|Day's range||24.97 - 27.46|
(Bloomberg) -- The next step for some U.S. refineries that have already cut way back may be a full stop.Marathon Petroleum Corp. plans to idle its Gallup, New Mexico, refinery next week, according to a person familiar with the matter. It’s the first U.S. facility to shut as the coronavirus pandemic empties skies of passenger planes and the roads of cars.It’s not likely to be the last. Major U.S. refiners, including Marathon, Valero Energy Corp. and Phillips 66, have lowered rates at their facilities to be at or near minimum levels as storage tanks fill up with fuel they can’t sell. While that “minimum” level differs from company to company, and in fact from plant to plant, it’s seen typically somewhere around 60% to 65% of capacity. Below that, many facilities need to be idled.“If after cutting rates to a minimum, refiners are still unable to move their products, they are faced with the prospect of completely shutting down,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.Slowing down a refinery isn’t like turning down the fire on a gas range when the water threatens to boil over. A refinery is a complex web of interconnected units, so once the amount of crude being processed in the distillation unit falls too low, secondary units don’t have enough feedstock to keep running. Since many units operate under high pressure as well as high temperature, it becomes more difficult to maintain the proper conditions for operation.“It’s complicated to keep the refinery in balance,” said Stephen Wolfe, head of crude oil at consultant Energy Aspects Ltd. “The rule of thumb for me was always 65% of the CDU. Below that, things get complicated. As you reduce rates, all the downstream operations have to be properly supplied, there are hydraulics limitations to how low you can go.”Refiners have been forced to take drastic measures to reduce fuel supply with gasoline demand plunging by almost half and storage tanks filling up. Measures to slow the spread of Covid-19 have hit gasoline and jet fuel especially hard, sending wholesale prices in some markets below 20 cents a gallon and crushing profit margins.U.S. refiners are processing the least crude and other feedstocks since 2011, down some 3.5 million barrels a day from year-end, according to government data. But with overall fuel demand down more than 7 million barrels a day since early March, the reductions haven’t been enough to stem the growing glut.“Plants are going to minimum rates as product containment becomes a larger problem across the U.S.,” said Wolfe. “If this fails, shut downs loom as the only solution for the enormous supply problem we have.”While some complexes with multiple sets of crude stills and secondary units can shut one down, smaller plants have less flexibility. If the entire facility has to be idled, units may either be placed on circulation, where hot oil is circulated but no fuel is made, or shut down completely.Minimum RatesMinimum crude unit rates can range from 60% and up, depending on the type of oil being used, if there are multiple units and how much storage is available, said Lipow. “If you have multiple units, you could shut one down and run the others at varying rates.”If a gasoline-making fluid catalytic cracker is shut, steam is lost that other units need to run. Shutting the cracker means finding a place for intermediate feedstocks like vacuum gasoil produced by the crude unit. An inland refinery can’t just put the intermediate products on a ship and send them elsewhere, but instead must store the products or send them away by more-expensive rail.If only crude rates are cut, the conversion units like FCCs and hydrocrackers are starved of the intermediate feedstock they need to run and must be cut back also or feedstock has to be purchased to run them.“There are more considerations than just saying we can shut this unit down and there is no more ancillary impacts,” said Lipow.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil is set to tumble back toward $20 a barrel as global producers will likely fall short of targeted cuts this week, leaving a supply overhang that will threaten to overwhelm global storage, according to ING Groep NV.Oil giants including Saudi Arabia and Russia are likely only going to be able to cobble together a global agreement to curb 6 million to 7 million barrels a day of supplies, said Warren Patterson, ING’s head of commodities strategy. That’s more than triple what OPEC+ was cutting at the start of this year but is short of the 10 million barrels a day or more that U.S. President Donald Trump proposed last week.It’s also well shy of the loss in demand of about 15 million barrels a day in the second quarter caused by government lockdowns to stop the spread of the virus, Patterson said. Brent crude, which has already plunged 50% this year, will crater further as storage is maxed out.