Friday, May 22nd, 2020
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
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Now, onto this week’s issue.
Curated weekly oil and gas newsletter
Oil Prices and Markets
Light, sweet crude (dollars per barrel): $33.56
Last week: $29.43
Natural Gas (dollars per million British thermal units): $1.690
Last week: $1.646
Rig count (United States): 318
Last week: 339
+ Oil Demand Mounts Comeback as Coronavirus Restrictions Ease – The Wall Street Journal
Gasoline demand is rising as consumers continue to prefer transportation by car instead of taking the risks of public transportation.
Monitoring the reopening of China, Europe, and the U.S. has given hope that oil can recover faster than once anticipated. That was certainly clear by the optimistic outlook provided by the IEA and EIA, the consensus of which was that the oil and gas recovery begins in Q3 2020 and is complete by year-end 2021.
“Last week, U.S. crude inventories declined for the first time in nearly three months, falling by 745,000 barrels, the U.S. Energy Information Administration said. The tally compared with expectations of a 4.1-million-barrel rise.”
The article calls out how important the last two weeks have been, mainly since May 8 when major U.S. states, most notably California and Texas, began easing restrictions.
On the downstream side, things are looking up in China. “Processing levels at the country’s refineries were approaching pre-crisis levels to about 13.3 million barrels a day, up almost 3 million barrels a day from the low point of late February, said Kayrros, a Paris-based commodities-analysis firm.”
That’s great news for large integrated majors who were seeing some of the lowest refining margins in over a decade.
“Chinese consumers also appear to be avoiding mass transportation. On Thursday morning, Wuhan, the original epicenter of the coronavirus outbreak, had traffic congestion rates of 54%, compared with an average of 42% last year. In Beijing, congestion was 73%, versus 62% last year, according to Dutch location technology firm TomTom International BV.”
+ Oil Markets Begin To Improve Following A Month of Historic Lows – The IEA Energy Mix
“The gradual relaxation of restrictions on movement means we are seeing the early signs of gradual rebalancing of global oil markets. Mobility still remains limited for many citizens, but businesses are starting to reopen gradually and people are returning to work, which will provide a boost to oil demand, albeit a modest one at first. In this context, the outlook has improved somewhat and prices, while still far below where they were before the start of the Covid-19 crisis, have rebounded from their April lows. Even more important than the easing of lockdown measures has been steep production declines in non-OPEC countries alongside the commitments made by the OPEC+agreement”
Drilling and Production
+ Natural Gas Exports Slow as Pandemic Reduces Global Demand – The New York Times
The article lists several Middle Eastern natural gas projects that have been delayed due to the price and demand uncertainty surrounding natural gas.
As mentioned in this newsletter, several large U.S. oil and gas companies have been cutting their planned capital expenditures for the year, which has ripple effects for buyers and sellers around the world.
“The pandemic is putting the brakes on a two-decade-long global expansion for natural gas, which has been replacing coal for electricity and heating and even competing with oil as a transportation fuel in some developing countries.”
“Investment decisions for proposed multibillion-dollar liquefied natural gas export terminals — which can take up to a decade to plan, permit and build — have been delayed or canceled in Australia, Mozambique, Qatar, Mauritania, Senegal and the United States in recent weeks. Industry executives estimate that investments of more than $50 billion will be delayed this year and next.”
The article notes that these project delays and a general undersupply of natural gas could give coal a resurgence if natural gas prices rise.
The article also provides updates on projects from Cheniere, Sempra, and Tellurian. Cheniere “says its final decision on a major expansion of an export facility outside Corpus Christi, Texas, now hangs on whether it can strike enough contracts with foreign buyers.”
For Tellurian, things are much worse. The company had to lay off “40 percent of its 176 employees and cut other expenses in an effort to save a proposed project in Lake Charles.”
As mentioned in our Spotlight issue last week, “the International Energy Agency projects a worldwide decline in gas consumption of 5 percent in 2020.”
+ Their Ship Came in as Oil Prices Crashed – The Wall Street Journal
There’s a lot to unpack in this WSJ article, but the main takeaway is that tanker and storage rates have fallen a lot in the past few weeks since oil demand has increased and prices have rebounded above the $30 level.
Worth a read if you’re interested in the trading side of commodities as well as the historical short-term volatility surrounding the oil storage space.
“April 2020 was the first month in history that renewables generated more electricity than coal on every day of the month.”
“The strong output from utility-scale solar, wind, and hydropower is based on several factors, including low gas prices, warmer weather, new renewable capacity connecting to the grid late last year, and lower power demand because of the coronavirus.”
There’s some good commentary in this article, aside from the eye-catching headline. It’s a good read for those interested in the fast-moving changes we are seeing in the power generation space.
+ Britain Breaks Record For Coal-Free Power Generation – The Guardian
“Coal-fired plants have not contributed to the electricity grid for 18 consecutive days”
“Coal made up only 2.1% of the country’s total power mix last year, a dramatic fall from almost a quarter just four years ago.”
Source: Drax Electric Insights.
Have a great weekend!
EKT Interactive Managing Editor