Friday, October 30, 2020

Exxon reports third straight quarter of losses with revenue down nearly 30%

A view of the Exxon Mobil refinery in Baytown, Texas.

A view of the Exxon Mobil refinery in Baytown, Texas.
Jessica Rinaldi | Reuters 

  • Exxon Mobil reported its third straight quarter of losses.
  • During the third quarter, the company lost $680 million, although Exxon said results improved on a quarter-over-quarter basis thanks to “early stages of demand recovery.”
  • On an adjusted basis, Exxon lost 18 cents per share during the third quarter while generating $46.2 billion in revenue.

Exxon Mobil on Friday reported its third straight quarter of losses as depressed oil demand sparked by the coronavirus pandemic weighed on the company’s operations.

During the third quarter, the company lost $680 million, although Exxon said results improved on a quarter-over-quarter basis thanks to “early stages of demand recovery.”

On an adjusted basis, Exxon lost 18 cents per share during the quarter while generating $46.2 billion in revenue. The Street was expecting a 25 cent loss per share and $46.01 billion in revenue, according to estimates from Refinitiv.

A year earlier, the company earned 75 cents per share on $65.05 billion in revenue. During the second quarter of 2020, Exxon lost 70 cents per share on an adjusted basis, while revenue came in at $32.61 billion.

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” Chairman and CEO Darren Woods said. “We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle.”

Exxon previously announced a reduction in its capital spending program — from $33 billion to $23 billion — and the company said it’s ahead of schedule due to increased efficiencies and a slower project pace, among other things. The company is targeting to spend $16 billion to $19 billion in its 2021 capital program.

Exxon also said Thursday it intends to reduce its U.S. staff by around 1,900 employees, with global workforce reductions potentially rising to as much as 15%. As of the end of 2019 Exxon had a global workforce of 88,300, including 13,300 contractors.

As oil and gas companies grapple with the ongoing demand loss from Covid-19, some companies have announced dividend reductions in an effort to slash costs.

Exxon has repeatedly said its dividend remains a priority, and on Wednesday the company maintained its fourth-quarter dividend at 87 cents per share. But it was the first time since 1982 that the company didn’t raise its payout. The company currently yields 10.56%.

Research firm Edward Jones noted that there’s an increasing risk that Exxon will have to cut its dividend in 2021 if demand doesn’t fully recover.

It’s been a difficult few months for Exxon. In August, the company was removed from the Dow Jones Industrial Average. Chevron recently surpassed Exxon for the first time to become the most valuable U.S. energy company based on market capitalization, although Exxon’s current market valuation is higher. Chevron also reported a difficult quarter on Friday.

Shares of Exxon were flat in premarket trading Friday. For 2020, shares have declined 52%.

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Thursday, October 29, 2020

Central banks sell gold for first time since 2010

261018-image-russia_central_bank.jpg 261018-image-russia_central_bank.jpg

Russian Central Bank

  • Global central banks were net sellers of 12.1 tons of gold (XAUUSD:CUR) in Q3 vs. net purchases of 141.9 tons a year earlier, according to the World Gold Council. The last quarter in which central banks were net sellers was Q4 of 2010.
  • Among the sellers were Uzbekistan and Turkey, and Russia was a net seller for the first time in 13 years.
  • Putting things in a bit of perspective, Q3's sales come following record purchases by central banks in 2018 and 2019. The sales come alongside record prices for gold, and also came at a time when a few governments were under some fiscal pressure thanks to the pandemic panic.
  • Q3's sales were part of an overall slowing in bullion demand in Q3, which fell 19% year-over-year to the weakest since 2009. Jewelry demand, in particular, has been weak throughout 2020.
  • Gold this morning is flat at $1,877 per ounce. It started Q3 at about $1,775, eventually rising to $2,100 in early August.

Wednesday, October 28, 2020

Venezuelan oil transferred at new ship-to-ship spot in the Caribbean, tanker data shows

 sinking-with-60-million-gallons-of-oil - wo text

(Reuters) - Venezuela’s state-run oil company PDVSA this week began using a new location near La Borracha island in the Caribbean sea for transferring Venezuelan crude from one ship to another for exports, according to tanker tracking data seen by Reuters.

