Saturday, May 30, 2020 /08:00
AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
The recent move by China to pass a national security law in Hong Kong
has reignited tensions between Washington and Beijing. Those tensions are now
threatening over $52 billion in energy sales and have brought an end to the oil
Oil prices have held onto the gains from the last few weeks, but the recent
rally seems to have stalled as demand shows signs of not returning to normal
any time soon. Meanwhile, U.S.-China tensions weighed heavily on financial and
commodity markets this week.
tensions threatens $52 billion in energy sales. The Phase 1
trade deal between Washington and Beijing is at risk of falling apart. President Trump is set to make a major announcement on Friday
regarding China, and amid escalating tension and China's moves in Hong Kong,
the actions will likely be punitive. China had previously pledged to make $52
billion in oil purchases over two years, a total that was always going to be
hard to meet.
executives get paid despite downturn. A number of U.S.
shale oil executives continue to receive hefty
compensation despite consistently posting unimpressive returns. Part of the
problem is the practice of basing compensation off of a company's performance
relative to its peers. Meanwhile, the oil majors continue to take on debt to
will OPEC+ do next? Two conflicting reports surfaced this
week, one claiming that Russia was considering extending the OPEC+ production
cuts beyond June, while the other said the opposite - that Russia would push
for loosening the cuts. Saudi Arabia appears ready to extend, but
in Moscow some Russian oil companies may find an
hit by overcapacity. A wave of refining capacity built over
the past few years has squeezed margins, and the downturn in the oil market
could push uncompetitive facilities offline permanently.
cut production by 1 mb/d. Alberta said that it has
cut production by 1 mb/d, a quarter of the province's output.
EIA data halts momentum. The EIA reported a jump in crude oil
inventories this week, made worse by a surge in imports. At the same time,
production dipped by another 100,000 bpd.
Oil loses key court case on climate. A U.S. Circuit Court
of Appeals ruled against oil
companies, deciding that a public nuisance case brought by California cities
could move forward in state courts. The case centers on damages inflicted a
handful of oil majors - ExxonMobil (NYSE: XOM), Chevron (NYSE:
CVX), BP (NYSE: BP), Royal Dutch
Shell (NYSE: RDS.A) and ConocoPhillips (NYSE: COP). The
companies sought to have the case tossed out, but the decision allows it to
proceed. Still, it could be years before the case is heard by a jury.
lays off 10-15 percent of staff. Chevron (NYSE:
CVX) said it would cut
10 to 15 percent of its global workforce, or between 4,500 and 6,750 jobs.
energy stocks outperform oil. Clean energy stocks are
performing better than oil during the global pandemic, according to a new
study. U.S. clean energy stocks have increased 2.2 percent in the first four
months of the year, even as the S&P 500 declined by 9.4 percent. "We found
that renewable power had a bit of a protective property, and that is something
we did not know before," one of the report's authors told the FT. "After this
kind of shock [in the market], this portfolio has done so well. Moreover,
between 2010 and 2019, renewable energy stocks returned 200 percent, while
fossil fuels returned 97 percent.
majors struggling with coronavirus infections. A wave of
infections have hit numerous oil projects around the world. More than 900
workers have been infected at the Tengiz oil field in Kazakhstan, led by Chevron (NYSE:
CVX) and a consortium of partners. Royal Dutch
Shell (NYSE: RDS.A) said that seven workers at an offshore
platform in the Gulf of Mexico have been infected. In recent weeks, other cases
have hit ExxonMobil (NYSE: XOM) and Total (NYSE:
LNG exports weaken. Weak economics have already cut into
U.S. LNG export volumes, even before accounting for cancelled June and July
cargoes. U.S. LNG's share of European imports have only averaged 15 percent so
far in May, down from 23.6 percent in April.
oil imports jump on arrival of Saudi "armada." The
widely-publicized "armada" of Saudi oil tankers finally arrived in the U.S.,
leading to a nearly 1-mb/d increase in oil imports in the latest EIA weekly
data. "The optics for Saudi crude aren't so great in Texas right now," Bill
Farren-Price, director at RS Energy Group, told the FT. "Despite
their huge cuts, the April export surge has just started unloading, with yet
another clue for Permian operators as to why US oil prices remain on the
won't bounce back until 2021. The chief executive of Precision
Drilling (NYSE: PDS) said that shale
drilling activity won't begin to grow again for another year.
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