“I’ve been looking at commodity markets now for a little over 10 years and I’ve never seen anything like this,” said Singapore-based Patterson in a telephone interview. “The scale of demand destruction that we’ve seen in the market is just shocking.”ING, the Amsterdam-based bank that finances commodities across the value chain, sees Brent crude averaging $20 a barrel in the second quarter before rebounding to $45 in the fourth quarter. Futures traded at $33.34 on Thursday.Patterson doesn’t think the U.S. will be given a direct mandate to cut a specific volume because of its antitrust laws, but the country will still contribute output declines as drillers halt activity because of low prices. Russia wants the U.S. to do more than an organic drop in production, but will ultimately accept it as part of a larger agreement, he said.ING sees Saudi Arabia cutting 3 million barrels a day and Russia 1.6 million. Other OPEC members and countries like Canada will contribute enough cuts to get to 6 million to 7 million barrels a day, but Patterson said he doesn’t see a way they can add enough to get to 10 million.Top producers are set to meet on Thursday, followed by a meeting of G-20 energy ministers the following day.Amid the gloominess in markets, Patterson remains constructive on precious metals, with gold seen as having the most upside across the commodities complex in the second quarter. Prices are expected to average at $1,700 an ounce during this period and could even test the previous record of $1,921.17 seen in 2011 in the next two to three months, although it’s unlikely to remain at that level, he said.“We have also seen quite a bit of increased volatility in gold prices over the last month or so, but I don’t think that diminishes its appeal as a safe-haven asset,” said Patterson. “Given the level of uncertainty that we’re currently experiencing and also the fact that if you look around the globe, there’s basically not a central bank which is not easing -- that all sort of has quite supportive fundamentals for gold.”Gold has been on a tear, trading near the highest level in more than seven years, as investors spooked by coronavirus-related market meltdowns and economic angst clamor for the traditional haven. Holdings in bullion-backed exchange-traded funds are at the highest ever, and prospects for the precious metal have also been supported by global stimulus measures aimed at shoring up growth, including the Federal Reserve’s unlimited quantitative-easing program. Spot gold traded at $1,648 an ounce on Thursday and is up almost 9% this year.Patterson also commented on industrial metals and iron ore:Among the base metals, ING is most constructive on nickel due to a growing market deficit as a result of rising demand in the battery sector, and sees an average price of $13,500 a ton by the end of this year.Patterson is bearish on zinc, which he sees averaging at $1,880 a ton over the fourth quarter. Further downside is seen between now and then, with prices expected to drop to $1,800 as smelters maximize refined output due to attractive treatment charges.Iron ore is seen averaging $85 a ton in the second quarter on rising demand in China, but will trend lower to average $75 by the end of year on continued improvement of supply from major producers such as Vale SA.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
While both Saudi Arabia and Russia have succeeded in crashing oil prices and bringing U.S. representative to the negotiating table, they are both running out of time
Arab Gulf oil producers began to tap the debt markets this week amid growing fiscal pressures on their economies and wealth funds in the oil price crash and the coronavirus pandemic
Crude oil production in the United States could fall by about 2 million bpd from current estimates of daily averages, according to the Energy Information Administration
Halliburton (HAL) is planning to freeze certain benefits dispensed for employee retirement accounts as the company continues to struggle with lower oil prices.
