Trump Proposes A $2 Trillion Infrastructure Intervention (31 March 2020): By Michael Kern - As the United States continues to grapple with a growing number of coronavirus cases, President Donald Trump is calling on yet another trillion-dollar spending plan to help bolster the economy. On Tuesday morning, U.S. President Donald Trump tweeted that Congress should pass a $2 trillion spending plan to revitalize the country's roads, bridges and other critical infrastructure, calling for it to be included in "Phase 4" of the country's measures to combat the impact of the COVID-19 crisis. (Source: Oil Price)
China Produces Record Amount Of “Fire Ice” (30 March 2020): By Irina Slav - In a world awash in oil and gas, you'd think it couldn't get any worse. Well, it can: China just announced that it had extracted a record amount of what has been poetically called fire ice. It is, however, a form of natural gas trapped in frozen water. At 861,400 cubic meters, this record might not be a whole lot of gas, but it may well be the start of something new, and gas producers may not like this 'something'. Gas hydrates don't garner a lot of media attention as a rule, simply because they have yet to become an addition to the world's energy mix. But when they do—if they do—they may change the international oil and gas market even more than the coronavirus outbreak has changed it now by decimating demand for hydrocarbons. (Source: Oil Price)
Natural Gas Prices Could Double Next Year (29 March 2020): By Nick Cunningham - Unprofitable drilling, a global recession and dwindling access to capital could lead to a decline in U.S. natural gas production this year and next. The declines could finally set the stage for an increase in prices in 2021, according to two reports. The frenzied pace of fracking in the U.S. over the last few years led to a supply glut even prior to the onset of the coronavirus. Associated gas in the Permian, along with record production in the Marcellus shale in Appalachia, crashed prices below $2/MMBtu at the start of 2020. (Source: Oil Price)
Oil Prices Could Fall Another 20% (28 March 2020); Brent crude was down four percent Friday afternoon at $27.50 per barrel. US crude was five percent lower at $21.47 per barrel. Prices were on track for their fifth weekly drop in a row as coronavirus ravages economies around the world. Containment measures have caused demand to slump and supply chains to be severely disrupted, dramatically lowering demand for oil. The price war launched by Saudi Arabia almost three weeks ago after talks with Russia over price stabilisation broke down has sent prices to their lowest level in 17 years. The Brent crude price was around $65 per barrel at the start of January. Faith Birol, head of the International Energy Agency, yesterday said oil prices could fall by 20 percent with 3bn people around the world on lockdown. (Source: Oil Price)
The Cheapest Way For Trump To Save U.S. Oil (27 March 2020): By Lourcey Sams - The President of the United States has the power, at his sole discretion without any other authority, to place a fee on imported oil or products. It becomes variable when a base price (floor price) is set and a fee is paid on any imports where the price on imports is below the base price. If the base price for oil was set at $50.00 per barrel and the import price is $30.00 per barrel, then an import fee of $20.00 per barrel would be paid to the United States Treasury. Likewise, if the import price (world price) is $50.00 a barrel, then no fee is paid. Thus, the fee is variable depending on the price paid for an imported barrel. (Source: Oil Price)
Goldman Sachs: Prepare For A Massive Oil Demand Shock (26 March 2020): By Tsvetana Paraskova - Global oil demand could plummet by 18.7 million bpd in April, deepening an expected demand plunge of 10.5 million bpd for March, Goldman Sachs said, while the coronavirus pandemic continues to claim thousands of lives and forces a growing number of major economies into lockdown. “A demand shock of this magnitude will overwhelm any supply response including any potential core-Organization of the Petroleum Exporting Countries output freeze or cut,” Goldman Sachs said in a note this week, as carried by Reuters. According to the investment bank, such a demand shock would need several million barrels of oil per day taken off the market. Goldman Sachs’s view about demand destruction is echoed by the world’s largest independent oil trader, Vitol, as analysts and trading houses race to reduce their demand outlooks and oil price forecasts by the week. (Source: Oil Price)
