Saturday, June 06, 2020 /08:00
PM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
In one of the most bullish days for oil
markets in 2020, OPEC+ looks to be on the brink of an agreement while the U.S.
job report saw an unexpectedly large drop in unemployment.
June 5th, 2020
Oil prices jumped yet again on positive
news from OPEC+ as well as a far better than expected jobs report. Brent surged
by more than $2 per barrel while WTI approached the $40 mark.
nears deal. OPEC+ made a breakthrough in
negotiations and the group is slated to meet on Saturday to sign off on the
deal, which calls for a one-month extension of the 9.7 mb/d cuts. A sticking
point had been the poor compliance rate from Iraq, but the Iraqi government
agreed to strict compliance, although there could be a domestic backlash from
unemployment rate unexpectedly drops. The U.S. unemployment
rate unexpectedly fell to 13.3
percent in May, with the return of 2.5 million jobs. Economists had expected
the unemployment rate to jump to around 20 percent. The numbers led to a wave
of optimism around economic recovery.
government beats back LNA. The Libyan National Army (LNA) retreated from Tripoli,
ending a 14-month assault on the capital. The civil war has also become a proxy
battle between other world powers. The prime minister of the Government of
National Accord (GNA) traveled to Ankara to meet with Turkish President Recep
Pickering launches clean tech research unit. In a sign of the
times, investment bank Tudor, Pickering, Holt & Co., which was an important
player in financing the U.S. shale industry, will begin research on clean
technologies. The firm will cut back on the number of oil and gas companies it
covers, and use an existing equity research team to cover clean tech.
to develop electric van. GM (NYSE: GM) is developing an
electric van for commercial use, a multibillion-dollar segment of the
transportation sector, according to Reuters. "It's going
to be similar to what the Model 3 has done for the consumer market," a UPS
executive told Reuters. "Now all of a sudden, we're off to the races." The GM
van is due to start production in late 2021.
unsubsidized offshore wind goes forward. Vattenfall AB is going
forward with a 1,500-megawatt offshore wind project in the North
Sea, and the project carries no government subsidies. When it comes online in
2023, it will be the world's largest, but won't carry that title for long as a
larger project in the UK is scheduled to come online shortly after.
alone among majors in clean energy. While many of the
integrated oil majors have promised larger investments in renewable energy,
Norway's Equinor (NYSE: EQNR) stands out. The majors are
estimated to spend $18 billion combined per year by 2025 on renewables, but
Equinor will account for $10 billion of that total, according to Rystad Energy.
The Norwegian company will be the only one to invest a majority of its
greenfield capex in clean energy.
oil and gas bankruptcies. So far in 2020, there have been 19
oil and gas producers in North America that have filed for bankruptcy, according to Haynes and Boone. Ultra Petroleum, Whiting
Petroleum and Diamond Offshore were the three
production coming back. Parsley Energy (NYSE: PE) and EOG Resources
(NYSE: EOG) each said this week
that they would bring back shuttered production. Restored production from shut
in wells could add 2 mb/d by August, but at the same time, the lack of drilling
means that steep decline rates take over, and in the medium-term, production drifts lower.
World should cut fossil fuel subsidies. The IEA said that
governments should use the oil price downturn to phase out fossil fuel
oil demand back to 90 percent. China's oil demand has recovered to 90 percent
of pre-pandemic levels.
companies withdraw personnel because of tropical storm. BP (NYSE: BP),
(NYSE: EQNR) and Occidental Petroleum (NYSE: OXY) said that they
began evacuating non-essential personnel from platforms in the Gulf of Mexico
because of a tropical storm.
Chesapeake "weeks away" from default. Famed shale gas driller Chesapeake
Energy (NYSE: CHK) is nearing bankruptcy, a filling that could
occur in "a matter of weeks, not months," according to a debt restructuring
adviser and the FT. Analysts say
Chesapeake could emerge from bankruptcy as a smaller, but potentially more
profitable, gas driller.
worst-performing energy commodity. Oil prices have recovered,
but spot LNG in Asia fell to $1.85/MMBtu in the last week of May, an all-time
low. Prices are down by three quarters since hitting a recent peak at
$6.80/MMBtu in mid-October. U.S. LNG shipments are suffering cancellations, and
LNG itself is now the worst-performing major
industry overinvests in petrochemicals. The market for
petrochemicals is souring amid
overcapacity and weaker-than-expected demand. Some companies are deferring or
canceling projects entirely. Those going forward are facing heightened
financial risk, such as Royal Dutch Shell's (NYSE: RDS.A) project
banks increase exposure to energy. The exposure of Canadian
banks to energy jumped 23 percent
over the past year. At the same time, the amount of loans impaired has doubled
to C$2 billion.
signs executive order on pipelines. Under an emergency decree,
the Trump administration signed an executive
order to waive environmental laws to speed up federal approval for mines,
highways and pipelines. But analysts said that the industry would be reluctant
to make investments based off of what could be a legally dubious and easily
cut back due to diesel glut. Refinery rates are coming back as
demand rebounds, but gasoline is rebounding faster than diesel. Inventories are
rising at a rapid clip. Refineries can retool their product mixes to churn out
relatively more gasoline. With thin margins, though, some refineries could cut output
Line 3 faces delay. Enbridge's (NYSE: ENB) Line 3
faces renewed delays after
Minnesota regulators said it would hold hearings on the impact to water
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