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Coronavirus Meltdown Continues As Brent Drops Below $50

As fears of the coronavirus outbreak reaching pandemic levels continue to spread, markets have taken a beating. Investors are panic selling and nearly every sector is plummeting. 

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Friday, February 28, 2020

The meltdown continues. Brent fell below $50 per barrel during intraday trading on Friday, and financial markets continued to post sharp losses. Oil is set to close out the week with the worst loss in four years. For stocks, the losses are the worst weekly performance since the global financial crisis in 2008. Whether this is an overreaction to the coronavirus or not is yet to be seen.

Stock market meltdown. The Dow Jones fell by a record number of points on Thursday, down nearly 1,200. That puts stocks in correction territory, with the index off about 15 percent in a week. “Obviously it’s a bloodbath,” David Bahnsen, chief investment officer of The Bahnsen Group, a wealth management firm, told the Wall Street Journal. “When you get into a free-fall mode, there’s really little that can be done but wait for some sort of footing to be found.” At one point, the Dow lost 500 points in 45 minutes on Thursday.

Brent at 14-mont low. Brent fell to $52 per barrel on Thursday, dropping to its lowest level since December 2018. By Friday, Brent had dipped below $50. 

Saudi Arabia seeks larger cut. Saudi Arabia is pushing OPEC to increase its production cut to 1 million barrels per day (mb/d). Just a few weeks ago, OPEC’s Joint Technical Committee recommended additional cuts of just 600,000 bpd. Riyadh’s proposal would entail Saudi Arabia taking on the bulk of the new cuts. To date, Russia has been reluctant to sign on, but the sharp drop in prices increases pressure on the group.  Related: Aramco To Invest $110 Billion In Huge Gas Field

Energy stocks plunge. Along with the rest of the stock market, energy shares fell sharply on Thursday, with the worst of the carnage reserved for drillers that also reported disappointing earnings. Whiting Petroleum (NYSE: WLL) fell by 25 percent on concerns over upcoming debt maturities. Continental Resources (NYSE: CLR) fell by 16 percent on a downbeat outlook. Others fared only slightly better. The selloff continued for the entire sector on Friday. 

BP withdraws from oil trade groups. BP (NYSE: BP) announced that it would withdraw from several lobby groups – the American Fuel and Petrochemical Manufacturers, the Western Energy Alliance and the Western States Petroleum Association. The announcement comes shortly after the oil major announced a series of climate initiatives in an attempt to begin transitioning the company to a lower carbon portfolio. 

Apache quits Alpine High. Apache (NYSE: APA) is pulling the plug on a highly-publicized oil discovery in the Permian basin. In 2016, the company announced a 2-billion-barrel discovery, the largest in a decade. At the time, Apache said Alpine High could be worth $8 billion, by conservative estimates. Three and a half years later, the company took a $3 billion writedown on the project and said it has “no current plans for future drilling at Alpine High.” 

China’s emissions fall sharply. Amidst an economic lockdown, China’s CO2 emissions have temporarily fallen by roughly a quarter.

BofA: Oil demand and supply to slow through 2025. A report from Bank of America Merrill Lynch sees oil demand slowing in the years ahead as EVs take hold. But it also sees supply growth slowing as U.S. shale slams on the brakes. The bank sees oil bouncing around between $50 and $70 through 2025.

Natural gas prices sink, little prospect of near-term recovery. A combination of oversupply, warm weather and, of course, the coronavirus have depressed gas markets. Inventories are on the rise and may take until next winter for there to be progress in working them off.

Tellurian hit by LNG negotiations. Tellurian (NASDAQ: TELL) saw its share price fall 35 percent during early trading on Friday, which comes after the company extended the amount of time India’s Petronet LNG Ltd had to finalized an agreement to buy gas from Tellurian’s Driftwood LNG plans in Louisiana, according to Reuters. Analysts raised the prospect of a lengthy delay in the final investment decision for the project. Tellurian is low on cash with maturing debt in May. 

Trump admin could end Chevron waiver in Venezuela. The Trump administration has repeatedly extended a waiver for Chevron (NYSE: CVX) to operate in Venezuela despite U.S. sanctions, but that could soon come to an end. Bloomberg reports that the administration could let the waiver expire in April as a way of increasing pressure on the government of Venezuela. 

Judge voids 1 million acres of oil and gas leases. A federal judge voided 1 million acres of oil and gas leases in western states in the U.S., calling the Trump administration’s fast-tracked leasing “arbitrary and capricious.”

Eni unveils clean energy plan. Eni (NYSE: E) announced a plan to cut greenhouse gas emissions by 80 percent, and it also said that its oil and gas production would peak by 2025 before entering decline. 

Pemex loss nearly doubles. Mexico’s state-owned Pemex posted a loss in 2019 nearly twice as large as the year before. The company’s debt stood at $105 billion at the end of last year. Meanwhile, oil production fell to 1.693 mb/d, down from 1.723 mb/d in 2018. A credit downgrade is widely expected.

By Tom Kool for Oilprice.com 

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