Russia’s Unexpected Advantage In The Oil Price War (25 March 2020): By Tsvetana Paraskova - While the ruble is now at its lowest level against the dollar in four years, the cheaper ruble has a silver lining for Russia’s oil producers in the oil price war for market share with Saudi Arabia. The collapse of the OPEC+ deal and oil prices has hit Russia’s financial markets and currency, leading to a sharp drop in the ruble versus the U.S. dollar. The lower the ruble slides against the U.S. dollar, the lower the production costs of Russian oil companies in U.S. dollars are. To be sure, a crumbling ruble is not the preferred outcome of the oil price collapse for Russia’s monetary system and foreign currency reserves. Still, it could help Russian oil firms to have lower costs in U.S. dollars for their operations. (Source: Oil price)
Oil Jumps As Fed Pledges “Unlimited” Cash To Bolster The Economy (24 March 2020): By Tsvetana Paraskova - Oil prices jumped by 4 percent early on Tuesday after the U.S. Federal Reserve launched on Monday extensive new measures to support the economy as the coronavirus pandemic spreads. But prices slid later in the morning. At 9:34 a.m. EDT on Tuesday, WTI Crude was up 3.98 percent on the day at $24.41, and Brent Crude was trading above the $30 a barrel mark, at $30.47, up by 3.86 percent. By 11:11 a.m, WTI had fallen to $23.32, down 0.17% over Monday. On Monday, the Federal Reserve on Monday said it was “committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.” (Source: Oil Price)
The Boldest Permian Plays To Watch As The Oil Market Circles The Drain (23 March 2020): By David Messler - Over-supplied markets like the oil market take prices in only one direction, down. We are seeing indications of a historically over-supplied market right now, so we expect continued weakness on the commodity front. The impact of this reality will be felt across the value stream for crude and refined products until demand begins to pick up. If you're a driver of a giant pickup truck, you're in for some of the happiest times of your life over the next few months. Over the short run crude will follow the law of diminishing marginal utility where early consumption is advantaged over later consumption of a good. (Source: Oil Price)
Not Even Higher Oil Prices Can Save U.S. Shale (22 March 2020): By Nick Cunningham - The U.S. shale industry is burning through cash so fast that even the state of Texas is looking at government rationed production targets. Texas Railroad Commissioner Ryan Sitton laid out his idea in an article for Bloomberg Opinion, proposing the commission institute a 10 percent production cut. It would mark the first time since the 1970s that the Railroad Commission regulated production. Sitton twisted himself into knots in an attempt to characterize OPEC abandoning production cuts as “anti-market” while describing his proposal to require cuts as a return to free market principles. Orwellian as it may seem, some Texas shale drillers welcomed government intervention, including Parsley Energy and Pioneer Natural Resources. (Source: Oil Price)
What Happens If Oil Prices Go Negative? (21 March 2020): By Stuart Burns - Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, “Oil prices can go negative.” That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply. In reality, inventory levels are already rising. CNN quotes Sankey, who said global oil demand is only around 100 million barrels per day. However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent. (Source: Oil Price)
Do Saudi Arabia And Russia Really Want To Kill U.S. Shale?: Since 2016, as an informal leader of the 13-strong non-OPEC group, Russia has been instrumental in the pricing of oil as Saudi Arabia, leading producer in the Organization of Petroleum Exporting Countries. Now, both find themselves at odds as to how to respond to the global economic crisis caused by the fall in petroleum demand resulting from the COVID-19 outbreak. The Saudis insisted on overall cuts to be shared by OPEC and non-OPEC with a 2:1 ratio. Russia saw no need for any cuts because, in its view, earlier OPEC and non-OPEC curtailments had allowed the US shale oil industry to fill the gap. With the sharp fall in oil prices, many small-scale shale oil drillers in the United States will go bankrupt as happened in late 2015 when the Saudis flooded the market with cheap oil. Starting in 2014, aided by high oil prices and technical advances, shale oil drillers boosted US crude oil production, accounting for a third of the onshore output. This raised US oil production from 5.7 million barrels per day in 2011 to a record 17.94 million bpd in 2018, outstripping Russia and Saudi Arabia – transforming the United States into an oil-exporting country after President Barack Obama lifted the 40-year-old crude-oil export ban in December 2015, following a congressional vote to that effect. (Source: Oil Price)
