYSE: CVX) over its
decades-long campaign of climate disinformation. A day earlier, Minnesota's
attorney general filed a similar lawsuit against Exxon, Koch Industries and the
American Petroleum Institute. Unlike past cases, which sought damages for the
company's role in fueling climate change, these cases hinge on consumer
to take $9 billion write down. Occidental Petroleum (NYSE: OXY) said it would
write down $9 billion, or more than 10 percent of the company's assets.
gas prices fall to 25-year low. Natural gas prices fell below
$1.50/MMBtu this week, the lowest level since the 1990s.
stand in way of rally. Poor refining margins throw up a red
flag to the oil rally. With demand still weak enough to squeeze margins,
refiners may purchase less crude oil, sapping the momentum for inventory
Democrats propose green tax incentives. House Democrats introduced a bill this
week that would extend tax incentives for renewables and electric
LNG exports plunge by half. U.S. LNG exports fell from 9.8
Bcf/d in March to just 4 Bcf/d by June. The glut of LNG worldwide is hitting
American exporters particularly hard.
grand jury announced criminal charges against gas industry. A
Pennsylvania grand jury announced criminal
charges against Range Resources (NYSE: RRC) and Cabot Oil
& Gas (NYSE: COG), two prominent Marcellus shale gas
companies. The grand jury also said that PA environmental agencies systemically
failed to protect the public.
could kill Vaca Muerta. The coronavirus could lead the Vaca
Muerta, or Dead Cow, to "slaughter," according to a new report. Already
struggling to be competitive, Argentina's highly-hyped shale formation is withering because of
the pandemic and the market downturn.
setback provision revived. Activists in Colorado have revived a
setback provision that failed in a 2018 referendum. The measure would require
drilling setbacks to increase from 500 feet
to 2,500 feet.
admin to open up Alaska's NPR-A. The Department of Interior announced plans to open
up 18 million acres of the National Petroleum Reserve-Alaska (NPR-A) for new
oil and gas leasing.
plans new oil export route. Iran plans to export oil
from a port on the Gulf of Oman by March, bypassing the Strait of Hormuz.
IMF cut global growth forecast. The IMF warned of a longer
and deeper recession, cutting its GDP forecast to negative 4.9 percent this
year, from 3 percent previously. It lowered its 2021 GDP growth forecast from
5.8 to 5.4 percent.
grow angry at executive pay. Failing oil and gas companies
continue to reward executives, despite bad performance. "It is the definition
of 'heads I win, tails you lose'. Management gets paid when the share price
goes up, when the share price goes down and when the company goes bankrupt," a
managing partner at a private equity company told the FT.
Fed survey finds gloom in Texas oil patch. Texas oil executives
do not think drilling activity will
return to pre-pandemic levels until at least 2022, according to the new Dallas
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