OPEC Prepares For Long-Term Oil Demand Risks

Oil prices have remained range-bound for the past several weeks, with the market in limbo as another COVID wave looms.

40 U.S. producers surveyed by the EIA posted a combined $48 billion in write downs in the first quarter of 2020, the largest negative adjustment in years.

- The companies account for over 6 mb/d of U.S. oil production.

- “Although companies will not have to value their 2020 proved reserves until the end of the year, these first-quarter adjustments, combined with crude oil prices that have remained much lower than 2019 levels during the second quarter of 2020, indicate that the net present value of proved reserves could continue to decline,” the EIA said.

Market Movers

- Kinder Morgan (NYSE: KMI) is seeking to raise $1.25 billion in new senior notes to pay off $949 million in high-interest debt due in September. The new notes would have a lower interest rate.

- Schlumberger (NYSE: SLB) was upgraded to Buy from Neutral by Citigroup with a $26 price target (up from $20). The bank noted a “greater than anticipated benefit from restructuring.”

- EQT (NYSE: EQT) said that all curtailed shale gas production has been brought back online. The Pittsburgh-based gas giant reported a net loss of $263 million in the second quarter.

Tuesday, July 28, 2020

Oil prices have been on autopilot for weeks, and the start of this week is no different. Prices remain trapped in the low-$40s, hemmed in by supply curtailments on the one hand, and concerns about depressed demand on the other.

Reliance overtakes Exxon to become #2. Reliance Industries has surpassed ExxonMobil (NYSE: XOM) in market share, rising to the second-largest energy company in the world after Saudi Aramco. Reliance has the world’s largest oil refinery and is now worth $189 billion, edging past the American supermajor.

More LNG cargoes canceled, but fewer. Around 30 LNG cargoes have been canceledfrom U.S. ports for the month of September, another month of large cancellations. However, that is fewer than the 50 canceled cargoes in July and 45 in August, offering some glimmer of hope that the market is improving.

40 U.S. producers surveyed by the EIA posted a combined $48 billion in write downs in the first quarter of 2020, the largest negative adjustment in years.

- The companies account for over 6 mb/d of U.S. oil production.

- “Although companies will not have to value their 2020 proved reserves until the end of the year, these first-quarter adjustments, combined with crude oil prices that have remained much lower than 2019 levels during the second quarter of 2020, indicate that the net present value of proved reserves could continue to decline,” the EIA said.

Market Movers

- Kinder Morgan (NYSE: KMI) is seeking to raise $1.25 billion in new senior notes to pay off $949 million in high-interest debt due in September. The new notes would have a lower interest rate.

- Schlumberger (NYSE: SLB) was upgraded to Buy from Neutral by Citigroup with a $26 price target (up from $20). The bank noted a “greater than anticipated benefit from restructuring.”

- EQT (NYSE: EQT) said that all curtailed shale gas production has been brought back online. The Pittsburgh-based gas giant reported a net loss of $263 million in the second quarter.

Tuesday, July 28, 2020

Oil prices have been on autopilot for weeks, and the start of this week is no different. Prices remain trapped in the low-$40s, hemmed in by supply curtailments on the one hand, and concerns about depressed demand on the other.

Reliance overtakes Exxon to become #2. Reliance Industries has surpassed ExxonMobil (NYSE: XOM) in market share, rising to the second-largest energy company in the world after Saudi Aramco. Reliance has the world’s largest oil refinery and is now worth $189 billion, edging past the American supermajor.

More LNG cargoes canceled, but fewer. Around 30 LNG cargoes have been canceledfrom U.S. ports for the month of September, another month of large cancellations. However, that is fewer than the 50 canceled cargoes in July and 45 in August, offering some glimmer of hope that the market is improving.

Oil majors find significant gas discovery in Egypt. Eni (NYSE: E), BP (NYSE: BP)and Total (NYSE: TOT) have announced a new natural gas discovery in offshore Egypt.

Permian natural gas production expected to rebound. Gas output from the Permian Basin is expected to rebound relatively quickly in the second half of 2020 and will remain robust for years to come, Rystad Energy projects. However, the pandemic may curtail investment in midstream capacity, which could result in higher levels of gas flaring after 2023.

China signs deals to develop Iranian oil field. Iran’s Petroleum Ministry has awarded a US$1.3 billion development deal to more than double oil production at the supergiant South Azadegan oilfield, the second such oil project signed this month, and a US$300 million development contract for Yaran. China is playing a key role in these projects.

Goldman Sachs recommends gold, warns about dollar. The U.S. dollar’s reign as the world’s reserve currency is coming under threat, according to Goldman Sachs. The investment bank recommended gold. “Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows,” the bank said.

By Josh Owens for Oilprice.com