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The End Of Growth For U.S. Shale

The End Of Growth For U.S. Shale

After years of boom and…

Josh Owens

Josh Owens

Josh Owens is the Content Director at Oilprice.com. An International Relations and Politics graduate from the University of Edinburgh, Josh specialized in Middle East and…

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Optimism Has Returned To Oil Markets

  • Optimism is growing in oil markets as WTI breaks above $41 and Trump hints at a trade deal with China.
  • While there is a wide spread in oil forecasts for 2020, an increasing number of analysts see $50 as a very real possibility before the end of the year.
  • The U.S. shale industry is bracing for a wave of bankruptcies as it prepares to write down more than $300 billion in assets.

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-    U.S. imports of natural gas from Canada in the western U.S. declined to 6.2 Bcf/d in April and 6.3 Bcf/d in May 2020, according to the EIA and Genscape.

-    Canadian natural gas prices have climbed above Henry Hub, as prices in the U.S. declined since late 2019, while Canada’s AECO prices rose due to lower inventories.

-    The EIA sees U.S. gas imports declining from 7.4 Bcf/d in 2019 to 7.0 Bcf/d in 2020. 

Market Movers

-    Marathon Oil (NYSE: MRO) fell 1.7 percent on Monday after Goldman Sachs cut its stock to Sell from Neutral. 

-    Gazprom (OTCPK: OGZPY) says the Nord Stream 2 pipeline is on track to begin operations by the end of this year or early 2021, despite U.S. sanctions.  

-    Concho Resources (NYSE: CXO) and Cimarex (NYSE: XEC) were upgraded by Bank of America Merrill Lynch to Buy from Neutral. The bank saw upside in large-cap stocks that are “leveraged to a faster recovery in oil prices.” 

Tuesday, June 23, 2020

Oil prices continue to rise with WTI moving above $41 per barrel in early trading on Tuesday. There is a growing sense of optimism and bullishness among analysts, even as pitfalls remain

Price forecasts vary, but $50 possible. The second half of the year looks a lot tighter for the oil market, and stronger demand could push oil back up to $50 before the year ends.

U.S. shale face $300 billion in write-downs. Roughly a third of the U.S. shale industry is insolvent, and the industry could write down as much as $300 billion in assets, according to a new report from Deloitte. A wave of bankruptcies could follow. “The oil industry is currently experiencing a ‘great compression’ in which companies’ room to maneuver is restricted by low commodity prices, reduced demand, capital constraints, debt loads, and health impacts of COVID-19,” the report said. Related: Oil Markets May Not Fully Recover Until 2022

Saudi Arabia, Kuwait and Chevron to restart Neutral Zone fields. Chevron (NYSE: CVX) said that oil exports from the Neutral Zone on the Saudi-Kuwait border will restart beginning in July. The initial sum will total 80,000 bpd. The fields have been idled since 2015 over disputes between the two countries over land use and environmental permits. 

Cheniere sees request for 16-23 LNG cancellations. Buyers of Cheniere Energy’s (NYSE: LNG) gas from Sabine Pass and Corpus Christi are requesting cancellation on 16-23 cargoes for August. Cheniere saw at least 20 cargoes cancelled for each of June and July. In total, some 40 to 45 cargoes from U.S. exporters are facing cancellation in August.

Mozambique offers $2.25 billion loan guarantee for LNG exports. Total (NYSE: TOT) and its partners in the $20 billion Mozambique LNG project have received a $2.25 billion loan guarantee from the government. 

Apple is worth more than the oil and gas sector. The market cap for Apple (NASDAQ: AAPL), at a little over $1.5 trillion, is worth more than the combined value of more than a dozen large oil and gas companies. ExxonMobil (NYSE: XOM), the largest oil major, is worth less than $200 billion, for instance. 

BP writedown could increase scrutiny on others. ESG-focused investor groups are dialing up the pressure on energy and mining companies worldwide, and the BP (NYSE: BP) writedown of $17.5 billion enhances their leverage as they seek more disclosure of climate-related financial risk.

New Mexico suffers oil bust. New Mexico cut its budget by $600 million because of the oil market downturn and the economic losses from the pandemic.  Related: WTI Jumps To $40 On Demand Recovery

Trump sours on Guaidó, doesn’t rule out meeting with Maduro. In an interview with Axios, President Trump suggested he had regrets about throwing U.S. support behind Venezuelan opposition leader Juan Guaidó. When asked if he would ever meet with President Nicolas Maduro, Trump said “I would maybe think about that.”

Junk energy borrowers see credit cuts. High-yield energy companies saw their credit lines cut during the latest credit redetermination period by an average of 23 percent. One of the worst was Oasis Petroleum (NYSE: OAS), which saw its credit line cut by 44 percent. 

Wells Fargo and Shell do solar deal. Wells Fargo agreed to buy electricity from a 150 MW solar project owned by Shell Energy, a subsidiary of the oil giant. The deal between an oil major and a big financier of oil projects shows the growing interest of renewable energy.

Inflated shale reserves? Bloomberg reports that many shale companies pressure their engineers to inflate the volume of reserves on their books in order to bolster market value. Higher stock prices translate into higher executive pay. 

China oil imports to slow. China is set to import 0.8-1.3 mb/d less in August and September than it did in May. Higher oil prices, higher inventories and the worry over a second wave of coronavirus infections are deterring purchases from Chinese refiners, according to Reuters

Can China save LNG? China is scooping up LNG cargoes to take advantage of better pricing amid the glut. China is on its way to surpassing Japan as the world’s largest gas importer. 

ADNOC inks $10 billion deal. Abu Dhabi National Oil Company (ADNOC) said on Tuesday that it has signed a $10 billion gas infrastructure deal with a consortium of investors. 

Amazon launches $2 billion VC fund for clean energy. Amazon (NASDAQ: AMZN) is launching a $2 billion internal venture capital fund for clean energy in an effort to address climate change. The fund will invest in multiple sectors, including transportation, electricity, battery storage, manufacturing, food and agriculture. The goal is to help move Amazon and other companies to net zero emissions by 2040. 

Trump admin greenlights LNG-by-rail. The Trump administration issued a final rule that gives the go-ahead for moving LNG by rail. 

By Josh Owens  for Oilprice.com 

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