(Bloomberg) -- On the final day of March, the supertanker Newton, loaded with crude from Saudi Arabia, did something rarely seen in the world of oil trading: it abruptly diverted from its original destination, Egypt, setting sail for the U.S. Gulf Coast instead.The Newton is just part of a flood of Saudi crude that’s headed for the U.S., with oil prices near the lowest levels in almost two decades. And it occurs as President Trump’s administration considers tariffs on imports of oil from OPEC’s largest producer.Saudi crude exports to the U.S. in March jumped to at least 516,000 barrels a day, the highest in a year, according to tanker-tracking data compiled by Bloomberg. So far in April, at least seven supertankers have left Saudi Arabia for America’s Gulf Coast, and another is expected to load in the coming days. Almost all of the vessels are chartered by Bahri, the Saudi national shipping company, fixture data show.The seven tankers that have sailed for the U.S. this month are hauling a combined 14 million barrels of crude. Through the same period in March, the kingdom exported just 2 million barrels to America. Saudi Arabia has pledged to boost exports in general, following the collapse of the OPEC+ alliance last month, and as of last week it was on track to ship 10 million barrels a day.The surge of Saudi crude comes at a decisive moment for the oil market, with the coronavirus outbreak squelching demand and a price war led by Saudi Arabia itself contributing to a supply glut. Prices have slumped so low that they could lead to forced output cuts if the current situation continues.That may not happen. Members of the former OPEC+ alliance are set to hold an online meeting on Thursday to discuss the possibility of voluntary cuts. On Friday, energy ministers from the Group of 20 nations will also hold a virtual meeting, giving the U.S. and others an opportunity to weigh in. Trump said earlier this week that he didn’t think tariffs would be necessary to blunt the impact of cheap oil imports, but added that he would impose them if he had to do so.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- India, the world’s third biggest oil consumer, is set to snap up millions of barrels of Middle East crude for its strategic reserves, signaling its support for global efforts to rescue the energy market.The purchases are aimed at taking advantage of low prices, according to officials with knowledge of the matter. But two of them said they’re also a signal of solidarity for the campaign to stabilize markets after Oil Minister Dharmendra Pradhan spoke with his U.S. and Saudi Arabian counterparts and the head of the International Energy Agency.While India’s storage capacity is relatively small, the purchases are an important sign that major consuming countries are trying to play their part in rebalancing a market that’s been pummeled by the coronavirus. China said earlier this month it would start buying up oil for its emergency reserves.New Delhi’s move appears to be part of a broader G-20 response to the collapse in oil prices. Fatih Birol, the head of the IEA, has encouraged oil importers with available storage to take advantage of low prices to snap barrels. “Oil consumers can help by filling up their strategic petroleum reserves,“ Birol said in an interview last week.A spokesperson at India’s oil ministry declined to comment.Major oil producers led by Saudi Arabia and Russia are currently trying to stitch together a deal to call off their price war and cut worldwide oil output by around 10 million barrels a day ahead of a meeting of the OPEC+ alliance and other producers on Thursday. Minister Pradhan is also set to take part in a meeting of G-20 energy ministers the following day.The Indian government may ask state-run refiners to buy the crude upfront from Saudi Arabia, the U.A.E. and Iraq and reimburse them later, the officials said, asking not to be named as the information is private.The country has space for an additional 15 million barrels of crude across its three strategic reserves at Mangalore, Padur and Visakhapatnam. The finance ministry has approved a request for funds from the oil ministry, the officials said.India is seeking to buy around 5.5 million barrels of the U.A.E.’s Upper Zakum crude for Mangalore and about 9.2 million barrels of Saudi oil for the Padur caverns, the officials said. It will also buy some of Iraq’s Basrah Light grade for Visakhapatnam.Mangalore Refinery and Petrochemicals Ltd., which had drawn out some Iranian crude stored in Mangalore last year, will likely be asked to fill the tanks back up with barrels from Abu Dhabi, said one of the officials. Tanks at Padur and Visakhapatnam will likely be filled with Saudi crude and Iraq’s Basrah Light, respectively. The South Asian nation has 39.14 million barrels of strategic reserves across the three facilities that can provide crude requirements for about 9.5 days, minister Pradhan told lawmakers last month. It plans to add two new strategic reserves with combined capacity of 47.7 million barrels, that will provide another 11.57 days of its needs.