April 28, 2020 / 8:23 PM / by Tom Kool of Oilprice.com /
Header Image Credit: Tass
we will take a quick look at some of the critical figures and data in the
energy markets this week.
We will then look at some of the key market movers early this week before
providing you with the latest analysis of the top news events taking place in
the global energy complex over the past few days.
We hope you enjoy.
Chart of the Week
Weekly U.S. consumption of petroleum products averaged 14.1 mb/d for the
week ending on April 17, down about a third from the pre-pandemic average.
Gasoline consumption averaged 5.3 mb/d, down from 8.9 mb/d
year-to-date through early March.
Distillate demand has held up better, down just 20 percent.
Dominion (NYSE: D) says a massive 2.6 GW
offshore wind project is on track to begin construction in 2024.
Diamond Offshore (NYSE: DO)
declared bankruptcy on Monday. Transocean (NYSE: RIG) and Valaris (NYSE:
VAL) saw their share prices fall by 14 and 15 percent,
CNX Resources (NYSE: CNX)
reported a $329 million loss, or a loss of $1.76 per share.
Tuesday April 28, 2020
Oil prices collapsed again on Monday on fears of
dwindling storage and also extreme volatility in the front-month contract for
WTI. "The key trigger this time was probably the unexpected decision by one of
the largest investment vehicles for retail investors to withdraw from the WTI
futures for June and to move instead into contracts with a longer term," Commerzbank said in a note.
exports rise in April. Crude oil supply from OPEC members
has soared by more than 2
million bpd in April to the highest levels since December 2018.
contract for June to lose value. A rerun of the WTI
meltdown is possible. Trading volumes are already down for June WTI and ETFs
are trading out of the contract. "No one wants to be among the last to close
out their position ahead of expiry, fearing a repeat of the May expiry," Warren
Patterson, head of commodities strategy at ING told the FT. "The move we are
seeing suggests that the June contract is going to become increasingly
illiquid, and as a result, will likely suffer from increased volatility in the
lead up to expiry."
Kearl Oil Sands has more than 50 workers with coronavirus. Imperial Oil
(TSE: IMO) said that more than 50
workers at its Kearl Oil Sands project have tested positive for COVID-19.
ins increase. Storage is filling up and forcing larger shut
ins. "We are moving into the end-game," Torbjorn Tornqvist, head of commodity
trading giant Gunvor Group Ltd., told Bloomberg. "Early-to-mid
May could be the peak. We are weeks, not months, away from it." According to
Goldman Sachs, global oil storage could be completely
full within the next three weeks. The investment bank said that upwards of 18
mb/d of supply would need to be shut in by then. Up until now, the shut ins
have been relatively minor compared to what is expected.
amends $5.6 billion Alaska sale. BP (NYSE: BP)
said that it adjusted the
terms of its $5.6 billion sale of its Alaska assets to privately-held Hilcorp Energy.
The deal is expected to maintain "the majority of the value of the
transaction," BP said in its statement.
rule out Arctic oil. In the face of withering pressure from
environmental groups, a growing number of big banks are cutting out Arctic oil
from their lending programs. Morgan Stanley became the latest major bank to declare that it would end
financing for Arctic oil.
rates soar. The cost of storing refined products at sea has
soared amid the glut. "The VLCC market continues to be strong...â€‰but
we are starting to see demand flow over into the product market," Lois
Zabrocky, CEO International Seaways, told the FT. "Refiners are
facing challenges recalibrating supply and demand."
profit falls, debt rises. BP (NYSE: BP) saw
its profit fall by two-thirds in the first quarter, and its debt soared to the
highest level on record. Still, the oil major didn't touch its dividend. Stuart
Joyner, equities analyst at Redburn, told Reuters that BP's "large
rise in net debt overshadows (its) underlying earnings beat."
and wind cheapest for two-thirds of planet. Solar PV and
onshore wind are now the cheapest source of
electricity for at least two-thirds of the global population, according to
Bloomberg New Energy Finance. Batteries are now the cheapest for peak times in
gas-importing regions such as Japan, China and Europe.
Resources sued. Casillas Petroleum Resource Partners sued Continental
Resources (NYSE: CLR), because of Continental's decision to
back out of a $200 million deal to buy oil and gas assets from Casillas.
companies call for green stimulus. A coalition of major
German companies said any
coronavirus-related stimulus should be focused on climate action.
economy hit hard. Saudi Arabia needs oil prices to trade
above $80 per barrel for it to balance its budget. GDP could shrink more than 3
percent this year and the government budget deficit could be 15 percent of
to rent out SPR. The U.S. Department of Energy has
finalized deals to rent out space in
the strategic petroleum reserve (SPR). So far, 1.1 million barrels have been
delivered out of an expected 23 million barrels.
Scenarios to push oil to $30. Brent has sunk to $20. There
are three big factors that will
determine how quickly oil prices rebound in the short run.
market imploding. The global market for LNG was entering a
downturn even before the pandemic and global lockdowns. Now a few dozen LNG
cargoes face cancellation amid a
slowdown and a global glut. Cheniere Energy (NYSE: LNG) may
bear the brunt of the cargo cancellations. A new study finds that the market is "imploding."
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Oil Build Threatens To Fill Up Global Storage Within Weeks