Oil demand is set to plunge by as much as 27 million barrels per day (mb/d) in April, a decline larger than anything that has occurred in the history of oil.
The decline in demand could cause inventories to fill up, enforcing substantial curtailments by refineries and shut ins at oil wells, according to a new report from Rystad Energy. The hit to demand will "last longer" than previously expected, as more countries impose lockdown orders while "the spread of the virus will resist restrictions more than we first expected," the firm said. Rystad sees a demand hit of around 20 mb/d in May and more than 15 mb/d in June. Demand growth remains negative for the duration of 2020.
New data from India shows that oil demand has plunged by 70 percent as the country has gone into lockdown.
Meanwhile, in the U.S., gasoline demand fell to 5 mb/d in the U.S. for the week ending on April 3, down from 9.6 mb/d three weeks earlier.
The collapse of demand and prices has quickly translated into supply cuts. Refining runs fell to 13.63 mb/d on April 3, down 2.2 mb/d in two weeks. Crude oil inventories jumped. Despite the sharp cuts at refineries, gasoline stocks also spiked by more than 10 million barrels. Staggering figures all around.
The sudden stop of demand filters back to the wellhead. EIA data shows that U.S. oil production fell 600,000 bpd for the week ending on April 3, "potentially heralding a faster-than-expected price response," as JBC Energy interpreted the data in a note.
Prices that oil drillers are getting behind the pipeline - that is, not the broader WTI benchmark, but what they may receive in West Texas or North Dakota - have fallen much more sharply than WTI or Brent. Midland discounts have widened to around $6 per barrel below WTI, according to Morgan Stanley. Bakken oil is now fetching prices as low as $14 per barrel.
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Pipelines are clogged with oil, so drillers have nowhere to sell. "In response to low prices and potential loss of flow assurance, we expect producers will begin to shut-in currently producing wells over the coming weeks," Morgan Stanley wrote in a note. "Legacy production from older wells appears most at risk, where we expect costs are higher than these basin averages."
A lot of hope from the U.S. industry has been pinned on OPEC+ cuts. At the time of this writing, an OPEC+ deal was coming together, with reports suggesting somewhere around 10 mb/d, although the exact duration and terms of the cuts remains unclear.
Regardless, output declines - top-down mandated or not - are in the offing. Several analysts say that even a historic OPEC+ cut won't be enough. "At best, the production cuts that are being considered could somewhat soften the blow of this slump in demand," Commerzbank wrote on Thursday. "Thus the oil price faces considerable downside risks following today's video conference."
In a separate report, Goldman Sachs said that even if OPEC+ manages to cobble together 10 mb/d of cuts, another 4 mb/d of "cuts" from market-induced shut-ins are likely. As a result, while there could be a short price rally from the announcement from OPEC+, "this support will soon give way to lower prices with downside risk to our near-term WTI $20/bbl forecast," Goldman said. "Ultimately, the size of the demand shock is simply too large for a coordinated supply cut, setting the stage for a severe rebalancing."
In a sign of the times, Continental Resources said on Tuesday that it would suspend its dividend and also curtail its own supply by 30 percent for April and May. Parsley Energy said it would shut down 400 wells in the Permian.
"While any potential cuts from Thursday's OPEC+ meeting would be positive, we do not expect a deal large enough to 'fix' near-term oversupply given the sheer magnitude of lost demand from the Covid-19 pandemic," analysts with Morgan Stanley said. "[W]e continue to see further oil production shut-ins and curtailments as likely with or without coordinated supply cuts."
By Nick Cunningham of Oilprice.com
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Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. More
Comments
Ammonium nitrate explosives are so cheap that you could even tunnel into solid rock to build giant storage caverns in regions where there wasn't a lot of ground water. Just connect the tunnels to the nearest large oil pipeline. Steel is cheap. Who is in charge of this country!
There was no memory in the history of oil of such demand destruction with demand plunging by an estimated 30 million barrels a day (mbd) and a market sagging under the weight of a glut estimated by some accounts at 1.8 billion barrels.
