In the past couple weeks, the world’s top five oil firms (BP, Chevron, ExxonMobil, Royal Dutch Shell and Total) reported combined losses of $53 billion for the second quarter. This week, BP announced it would cut production by the equivalent of a million barrels of oil per day until 2030 as part of a plan to reach “net zero” greenhouse emissions by mid-century. As the global pandemic continues to batter industries worldwide, it appears the coronavirus has sped up big oil’s shift to green.
Second Quarter Misery
Oil majors around the world have begun to release their second quarter earnings and the results are dismal. Royal Dutch Shell reported a staggering $18 billion quarterly loss, Total reported an $8 billion loss, Chevron at $8 billion as well, and while much less severe than their peers, ConocoPhillips reported $1 billion in losses. More reports will be released in the coming days but the true effects of the global pandemic and price war are starting to show and it does not look great for the oil and gas industry.
Money Burning A Hole In Your Pocket
Chevron finally pulled the trigger with their unspent Anadarko money from last year, purchasing Noble Energy in an all stock deal for ~$13 billion. This acquisition ends a long drought of deals and puts Chevron back in the news almost two years after putting Anadarko in play and ultimately standing aside to let Occidental buy it. This also marks the largest transaction in the oil industry since the start of the global pandemic.
Expect the Unexpected
During the OPEC+ meeting on Wednesday, members made the decision to uphold the agreed upon production cuts from their April meeting. With 107% compliance with output cuts in June and economies restarting worldwide causing oil demand to quickly pick up steam, most experts expected a reduction in the agreed upon 7.7 million barrel per day cut for August. Sometimes you just have to expect the unexpected.
Three Strikes and You’re Out
Three major blows were inflicted on U.S. pipelines in just a two day span. First, Dominion Energy and Duke Energy canceled the Atlantic Coast natural gas pipeline project on the same day the U.S. District Court for the District of Columbia ordered the Dakota Access pipeline to be shut and emptied. The following day, the U.S. Supreme Court ordered that construction of the long-delayed and once-resurrected Keystone XL project cannot begin. For it’s one, two, three strikes you’re out in this brutal, unforgiving game.
Summer Heat
The summer heat has brought plenty of excitement to the oil and gas industry. Feuding investment companies argue if oil demand will ever reach pre-pandemic levels, natural gas prices fall to 25 year lows, and one shale pioneer had to take a break from the heat and file for bankruptcy protection all while employment rates began to skyrocket.
You’re Hot Then You’re Cold…
Just last week we reported that JP Morgan was predicting $100 Oil “in the observable future” and “could see the price of oil hit $190 a barrel by 2025”. Well, those predictions have been revised in the past week and now they predict “oil may never hit $100 again” as a result of the price war, the ongoing pandemic, decimated demand, and U.S. Shale resilience. Talk about being indecisive! In other more exciting news, two leading oil price reporting agencies launched a new U.S. crude benchmark to rival WTI, how cool!
Unprecedented Fall of U.S. Oil
As the world continues on its long road to recovery from the global pandemic, oil demand is slowly on the rise. Unfortunately, domestic oil production is falling fast with current rates the lowest they have been since March of 2018 and predictions for July would put levels at their lowest since 2013. Has the price war and pandemic destroyed the U.S. Oil Industry?
Not Out Of The Woods
It was a rough end to a week in oil and gas that started so well. After weeks of climbing, oil prices will experience their first weekly loss in seven weeks just as the United States announced an official recession. Things are moving forward but we are not out of the woods just yet.
One Day at a Time. One Step at a Time.
Global oil prices have risen to their highest levels since March on talks of OPEC+ planning to extend production cuts during their Saturday meeting. After almost a week of wrangling, Saudi Arabia and Russia clinched a deal with Iraq over its compliance, paving the way for the agreement’s extension into July instead of tapering them. As the world attempts to return to a new normal, we must take things one day at a time, one step at a time.
Commodity Supply Balance: How Production Cuts have Caused Bullish Sentiment on Commodity Markets
The dual black swan events of the COVID-19 pandemic and oil price war have created a unique analytical opportunity within petroleum products. As oil prices crashed, natural gas prices have largely remained unchanged due to the markets in which the commodities are used. Transportation which is the main use of oil has almost entirely stopped, whereas electricity generation and heating, the destination for most natural gases has remained similar to pre-2020 levels. Such modifications to consumption caused markets to go haywire and commodity prices to crash. With crude production cuts now occurring at a faster pace than anticipated and states lifting restrictions, supply and demand dynamics for liquids compared to natural gas has changed since April. As the United States begins returning to normal, an update to these commodity market assumptions is in order.
Market Take Over
Early signs of growing demand for crude oil have prompted market optimism that has led to increased WTI buying, setting the stage for the benchmark’s best-ever monthly performance regardless of domestic storage hitting their highest levels in history. With oil surging, there seems to be renewed optimism in the energy industry.
Trusting the Process
This time last month WTI prices went negative for the first time in history as the May front month contract expired. Instead of plunging into negative territory again this month with the expiry of the June contract, prices remained strong and rallied into the thirties for the first time since March. Does this indicate the worst is over for the global oil industry?
Steps in the Right Direction
For the first time since January, crude oil inventories declined indicating the world has begun its journey on the road to a slow and fragile recovery. While this does not mean the global oil and gas industry is out of the weeds just yet, this week’s events show steps in the right direction.
The Road to Recovery
Global Economies are officially shrinking with the release of first quarter data, shell wells are being shut-in, global crude has nowhere to go, and according to new EIA data, the United States actually produced more energy than it consumed for the first time since the late 1950s in 2019.
All Dressed Up With Nowhere To Go
Global Economies are officially shrinking with the release of first quarter data, shell wells are being shut-in, global crude has nowhere to go, and according to new EIA data, the United States actually produced more energy than it consumed for the first time since the late 1950s in 2019.
So Much For Black Gold
The change in your pocket or between your couch cushions became more valuable than a barrel of oil on Monday as prices went negative for the first time in history. Historically low prices have prompted producers in North Dakota to shut-in their wells, regulators in Oklahoma and New Mexico to allow producers to shut-in wells without consequence, but Texas is still hesitant to take action.
Natural Gas Rebound Poised for Recovery Before Crude Oil: Why the Market has Priced Electricity and Liquid Fuel Demand into Commodity Prices
The dual black swan events of the COVID-19 pandemic and oil price war have created a unique analytical opportunity within petroleum products as the strip price for natural gas is showing larger percentage increases than crude or NGLs because the market is pricing in the assumption that continued electricity demand will not fall as quickly as the oversupply of natural gas.