PDVSA [PDVSA.UL], whose exports have been hit by U.S. sanctions, in late 2018 tested the spot near La Borracha, about 16 kilometers (10 miles) off the coastal city of Puerto la Cruz, but it had not used it until now, according to shipping sources.

In recent weeks, the company informed customers about the possibility of moving a portion of the ship-to-ship (STS) transfers it now does near its Amuay refinery on Venezuela’s western coast to a new location away from shore off Los Monjes islands, near the maritime border with Colombia.

Conducting STS operations at these new areas further from shore is more expensive and results in less supervision from Venezuelan authorities, according to the shipping sources and PDVSA customers consulted by Reuters.

PDVSA and Venezuela’s oil ministry did not immediately reply to requests for comment.

The STS operation currently underway near La Borracha involves a vessel that loaded 700,000 barrels of Venezuelan heavy crude at PDVSA’s Jose port in mid-October, according to vessel monitoring firm The tanker took a “dark voyage” to Venezuela, meaning its transponder was off during its entire trip, making it difficult to identify.

A transponder transmits a ship’s unique registration number, name, location, origin, destination and cargo to a satellite.

The other tanker had been anchored off Venezuelan waters in the Caribbean sea for days before sailing to the STS spot, added.

Photos taken from a nearby tanker seen by Reuters showed the two vessels doing the transfer on Monday. The receiving vessel, which had its transponder online as of Oct. 27, has not departed, according to Refinitiv Eikon data.

Reporting by Marianna Parraga; editing by Grant McCool

Monday, October 26, 2020

Iran's Strategic Goreh-Jask Oil Pipeline Project Nearing Completion

One million bpd of oil will be piped from west of the Persian Gulf to Jask in the mouth of the Sea of Oman as part of a project to enable Iran's oil exports from the east of the Strait of Hormuz.


Iran’s new 1000-kilometer-long Goreh-Jask oil pipeline in the southern Hormozgan province, which will provide the country with an alternative route for crude oil exports that are currently transferred through the Strait of Hormuz, has registered over 60 percent of physical progress and is underway with full force.

The project, which is aimed at expanding the oil transport capacity in the south of the country to one million barrels a day, was inaugurated in late June by President Hassan Rouhani.
Addressing the inaugural ceremony of the project, President Rouhani said this project was currently the country’s most strategic project.

Rouhani said a total of $300 million has so far been invested in the project while another $800 million to $850 million is needed for its full operation.

“We hope that exports from Jask will begin as the government’s most strategic project by the end of this [calendar] year (March 20, 2021),” the president noted.

According to the head of Iran’s Petroleum Engineering and Development Company (PEDEC), considering the current rate of progress in the Goreh-Jask oil pipeline project, National Iranian Oil Company (NIOC) will be able to export its first oil cargo from Jask terminal by the end of the current Iranian calendar year.

Touraj Dehqani, who visited the project on Sunday, held several meetings with contractors and project managers and was briefed about the details of the project progress; during these meetings, the official emphasized the completion of the project on schedule.

Regarding the overall progress of the project, he said: “The project is being followed up with the aim of completing and launching it before the end of the year, and considering that the project progress has reached about 60 percent, so we focus more on the sectors in which the project operations are facing difficulties and need more attention.”

According to the official, currently, about 650 kilometers (km) of pipes have been provided to the project site.

“It is necessary for pipe manufacturing companies to make extra efforts for timely delivery of the entire length of pipes required for the project within the next three months and send it to the workshop,” he stressed.

Regarding the pump houses No. 2 and 4, which are important parts in the first phase of the project and have priority, more attention has been paid to the supply of required items and deficits. Delivery of the main pumps needed for the launching of this phase is also planned by domestic manufacturers for late November, Dehqani explained.

“Also, in the storage tanks section of Jask terminal, parts of sheets have been made and the welding operations of the tanks have started about one month ago”, the official added.

The PEDEC head also referred to the consequences of the outbreak of the coronavirus and said: “In such circumstances, we have always tried to monitor the health and safety protocols to ensure the health of our colleagues.”

Goreh-Jask pipeline will transfer one million barrels of heavy and light crude oils per day to Jask oil terminal in the southern Hormozgan province to be exported. 

