• 4 minutes Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 8 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 11 minutes Why Trump Is Right to Re-Open the Economy
  • 13 minutes Its going to be an oil bloodbath
  • 1 min "Saudi Armada heading to U.S.", "Dumping" is a WTO VIOLATION.
  • 2 hours Cpt Lauren Dowsett
  • 48 mins Trump will be holding back funds that were going to W.H.O. Good move
  • 5 hours Death Match: Climate Change vs. Coronavirus
  • 26 mins Washington doctor removed from his post, over covid
  • 56 mins Which producers will shut in first?
  • 3 hours Free market or Freeloading off the work of others?
  • 4 hours ‘If it saves a life’: Power cut to 1.5 million Californians
  • 6 hours US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 8 hours Ten days ago Trump sent New York Hydroxychloroquine. Being administered to infected. Covid deaths dropped last few days. Fewer on ventilators. Hydroxychloroquine "Cause and Effect" ?
  • 8 hours Russia's Rosneft Oil is screwed if they have to shut down production as a result of glut.
  • 6 hours How to Create a Pandemic
Alt Text

The Largest Oil Market Intervention In History?

While the figures quoted in…

Alt Text

U.S. Rig Count Could Collapse By 65%

The American oil and gas…

Alt Text

The Oil Price Crash Won’t Stop The Tesla Boom

Low gasoline prices are generally…

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…

More Info

Premium Content

The Oil Price Collapse Is Far From Over

Oil prices fell on Monday, continuing to slide after taking major losses last week. 

(Click to enlarge)

(Click to enlarge)

(Click to enlarge)

(Click to enlarge)

-    The EIA projects that Brent will average $43 per barrel in 2020, down from $64 per barrel in 2019. That figure, from today’s standpoint, looks wildly optimistic. 

-    That translates to inventory builds of 1 mb/d on average this year. Again, that number belies the massive build and gargantuan supply surplus that other forecasters see. 

-    The agency expects Brent to average $55 per barrel in 2021.     

Market Movers

-    ExxonMobil (NYSE: XOM) saw its credit rating downgraded by S&P from AA+ to AA. The outlook remains Negative. RBC cut Exxon to Sell. 

-    Pioneer Natural Resources (NYSE: PXD) said it would cut 2020 capex by 45 percent and cut its rig count in half from 22 to 11 within the next two months.

-    BP (NYSE: BP) said it may cut capex by 20 percent. 

Tuesday, March 17, 2020

Oil prices dropped sharply on Monday, and the Dow Jones suffered its worst day in decades. Reports of a major economic stimulus in the making helped stabilize markets when trading started on Tuesday, but prices fell again as Saudi Arabia announced it would increase exports again.

Saudi Arabia boosts oil exports to record high. Saudi Arabia escalated the oil price war once again today by announcing plans to boost its oil exports to 10 million bpd from May. This is 3 million bpd more than it exported in February. With oil markets already oversupplied and coronavirus continuing to cause disruptions to supply chains around the world, both markets and oil prices are likely to suffer.

Related: Saudi Arabia’s Oil War Could Bankrupt The Kingdom

Aramco “very comfortable” with $30 oil. Saudi Aramco said that it would keep production elevated through May at least, and that the company was “very comfortable” with oil at $30 per barrel. “In a nutshell, Saudi Aramco can sustain the very low price and can sustain it for a long time,” Aramco CEO Amin Nasser said on Monday on an earnings call with investors. “For the production in May ... I doubt it would be any different from next month.”

Exxon considers capex cuts. In a dramatic about-face just two weeks after its annual Investor Day, in which it laid out aggressive spending plans, ExxonMobil (NYSE: XOM)said that it was looking at “steps to significantly reduce capital and operating expenses in the near term.” ExxonMobil was downgraded by S&P with a Negative outlook.

