Saturday, March 21,
2020 /08:00 PM / by Tom Kool of Oilprice.com / Header Image
The rebound in oil prices on Thursday didn't last long as bearish sentiment
once again took hold on Friday morning, with some analysts contemplating the
possibility of $5 WTI
Friday, March 20th, 2020
Oil prices rebounded on
Thursday on hopes of a trillion-dollar stimulus package from Washington, along
with other stimulus measures from governments around the world. The rally was
short-lived however, with a growing number of analysts see a deeper bottom for
$5 oil is possible. Citigroup laid out a pessimistic
scenario in which WTI falls to $5 per barrel. Energy Aspects said Brent could
fall to $10. Mizuho Securities said some oil could even fall into negative
territory absent shale shut ins. "This is Operation Desert Storm, Enron, 9/11,
Hurricane Katrina/Rita, Lehman Bros, combined," Stephen Schork, president of
the energy consultancy Schork Group Inc., told Bloomberg.
could store jet fuel at sea. Oil companies are rushing
to store oil at sea, but the glut has become so severe that the majors are
looking at even storing jet fuel at sea. That practice is rare because jet fuel degrades more
quickly than other fuels and is sensitive to contamination. "The industry
generally expects products will be used within three months of being produced," said George Hoekstra, an independent consultant, told Reuters.
considers the unthinkable - regulating production. Several
oil executives have reached out to the Texas Railroad Commission, which
regulates oil and gas in the state, asking for regulation on production in
order to rescue prices, according to the WSJ.
In Bloomberg Opinion, Texas Railroad Commissioner Ryan Sitton proposed rationing
production, cutting output in the state by 10 percent.
Dakota to keep inactive wells inactive. North Dakota
regulators are considering moves
that would allow oil producers to keep their wells inactive, rather than
forcing them to choose between producing and reclamation. The logic would be
trying to keep unwanted production offline.
furloughs 3,500 workers. Halliburton
(NYSE: HAL) furloughed 3,500
workers on Wednesday, putting them on limited work schedules for two
Oilfield services most at risk of credit shock. Moody's
said that weaker oilfield services companies are the most vulnerable to a credit shock. Roughly $32 billion in debt in oilfield
services falls due between this year and 2024. Smaller regional players "face
the brunt of the sector's weakness, and therefore the greatest refinancing
look to cut processing. Low oil prices are typically
good for refiners, but demand destruction is putting refiners in a bind.
Refining margins for transportation fuels fell into negative territory in Europe and Asia. Marathon
(NYSE: MPC) cut production
at its Los Angeles refinery, California's largest. Meanwhile, a growing number
of refiners are sending staff
home because of the coronavirus, including HollyFrontier (NYSE: HFC), Royal Dutch
Shell (NYSE: RDS.A) and Valero (NYSE:
to cut spending and freeze recruitment. Total (NYSE:
TOT) said that
it would halt its share buyback program, its recruitment program and also cut
capex, perhaps by as much as 20 percent.
calls for emergency meeting. Iraq's oil minister called for
an emergency OPEC meeting, but a meeting seems unlikely before June.
suspends construction at cracker plant. Royal Dutch
Shell (NYSE: RDS.A) suspended construction
at its massive ethane cracker in Western Pennsylvania due to the coronavirus.
The project has around 8,000 workers on site.
suspends flights to Alaska North Slope. The
coronavirus has forced ConocoPhillips (NYSE: COP) to cancel flights
for hundreds of workers to Alaska's North Slope for at least two weeks.
drillers getting crushed. More shale drillers are
exploring debt restructuring as WTI sinks into the mid-$20s.
industry lost $2.1 billion last year. A survey of 34
North American shale-focused drillers reported a combined $2.1 billion in 2019,
according to IEEFA.
That capped off a decade in which they spent $189 billion more than they
cuts top $31 billion. The global oil and gas industry
has already slashed $31
billion from spending plans this month, following the historic collapse in
gas prices could rise on shale knockout. With the
Permian basin on the ropes, associated gas production could decline as drilling
dries up, tightening up the gas market. "We increase our 2021 price forecast to
$2.45/MMbtu as we expect to see accelerating production declines next year," Bank of America Merrill Lynch wrote in a note. At the same time, gas demand in
the power sector is down as the U.S. goes on lockdown and appears set to enter
into economic recession.
crash could destroy biofuels market. The crash in oil
prices makes ethanol comparatively expensive around the world.