COLUMN-China Crude Storage Flows Accelerate as Last of Cheap Oil Offloads: Russell

Location of existing strategic oil reserve bases in China. Red boxes indicate SPR sites in Phase I; green boxes indicate SPR sites in Phase II

China’s flow of crude oil into storage accelerated in September, reversing two months of declines, as the world’s biggest importer of the fuel continued to work its way through massive volumes purchased during a brief April price war. 

The flow of crude into commercial and strategic stockpiles was about 1.75 million barrels per day (bpd), according to calculations based on official data for crude imports, domestic output and refinery runs.

China doesn’t disclose flows into the nation’s Strategic Petroleum Reserve (SPR) or commercial storage tanks, but an estimation can be made by deducting the amount of crude processed from the total amount of crude available from imports and domestic output.

China’s crude output was 16.1 million tonnes in September, while imports were 48.48 million tonnes, giving total available crude of 64.58 million tonnes, or about 15.71 million bpd.

Refinery throughput in September was 57.35 million tonnes, equivalent to about 13.96 million bpd, leaving the difference between the two at 1.75 million bpd.

That was up from 1.1 million bpd in August, but lower than 1.92 million bpd in July, and well below the 2.77 million bpd seen in June.

The September storage flows were also slightly below the 1.83 million bpd average for the first nine months of the year, although still higher than the 940,000 bpd for 2019 as a whole.

The rise in flows into storage tanks in September was largely driven by higher crude availability, given that refinery processing was more or less steady, with September’s 13.96 million bpd only just below August’s 14.0 million bpd.

September crude imports were 11.8 million bpd, up 620,000 bpd from 11.18 million bpd in August, and also marking the fifth consecutive month imports have exceeded 11 million bpd.

It’s no secret that the high levels of crude imports by China are the result of a buying spree during the brief price war between top exporters Saudi Arabia and Russia in April.

That price war, coupled with the economic hit caused by lockdowns to combat the spread of the novel coronavirus, sent global benchmark Brent crude to the lowest in 17 years in late April.

While the Saudis and Russians, and other members of the group known as OPEC+ soon reached an agreement to extend and deepen crude output cuts, the price war allowed China to gorge on cheap oil.

So much oil was purchased that tankers were waiting for more than a month outside Chinese ports to discharge cargoes.

However, the overhang of imports is almost over, with Refinitiv Oil Research estimating about 2.7 million tonnes, or about 635,000 bpd, remains to be offloaded in October.


With imports likely to return to more “normal” levels from November onwards, it’s also likely that China’s storage flows will drop as well.

What’s not clear is whether Chinese refiners will prefer to use up accumulated inventories over the northern winter, or whether they will continue to import crude at rates more akin to the 10.5 million bpd level that prevailed prior to the coronavirus outbreak.

While China’s fuel demand has largely recovered since the lockdowns of the first and second quarters, it also seems evident that refiners are capping monthly processing at around 14 million bpd.

Even this level likely exceeds actual domestic consumption, meaning fuel inventories are probably increasing as well.

This is especially the case since China’s refiners are unable to export excess refined products, given weakness in much of the rest of Asia, where several countries are still battling to control the coronavirus pandemic.

Exports of refined products were 3.95 million tonnes in September, down 7.7% from August’s 4.27 million and 30.5% weaker than the 5.68 million tonnes in September 2019.

The risk for crude oil prices, and for products too, is that China has built up large inventories of both and will take some time to work through the excess. 

Friday, October 23, 2020

Last Rites for Venezuela’s State-Owned Oil Company

An oil pumpjack and tank with the logo of the state oil company PDVSA in Lagunillas, Venezuela, January 29, 2019. (Isaac Urrutia/Reuters) 

Socialist mismanagement is killing Venezuela's national oil company.

Venezuela is in the throes of an unprecedented economic collapse. Oil, Venezuela’s lifeblood, is being mismanaged by PetrĂ³leos de Venezuela (PDVSA), the country’s state-owned oil company. Faced with dwindling revenue from PDVSA, the government has relied on its central bank to finance public expenditures. To satisfy these demands, the Banco Central de Venezuela has turned on the printing presses, and, as night follows day, hyperinflation has reared its ugly head again.

In total, there have only been 62 episodes of hyperinflation in history. Venezuela, along with Lebanon, is one of only two countries currently experiencing hyperinflation. Today, Venezuela’s annual inflation rate is 2,275 percent per year, the highest in the world.