IEA: Oil producing countries at risk. The oil price downturn could mean that up to 85 percent of government revenues vanish in certain “vulnerable” countries, according to the IEA. The agency singled out Ecuador, Iraq and Nigeria as particularly at risk. “International financial institutions may need to step in and take special measures,” IEA’s Fatih Birol said. The IEA and OPEC issue joint statement expressing concern about oil-producing countries. 

Fed cuts rates to near zero, ratchets up bond purchasing. The Federal Reserve decided to use up a lot of its ammo, slashing rates to between 0 and 25 basis points. It also announced $700 billion in securities purchasing. Even still, in a sign that the economic contagion is growing alongside the pandemic, the Dow Jones Industrial average dropped by nearly 13 percent, its worst single-day loss since 1987.

Oil prices to drop to shut-in levels. Several oil market analysts said that oil prices might need to drop to short-run cash cost levels for shale drillers. Goldman Sachs puts that at about $23 per barrel. At that price, companies cannot even cover the cost of drilling wells. “I don’t think we’ve reached the lows yet,” Andy Lebow, senior partner at Commodity Research Group, told the WSJ. “Right now, there’s no good news for the market.”

Trump to buy 78 million barrels for SPR. President Trump proposed filling up the U.S. Strategic Petroleum Reserve (SPR) in an effort to mitigate the damage. The approximately 78 million barrels of available storage would equate to 0.5 mb/d of demand for half a year. 

Oil demand to fall by 10 mb/d. Goldman Sachs says the market surplus could be around 6 mb/d. Other analysts, including Trafigura, says oil demand could plunge by 10 mb/d. 

Republican Senators send letter to Saudis. A group of 13 Republican Senators sent aletter to Saudi crown prince Mohammad bin Salman, urging him to reverse course on flooding the oil market. 

Oxy to try to block Carl Icahn. Hedge fund investor Carl Icahn nearly quadrupled his stake in Occidental Petroleum (NYSE: OXY) in what is perceived as an attempt to topple leadership. Icahn opposed the $55 billion acquisition of Anadarko Petroleum last year by Occidental. But Occidental quickly moved to dilute its shares in an effort to beat back Icahn. 

Saudi Aramco to cut spending. Saudi Aramco (TADAWUL: 2222) said that it would cut spending to between $25 and $30 billion this year, down from $32.8 billion last year.     

Few shale companies profitable. Only 16 shale companies have average new well costs below $35 per barrel, including Devon Energy (NYSE: DVN) and EOG Resources (NYSE: EOG). But that figure excludes other costs, including dividends, debt and other corporate costs.  Related: Is $10 Oil On The Horizon?

Regional banks exposed to energy at risk. U.S. and Canadian banks have more than $100 billion in loans outstanding to energy companies, according to the Wall Street Journal. The problem is more acute for medium-sized regional banks, rather than big Wall Street banks.  

IEA: Stimulus should focus on clean energy. The head of the IEA, Fatih Birol, said that any economic stimulus under consideration in response to the coronavirus pandemic should focus on clean energy. “These stimulus packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities,” Birol wrote. At the time of this writing, the Trump administration was looking at around $850 billion in economic stimulus, although the details are still in the works. 

Wall Street still underestimating pandemic. To date, investment advisors have underestimated how disruptive the pandemic would be. But even as the market collapses, experts could still be underappreciating the far-reaching impacts to come. 

Chesapeake turns to debt restructuring advisers. Chesapeake Energy (NYSE: CHK)has tapped debt restructuring advisers, according to Reuters. The Oklahoma-based driller faced a difficult challenge paying back $9 billion in debt even before the pandemic and collapse of prices.

“Breakup” clauses to become more common for LNG. The market bust for LNG will likely increase the use of “breakup” clauses in LNG contracts, which are typically rigid and long-term. 

Storage costs soar. The cost to store oil has skyrocketed, both onshore and offshore. At Cushing, rates doubled over the past month.

By Josh Owens for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage






Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News