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.
Oil Profitability Around the World
The cost to produce a barrel of oil varies throughout the world and impacts the determination of global benchmark prices. If only a portion of global supply is economic at current commodity prices, global demand will be what influences the price floor. Once inventories are drawn down, supply/demand economics will drive up the price of oil to ensure supply can meet demand. Be sure to check out the periodical below for an in depth analysis of the economic price to produce a barrel of oil around the world, and why global demand will be the driver for oil prices to set a $55-60/bbl floor for the foreseeable future.
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.
Did the Federal Bailout Simply Delay The Inevitable for Oil and Gas Companies?
At the end of March during the peak of the pandemic, the Federal Reserve was authorized to buy tens of billions of dollars in corporate bonds from the energy industry. These actions, paired with those taken by the Federal Government to save the oil and gas industry, were met with harsh criticism because the industry was struggling long before the global pandemic and seemed to simply be delaying the inevitable.
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.
Post-COVID Global Oil Demand Series – Part 4: Global Oil Demand
Hydrocarbons are the largest global energy source, and demand for them has been growing rapidly in the past decade. Unfortunately, that progress was stunted with the recent global pandemic that shut down economies and societies worldwide. As the world recovers from the coronavirus, hydrocarbons will be in high demand in order to fuel the progress of the human race. The final piece of our four part series on post-COVID oil demand will investigate the overall change in global oil demand in a post-COVID world.
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.
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.
The Incoming Glut: Excessive Levels of Heavy Crude Supply in a Saturated Market
The worst of the coronavirus induced oil crash seems to have bottomed out as storage inventories saw fairly dramatic drawdowns in the final weeks of May, a reversal of events from the past several months. Such relief may be all but eliminated in the ensuing week as an influx of nearly fifty million barrels of foreign crude oil is about to reach the U.S. Gulf and West coasts. The volume of incoming crude may offset most of the production cuts generated by domestic operators and extend low oil prices until the inventories can be worked back down.
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?
The Assault on the Petro-Dollar – Additional Information
President & CEO of RARE PETRO, Anthony D. McDaniels, sat down with Kathryn Mills of The Crude Audacity Podcast to discuss the assault on the PetroDollar LIVE on Facebook and YouTube. It was an energetic discussion on today’s Global Oil Market and what it means for the strength of the American Oilfield, American Energy Security, and American Global Influence. While their conversation was lively, it was not quite long enough to dive deep into the complex intricacies fueling this Oil War. Check out our analysis below!
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.