How could this be? After all, Venezuela has the largest proven crude-oil reserves in the world. At 303.81 billion barrels, they are larger even than Saudi Arabia’s, which stand at 258.6 billion barrels. Considering the extent of the country’s resources, it might strike most people as surprising that Venezuela’s hyperinflation is linked to the mismanagement of PDVSA, a state-owned enterprise (SOE). But PDVSA dominates the Venezuelan economy and accounts for 99 percent of Venezuela’s foreign-exchange earnings. In a sense, PDVSA is the Venezuelan economy, and even by SOE standards, the company is grossly mismanaged.

Under the direction of Luis Giusti in the 1994–98 period, PDVSA’s production soared. This trend changed in 1999, when Hugo Chavez became Venezuela’s president and introduced Chavismo as the country’s guiding economic doctrine. Venezuela’s oil output began to stagnate, a situation that worsened further after the coup attempt of April 2002. Chavez responded with mass purges of PDVSA’s employees, replacing them with “reliable” hands — those loyal to Chavez’s socialist regime.

After the 2002–03 output plunge, Venezuela’s oil production temporarily recovered. However, with the death of Chavez and Nicolas Maduro’s assumption of the presidency in March 2013, another output plunge began. This trend has left Venezuela’s output drastically lower than when Chavez took power in 1999 (see the chart below).

In addition to the reduction in PDVSA’s crude oil output, its physical capital has been consumed at an unsustainably rapid rate, with capital expenditures far below the value of equipment that is being consumed each year by depreciation and amortization.

There has also been a drop in the stock and quality of PDVSA’s human capital. In 2017, President Nicolas Maduro named a National Guard general, Manuel Quevedo, the leader of PDVSA, despite his having no industry experience. Quevedo was soon ousted by Asdrubal Chavez, a cousin of Hugo Chavez, in late April 2020 despite the new leader’s international reputation as a drug lord.

Unsurprisingly, PDVSA’s chronic mismanagement has been accompanied by a recent collapse in the number of operational oil-drilling rigs in the field (see the chart below). Indeed, it has been reported that, as of August 2020, PDVSA has no operational oil rigs

If all that isn’t bad enough, equipment breakdowns and increased accident rates have contributed further to long downtimes and output declines. As of October 1, 2020, PDVSA had reported 42 accidents and incidents since 2003, costing the SOE approximately 580 days of production. Because many of PDVSA’s blunders go unreported, and many of the mismanagement incidents (such as the sinking of the natural gas exploration rig “Aban Pearl”) cannot be quantified in terms of days lost, the true number of days in which PDVSA’s production has been hampered due to mismanagement is undoubtedly much higher than reported figures.

PDVSA’s decreased output is not due to dwindling oil reserves, but instead due to a reduction in its depletion rate. The depletion rate — the rate at which oil companies are depleting their proven reserves — provides the key to understanding the economics of an oil company and the value of its reserves.

Venezuela’s depletion rate has been falling rapidly since 2007 (see the first chart). In 2019, it sat at 0.121 percent per year, indicating that it would take 569.41 years for PDVSA to tap half of its reserves.

This has noteworthy economic implications. Because of positive time preference and discounting, the value of a barrel of oil produced today is higher than the value of a barrel of oil produced in the future, provided the price of oil remains the same. Given Venezuela’s incredibly low depletion rate, its reserves are essentially worthless because they are left in the ground for too long.

To put Venezuela’s depletion rate into perspective, consider Exxon, one of the world’s largest oil companies. At the end of 2019, Exxon’s depletion rate was 6.53 percent per year —comparable to that realized by most major oil companies. That rate implies that it would take 10.25 years for Exxon’s oil reserves to be halfway depleted. That is 559.16 years earlier than when PDVSA would deplete half of its reserves. If we discount at 10 percent, the median value of Exxon’s reserves is worth 37.65 percent of their wellhead value (the value that the producer would receive if the oil was sold at the wellhead and not distributed further downstream) — not zero, as is the case for PDVSA.

Thanks to Venezuela’s embrace of socialism and Chavismo, PDVSA has probably destroyed more economic value than any institution in world history. This brings back memories of President George W. Bush’s infamous remark that “this sucker could go down.” It’s no surprise that the clergy are preparing to administer PDVSA’s last rites.