(Updates with more details in 10th, 11th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Oil markets are sending confusing signals at a time when more confusion is the last thing anyone needs. When Russia walked out on OPEC+ rather than contribute to more output cuts, Saudi Arabia turned on the crude taps. Whatever Riyadh’s intention, this “price war” was quickly made meaningless by the impact of the new coronavirus on global oil demand. The price collapse has been beyond anything anyone could have imagined.Now, storage room for crude is becoming scarce. Analysts warn darkly that plunging prices may threaten global economic stability. Equities follow the oil price news. Everyone seems to agree that prices should stop falling; and yet no one seems to argue that a very low oil price is exactly what the world’s economy needs to recover.The combination of price war and pandemic is also creating strange bedfellows. Some American shale producers are advocating that their country blocks Saudi oil imports, others want to talk to OPEC. President Donald Trump’s government has expressed an interest in cooperating on global oil supplies with Saudi Arabia and Russia; it’s nudging OPEC+ to reconvene, or an even wider group of producers to meet. Could we be witnessing the emergence of an unholy alliance of Saudi Arabia, Russia and the U.S., to “manage volatility,” and incidentally shore up the price of oil?Cards on the table, I hope not.Oil is still the lifeblood of modern commerce. It takes seven liters (1.85 gallons) of the stuff to produce $100 of global gross domestic product. This is better than the 10 liters of 30 years ago, but the price of oil still matters. Today, the world has three centers of oil production, each with its own governance structure, its own economic and strategic interests, and each with an entourage of similarly structured, smaller producers in geographic proximity. Taken together, these three — the U.S., Saudi Arabia and Russia — account for 45% of global liquid hydrocarbon production (almost half of which now comes from the U.S.).In this new world, U.S. energy “independence” (or “dominance”, as the Trump administration likes to call it) has become an important strategic asset. It took a little longer for the economic implications of becoming a net oil exporter to sink in. A flurry of presidential tweets demanding lower prices notwithstanding (aimed at an electorate with big cars and low incomes), the U.S. economy is on the verge of becoming a net beneficiary of rising oil prices, if it isn’t already.The shale industry, from which all this change originates, is in the midst of a difficult process of financial restructuring — not untypical for a new industry but painful for individual companies. Many firms have seen financial constraints emerge, long before the coronavirus struck.The collapse of price support from OPEC+, signaled by that Russian walkout and Riyadh’s reaction, would have sounded the death knell for many shale companies even without the pandemic. However, if Moscow’s — or Riyadh’s — strategy was to kill the industry, it would almost certainly have failed. U.S. finance thrives on such disruption. Even now, American shale assets will be mothballed and change hands, debt will be restructured, and hydrocarbons will flow, quite possibly at a more efficient cost per barrel. Sources of financing may change. The technology is here to stay.Presently, Saudi Arabia has every incentive to come to an output agreement. Its society is simply too dependent on oil to let its price stay on the floor. Russia, meanwhile, is vulnerable to a global inventory overhang, which would force its producers to shut in production. The risk to its fields makes it an unlikely candidate for an all-out dispute. Of the three main producers, the capacity for a longer price “war” is actually highest in the U.S.But could the threat to America’s newly strategic shale industry from price competition really bring Washington into a dialogue with OPEC? Should it?In a shrinking market, the low-cost producer is king. Left alone, a global oil market would emerge in which large OPEC producers from the Gulf (the cheapest) would have the first go at selling whatever quantity they desire. A mix of global companies would be next; this second layer might indeed be tilted toward Russian operators, with low production costs and the helping hand of government. Unconventional producers — nimble, numerous, and price responsive (as in the U.S. shale patch) — would close off the system. They would produce the residual, and the cost at which they’re capable of doing so would set the global price of oil.This would be a market as stable and efficient as it gets. It is actually what we have today, when factoring in the restrictions that falling oil demand growth will place eventually on the ability of groups like OPEC and OPEC+ to interfere to raise prices.Beyond the immediate emergency, meaningful long-term cooperation to “stabilize” prices would require state intervention or quotas; or U.S. import restrictions. Any of these would mean curtailing the benefits of competition and open entry to which the U.S. shale industry owes its existence. In the short term, such measures would fly in the face of supporting the post-pandemic economy by pushing up fuel costs. In the long term, they would curtail the capacity to innovate on which we depend so heavily in the transition to cleaner fuels.So the answer on whether the three big producers should be joining hands on the crude price is no. The rest of the world has very little to gain from more intervention in global oil markets. What’s needed instead are better rules to safeguard competition on a global scale. This may be wishful thinking. But the temptation to “manage” the market, now or when peak oil demand approaches in earnest, should be resisted. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Christof Ruehl is a senior research scholar at Columbia University's Center on Global Energy Policy and a senior fellow at Harvard Kennedy School.