Saturday, July 25 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil prices have once again fallen back to the
$40 mark as the EIA published bearish data that dampened optimism in markets.
Friday, July 24th, 2020
Oil fell back to around $40 for WTI and $43 for Brent - familiar territory for
the market over the past few weeks. The EIA's data for this week was more
downbeat, dashing hopes of positive momentum. Still, crude remains stable and
steady at around $40, trapped between coronavirus fears on the downside, and
improving fundamentals on the upside.
More M&A to come. The Chevron (NYSE:
CVX) purchase of Noble Energy (NASDAQ: NBL) may
spark more M&A activity. Goldman Sachs said more M&A could be positive
for the macro outlook for oil because consolidation will translate into slower
production growth. "We believe strip prices are too low and are likely to move
higher in 2021, a catalyst not only for fundamental upside to E&P stocks
but also for potential M&A values," Goldman Sachs said in a note.
seeking bids for 4GW of renewables. New York is seeking bids for 2.5 GW of offshore wind and 1.5 GW of onshore renewables. The
state will also invest $400 million in port upgrades to support offshore wind.
Arabia explores asset sales. Saudi Arabia is accelerating plans to sell off state assets and is considering an income tax in
order to shore up its budget.
posts surprise profit. Equinor (NYSE: EQNR) said that
it earned $646 million in the second quarter, down by half from a year ago, but
much better than analysts had anticipated. Notably, however, Equinor did not
touch its long-term oil price forecasts, so it did not report any write
cuts 21,000 jobs. Schlumberger (NYSE: SLB),
the largest oilfield services company in the world, said it
would eliminate 21,000 jobs. The company posted a loss of $3.4 billion in the
second quarter, including a $3.7 billion dollar impairment. Schlumberger's CEO
Olivier Le Peuch said the company is preparing "for a market of smaller scale
and lower growth outlook, but with higher returns."
buys Montney shale assets. ConocoPhillips
(NYSE: COP) said it
would spend $375 million to acquire 140,000 net acres in the liquids-rich
Inga-Fireweed asset of the Montney shale in British Columbia. The acquisition
adds over 1 billion barrels of oil equivalent to reserves, with an all-in cost
of supply in the mid-$30s.
announces gigafactory in Texas. Tesla (NASDAQ:
TSLA) confirmed rumors that it plans on building a
gigafactory in Austin, Texas. The factory will be used to build the Cybertruck,
Tesla's electric pickup.
at China's oil ports. Congestion at China's east coast
oil ports are adding costs for shippers and importers, a bottleneck that could stretch into
August. China has purchased a record amount of oil in recent months.
oil production increase likely fleeting. The rise in
weekly production to 11.1 mb/d in the latest EIA data will likely be
temporary, according to analysts. The steep declines in shale wells are expected to overwhelm
the return of shut-in production by the end of the summer, dragging overall
output back down.
considers oil hedge. Pemex routinely secures massive
oil hedges, but Russia appears ready to follow suit. President Vladimir Putin
gave his government the go ahead to consider hedging Russia's massive oil and
gas export revenues to protect the country from drops in prices, according
turns to solar...to produce oil. Chevron (NYSE:
CVX) is using solar in
California to cut the cost of oil production.
strife in Guyana threatens oil future. Months of
deadlock over a disputed presidential election has ratcheted up tensions in
Guyana. President David Granger is widely interpreted as having lost the
election, but has refused to concede. ExxonMobil (NYSE: XOM) admitted
in an earnings call that the political conflict has slowed key
permitting decisions. Exxon pushed back its oil production goals by six to 12
flares in Permian leads to high methane emissions. One
in every 10 flares in the Permian basin in June was unlit, venting unburned
methane into the atmosphere, according to a new report.
Hughes sees long road to recovery. Baker Hughes
(NYSE: BKR) reported a net loss of $201 million in the
second quarter and does not see a swift rebound ahead. "Although the majority
of lockdowns have been easing globally and economic activity likely troughed
during the second quarter, visibility on the economic outlook remains extremely
limited," said Lorenzo
Simonelli, CEO of Baker Hughes.
uptick in LNG prices offer glimmers of hope. LNG spot
prices in Asia (JKM) rose to
$2.40/MMBtu on improving demand, compared to the record low of $1.85/MMBtu in
May. Demand in Asia is rising steadily.
lending contracts. Banks have already cut their
reserve-based lending amounts, but the tightfisted approach is showing no signs
of loosening. Lack of capital puts a lot of shale drilling in danger. "As long
as oil prices stay at $40 or less and gas stays at $2 or less, I think banks
are going to continue to be very cautious and continue to pull back," said Spencer
Cutter, an analyst at Bloomberg Intelligence. "It'll be the end of shale if oil
stays below $40."
The post Oil
Prices Stuck At $40 first appeared in Oilprice.com
on July 24, 2020.
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