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Oil Prices Fall Back After A Brief Rally

Oil Prices

Oil prices have been trading in a relatively tight range for the last few weeks, and despite the recent bullish momentum WTI hasn’t been able to break out.

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Friday, August 14th, 2020

Another week and another snoozer for oil prices. WTI and Brent remain in a narrow range, although their foothold in the $40s feels more solid than it has in the past. EIA data this week showed another decent stock decline, along with an uptick in gasoline demand. 

IEA: Oil demand takes a hit. The International Energy Agency expects crude oil demand this year to be 8.1 million bpd lower than it was in 2019, a downward demand forecast revision of 140,000 bpd, the authority said in its latest Oil Market Report. The agency cited the very weak aviation industry as a main reason why demand could remain depressed. 

Inventories to draw down at “record speed.” In the fourth quarter, oil inventories could draw down at “record speed,” according to SEB. “[T]he IEA yesterday (13 August) projected a call-on-OPEC in Q4 2020 of 29.5m bl/day. If this turns out to be correct and OPEC and OPEC+ both stick to their agreed caps, then global inventories will decline by between 4m bl/day and 5.2m bl/day in Q4 2020 - an inventory draw of between 370m bl and 480m barrels in a single quarter, which cannot be far from a historical record,” SEB’s Bjarne Schieldrop said in a statement.  Related: Oilfield Service Companies Are Bailing On The Permian

U.S. seizes Iranian fuel ships. The U.S. filed a lawsuit in July against four ships carrying gasoline from Iran to Venezuela. U.S. officials said the four ships are en route to Houston, and the seizures should deter shipowners from taking business in violation of U.S. sanctions. 

China’s refinery runs hit record. China’s refinery processing surged by 12 percent in July month-on-month, but that coincided with a buildup in refined product inventories. Refineries have likely cut processing this month. 

Trump admin rolls back methane regulations. The EPA announced a roll back of methane regulations on oil and gas operations. Smaller drillers favored the removal of regulation, but the oil majors opposed the move. The majors have bet big on natural gas as a source of growth in a low-carbon world, and fear the reputational stain on gas from increased methane emissions. 

France sends navy to Eastern Mediterranean. France sent naval forces to the Eastern Mediterranean to provide military assistance to Greece and to deter Turkey from oil and gas exploration in contested areas around Cyprus. “The situation in the Eastern Mediterranean is alarming. Turkey’s unilateral decisions in matters of oil exploration provoke tensions,” French President Emmanuel Macron tweeted.

Mountain Valley Pipeline sees NC permit rejected. North Carolina regulators denied a key water permit for the Mountain Valley Pipeline, one of the few remaining high-profile long-distance natural gas pipelines under construction. The pipeline would carry Marcellus shale gas to the southeast. MVP is a joint venture between developer EQM Midstream and the subsidiaries of several utilities including NextEra Energy (NYSE: NEE) and Consolidated Edison (NYSE: ED).

BP considering remote work. BP (NYSE: BP) is considering a “radical reconfiguring of its offices,” including letting leases expire on office space and shifting nearly 50,000 employees to remote working, The Guardian reports

Decline in U.S. flaring. In 2019, global gas flaring hit its highest level in a decade, with much of the increase coming from U.S. shale. However, in the past 12 months, gas flaring in the U.S. has declined by 70 percent, according to the Earth Observation Group at the Payne Institute for Public Policy. The decline was largely driven by a slowdown in drilling. Capital discipline presents a hopeful scenario in which a consolidated industry can get a handle on the flaring crisis, the FT reports

Brookfield to buy stake in Cheniere. Brookfield Asset Management Inc.’s (NYSE: BAM) infrastructure arm is in talks to acquire Blackstone Group Inc.’s (NYSE: BX)minority stake in liquefied natural gas terminal operator Cheniere Energy Partners LP (NYSEAMERICAN: CQP), according to Bloomberg

Shell eyes stake in $9B Indian petrochemical project. Royal Dutch Shell (NYSE: RDS.A) is eyeing a 50 percent stake in a $9 billion petrochemical project in India. 


Venezuela’s oil production could fall to zero. Venezuela’s oil exports are suffering another blow these days: the quality of the crude loaded on tankers is so poor that loadings are being delayed. IHS Markit said that Venezuela could soon be producing “close to zero barrels of oil.” Currently, production has fallen to about 100,000 to 200,000 bpd, down from 650,000 bpd a year ago.  Related: Iran Seizes Oil Tanker In Strait Of Hormuz

U.S. offshore wind to see “explosive growth.” The U.S. could have as much as 25 gigawatts (GW) of offshore wind built by 2030, according to Wood Mackenzie. 

Exxon Payara project in Guyana on hold. ExxonMobil’s (NYSE: XOM) Payara-Pacora joint development project in offshore Guyana has been put on hold until the new administration of President Mohamed Irfaan Ali conducts a thorough review of the project.

Aramco to make spending cuts. Saudi Aramco (TADAWUL: 2222) could cut spending, lowering its planned capex to $20 to $25 billion this year from previous guidance of $25 to $30 billion.  

Hi-Crush gave out millions to executives right before bankruptcy. Frac sand supplier Hi-Crush (OTCMKTS: HCRSQ) handed out $3 million in executive compensation to four executives five days before declaring bankruptcy, according to Reuters.

By Tom Kool for Oilprice.com

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