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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Oil Prices Fall Back Below $40 On New COVID Fears

  • The two-month oil rally has stalled, with WTI falling back to $38 per barrel.
  • The resurgence of Covid-19 across the U.S. has halted the market’s positive momentum.
  • Natural gas prices fell below $1.50/MMBtu this week, the lowest level since the 1990s. 
Oil Prices

Oil prices have fallen below $40 as the U.S. sees a record spike in COVID-19 cases and fears of demand weakness increase.

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Friday, June 26th, 2020

The two-month oil rally has stalled, with WTI falling back to $38 per barrel. The resurgence of Covid-19 across the U.S. has halted the market’s positive momentum. In many ways, the rally was already overdone. 

Coronavirus spread a big oil risk. Texas Governor Greg Abbott ordered bars to shut down on Friday as the spread of the coronavirus continues to accelerate. With several states – and the U.S. as a whole – setting new daily records for positive cases, fuel demand faces enormous downside risk in the weeks ahead. For instance, Texas gasoline demand on June 24 was 17.8 percent lower than on June 17.

California’s new zero-emissions truck rule. California regulators approved a new rule requiring more than half of all trucks sold to be zero-emissions by 2035, with incremental targets beginning in 2024. The rule is estimated to lower the state’s greenhouse gas emissions by 17 million metric tons, and save truck operators $6 billion on fuel costs. It is also expected to spur manufacturing for electric heavy-duty trucks. Related: China Sees Tanker Traffic Soar As Oil Storage Runs Out

Judge shuts down Line 5. A federal judge ordered Enbridge (NYSE: ENB) to temporarily shut down the aging Line 5 pipeline after anchor support of the pipeline recently shifted. The judge will hold a hearing on Tuesday to weigh the state of Michigan’s request to keep the pipeline closed indefinitely. The pipeline carries 540,000 bpd of light crude and natural gas liquids from Alberta through Wisconsin, Michigan and then back into Canada at the oil hub of Sarnia, Ontario.

DC and Minnesota file lawsuits against Exxon, API, Koch. Washington DC and Minnesota each announced separate lawsuits against the oil industry this week. The DC attorney general sued ExxonMobil (NYSE: XOM), BP (NYSE: BP), Royal Dutch Shell (NYSE: RDS.A) and Chevron (NYSE: CVX) over its decades-long campaign of climate disinformation. A day earlier, Minnesota’s attorney general filed a similar lawsuit against Exxon, Koch Industries and the American Petroleum Institute. Unlike past cases, which sought damages for the company’s role in fueling climate change, these cases hinge on consumer protection violations. 

Occidental to take $9 billion write down. Occidental Petroleum (NYSE: OXY) said it would write down $9 billion, or more than 10 percent of the company’s assets. 

Natural gas prices fall to 25-year low. Natural gas prices fell below $1.50/MMBtu this week, the lowest level since the 1990s. 

Refiners stand in way of rally. Poor refining margins throw up a red flag to the oil rally. With demand still weak enough to squeeze margins, refiners may purchase less crude oil, sapping the momentum for inventory drawdowns. 

House Democrats propose green tax incentives. House Democrats introduced a bill this week that would extend tax incentives for renewables and electric vehicles. 

U.S. LNG exports plunge by half. U.S. LNG exports fell from 9.8 Bcf/d in March to just 4 Bcf/d by June. The glut of LNG worldwide is hitting American exporters particularly hard.  Related: Underinvestment Could Send Oil Prices Soaring

PA grand jury announced criminal charges against gas industry. A Pennsylvania grand jury announced criminal charges against Range Resources (NYSE: RRC) and Cabot Oil & Gas (NYSE: COG), two prominent Marcellus shale gas companies. The grand jury also said that PA environmental agencies systemically failed to protect the public. 

Coronavirus could kill Vaca Muerta. The coronavirus could lead the Vaca Muerta, or Dead Cow, to “slaughter,” according to a new report. Already struggling to be competitive, Argentina’s highly-hyped shale formation is withering because of the pandemic and the market downturn.


Colorado setback provision revived. Activists in Colorado have revived a setback provision that failed in a 2018 referendum. The measure would require drilling setbacks to increase from 500 feet to 2,500 feet.

Trump admin to open up Alaska’s NPR-A. The Department of Interior announced plans to open up 18 million acres of the National Petroleum Reserve-Alaska (NPR-A) for new oil and gas leasing. 

Iran plans new oil export route. Iran plans to export oil from a port on the Gulf of Oman by March, bypassing the Strait of Hormuz.

The IMF cut global growth forecast. The IMF warned of a longer and deeper recession, cutting its GDP forecast to negative 4.9 percent this year, from 3 percent previously. It lowered its 2021 GDP growth forecast from 5.8 to 5.4 percent.

Investors grow angry at executive pay. Failing oil and gas companies continue to reward executives, despite bad performance. “It is the definition of ‘heads I win, tails you lose’. Management gets paid when the share price goes up, when the share price goes down and when the company goes bankrupt,” a managing partner at a private equity company told the FT

Dallas Fed survey finds gloom in Texas oil patch. Texas oil executives do not think drilling activity will return to pre-pandemic levels until at least 2022, according to the new Dallas Fed survey.

By Tom Kool for Oilprice.com 

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