Saturday, June 13, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
Oil prices are set for their first weekly
loss in over a month as a jump in COVID-19 cases threaten the economic recovery
while oil supply continues to come back online.
June 12th, 2020
Oil is set for the first weekly decline in
over a month, dragged down by the broader selloff on Thursday. The jump in
coronavirus cases in the U.S. sparked renewed concerns about the economic
recovery. The Federal Reserve warned of long-term scars on the economy. At the
same time, oil analysts have warned that the crude oil rally may have gone too
gasoline demand picks up. U.S. gasoline demand ticked up to
7.9 mb/d in the first week of June, up about 350,000 bpd from a week earlier.
Jet fuel demand is still a shadow of its former self, stuck at 30 to 40 percent
of its pre-pandemic levels.
20 percent oil price correction. Goldman Sachs said that an
oil price correction of about 20 percent may already be underway. "Despite the
rally, we have been hesitant to recommend a long position this early in the
cycle for several reasons," Goldman Sachs commodities analysts wrote in a note.
Inventories are too high and the price rally has gone too far, the bank said.
offshore drilling plan. The Trump administration is
planning to push for opening up Florida for offshore oil drilling, but the
proposal will wait until after the November election in order to avoid
political blowback, according to Politico. Drilling in Florida faces bipartisan opposition.
The eastern Gulf of Mexico has long been off-limits to the industry.
to return to growth in 2021. U.S. shale will concentrate on
the Permian basin, where growth returns in 2021 and
continues through 2030, according to Wood Mackenzie. Meanwhile, the Eagle Ford
won't return to its 2019 average until 2024, but will then decline. Projections
vary, but the comeback is widely expected to be slow.
oil execs see rewards before bankruptcy. Around 35 oil
executives at Whiting Petroleum (NYSE: WLL), Chesapeake
Energy (NYSE: CHK) and Diamond Offshore Drilling (OTCMKTS: DOFSQ)
are set to enjoy $50 million in payouts even as their companies head into
bankruptcy, according to Bloomberg. The list of companies engaging in this
practice is rising, with California Resources Corp. (NYSE: CRC)
recently guaranteeing executive bonuses. On Thursday, Extraction Oil
& Gas (NYSE: XOG) disclosed $6.7 million
in payments to 16 executives ahead of a possible default on bond payments.
U.S. production bottoms out at 10.6 mb/d. The EIA says that
U.S. oil production will drop to 10.6 mb/d
by March 2021, a decline of 2.2 mb/d from a recent peak in November 2019. The
agency sees U.S. production averaging 11.56 mb/d in 2020, a 130,000-bpd
downward revision from last month's forecast.
to delay refinery expansion. ExxonMobil
(NYSE: XOM) said it would
delay the startup of its Beaumont refinery expansion on the Texas Gulf Coast by
a year due to the downturn in demand. When the expansion is complete in 2023,
the refinery will be the largest in the U.S.
to revive North Sea asset sales. After putting proposed
asset sales on ice during the pandemic, ExxonMobil (NYSE: XOM) is once
again pushing to dispose of
its unwanted assets. Exxon had wanted to raise $2 billion, but now expects to
New Guinea passed legislation affecting Exxon. Papua New
Guinea passed legislation
to increase benefits to the country from oil and gas operations. Exxon operates
a massive natural gas drilling and export project in the country and is
considering a $13 billion doubling of that project's capacity.
sees windfall profit. Oil trader Trafigura posted its largest profit in the
first two quarters since 2016, with year-on-year earnings up 27 percent.
Trafigura benefited from oil storage and volatility. Emerging markets cut fuel subsidies. A sharp economic downturn, combined with lower fuel
prices, has led to a number of emerging market countries to cut fuel subsidies.
Nigeria and Tunisia trimmed subsidies, while India hiked gasoline and diesel
LNG buildout struggles. Tellurian's (NASDAQ: TELL)
LNG project remains unbuilt after years of construction. The company's market
cap has plunged below $400 million, down from over $4 billion from a few years
ago. The FT looks at the
lithium prices depress investment. The fall of lithium prices could deter
new investment, impacting the proliferation of electric vehicles.
gas demand to fall by 4 percent. Global natural gas demand
could slump by as much as 4 percent in 2020, according to a new report from the
IEA. That would be double the percentage decline seen during the 2008-2009
CEO resigns, second bankruptcy possible. The CEO of Weatherford
International (OTCMKTS: WFTLF) stepped down, and analysts
say that the company could be forced into bankruptcy for the second time in
less than a year. Once one of the top four oilfield service companies in the
world, Weatherford's demise illustrates the deep pain for drilling
down to 1 rig. Venezuela has 1 rig drilling for
oil in the country, and 1 for gas. As recently as March, there were 25
investment hits 15-year low. Global spending on upstream
oil and gas could fall to $383
billion in 2020, the lowest level in 15 years and a drop of 29 percent from
Related News â€“ Previous Oilprice Intelligence Report
- Why Oil
Prices Didn't Rally After The OPECplus Extension
- Oil Prices
Surge As OPECplus Nears Deal - OIR 050620
- Oil Rallies
Towards $40 as OPECplus Nears Deal - OIR 020620
- Oil Prices Slide As U.S.-China Tensions Spike
- Will U.S.
Shale Survive If Oil Hits $40?
- Is The Oil
Rally Coming To An End?
- The Oil Bulls Are Back - OIR 190520
- A Relentless Oil Price Rally - OIR 150520
- Oil Holds Gains Despite Massive Unemployment - OIR 080520
- The Worst
May Be Over For Oil - OIR 050520
Related News â€“ Oil and Gas
Cuts Could Be Deeper for Longer
- Why Oil
Prices Didn't Rally After The OPECplus Extension
Deregulation Farce; What's The Way Forward?
Deal Fails To Give Prices Major Boost
Arabia Increases Its Oil Prices By Most In Two Decades
Extends Deeper Production Cut to July
Removes Existing PMS Price Cap; Commences Market Based Pricing Regime
Conundrum in the Retail Pricing of PMS
- Crude Oil Production Cuts Will Spur Nigeria's Negative Growth in Q2
2020 - PFI Capital
Prices of PMS, AGO, HHK and Cooking Gas - April 2020
Oil and Gas Industry Update
Gas: Demand Pressure and Price Plunge hit LNG Revenue
- OMCs to
Resume Importation of Petrol
Litres of PMS Imported Into Nigeria in 2019 - NBS
- Ahead of
Tomorrow on WebTV: Discussions on Post COVID-19; Repositioning The
Nigerian Gas Industry