Wednesday, October 21, 2020

Russia’s Novak says premature to talk about OPEC+ plans beyond 2020

Russia's Novak says premature to talk about OPEC+ plans beyond 2020- oil and gas 360

Source: Reuters 

MOSCOW – Russia’s energy minister said on Tuesday it was too early to discuss the future of global oil production curbs beyond December, less than a week after saying plans to reduce the output restrictions should proceed.

OPEC and allies including Russia, known as OPEC+, agreed in April they would gradually ease production cuts – introduced to support prices after a plunge in demand caused by the COVID-19 pandemic – with one phase of the easing set to begin on Jan. 1.

However, a second wave of infections has put a question mark over this timetable.

“It is too early to talk about the future of the OPEC+ deal beyond December,” Russian Energy Minister Alexander Novak said in comments to Reuters made via the ministry’s press service

“We need to understand” how the situation develops in the coming month before taking any decision, he added.

The ministry was replying to a request for comment on whether Russia might support keeping production cuts unchanged after 2020, as some industry sources had suggested.

Only last week, Novak said the Organization of the Petroleum Exporting Countries and its allies would ease output curbs as planned, despite a global spike in COVID-19 cases.

OPEC+ is next due to meet on Nov. 30-Dec. 1.

Russian President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed bin Salman, widely known as MbS, held two telephone calls last week, an unusual frequency of contact between them, as the OPEC+ ministerial summit fast approaches.

Kremlin spokesman Dmitry Peskov said regular contact was necessary as markets were volatile.

“The Russians are considering to support the rollover beyond December 2020 despite Novak’s statements about the plan of continuing the pact as it is now. All these Putin-MbS calls recently have not been for nothing, they are negotiating actively on the possible rollover,” one industry source said.

OPEC+ is cutting output by 7.7 million barrels per day (bpd) to help support prices and reduce inventories. It is due to reduce this to 5.7 million bpd from Jan. 1.

However, the International Energy Agency has said the second wave of COVID-19 is slowing demand and will complicate efforts by producers to balance the market.

Novak said on Monday the recovery in the market had been slowed by the second wave, while winter might bring more uncertainty due to a traditional decline in motor fuel demand.

Making a possible case for rolling over cuts, OPEC+ noted in a document that the balance between supply and demand might not be restored in 2021, under a pessimistic scenario.

A second government source said Russia, for now, would not disclose its plans on whether to continue with the current oil output cuts in order to prevent an overreaction in the market.

“The forecasts on the perspectives of the demand rising in 2021 are rather disappointing, it seems we will have to keep up the cuts,” the source added.

The Kremlin did not respond to a request for comment.

Tuesday, October 20, 2020

Gazprom Neft Moscow Refinery’s Tanker Loading Terminal Capacity up 25%

The Gazprom Neft Moscow Refinery has increased capacity at its automated tanker-loading terminal by 25%, further enhancing the security of fuel supplies to the capital and its suburbs.

his cutting-edge complex, constructed in 2019, is designed to handle shipments of aviation and motor fuels to road-tankers. Terminal capacity has been increased in line with higher production at the high-tech Euro+ refining complex, thanks to which the Moscow Refinery has increased gasoline, diesel and aviation fuel production capacity by 15%, 40%, and 100%, respectively.

An audit of all production processes involved in the operation of the tanker-loading terminal was undertaken in order to increase efficiency, with solutions subsequently deployed to reallocate logistics and traffic flows throughout the area, manage and prioritise tanker-loading queues, and systemise procedure in working with equipment, all of which has made it possible to increase daily fuel shipments.

Throughput capacity at the automated tanker-loading terminal is more than 250 tankers per day. Technology is making it possible to refill all of a tanker’s fuel-storage compartments at the same time, cutting refill times four-fold. A high-precision digital control system means fuel consignments are accurate to within 100 grammes. The complex uses modern environmental protection technologies and control systems which deliver the highest possible level of environmental safety.

The terminal is equipped with a vapour-recovery system, which captures spent vapour and condenses it into liquid condensate, before returning it to the production cycle. Further protection is offered by a hermetically sealed bottom-loading system, which prevents any emissions of oil products into the atmosphere while also preventing any dust or sediment from reaching tanker fuel compartments.

