Energy Prospectus

Opening Prices:
> WTI is down 23c to $35.26/Bbl, and Brent is up 23c to $38.07/Bbl.
> Natural gas is down 7.3c to $1.776/MMBtu.

Closing Prices:
> WTI prompt month (JUL 20) was down $0.05 on the day, to settle at $35.44/Bbl.
> The HH natural gas prompt month (JUL 20) was down $0.075 on the day, to settle at $1.774/MMBtu.

On May 29 Reuters reported OPEC oil output hit the lowest in two decades in May as Saudi Arabia and other members started to deliver a record supply cut, a Reuters survey found, although Nigeria and Iraq are laggards in making their share of the reduction. On average, the 13-member OPEC pumped 24.8 million b/d during May, the survey found, down 5.91 million b/d from April's revised figure. "OPEC has made a strong start in May with its latest production cut, lowering supply by 5 million bpd versus April," Daniel Gerber, chief executive of Petro-Logistics, which assesses OPEC supply by tracking tanker shipments, told Reuters. "However, compliance is far from perfect. With less than four weeks between the adoption and the start of the agreement, many countries had already committed volumes to buyers and have not managed to reduce supply to the agreed levels."

On May 29 Reuters reported oil prices will gradually gain this year with demand improving and supply falling, although tensions between the United States and China are hanging over the coronavirus-hit market, a Reuters poll showed on Friday. The survey of 43 analysts forecast Brent crude would average $37.58 a barrel in 2020, about 5% above April's $35.84 consensus, but still lower than the $42.37 average so far this year. U.S. West Texas Intermediate crude is seen averaging $32.78 a barrel, up from $31.47 last month, after a brief historic fall in the front-month futures contract to minus $40 in April. Global benchmark Brent hit a 21-year low of $15.98 a barrel last month as demand collapsed amid the coronavirus pandemic.

On May 28 Reuters reported a flurry of tentative bookings to export U.S. crude oil from the Gulf Coast suggests demand is edging up after the coronavirus slammed energy consumption worldwide. BP (BP-NC), Trafigura (TRAFGF-NC) and Equinor (EQNR-NC) have all tentatively fixed vessels this past week to carry U.S. crude to global destinations over the coming month, according to Refinitiv Eikon data and shipping sources. Commodities merchant Trafigura and Occidental Petroleum (OXY-NC) are among companies looking to book vessels to ship crude from the U.S. Gulf Coast to Asia, one shipbroker said. The U.S. Gulf export market was particularly active last week, with around six ships confirmed with June loading dates, another shipping source said.

On May 28 Reuters reported Saudi Arabia and some other OPEC oil producers are considering extending record high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources. So instead of easing their output cuts come July, several OPEC+ sources told Reuters there are discussions led by de facto OPEC leader Saudi Arabia about sustaining those cuts. "The Saudis see that the market still needs support and want to roll over the same cuts until end of the year. The Russians also want the same but the problem again is with the oil companies," one OPEC+ source said. Russian Energy Minister Alexander Novak met with domestic major oil companies on Tuesday to discuss the possible extension of the current level of cuts beyond June. Sources familiar with Russian oil thinking said no decision was made as opinions are divided, with some arguing Moscow should wait to see demand levels as airlines begin to fly again. "Of course if we are told to continue with the cuts, we will obey. But if the demand is OK, we don't see a reason to change the deal," said one source at a Russian oil company, referring to the current pact calling for cuts through June. Russia's Novak had said he expected the oil market to balance out in June/July as oil demand recovers amid easing lockdowns. The Russian source agreed with that assessment, which may show that Moscow sees no need for changes to the current deal. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further "close coordination" on oil output restrictions, the Kremlin said on Wednesday. The OPEC+ group is due to hold an online conference in the second week of June to discuss their output policy.

June 1: DUBAI/MOSCOW (Reuters) - OPEC and Russia are moving closer to a compromise on extending current oil output cuts and are discussing a proposal to roll over supply curbs for one to two months, three OPEC+ sources told Reuters on Monday.

OPEC+ decided in April to cut output by a record 9.7 million barrels per day, or about 10% of global output, to lift prices battered by a demand drop linked to lockdown measures aimed at stopping the spread of the coronavirus.

Rather than easing output cuts in July, sources told Reuters last week that de-facto OPEC leader Saudi Arabia was leading discussions on sustaining them until the end of the year.

However, it was yet to win support from Russia, which believes curbs could be eased gradually.

“It is the proposal now, but it is yet to be finalised,” one OPEC+ source said of the 1-2 month extension.

“It’s for a month or two, not for half a year,” one Russian oil source said, on the rollover of the existing cuts.

Another OPEC+ source said there was support for Russia’s proposal for an extension of one month, but “we still do not have consensus over it”.

The OPEC+ group is likely to hold an online meeting on June 4 to discuss output policy, after Algeria, which currently holds the presidency of the Organization of the Petroleum Exporting Countries (OPEC), proposed a meeting planned for June 9-10 be brought forward.

Reduced production from OPEC+, combined with a record decline in output from non-members such as the United States and Canada, have helped to lift oil prices towards $35 per barrel, but they remain at only half the level of the start of the year.

Energy Report: Seeking Supply Demand Balance In Oil Market
By Phil Flynn Jun 01, 2020 08:44AM ET

In a world full of turmoil, we are striving to find balance not only in the energy markets but around the world. Tension surrounds the globe with riots in major US cities and increasing tensions between the US and China, and despite this turmoil, markets are holding better than one might expect.

Oil prices have traded on both sides of unchanged after Friday's late rally on plunging oil rig counts and OPEC-plus speculation. Talk of OPEC pushing up the date of the OPEC meeting to June 5th and talk that they are in negotiations to extend the record production cuts past the July end date is supporting the market even as global tension fears could potentially thwart demand. While Russia is warning the market to not get ahead of itself because negotiations are ongoing, there is a sense that the cuts will be extended and perhaps added to for a couple more months.

US oil production should continue to fall. Marketwatch reported Baker Hughes on Friday said that the number of active U.S. rigs drilling for oil declined by 15 to 222 this week. < We need at least 800 rigs drilling for oil in the U.S. to hold production flat. THAT WILL NOT HAPPEN THIS YEAR NO MATTER HOW HIGH THE OIL PRICE GOES.

The oil-rig count has now fallen for 11 weeks in a row, suggesting further declines in domestic crude output. The total active U.S. rig count, meanwhile, also fell by 17 to 301, according to Baker Hughes. The plunge in rigs is reflective of an industry that is still in contraction. That is a strong source of underlying support for oil prices.

Trade concerns though are weighing on oil. Bloomberg News reported that "Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the U.S. over Hong Kong, according to people familiar with the situation. State-owned traders Cofco and Sinograin were ordered to suspend purchases. The move could raise concerns about a trade war that could hit global oil demand again."

Unrest in American cities is also taking its toll on oil demand. Cities that are just trying to reopen from the coronavirus may get shutdown as violence for the sake of violence is threatening the economic recovery. Protests over the death of George Floyd has expanded into senseless violence that does no good for anyone. Injustice is never solved or made right with more hate and injustice. In Chicago, the protest has canceled rail and bus service and workers are being told to stay home. < Why are blacks protesting when 100% of the people (white, black, orange, purple, yellow, etc.) all think the police officer who killed George Floyd is guilty of murder. Could it be they just want the free pass to grab free stuff at Target?.

Still, we look at the resilience of this market. While the turmoil may slow the recovery, an extension of OPEC plus cuts will give the bulls the upward track. < If OPEC+Russia extend the production cuts a few more months they will get the oil prices they need to balance their budget.