March 10, 2020 /09:00 PM / By Tom Kool of Oilprice.com /
Header Image Credit: Oilprice
Today, 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.
U.S. natural gas production grew by 9.8 billion cubic feet per day (Bcf/d) in 2019, a
10 percent increase from a year earlier.
The volume of gas exported rose sharply, to an average of 12.8 Bcf/d.
Appalachia remains the largest source of gas production at 32.1 Bcf/d, but the
Permian gas output hit 28 Bcf/d last year, closing in on Appalachia.
Energy (NYSE: CVE) cut capex by 32 percent and will temporarily suspend its
crude-by-rail program. It also said production would drop to 432,000-486,000 bpd,
down from 472,000-496,000 bpd previously.
Energy (NYSEMKT: REI) said it would cease drilling until oil prices stabilize.
(NYSE: OVV) cratered by more than 70 percent on Monday, but
rebounded by 33 percent on Tuesday. The oil company said it would cut spending to maintain free cash
Tuesday, March 10, 2020
After a historic rout, oil prices rebounded on Tuesday, but still traded in the
mid-$30s. Saudi Arabia announced a major escalation in the price war. But hopes
of economic stimulus, along with immediate announcements of cuts in the shale
patch, helped stop the slide in oil prices, at least temporarily.
Arabia to increase production to 12.3 mb/d. In April, Saudi
Aramco said it would increase production to 12.3 mb/d. Output will be "300,000
barrels per day over the company's maximum sustained capacity of 12 million
bpd," Aramco chief Amin Nasser said in a statement received by Reuters. The move marks a major escalation in the price
could increase production by 0.5 mb/d. Russia's energy
minister said that it could increase production by 0.5 mb/d in the near future, but
also said that the "door isn't closed" for further talks. "If needed, we have
various tools, including reducing and increasing production, and new agreements
can be reached," Russian energy minister Alexander Novak said.
says it can weather the storm. Russia said that it can
withstand oil prices at $25-$30 per barrel for 6-10 years, shrugging off the price war. Saudi Arabia also
has deep pockets, but it has budgetary pressure and a fixed exchange rate that
will require dipping into cash reserves.
Arabia preparing for $12-$20 oil. Saudi Arabia is preparing budget exercises that account for the possible
scenario that oil drops to between $12 and $20 per barrel. The government is
even looking at the extreme scenario that oil drops below $10 per barrel.
shale cutbacks announced. Spending cuts from a few shale companies
came out immediately. Diamondback Energy (NASDAQ: FANG) said
that it would reduce the number of rigs, reduce its spending and cut its active
completion crews. Parsley Energy (NYSE: PE) made a similar announcement. "You're going to see activity grind to a stop. At this level, this is survival:
for some companies, they'll be gasping for oxygen," said Dan Yergin, vice chairman of IHS Markit.
could decline by 1-2 mb/d. "A decline in US shale oil
production of 1-2m bl/day from current total US oil production of 13.1m bl/day
is natural to expect," Bjarne Schieldrop, chief commodities analyst at SEB,
said in a statement. "We now think that a last-minute deal between Russia and
OPEC before the expiry of the current cuts at the end of March 2020 is very
unlikely. Russia has probably firmly decided that now is the time to pull away
the rug from under the feet of the shale oil producers, so now is the time for
the second shale oil reset."
shale wells unprofitable. At prevailing prices, nearly all
new shale wells won't make money. Only five companies have breakeven prices lower than the current
oil price, according to Rystad Energy.
Oil demand to contract. The IEA said that oil demand will contract for the first time since 2009. The agency
forecasted a demand loss of 90,000 bpd this year.
may cut spending. Less than a week after it gave its annual
investor presentation, Chevron (NYSE: CVX) said that it may consider spending cuts. It is the first
oil major to announce a rethink following the latest price collapse.
exodus leave energy stocks in disarray. The 25 percent
plunge in oil prices on Monday led to even steeper losses for energy stocks. Moody's warned about a rise of defaults.
loans come under stress. The sharp drop in both oil prices
and broader equities put the spotlight on leveraged loans. Corporate debt has
skyrocketed over the past decade, helped along by low interest rates. Much of
the borrowing has occurred with riskier companies. Risky energy companies make
up a significant slice of the $1.3 trillion in high-yield bonds. Barclays estimates that buyers of leveraged loans may only be able
to recover 55 to 60 cents on the dollar, down from 67 cents historically.
could cut capex by $100 billion. If oil prices stay at
around $30 per barrel, total capex could plummet by $100 billion this year, and
by another $150 billion in 2021, according to Rystad Energy.
prices fall to record low. Spot LNG prices in Japan fell to $3.40/MMBtu, a record low since Japan started
tracking data in 2014. JKM prices in Asia fell to $2.70/MMBtu last month.
to ease restrictions in Hubei province. In a sign that the
campaign to reduce the spread of the coronavirus, authorities in Hubei
Province, the epicenter of the outbreak in China, are moving to ease restrictions after a significant drop in new infections.
slashes head count. LNG exporter Tellurian
(NASDAQ: TELL) cut 40 percent of its workforce in a major
to cut Permian activity slightly. ExxonMobil
(NYSE: XOM) said last week that it would slightly reduce the pace of drilling in the Permian, although it
still aims to produce 1 mb/d in the basin by 2024. However, those plans were
unveiled before the latest meltdown in the market.
East recession possible. The collapse of oil prices could trigger an economic recession in the Middle East.
Supply Overhang to Keep Crude Prices Subdued
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Prices Of PMS, AGO, HHK and Cooking Gas - January 2020