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Donald Trump is trying to do something no U.S. president has dared to do in decades: Drive up the price of oil.For more than three decades, U.S. presidents proclaimed cheap fuel as an almost God-given right for American motorists and homeowners, shaping the country’s foreign policy in pursuit of lower prices. As president, Trump didn’t just back cheap crude, he was its biggest supporter, frequently attacking OPEC and celebrating the shale boom’s deliverance of “energy dominance.”Now, the Russia-Saudi price war and a killer pandemic have caused prices to plunge, putting Trump in the awkward position of begging those same countries to turn off the taps, even though retail gasoline will become more expensive as well. The U-turn comes as America has gone from being the top importer of oil to the top producer, aligning its interests more closely with Saudi Arabia and Russia in a shift that holds the potential to reverberate through foreign policy for years to come.“It used to be very clear. For decades, when the U.S. was the largest importer, low oil prices were a real benefit to the country,” said Dan Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd. “But now, it’s very different. It’s become such an important industry again, with the supply chains that go all across the country.”The new direction could change both how the U.S. engages with its Middle East allies when prices rise and how the market itself is perceived. Just as many Wall Street traders have assumed that the U.S. Federal Reserve will save the day since the 1987 Black Monday crash, oil traders may now expect the same from the White House.Trump administration officials have said they are prepared to support OPEC and its allies agreeing to restrain output to lift oil prices. For now, Trump hasn’t said whether he would try to rein in U.S. production or limit crude exports. But he has threatened to put tariffs on foreign crude to protect energy workers and domestic oil companies if the Saudis and Russians don’t agree to output cuts.“I never thought I’d be saying that maybe we have to have an oil increase, because we do,” Trump said in late March. “The price is so low.”Trump will likely aim for an oil-price sweet spot, said Kevin Book, managing director of research firm ClearView Energy Partners.It needs to be high enough to sustain a domestic industry tied to about 10.9 million jobs, including 1.1 million directly connected with production, drilling and support activities. At the same time, it needs to be low enough to provide cheap energy to help prompt an economic rebound after the coronavirus pandemic subsides.Even as the U.S. claimed the title of the world’s top oil producer, the country has remained at the mercy of Saudis who have a geological advantage over America and can extract crude at much lower prices. And now the oil that made America energy dominant is so costly to extract that almost 40% of U.S. producers face insolvency within the year if prices remain near $30 per barrel, the Federal Reserve Bank of Kansas City warned on Tuesday.Trump isn’t the first president to criticize OPEC for prices being too low. The last time the U.S. so publicly begged the alliance to scale down output was April 1986, when Ronald Reagan was spooked by plummeting prices hurting oil producers in Alaska and Texas. He dispatched then-Vice President George H.W. Bush to Saudi Arabia.In comments similar to Trump’s today, Bush told the late King Fahd that the U.S. is interested in “cheap energy,” according to contemporaneous press reports. Yet he also cast cheap crude as a double-edged sword for America, stressing that “a viable domestic oil industry is in the national security interests of the United States,” recalled Bob McNally, founder of oil consultant Rapidan Energy Group, in his book “Crude Volatility.”Bush’s mission was not an immediate success. Although Bush and King Fahd agreed the world needed stable oil prices, they did not agree on how to achieve them. And Saudi oil production continued to rise for at least four more months. OPEC countries ultimately agreed to cut output and abide by quotas by December 1986, eight months after Bush’s visit.Now Trump is in a similar position, as he exhorts Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman to slash production by at least 10 million barrels a day, despite having blasted OPEC in the past as a “monopoly” that is “robbing our country blind” and having long celebrated low gasoline prices as a “tax cut” on American consumers.“It’s a remarkable change,” said Jason Bordoff, a White House energy adviser during the Obama administration. “The American political consciousness has been shaped by half-a-century of worry about high prices and foreign oil.”Not everyone, though, is happy with Trump’s shift. “We’ve seen every president declare that we are energy independent and then we find ourselves pleading with the Saudis and Russians,” said Robbie Diamond, head of Securing America’s Future Energy, a group that argues for a greater variety of transportation fuels and more transparent oil markets.“If we were energy dominant,” he said, “we would not be groveling to these countries to cut production.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Alberta Premier Jason Kenney says the combined toll of Covid-19 pandemic, the global economic recession and the collapse in oil prices represent the greatest challenge in the province’s modern history, threatening its main industry and wreaking havoc on its finances.In a televised address on Tuesday, Kenney warned that there is a “very real possibility” of negative prices for Alberta’s energy products. He also said measures to deal with the crises may cause Alberta’s budget deficit this year to almost triple to C$20 billion ($14 billion).