Tuesday,
August 11, 2020 / 06:40 PM / by Josh Owens of Oilprice.com /
Header Image Credit: Oilprice
Oil prices strengthened again on hopes of a slowdown in
coronavirus transmission in the United States. "The fact that the COVID
cases seem to be tapering off in the U.S. is making people a little more
optimistic about getting it under control and demand recovering toward the end
of the year," said Michael
Lynch, president of Strategic Energy & Economic Research. Also, Russia said
it was moving forward with a coronavirus vaccine despite the lack of rigorous
trials. The health impact is unclear, but any positive vaccine news has tended
to spark a bullish reaction from the market.
Rig count slides again. Even
as the oil market has stabilized, the U.S. oil industry has not returned to
drilling. Even the Permian basin continues to lose rigs. "North American
E&Ps are in a battle for investment relevance, not a battle for global
market share," Matt Gallagher, CEO of Parsley Energy Inc. (NYSE: PE), told
analysts during a conference call. "Allocating growth
capital into a global market with artificially constrained supply is a trap our
industry has fallen into time and time again."
U.S.
oilfield services lose more than 9,000 jobs in July. The
U.S. oilfield-services sector cut 9,344
jobs in July, a sharp increase in job losses from a month earlier. In total,
nearly 100,000 jobs have been lost since the start of the pandemic. The
expiration of federal support could lead to more job cuts.
Permits for horizontal drilling hit a
10-year low. Not only is the rig count at historic
lows, but so are new drilling permits. "Drilling permits, which are
increasingly reliable indicators of future activity levels, dipped to a 10-year
monthly low this July, with only 454 awards," Rystad Energy wrote in a
report. The firm said that unless WTI prices quickly move to $50 per barrel
within the next few weeks, it is unlikely that the rig count will increase
significantly before 2021.
Canadian oil sands producers lose $C$2.4
billion in the second quarter. Combined, top oil
producers in Canada's oil sands lost C$2.4 billion ($1.8 billion) in the second
quarter, following a first quarter loss of C$8.8 billion. Capital is also becoming
a concern. Recently, HSBC, Norges Bank, and Deutsche Bank said they
would no longer finance Canada's oil sands.
Trump admin to gut methane regulations. The
EPA is expected to announce a rollback of
standards on methane emissions from oil and gas operations. The move was long
expected. However, this regulation could be quickly repealed if the Democrats
take control of the Senate and Joe Biden wins the White House.
Occidental loses $8 billion. Occidental
Petroleum (NYSE: OXY) lost $8
billion in the second quarter, including a $6.6 billion write-down. Oxy also
said that its oil and gas production would fall by 13 percent this quarter and
by another 5 percent in the fourth quarter. Notably, Oxy said that its Permian
production would fall by 37 percent this year. "We remain concerned about
the company's high debt load and ability to generate cash flow in a prolonged low
oil price environment," Jennifer Rowland, an analyst with Edward Jones,
wrote in a note.
9 companies file for bankruptcy in
July. A new report from
Haynes and Boone finds that 9 North American oil and gas companies filed for
bankruptcy in July, a 66 percent increase from the same period a year earlier.
In the first seven months of the year, 32 companies sought bankruptcy protection.
Nord Stream 2 at risk of non-completion. U.S.
sanctions are increasing the
odds that the Nord Stream 2 pipeline does not reach completion, according to Uniper
(OTC: UNPPY), one of the project's partners. If the pipeline
cannot be completed, Uniper says it "may have to impair the loan provided
to Nord Stream 2 and forfeit the planned interest income".
SEB: $60-$80 oil possible, depends on
shale. The lack of drilling activity could push oil
prices up to $60 per barrel at some point next year, but that depends on shale
restraint, according to SEB. Any surge in drilling will keep prices depressed.
"The US shale oil sector and its investors need to start behaving more
like OPEC+ and constrain investments and supply to some extent if they want to
walk away with profits," said Bjarne Schieldrop, chief commodities analyst
at SEB.
Iran oil exports higher than data suggests. Iran
is exporting as
much as 600,000 barrels daily, using ship-to-ship transfers with transponders
turned off to avoid detection, skirting U.S. sanctions. The daily average
number compares with an estimate of 227,000 bpd made in a U.S. Congressional
report.
U.S. producers take oil back from
SPR. U.S. oil companies have started pulling
their crude oil back from government storage tanks, suggesting that the glut
that forced them to stash it there in the first place is now easing.
Oil majors' cuts reach 1 mb/d. The
five largest oil majors have written
down a combined $50 billion in assets and slashed production by
1 mb/d. Only ExxonMobil (NYSE: XOM) did
not write down any assets, although the company said in a filing that it may
revise down its reserves at the end of the year.
Credit:
The post Oil Prices
Rally On New COVID Optimism first appeared in Oilprice.com
on August 11, 2020.
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