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Oil Rallies On Stimulus Hopes

Oil prices climbed higher at the start of the week due to an oil strike in Norway, stimulus talks in the U.S. congress and a hurricane in the Gulf of Mexico

Chart of the Week

-    U.S. natural gas production, consumption, and gross exports all set new records in 2019.

-    Production rose by 10 percent to 93.1 bcf/d, consumption was up 3 percent, and exports were up by 29 percent to 12.8 bcf/d.

-    Texas saw its gas production rise by 15 percent, rising to 22.2 bcf/d. Pennsylvania’s output rose by 10 percent to 18.6 bcf/d.

-    However, towards the end of 2019, gas production began to contract due to a shrinking rig count and low prices. 

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-    Equinor (NYSE: EQNR) shut down four offshore oil fields in the North Sea due to a worker’s strike. The fields produce more than 330,000 barrels of oil equivalent per day combined.

-    Sempra Energy’s (NYSE: SRE) Cameron LNG shipped its first LNG cargo since late August when Louisiana was hit by Hurricane Laura.  

-    Premier Oil (OTCPK: PMOIF) and Chrysaor Holdings agreed to a merger that will create the largest oil and gas producer in the North Sea. 

Tuesday, September 29, 2020

Oil prices shot up on Monday and Tuesday, pushed higher by an oil strike in Norway, potential stimulus talks in the U.S. Congress, and a strengthening hurricane in the Gulf of Mexico. 

Hurricane Delta rapidly intensifies to Cat 4. Hurricane Delta rapidly intensified into a Category 4 storm on Tuesday, and it is moving into the Gulf of Mexico and could become a hurricane later this week. It is on track to make landfall in Louisiana by late Friday. 

Saudi budget plans for $50 oil in 2023. Riyadh is forming a budget that assumes oil remains at about $50 per barrel for the next three years. The IMF estimates that Saudi Arabia needs oil at about $66 per barrel to break even next year. 

Related: Oil Markets Brace For Tough End Of Year

7 of 10 lost oil jobs not coming back. A new study from Deloitte predicted that 7 out of 10 jobs lost this year as a result of the oil market downturn will not come back by the end of next year, suggesting that some job loss will be semi-permanent. The U.S. oil, gas, and petrochemical sector shed about 107,000 jobs between March and August, and only about 30 percent will return.

Natural gas prices face downward pressure. Natural gas prices have spiked in recent weeks. But mild weather returns to the Northeast and an East Coast LNG terminal undergoes maintenance, which could put near-term downward pressure on the natural gas market. Natural gas prices traded just below $2.60/MMBtu on Tuesday.

Morgan Stanley: Natural gas prices see upside risk for winter. Record production declines combined with rising demand could create the “tightest gas market of the past decade,” according to a new report from Morgan Stanley. The investment bank warns that inventories could draw down sharply this winter, “potentially eclipsing those of the 2013-14 polar vortex.” The bank hiked its price forecast for 2021 to $3.25/MMBtu, up from $3.05/MMBtu, and it also warned that there is upside risk of $5 if the weather turns out to be especially cold.

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Guyana’s oil boom not at risk from pandemic. Despite the current headwinds, there are signs that Guyana’s offshore oil boom will gain further momentum. Low breakeven costs, enormous resources, and improving governance will ensure Guyana continues to build out its oil sector. 

NextEra passes ExxonMobil in market cap. NextEra Energy (NYSE: NEE) has surpassed ExxonMobil (NYSE: XOM) in market capitalization, a sign of investor’s increasing belief that the energy transition is accelerating. NextEra has a market cap of $138 billion, with Exxon now slightly lower. 

Exxon’s secret plans for higher emissions. Internal documents obtained by Bloomberg found that ExxonMobil (NYSE: XOM) has plans to ratchet up its carbon dioxide emissions by 17 percent by 2025, a dramatic move as most of its peers set targets to cut emissions. Exxon has never disclosed its emissions, but the internal documents demonstrate that the company has carefully calculated the expected increase for its 7-year spending plans laid out in 2018.

Exxon to cut 1,600 jobs. ExxonMobil (NYSE: XOM) will cut 1,600 jobs across Europe by the end of the year, according to Reuters.

Pipeline operators cutting fees. U.S. oil pipeline operators are slashing their fees in order to keep customers amid weak demand. Kinder Morgan (NYSE: KMI) is offering a 50 percent discount on one of its Eagle Ford pipelines, for example. 

Small energy firms lean on taxpayers. More than a few small oil and gas companies took millions of dollars in taxpayer-funded loans this year, according to Reuters. At least a dozen companies took $50 million.  

Oil majors hit hard by Canada’s stock selloff. Canada’s oil industry is suffering the consequences of the global oil demand and price crash, just like every company in the sector anywhere in the world. But Canada’s oil sector has other problems. The Canadian industry faces increased environmental, social, and governance (ESG) scrutiny, which has led to international investors shunning the stocks of Canadian oil firms and international oil majors divesting from oil sands.

Suncor plans layoffs. Suncor (NYSE: SU), Canada’s largest oil sands producer, is planning to cut its payroll by 10 to 15 percent over the next 18 months. 

U.S. refiners increase renewable diesel, eyeing Canada. Canadian Prime Minister Justin Trudeau is expected to unveil his Clean Fuel Standard later this year, and U.S. refiners are hoping to cash in. U.S. refiners have already gone ahead with higher production of renewable diesel.  Related: Energy Storage Market To See Explosive Growth This Decade

3 GW of solar expected. The U.S. is on track to install a record 3 GW of new solar capacity this year, according to Bloomberg NEF. Next year, installations could rise to 3.6 GW.

Energy storage to see explosive growth. The global energy storage market is set for a 31-percent compound annual growth rate by 2030, Wood Mackenzie said in a recent report.

By Josh Owens for Oilprice.com 

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