• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 18 hours Could Someone Give Me Insights on the Future of Renewable Energy?
  • 19 hours The United States produced more crude oil than any nation, at any time.
  • 18 hours How Far Have We Really Gotten With Alternative Energy
  • 1 hour Bankruptcy in the Industry
  • 17 hours "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
OPEC+ Can Stop An Oil Rally To $100

OPEC+ Can Stop An Oil Rally To $100

The OPEC+ group could influence…

Uncertainty Drives Investors to Oil Stocks

Uncertainty Drives Investors to Oil Stocks

The reason that investors have…

Editorial Dept

Editorial Dept

More Info

Premium Content

The Problem With OPEC's Production Cut


Market Movers

- While the market waits for the critical OPEC+ production cut deal to kick in, early data on OPEC’s April production suggests that it hit 13-month highs in April--30.25 million bpd. That 30.25 million bpd is a month on month increase of 1.61 million bpd. The largest increases were from Saudi Arabia and the UAE, which produced 11.3 million bpd and 3.85 million bpd respectively. For Saudi Arabia, this is a record. The new production cut deal goes into production on May 1, and the OPEC MOMR showing official April production data will be published on May 13, to which the market will react with falling prices. Between May 1--when the production cuts are set to begin--and the report, look for OPEC members to attempt to calm markets by providing interim production insights to highlight the action they are taking to reduce production. In reality, it will be difficult for countries to come up with such a sharp decrease in production that would start immediately on May 1, given the high volumes OPEC kicked out in April.

- Last week, as we detailed, Chevron and Halliburton were forced to wind down operations in Venezuela after the U.S. refused to extend sanctions waivers. And this week, more change is afoot, with Maduro replacing Manuel Quevedo - the now-former Energy Minister and PDVSA head - with two new figures. For the PDVSA head, Maduro chose the first cousin of Hugo Chavez, Asdrúbal Chávez, who had served on the Citgo board until he was ousted by Maduro’s opposition last year. For oil minister, Maduro chose an alleged drug trafficker, El Aissami. PDVSA documents this week also showed the state-run oil giant is considering bringing in private oil companies to operate and even own oil assets as the country struggles to regain some lost sway in the oil markets.

- The United States oil industry is hemorrhaging. With most oil companies pumping at an expense that far surpasses the current price of WTI, some shale companies--such as Whiting and Diamond Offshore Drilling--have already filed for bankruptcy, and hundreds more may follow. The Trump Administration was looking for publicly palatable ways to extend lifelines to the oil industry without it being seen as a bailout. The first step was to make available storage space to nine oil companies. The problem, however, is far greater than freeing up oil storage space. On Thursday, the Federal Reserve changed the rules surrounding its Main Street Lending program to allow larger companies to tap the funds, to waive the requirement that a company be in good standing as of March 2020 and to allow the funds to be used to refinance existing debt--a clear win for the oil industry that for the most part, has been shut out of these funds.

- A week ago, all the grand-standing coming out of Washington was that Trump could potentially impose a crude import ban as a fleet of Saudi tankers approached with some 40 million barrels of oil to dump on the market. This is a problem for Trump, who is under pressure to take a stance with the Saudis, which he has avoided doing so far. This Saudi oil is essentially a direct action against the U.S. shale patch, and if it reaches the shore, there will be a problem--but everyone has now gone quiet on this oil now.

Discovery, Development & Deals

- The biggest disappointment on the discovery scene this week (or this year) is an abrupt slap in the face to Lebanon’s long-awaited dreams of getting in on the East Mediterranean hydrocarbon bonanza--the same Levant Basin power that Israel now holds in this massively contested offshore hotspot. French Total SA came up dry in its first well drill. Total leads the international consortium for Block 4, with a 40% interest. Italian Eni also has a 40% interest, with a 20% interest for Novatek. The well was completed on April 26th, reaching a depth of 4,076 meters. While it found traces of gas, the well failed to encounter a reservoir in the Tamar formation, thus missing its main objective.

- ADNOC (the Abu Dhabi National Oil Company), and ADPower (the Abu Dhabi Power Corporation), have issued a joint tender for the development and operation of the MENA region’s first high-voltage, direct-current, HVDC, subsea transmission system. The system will connect ADNOC’s offshore production facilities to ADPower’s onshore grid with the most advanced technology.

Earnings & Cuts

- BP announced a $4.4 billion net loss in Q1 2020, citing supply and demand shocks. This compares to a $2.9 billion after-tax profit in Q1 2019. BP’s Q1 production fell 2.8% to 3.7 million bpd. Q2 will see additional production outages. BP reaffirmed its intention to sell its $5.6 billion Alaska-based Hillcorp business as part of BP’s $15 billion divestment program.

- Three of China’s oil majors--CNOOC, PetroChina, and Sinopec--are slashing capex to the tune of $19 billion for 2020, including for international projects. That China is moving away from its rigorous pump at almost any cost strategy to sustain its oil habit is particularly telling as to just how hard the coronavirus has hit oil demand and oil prices.

- Shell cut its dividend for the first time since the 1940s, reducing it by 66% to 16 cents a share after first-quarter profit fell by nearly half. The company also suspended the next tranche of its share buyback program. New measures could save Shell almost $30 billion this year. Shell added after the quarterly results that the pandemic would change the oil industry forever.

- ConocoPhillips said it would cut 35% of its total output by June compared to 2019 production levels, after losing $1.7 billion in Q1. This is the second production cut the company announced in the last couple of weeks. ConocoPhillips is now expecting to cut a total of 460,000 bpd by June.

- Oilfield services companies with a presence in Alaska have announced layoffs in the state, including Baker Hughes, Schlumberger, Halliburton, and Peak Oilfield Services.

- Mexico’s Pemex has come up with a plan to save between $4 billion and $5 billion over the next couple of months as the sting of the coronavirus eats away at oil majors all over the world. Part of its cost-cutting will come from reducing travel for its personnel and the suspension of medical expense reimbursements.

- Norway’s government has proposed a temporary tax break to support the oil and gas industry with measures that would provide $10 billion of liquidity in 2020-21. The companies would be allowed to write-off investments more quickly, effectively postponing tax payments for years. Norway will also be reducing crude oil production by 250,000 bpd in June, and then maintaining a 134,000-bpd lower rate of production for the rest of the year.


- Chevron is cutting its 2020 capex by $2 billion. It is the second spending plan cut in a bit over a month. The capex targets for 2020 are now 30% lower than their original plan for this year.

- Exxon shocked markets with a surprise loss of $610 million for Q1--it is the first quarterly loss since its merger in 1999. Exxon announced it would cut its spending by one-third, to just $23 billion.

Politics, Geopolitics & Conflict

- Libyan militia commander Khalifa Haftar has ordered his troops to halt operations during the Muslim holy month of Ramadan, though the Government of National Accord (GNA) has not publicly agreed to a ceasefire on its end, which is more an issue of trust at this point. The past few weeks have seen an uptick in sporadic violence in Tripoli and indiscriminate shelling of medical facilities by Haftar’s LNA forces. Overall, the GNA will view Haftar’s Ramadan ceasefire as buying time to regroup and resupply. But the general has also lost important territory outside the capital, despite his declaration on Monday of a “popular mandate” to assume control of Libya as a whole. Haftar’s declaration was not well received among his usual external supporters. Haftar is losing his footing and his Monday declaration was a desperate, failed attempt to regain control after what appears to be a split with the authorities in the east, who have been putting together plans for reconciliation with the GNA.

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News