“I cannot overstate how grave the implications of this will be for jobs, the economy, and the financial security of Albertans,” Kenney said.Kenney also said that the province won’t be able to start relaxing social-distancing measures to slow the spread of the virus until the end of May. Once the province does start to relax those measures, it will mimic other jurisdictions like Taiwan, Singapore and South Korea that have managed to both contain the virus while keeping their economies functioning, he said.That will include aggressive mass testing to identify positive cases and those with immunity, precise targeting of close contacts, border screening, strict enforcement of quarantine orders and encouraging the use of masks in crowded public spaces, he said.Kenney also released projections for the numbers of potential infections and deaths from the Covid-19 virus in the province under different scenarios:Under the “probable” scenario, Alberta may see as many as 800,000 infections and 400 to 3,100 deathsUnder the less likely “elevated” scenario, the province may see as many as 1 million infections and 500 to 6,600 deathsIf the province implemented no social-distancing measures, it could have experienced as many as 1.6 million infections and 32,000 deaths.“These models are not a done deal,” Kenney said. “I want Albertans to see them as a challenge. Perhaps the greatest challenge of our generation.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The ongoing price crash triggered by the coronavirus and the oil war has in many ways hammered investments into upcoming African, Latin American and Asian plays
(Bloomberg) -- The U.S. cut its 2020 oil production forecast by more than 1 million barrels a day, as collapsing crude prices and plummeting demand threaten to shutter production in the country’s biggest fields.Production is expected to average 11.76 million barrels a day through December, down from a previous forecast of 12.99 million barrels, the Energy Information Administration said on Tuesday. The agency also trimmed its 2021 output expectations by 1.6 million barrels a day to just over 11 million daily barrels.The report comes just days before OPEC, Russia and other producers meet to negotiate a round of coordinated output curbs meant to stem crude’s historic plunge. President Donald Trump, who has been trying to broker a deal to end the price war between the Saudis and Russians, faces pressure from his counterparts to join in a global supply-cut agreement after prices plunged to their lowest levels in almost two decades.The latest forecasts reinforce comments that Trump made just a day ago about low oil prices already forcing U.S. oil producers to cut back.“The cuts are automatic if you’re a believer in markets,” he told reporters late Monday. “They’re already cutting. If you look, they’re cutting back. It’s the market. It’s demand. It’s supply and demand. They’re already cutting back and they’re cutting back very seriously.”Massive SurplusThe EIA also slashed its 2020 global petroleum supply forecast by 2.7 million barrels a day, and reported a looming supply surplus of 11.4 million daily barrels in the second quarter. That would eclipse the 10 million barrel-a-day production cut Trump has suggested OPEC+ shoulder in a bid to resuscitate the market.The agency’s 2021 forecast bottoms out at 10.91 million barrels a day in March 2021. That would amount to a production cut of almost 2 million barrels a day from the all-time high of 12.87 million barrels in November 2019.The Energy Department attributed its gloomy production outlook to “unprecedented worldwide demand impacts of Covid-19 coupled with the disruptive actions of the ongoing dispute between OPEC + nations,” agency spokeswoman Shaylyn Hynes said in a statement. “The Secretary is confident that both of these forces are temporary, and the market will recover,” she said, referring to Energy Secretary Dan Brouillette.The market rout -- spurred by coronavirus-related lockdowns and a price war for market share between the Saudis and Russians -- has already forced shale explorers to pare back their budgets. With storage rapidly filling up and nowhere for excess barrels to go, some companies are already starting to shut in wells.Net Importer“The U.S. oil industry is being wrestled to the ground by the Russians and Saudis,” Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts, said before the report was released. “Involuntary participation is the best way to put it.”EIA forecasts that the U.S. will return to being a net importer of crude oil and petroleum products in the third quarter of 2020 and remain a net importer in most months through the end of the forecast period. The agency expects Brent, the global benchmark crude, to average $33.04 a barrel this year, down from earlier expectations of $43.30.The U.S. will join in a discussion of energy ministers from the Group of 20 industrialized nations on Friday that will follow the OPEC + meeting, the Energy Department said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Russia on Tuesday confirmed its participation in the meeting of leading oil producers set for April 9, joining Saudi Arabia and the rest of the OPEC members. The conference, due to be held via a video link, had been initially scheduled for April 6 but was delayed amid a war of words between Russia and Saudi Arabia. "Oil prices are holding their ground with market expectations building on an agreement for an output reduction of 10 million barrels per day (bpd), or at least close to 10 million bpd," BNP Paribas (PA:BNPP) analyst Harry Tchilinguirian told the Reuters Global Oil Forum.