All filling points are equipped with cutting-edge emergency protection and firefighting systems. 

Monday, October 19, 2020

OPEC Launches 2020 Edition of the World Oil Outlook 

The 2020 OPEC World Oil Outlook (WOO) was launched Thursday in Vienna, Austria, providing the OPEC Secretariat’s in-depth look at the unprecedented scale and impact of the COVID-19 pandemic on the global energy and oil markets, an assessment of the medium- and long-term prospects, as well as analysis of various alternative scenarios and sensitivities that have the potential to impact the petroleum industry in the years ahead.

The WOO for the first time extends its outlook to 2045, providing an additional five-year window to examine developments in energy and oil demand, oil supply and refining, the global economy, policy and technology developments, demographic trends, environmental issues and sustainable development.

In the foreword to the 14th edition, His Excellency Mohammad Sanusi Barkindo, OPEC Secretary General, highlighted that the publication was published at a defining moment in the history of OPEC, a year marked by the COVID-19 crisis and the Organization’s 60th anniversary.

“In a year without precedent, we are very proud to bring you this exceptional edition of the WOO with the hope that it enriches the global energy dialogue and inspires closer cooperation,” the Secretary General said. “As we turn an important page in our history, OPEC’s commitment to securing an efficient, economic and steady supply of oil to consuming countries, and providing essential support to the global economy, is as unshakable today as it was when the Organization was founded 60 years ago.”

The videoconference launch also featured remarks by Dr Rainer Seele, CEO of the Austrian oil and gas company OMV, and Dr Jonas Puck, Academic Director of the MBA in Energy Management programme at the Executive Academy of the Vienna University of Economics and Business.

This year’s edition of the WOO also examines the bold and decisive actions taken by 23 OPEC and non-OPEC oil-producing countries in the Declaration of Cooperation (DoC) in response to the unprecedented market challenges resulting from the pandemic-related economic slump. The DoC committed to the largest and longest-ever oil production adjustments, which have helped to restore market stability since the second quarter of 2020 and provide a platform for recovery.

The WOO 2020 launch represents the culmination of months of planning, writing, review and production under unique circumstances. OPEC’s flagship annual publication was in large part carried out remotely, reflecting the global impact of COVID-19 on work environments and travel.

Like its predecessors, the WOO 2020 should be viewed as a helpful and insightful reference tool, one that underscores OPEC’s commitment to knowledge-sharing and data transparency. It also is intended to enrich the global energy dialogue and inspire closer cooperation – the hallmarks of OPEC’s 60-year record of success.

OPEC was founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela on 14 September 1960 during a ceremony at the Al-Shaab Hall in Baghdad, Iraq. The Organization today comprises 13 Member Countries and the OPEC Secretariat is located in Vienna, Austria.

Highlights from this year’s WOO include:

Despite the large drop in 2020, global primary energy demand is forecast to continue growing in the medium- and long-term, increasing by a significant 25% in the period to 2045.

All forms of energy will be needed to support the post-pandemic recovery and to address future energy needs.

Oil is expected to retain the largest share of the energy mix throughout the outlook period, accounting for a 27% share in 2045.

Natural gas will be the fastest-growing fossil fuel between 2019 and 2045 and, after oil, will remain the second-largest contributor to the energy mix in 2045 at 25%.

‘Other renewables’ – combining mainly solar, wind and geothermal energy – will grow by 6.6% p.a. on average, significantly faster than any other source of energy.

Assuming that the COVID-19 pandemic is largely contained by next year, oil demand is expected to partly recover in 2021 and healthy demand growth rates are foreseen over the medium-term horizon.

Globally, oil demand is projected to increase from nearly 100 mb/d in 2019 to around 109 mb/d in 2045.

In OECD countries, oil demand is expected to plateau at around 47 mb/d during the period 2022-2025 before starting a longer-term decline towards 35 mb/d by 2045.

In contrast, demand in non-OECD countries is projected to rise by 22.5 mb/d over the forecast period, from nearly 52 mb/d in 2019 to 74 mb/d in 2045.

India is expected to be the largest contributor to incremental demand, adding around 6.3 mb/d between 2019 and 2045.

Oil demand in road transportation will continue to dominate the sectoral breakdown, but the largest growth will come from petrochemicals.