The market has already given its verdict on the agreement by OPEC++ to cut 10 mbd. Oil prices declined.
No matter how big the cuts are, they will hardly have a positive impact on oil prices whilst the coronavirus outbreak is still raging. Any cuts are oil down the drain. It is far better for countries of the world to implement similar measures to those that enabled China to control the outbreak and open the country to business again.
Still, once the coronavirus is contained, I am convinced that the global economy and China's will behave like a patient who has been quarantined with no food. Once out of the quarantine, his appetite would be rapacious and this will exactly how the global economy and the global oil market will react with oil imports doubling if not tripling to recoup lost demand.
Oil prices and demand will recoup all their previous losses.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
OPEC is completely irrelevant but they still love holding those expensive meetings in Geneva pretending that a Cartel with a global share trending towards one third, and with member countries as cooperative as a herd of cats, has any relevance whatsoever.
The Saudis, especially, and the Russians have tried and failed to crush shale as shale drillers continually lowered their costs using American ingenuity, and they will fail again.
Why?
Read below:
CROCODILE's tears.
Think logically until you are able to realise that these notoriously clever and greedy businessmen, Trump (knew about this virus business of bg), Bill Gates has long been involved in the Virus-infection-spreading-business along with that moral characterless, small englo-hebruish group (that include ex-NY mayor Rudi Giuliani, ex-potus gw Bush etc. -which were fully involved in free of personal costs -demolishing job of that NY Twin Towers where almost no hebru-speaking but thousands of innocent American were killed) and in current global crises of virus, doubtlessly bg had an active evil hand on the laboratory-production of Covid-19 pandemic-germ that as of today, April 1st, 2020, are still being sprayed from the sky at higher altitudes on designated areas, not even excluding Citizens of New York, USA. (Readers of this informational thought-work should be proactive with awreness and generate alert for the unsuspecting fellow citizens and thereby, help awakening of average global folks, and everyone in all corners of the world should remain vigilant to mysterious objects like unusual flights, drones, abandoned containers in crowded public places etc. by which the jobs of virus spreading would be and is still being continued elsewhere in the world.
An Evil in disguise of so called Microsoft businessman without any trace of doubt, had long been encouraging virus panic in the minds of ignorant global folks for years and lavishly funded the Corona virus research and laboratory production of this sickening virus in reality -PERIOD.
7 billion humans are too much for this earth to bear? (only an idiot with small mind and a super dumb, hebruish-satanic-mentality is capable of thinking so and contemplating such ideas of mass destruction of ordinary population!
Even '7 trillion humans" are nothing for this world to make the globe over crowded).
Cosmic Creator has the knowledge of what a small group of englo-hebruish guys has done in secret.
Watch how the punishment begins to take place slowly like a boomerang on personal level?
bill gates and alike guys w.buffets, v.putin, d.trump, some Swiss bankers and royals, type dishonesty manipulating money makers should be placed behind bars soon and brought to justice (HGP inspired) and start getting the due punishment for their remotely accomplished, deliberately committed crimes against humanity!
Globally aerial distributions of disease bearing, Anthrux kind of laboratory created germs are not invincible when awareness gets over the terror of global mass in lockdown.
Also, take a note that the different kind of criminals, the mindlessly cruel, inhumanely brutal, dishonest and greedy Chinese heads of CCP should not be off the hook.
Wait and see! !!!!
Visit www.shahislam.com for more information.
What goes up too high, must come down too strong. That's a basic rule naturally applies on earth.
It would be wise, before the watching world, to relax a bit at this harsh time of Corona crisis.
Can a sane human mind decide to kill a helpless bird that seeks shelter in our home during a storm (covid-19)?
For the sake of fair justice, in the sense of enlightening better humanity for all, and avoiding occurrences of any miscarriage of justice in a sudden, untested system, forgiveness should prevail over narrow, revengeful sentiment! Prior to convicting in global public sight all the above indicated thugs and more, some thorough review of their cases would be reasonable by providing them with opportunities that this generation would be able to clearly see and hear their versions of story of heinously greed-blind wealth building strategies.