Additionally, gold futures rose 0.7% to $1,705.10/oz, after earlier climbing to a new seven-year high of $1,742.20, while EUR/USD traded at $1.0875, up 0.8%.
(Bloomberg) -- From Russia’s northeastern coast of Sakhalin to the Permian basin in the U.S., oil is going cheap as sellers slash prices in a desperate attempt to attract buyers.Refiners across the world have made deep cuts to crude-processing rates due to slumping consumption and a growing fuel glut, leaving producers struggling to find buyers for their cargoes. Sellers, meanwhile, are aggressively dropping the price of their oil while they tussle for the remnants of demand, with the prospect of forced output cuts looming as global storage swells.In recent days, benchmark crude prices have rallied in the financial markets, primarily due to speculation that the world’s largest producers might reach some sort of truce to halt the price war. However, gloom persists in the physical markets, where actual barrels of oil are bought and sold, with crude still trading well below benchmark levels.For example, the spot differential for Russia’s Sokol was at a discount of about $8 a barrel against Dubai crude this week, according to traders who asked not to be identified. That’s the lowest in more than five years and a whopping $11 less than the last reported deal for the grade. Australia’s Varanus traded at a discount of between $13 and $14 against London’s Dated Brent, compared with a 50-cent premium for the previous cargo.U.S. crudes have declined to multi-year lows against benchmark Nymex crude oil futures because suppliers are running out of space to store barrels.Last week, the discount for West Texas Intermediate crude trading in Midland, Texas, America’s shale capital, fell to the lowest level since 2018. Offshore grade Heavy Louisiana Sweet oil plunged to the weakest discount to oil futures in data going back to 1991. Another offshore crude Mars Blend, a regional sour benchmark, tumbled to the lowest level in over a decade.Storage tanks the world over are filling fast, including at the 45 million-barrel Saldanha Bay terminal, a key hub in Africa. Scores of supertankers have also been charted for long-term plays, to be used as floating storage.“One could argue that currently there is a disconnect between the futures prices and the physical differentials which is pointing towards a more distressed market,” researchers at the Oxford Institute for Energy Studies said in a report.The study noted that the movement of price differentials -- the gap between the price for physical crude and its benchmark -- has been more extreme than for futures prices. It also highlighted that the weakness in grades like CPC Blend and Murban is due to high yields of jet fuel and naphtha, a component in gasoline production.The consumption of jet fuel to gasoline has plummeted as governments try and curb the spread of the coronavirus pandemic by forcing people to stay at home. While China remains a bright spot as people return to work and factories begin to reopen after a prolonged shutdown, activity at Indian ports has slowed and the nation’s refiners are curbing processing amid a crippling lockdown.See also: Oil’s Apocalyptic April Could Reverberate for Years to ComeHowever, oil traders still have their sights on sending unsold crude to Asia, even as refinery margins in the region swing between profits and losses. The market phenomenon known as super-contango, where prompt crude prices are sharply below cargoes for delayed delivery, means that the cost of chartering a tanker can be offset by such gains, making the strategy viable.Even so, the question is where exactly in Asia can they send their supplies right now to get some relief. Recently, a tanker that was initially booked to send U.S. crude to India, based on fixture reports, was sent to China instead. Indian refineries have issued force majeure notices to defer their crude deliveries because the virus-led quarantines have crushed fuel consumption.(Updates with details on U.S. crude market activity in fifth and sixth and final paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
G20 oil ministers are set to meet on Friday to discuss what could be the biggest ever oil production cut in history, but the effect of the output reduction might not have a large impact on devastated oil markets