Oil & Gas Prices - April 9

[dan_s]

Opening Prices:
> WTI is up $1.27 to $26.36/Bbl, and Brent is up $1.25 to $34.09/Bbl.
> Natural gas is down 1.6c to $1.767/MMBtu.

Oil prices moved higher on Thursday, ahead of a pivotal meeting in which OPEC and its allies, known as OPEC+, will discuss historic production cuts as the coronavirus pandemic continues to sap demand for crude.
The virtual meeting will begin around 10 a.m. ET.
The “teleconference will be a make-or-break moment for the oil market,” said Again Capital’s John Kilduff. < This meeting might not produce the final agreement, so don't freak out if nothing firm is decided today.

[dan_s]

Note from Raymond James Energy Team

This week's petroleum inventories update was bearish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates — including SPR) built by 26.2 MMBbls, versus consensus estimates calling for a build of 16.3 MMBbls and a seasonal draw of 0.1 MMBbls. Turning to crude, total inventories built 15.2 MMBbls, versus consensus calling for a build of 9.3 MMBbls and a normal seasonal build of 2.3 MMBbls. Refinery utilization fell to 75.6% from 82.3% last week. Total petroleum imports were 7.9 MMBbls per day, down from last week’s 8.3 MMBbls per day. Total petroleum product demand decreased19.1% after last week’s 8.0% decrease. On a four-week moving average basis, there is a 10.7% y/y decrease in total demand.

Throughout the past week, market speculation has swirled about a compromise agreement to end the Saudi-Russia oil price war.

This will ultimately be a political decision for the House of Saud and the Kremlin, whose fundamental strife is as much about foreign policy (e.g., Syria and Iran) as it is about market share in oil production. While the oil industry would naturally welcome any production curtailments by either or both of these two countries, it should be emphasized that 80-90% of the unprecedented oil glut has been caused by demand rather than supply. We estimate that during the current quarter, 20 million bpd, or 20% of global demand, is being effectively erased by COVID-related disruptions in transportation and economic activity. With at least 2.6 billion people around the world covered by lockdowns/stay-at-home orders, and less stringent restrictions affecting billions of others, the impact on oil demand is many times more severe than during the global financial crisis. Needless to say, the timing of improvement in demand, enabled by the easing of lockdowns and broader economic normalization, will largely be a function of medical and public health developments vis-a-vis the virus. Following the epic sell-off, the 12-month futures strip ($32.91/$37.67/Bbl for WTI/Brent) is showing meaningful contango. Several key question marks remain: 1) on the bullish side, the possibility of supply disruptions above and beyond the current ones, including but not limited to Iran, and 2) on the bearish side, the massive uncertainties surrounding the intensity and duration of the pandemic’s demand impact.

[dan_s]

EIA expects Brazil’s petroleum and other liquid fuels production to grow more slowly than previously forecast. Near the end of March, Brazil’s national oil company Petroleo Brasileiro, S.A. (Petrobras) announced a 100,000 b/d production cut for the remainder of 2020. Petrobras will idle some shallow-water platforms with higher production costs in the Sergipe, Rio Grande do Norte, and Ceará states to achieve these cuts. Additionally, production volumes from the P-70 floating, production, storage, and offloading vessel (FPSO) will be delayed until 2021. The P-70 was damaged in a storm in February 2020, and was originally scheduled to begin producing in the first half of 2020. The main driver for Brazil’s production growth in 2021 will be the start-up of P-70 and two other FPSOs in 2021 that EIA does not expect will be affected by events in 2020 at this time.

EIA expects Asia, China and India to shut in about 250 thousand b/d of production during the next few months as a result of immediate COVID-19 impacts on labor mobility and other logistics. In addition, the significantly lower oil price environment will reduce capital expenditure of upstream investors and shutter production at higher production cost fields, such as China’s tight oil plays in the north central and northwest of the country and the mature fields that require enhanced oil recovery. Crude oil production projections for both China and India are lower than in last month’s STEO, and EIA expects declines to deepen in 2020 and 2021. India plans to begin oil production from the deepwater KG-DWN-98/2 oil and natural gas project in early 2021, which will offset some production declines from mature basins in 2021.

[dirtdauber]

Dan,
You said, "EIA expects Asia, China and India to shut in about 250 million b/d of production". That volume musty be a typo, could you correct it, please?

[dan_s]

The original comments posted were cut directly from the EIA's "Short-Term Energy Outlook" report.
You're right, it must be 250,000 bopd.

[dan_s]

At 11:20 AM CT: Oil prices were higher on Thursday but pared some of the earlier gains in another volatile session as investors await the outcome of the OPEC+ video conference meeting. The US crude was up 2.6% to around $25.75 a barrel, after jumping as much as 12% to $28.36 a barrel after Reuters reported that Saudi Arabia and Russia reached a deal and that production cuts could reach 20 million barrels per day while markets were expecting a smaller 10-15 million cut. The Brent crude was up 1.5% to $33.32 a barrel after rising more than 10%.

[dan_s]

OPEC++ first step is 10 million BOPD cut:
https://oilprice.com/Energy/Oil-Prices/ ... t-Cut.html

[dan_s]

Closing Price:
> WTI prompt month (MAY 20) was down $2.33 on the day, to settle at $22.76/Bbl.
> NG prompt month (MAY 20) was down $0.050 on the day, to settle at $1.733/MMBtu

Just another day in Crazy Coronavirus World

I'm not sure, but I think the $2.3 Trillion Stimulus plan announced today by the Fed might keep a lot of our small-caps out of Chapter 11.

Just remember that you and I would go to jail for printing $100 bills in our basement, but the Fed can print as many as they wish. Don't the Debits have to equal the Credits on the Fed's Balance Sheet? Seriously, where this all ends is anyone's guess. Will we every get baseball back?