Saturday, July 11, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil prices fell on
Thursday as COVID-19 cases continued to spike in the U.S., which the IEA
highlighted as a major threat to oil markets in today's report, but
prices were quick to return to the $40 mark on Friday.
Friday, July 10th, 2020
Oil posted a price correction on Thursday on fears of the rising coronavirus
numbers in the U.S., something that the IEA warned about in its latest Oil
Market Report out today. In early trading, prices firmed up, with WTI holding
onto $40 per barrel.
raises demand forecast; warns about risk. The IEA hiked
its demand forecast for 2020 but also warned that the spreading coronavirus in
the U.S. poses downside risks. The agency said demand could be 400,000 bpd
higher than previously thought this year due to a rapid bounce back in many
economies around the world, particularly in China and India. Also, oil supply
fell by 2 mb/d in June, further tightening the market.
hits Texas refineries. Marathon Petroleum's (NYSE:
MPC) Galveston Bay refinery in Texas City, the
second-largest refinery in the country, has over 100 confirmed cases of
Covid-19, according to Bloomberg.
At least four other refineries have also reported positive cases.
offshore wind to take off. Investment in U.S. offshore
wind could soon match total investment levels in offshore oil and gas. A new
study from Wood Mackenzie projects offshore wind investment could reach $78 billion this
decade, compared to $82 billion for offshore oil and gas. In the decade ending
in 2010, wind saw virtually nothing while offshore oil and gas received $154
lifts force majeure. Libya's National Oil Corp. lifted force
majeure on its oil exports, raising the prospect of additional supply coming
back to the market.
Supreme Court ruling raises questions for oil. The U.S.
Supreme Court ruled that a large swathe of Oklahoma remains in control of
Native American tribes. The decision raises questions about whether oil and gas sites will no longer fall under the
control of Oklahoma regulators, instead potentially reverting to federal
control with tribes as beneficiaries.
gas pipeline inches forward. Global Infrastructure
Partners announced a
$345 million initial investment in the Whistler pipeline, which would carry
natural gas from Waha in West Texas to the Gulf Coast. The pipeline is slated
to come online in late 2021.
oil storage is almost full. Iran has cut oil production to
its lowest level in four decades as storage tanks fill up, according to Reuters.
to become a "power company." Royal Dutch
Shell (NYSE: RDS.A) chairman Chad Holliday said that
the company would transition to become "more of a power company than an oil
lowers gas production forecast. The EIA slightly downgraded its
forecast for U.S. natural gas production for the third quarter by nearly 1
percent, noting lower natural gas prices. Gas output is expected to fall by 3
percent for all of 2020. The declines come after the U.S. posted record gas
production numbers in 2019.
LNG utilization rates fall to just 32 percent. The glut of
LNG has led to a steep drop in
utilization rates of U.S. LNG export terminals. Gas flows to LNG facilities has
declined by more than half to 3.1 bcf/d so far this month, down from 8.7 bcf/d
in February. Export terminals are now only using 32 percent of capacity.
Utilization is expected to rebound, but still only average between 60 and 70
percent for the next several years.
drilling permits fall by 69 percent. The Texas Railroad
Commission approved 312
new drilling permits in June, down from 1,001 in May.
U.S. oil coming back. Houston-based Noble Energy plans
to bring back by
the end of July most of the oil production it had curtailed in the second
quarter. Overall, U.S. oil production held steady in the most recent EIA data
at 11 mb/d.
oil sands restore 20 percent of shut-in production. Canadian
oil sands producers brought back 20 percent of their shut-in production.
$150 oil possible? The steep decline in upstream
investment could create a historic bull market in the years ahead. "That funding pressure is
going to be massive. It's going to be really difficult for some of the
producers to produce," Trevor Woods, chief investment officer of Ohio-based
hedge fund Northern Trace Capital, told the WSJ. "We could hit $150 pretty easily by 2025." The thesis rests on slow but steady
increases in demand over the next decade.
imports of Mexican oil hit 8-year high. A fire at a
Mexican refinery and swelling inventories pushed more Mexican oil to the United
States, which imported 1.3 mb/d in the first week of July, the highest level since 2012.
American oil and gas bankruptcies rise. The number of oil
and gas bankruptcies rose by 18 in
the second quarter, according to a new analysis from Haynes and Boone. That was the highest quarterly total since
2016. Chesapeake Energy's (NYSE: CHK) bankruptcy stood
out as the largest on the list.
close to an autonomous car. Elon Musk said that Tesla (NASDAQ:
TSLA) is very close to having the Level 5 autonomous
driving technology. "I remain confident that we will have the basic
functionality for level 5 autonomy complete this year," Musk said in
a pre-recorded message.
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