There would be some sort of justifications in applying 'tit for tat strategy' against Bill Gates type criminals in disguise -who devilishly took laws directly in their dirty hands to depopulate the world by laboratory productions and aerial distributions of modified flu viruses (Covid-19 or 13 or 22 etc.) to help existence of their shrinking hebruish community like revenging terrorists amidst China led global economic and social chaotic situations.
(To be cont.)
Why?
Read below:
CROCODILE's tears.
Think logically until you are able to realise that these notoriously clever and greedy businessmen, Trump (knew about this virus business of bg), Bill Gates has long been involved in the Virus-infection-spreading-business along with that moral characterless, small englo-hebruish group (that include ex-NY mayor Rudi Giuliani, ex-potus gw Bush etc. -which were fully involved in free of personal costs -demolishing job of that NY Twin Towers where almost no hebru-speaking but thousands of innocent American were killed) and in current global crises of virus, doubtlessly bg had an active evil hand on the laboratory-production of Covid-19 pandemic-germ that as of today, April 1st, 2020, are still being sprayed from the sky at higher altitudes on designated areas, not even excluding Citizens of New York, USA. (Readers of this informational thought-work should be proactive with awreness and generate alert for the unsuspecting fellow citizens and thereby, help awakening of average global folks, and everyone in all corners of the world should remain vigilant to mysterious objects like unusual flights, drones, abandoned containers in crowded public places etc. by which the jobs of virus spreading would be and is still being continued elsewhere in the world.
An Evil in disguise of so called Microsoft businessman without any trace of doubt, had long been encouraging virus panic in the minds of ignorant global folks for years and lavishly funded the Corona virus research and laboratory production of this sickening virus in reality -PERIOD.
7 billion humans are too much for this earth to bear? (only an idiot with small mind and a super dumb, hebruish-satanic-mentality is capable of thinking so and contemplating such ideas of mass destruction of ordinary population!
Even '7 trillion humans" are nothing for this world to make the globe over crowded).
Cosmic Creator has the knowledge of what a small group of englo-hebruish guys has done in secret.
Watch how the punishment begins to take place slowly like a boomerang on personal level?
bill gates and alike guys w.buffets, v.putin, d.trump, some Swiss bankers and royals, type dishonesty manipulating money makers should be placed behind bars soon and brought to justice (HGP inspired) and start getting the due punishment for their remotely accomplished, deliberately committed crimes against humanity!
Globally aerial distributions of disease bearing, Anthrux kind of laboratory created germs are not invincible when awareness gets over the terror of global mass in lockdown.
Also, take a note that the different kind of criminals, the mindlessly cruel, inhumanely brutal, dishonest and greedy Chinese heads of CCP should not be off the hook.
Wait and see! !!!!
Visit www.shahislam.com for more information.
What goes up too high, must come down too strong. That's a basic rule naturally applies on earth.
It would be wise, before the watching world, to relax a bit at this harsh time of Corona crisis.
Can a sane human mind decide to kill a helpless bird that seeks shelter in our home during a storm (covid-19)?
For the sake of fair justice, in the sense of enlightening better humanity for all, and avoiding occurrences of any miscarriage of justice in a sudden, untested system, forgiveness should prevail over narrow, revengeful sentiment! Prior to convicting in global public sight all the above indicated thugs and more, some thorough review of their cases would be reasonable by providing them with opportunities that this generation would be able to clearly see and hear their versions of story of heinously greed-blind wealth building strategies.
There would be some sort of justifications in applying 'tit for tat strategy' against Bill Gates type criminals in disguise -who devilishly took laws directly in their dirty hands to depopulate the world by laboratory productions and aerial distributions of modified flu viruses (Covid-19 or 13 or 22 etc.) to help existence of their shrinking hebruish community like revenging terrorists amidst China led global economic and social chaotic situations.
(To be cont.)