U.S. Oil Industry Could End Up Losing More Than 200,000 Jobs (19 March 2020): By Irina Slav - With West Texas Intermediate below $30 a barrel and Saudi Arabia’s plans to keep pumping as much as it can for as long as it can, the U.S. oil industry is bracing for job losses that could end up in five-figure territory. “A sustained drop in oil prices would cost the sector 50,000-75,000 jobs if employment returned to its low from a few years ago,” the chief economist of PGIM Fixed Income, Nathan Sheets, told CNBC this week. The last industry downturn caused by low prices cost the U.S. oil industry—including oilfield services—as many as 200,000 jobs. That was about a third of the total workforce employed in the sector. Now, the US oil industry could be headed for a rerun. (Source: Oil Price)
Coronavirus Could Bankrupt 20% Of European Oilfield Services (18 March 2020): By Tsvetana Paraskova - More than 200 small- and medium-sized oilfield services operators in Europe, or 20 percent of all European oilfield services firm, could go bust as the coronavirus epidemic will hit the market hard and wipe out US$5 billion worth of orders, Rystad Energy said in a new impact analysis. Most of the hardest hit firms will be in the UK and Norway, Western Europe’s largest oil and gas producers, according to the energy research company. Travel restrictions, quarantines, and capital expenditure (capex) cuts amid the Covid-19 outbreak will seriously disrupt the European oilfield services market, which is set to suffer this year, compared to pre-virus estimates of a flat US$47 billion market in 2020. (Source: Oil Price)
Morgan Stanley Slashes Brent Oil Forecast To $30 (17 March 2020): By Irina Slav - Morgan Stanley further cut its oil price forecast, now expecting Brent crude to average $30 a barrel during the second quarter, from $35 a barrel earlier. Reuters quoted the investment bank as saying, “Temporary sell-offs to even lower levels are possible, if not likely.” Barclays also revised its oil price forecast earlier this month. The UK bank now expects Brent to average $43 a barrel in 2020, with West Texas Intermediate at $40. That’s down from an earlier forecast of $59 for Brent and $54 for WTI. Even earlier, Morgan Stanley said it expected Brent crude to average $55 a barrel in the second quarter, down from $57.50 earlier, and WTI to trade at around $50 a barrel, down from $52.50. (Source: Oil Price)
The Most Destructive Oil Price Crash In History? (16 March 2020): By Tom Kool - As markets brace for yet another week of total liquidation (even gold fell below $1500), oil drillers are preparing for the worst. Last time crude traded this low, back in 2016, U.S. oil firms entered survival mode, slashing costs, cutting jobs and optimizing drilling processes. But this time, there’s not a whole lot left to cut. The 2014-2016 oil price crash happened gradually, over the course of several months. 2020’s crash happened in just a few weeks and could end up being a lot more destructive. (Source: Oil Price)
Four Commodities Crushed By Coronavirus (15 March 2020): By Julianne Geiger - It’s not just oil getting crushed right now--commodities across the board are nose-diving, including precious metals. Not even gold can maintain its safe-haven status. The only shelter right now for sentiment is in the US dollar. Everything’s plunging to new lows. Even bitcoin, whose digital existentialism should theoretically protect it from a biological virus. Even palladium, which had recently been soaring to historical heights and had become everyone’s new favorite metal. And if you thought gold was the only safe-haven investment that affords real staying power--think again. Everything’s being sold for cold, hard cash. (Source: Oil Price)