Oil demand in the aviation sector was most affected by COVID-19 restrictions in relative terms, but is projected to partly recover in 2021 and will continue growing thereafter.

US tight oil is expected to recover quickly as market conditions improve, but is not likely to reach heights projected in previous Outlooks.

Looking further ahead, non-OPEC supply will decline again after US tight oil peaks around 2030 while OPEC liquids will fill the gap, rising by around 10 mb/d to 44 mb/d by 2045.

The downstream has come under enormous pressure due to declining demand. This will likely force a wave of refinery closures, especially as new capacity comes online in the Asia-Pacific and Middle East & Africa regions.

The global oil sector will need cumulative investment of $12.6 trillion in the upstream, midstream and downstream through to 2045.

Traded volumes of oil are expected to grow only modestly in the long-term, in line with supply patterns. However, the Middle East’s share of global crude and condensate trade will rise robustly during the second part of the forecast period.

Crude and condensate flows between the Middle East and Asia-Pacific remain the most important oil trade link, with volumes increasing from around 15 mb/d in 2019 to nearly 20 mb/d in 2045.

The Asia-Pacific region is forecast to remain the most important crude oil importing region throughout the forecast period, with imports rising by more than 6 mb/d.

Technological advancements are set to shape the global energy landscape while public policies relating to energy demand and supply are expected to become more stringent over the forecast period.

Enhanced global collaboration is vital to address the challenge of climate change.

International cooperation could allow a more coherent, balanced and integrated approach for realizing the Paris Agreement goals and interlinked sustainable development aspirations.

The WOO 2020 is available via two digital interfaces, the OPEC WOO App and a comprehensive interactive version, which can be accessed at

Friday, October 16, 2020

Exclusive: BP may cut oil supply to Caribbean refinery if it stays idle - sources

Limetree Bay refinery 

(Reuters) - The problem-plagued Limetree Bay refinery in St. Croix, Virgin Islands, may lose its main supplier of crude, oil major BP, if it isn’t successfully up and running by December, according to two people familiar with the matter.

The Caribbean refinery’s owner, Limetree Bay Ventures, has spent at least $2.7 billion (£2 billion) restoring the facility, initially hoping to tap rising demand for low-sulfur fuels and markets in Latin American and Caribbean. But the plant’s restart date has been delayed by nearly a year now.

BP Plc BP.L invested in the plant with an agreement to supply its crude and market the fuels produced in anticipation of a late 2019 startup. BP can terminate that contract if the plant cannot reach a certain production target by year-end, the people said, threatening the future of the largest new refining capacity in the Americas.

Limetree owners EIG Global Energy Partners and Arclight Capital Partners embarked on the overhaul in expectation of a surge in demand for marine fuels that comply with new maritime rules for low sulfur content. BP’s investment was to be repaid from product sales.

The goal was to have the refinery produce as much as 210,000 barrels per day of refined product, but the COVID-19 pandemic has crushed refining margins for fuels across the globe.

BP and EIG declined comment. Arclight could not be reached for comment.

In recent weeks, Limetree experienced problems trying to restart the crude unit, according to one of the people familiar with the matter. That followed a series of delays due to corrosion uncovered during renovations.

With the problems the refinery is having, it is less attractive for BP to remain invested, according to sources familiar with the plant. The oil major is in the midst of a global overhaul of its operations, with plans to boost renewable investments and cut fossil fuel development, which also now makes this investment less attractive.

At least one vessel carrying crude oil booked by BP has been moored outside the refinery since the end of August, waiting to unload crude loaded from Guyana, according to two sources and data from Refinitiv Eikon. Companies usually pay demurrage fees when ships idle without unloading.

Hovensa, the refinery’s previous owner, shut the plant in 2012 due to poor refining economics, but it once processed more than 500,000 barrels of crude per day.

Earlier this year private equity group EIG took majority control of Limetree Bay Ventures, the parent of the refinery and nearby oil terminal. Private equity firm Arclight Capital Partners acquired the site in 2016 with Freepoint Commodities and remains a major investor.

Restarting mothballed refineries is challenging, said John Auers, executive vice president at refining consultancy Turner, Mason and Company, even though several Limetree units are only about 20 to 30 years old, relatively new for a refinery.

“Problems are not uncommon with startups, even at new facilities because of all the moving pieces, high pressures and high temperatures,” Auers said.