The Oil Collapse Isn’t Over Yet (13 March 2019): By Editorial Dept - Welcome to $30 Oil, But It Could Be Lower. Last week, Saudi Arabia threatened to flood the market with oil. This week, it did just that. Aramco has been ordered to raise output capacity to 13 million bpd (from 12 million bpd), and it’s also going to slash its selling price by $6-$8 per barrel. Aramco will also load 300,000 bpd more for its customers in April, raising exports for the month to 12.3 million bpd. If you thought the market was bad before this, consider that Aramco’s highest known production rate was 11.9 million bpd (back in November of 2018). (Source: Oil Price)
Oil Prices Rise As Trump Declares National Emergency Over Coronavirus Outbreak (13 March 2019): By Michael Kern - There’s no doubt about it, it has been a rough week for oil. Just days after Saudi Arabia and Russia launched a full-blown oil war, forcing prices to drop by 25% in a single day, the U.S. President declared a travel ban for all flights to Europe. And now, the President has declared a National Emergency. But there was also some bullish news for oil markets in Trump's speech, sending oil prices upward. Trump's statement came as a number of public and private businesses have already taken action. Major sporting leagues, conferences and public events have already been canceled, and schools across the nation had already been shut down in an attempt to slow down the spread of the virus. (Source: Oil Price)
The Reason Why Russia Refused To Cut Oil Production (12 March 2020): By Irina Slav - OPEC asked Russia to cut an additional 300,000 bpd in oil production at last week’s meeting in Vienna, but according to Russia’s Deputy Energy Minister, this would’ve been ‘technically challenging’ OPEC asked Russia to add another 300,000 bpd to its production cut quota art the Vienna meeting last week, but it would have been technically challenging to do this, deputy energy minister Pavel Sorokin told Reuters. (Source: Oil Price)
Traders Are Making A Killing In The Oil Price War (11 March 2020): By Tom Kool - Oil prices crashed after Russia and Saudi Arabia announced that they will abandon OPEC production quotas and open the taps, and while drillers and oilfield service companies are feeling the pain, the world’s largest oil traders are eyeing huge profits. After all, volatility is a trader’s best friend. Oilprice.com’s Alex Kimani wrote back in January that the world’s 5 largest oil traders made a killing in 2019 by trading catalysts that created worldwide supply disruptions such as the contaminated crude at the Druzhba pipeline in Russia and the attacks on Saudi Arabia’s key oil facilities in September. (Source: Oil Price)
U.S. Shale Collapse Will Lead To Higher Oil Prices (10 March 2020): By Nick Cunningham - U.S. shale growth is about to decline, becoming an immediate victim of the Saudi-Russian price war. Saudi Aramco said that it would increase oil production to 12.3 million barrels per day (mb/d) in April, a shocking escalation of the war for market share. That level of output is believed to be beyond what Aramco can produce on a sustainable basis. In other words, Saudi Arabia is going all-out to flood the market. (Source: Oil Price)
Oil Price Crash: 50% Of U.S. Shale Could Go Bankrupt (9 March 2020): By Nick Cunningham - It’s one for the history books. Oil opened on Monday down roughly 25 percent, the sharpest decline in decades, and broader financial markets fell so precipitously that the circuit breakers put in place during times of volatility tripped, temporarily halting trading. The list of adjectives available to describe what is happening to the oil market is not adequate. There are now multiple crises unfolding at the same time. (Source: Oil Price)
Oil Prices Crash 25% As Oil War Begins (8 March 2020): By Michael Kern - Russia has just sparked what may end up being among the ugliest oil price wars in recent history. And Saudi Arabia is firing back. As the two oil superpowers face-off, American oil companies may end up as the biggest victims. Russian President Vladimir Putin announced on Sunday that present oil prices were sustainable for the Russian economy. Adding that Russia had the tools to react to any adverse results of the spread of the coronavirus on the global financial climate. "I want to stress that for the Russian budget, for our economy, the current oil prices level is acceptable," Putin explained in a meeting with Russian energy officials. (Source: Oil Price)