Reporting by Laura Sanicola; additional reporting by Gary McWilliams; Editing by David Gregorio

Thursday, October 15, 2020

Iranian tanker departs for Persian Gulf carrying Venezuelan heavy oil


IMO: 9362061
Vessel Type - Generic: Tanker
Vessel Type - Detailed: Crude Oil Tanker
Status: Active
MMSI: 422209800
Call Sign: EPJH7
Flag: Iran [IR]
Gross Tonnage: 163660
Summer DWT: 317367 t
Length Overall x Breadth Extreme: 333.17 x 60 m
Year Built: 2008

CARACAS, Oct 9 (Reuters) - An Iranian-flagged oil tanker left Venezuela on Friday for Iran’s Kharg Island, Refinitiv Eikon data showed, after the vessel loaded 1.9 million barrels of heavy crude at the South American country’s Jose oil terminal.

The shipment marks the latest example of cooperation between the two OPEC nations this year as they step up commercial ties to try to rescue their respective oil industries, both of which are under intense pressure from U.S. sanctions.

The very-large crude carrier (VLCC), registered in shipping databases under the name Horse, discharged 2.1 million barrels of Iranian condensate to be used as diluent for Venezuela’s extra heavy oil production in September.

It then loaded Merey heavy crude, Venezuela’s flagship grade, for export under a deal between state-run oil companies Petroleos de Venezuela and National Iran Oil Company (NIOC), according to a PDVSA source.

PDVSA referred to the vessel as the “Master Honey” in its internal export schedules, seen by Reuters.

The vessel arrived in Venezuela and loaded crude without transmitting its location, as required under international shipping law in most cases, until about 2 a.m. (0600 GMT) on Friday, the Refinitiv Eikon vessel-tracking data showed.

PDVSA did not respond to a request for comment. Its export schedules did not list the cargo’s destination cargo.

Many oil tankers have changed their names and even their managing companies after visiting Venezuelan ports this year to avoid U.S. sanctions, according to public shipping registries and Refinitiv Eikon data.

The United States has sanctioned PDVSA as part of a series of measures to try to oust Venezuelan President Nicolas Maduro. It has imposed sanctions on Iran’s oil industry to try to thwart the country’s nuclear program.

Washington took no action to disrupt Master Honey’s voyage, or a separate flotilla of three Iranian tankers that brought fuel to gasoline-starved Venezuela last week. (Reporting by Deisy Buitrago in Caracas, Luc Cohen in New York and Marianna Parraga in Mexico City; Editing by David Clarke)

Wednesday, October 14, 2020

ConocoPhillips in Talks to Buy Concho Resources in Big Shale Bet

  • Energy producers could announce deal in next few weeks
  • Explorers are seeking to bulk up in productive Permian Basin

ConocoPhillips is in talks to acquire rival Concho Resources Inc., according to people familiar with the matter, as one of America’s largest independent oil explorers looks to make a bold bet on shale during an historic industry downturn.

The companies may announce a deal in the next few weeks, said the people, who asked to not be identified because the matter isn’t public. Concho shares climbed as much as 15% in New York trading Wednesday, the most since April. They were up 13% at $49.73 each at 9:50 a.m., giving the Midland, Texas-based company a market value of about $9.8 billion.

Conoco shares climbed 1% to $35.25, translating into a market value of almost $38 billion. No final decision has been made and talks could fall through, the people said. Representatives for Conoco and Concho didn’t immediately respond to requests for comment.

The potential combination would be the latest sign that long-expected consolidation in the shale patch has finally arrived. A purchase of Concho, which has an enterprise value of $13.4 billion, could become the year’s largest takeover of an oil and gas company, according to data compiled by Bloomberg. It would likely surpass Chevron Corp.’s all-stock acquisition of Noble Energy Inc., which was valued at about $11.8 billion including debt when it closed in October.

It would follow Occidental Petroleum Corp.’s $38 billion purchase of Anadarko Petroleum Corp. last year and could come just weeks after a $2.6 billion merger of Devon Energy Corp. and WPX Energy Inc. A transaction would also continue a trend of explorers seeking to bulk up specifically in the oil-rich Permian Basin of West Texas and New Mexico, the most productive field in the U.S.

‘Across the Board’

Conoco has been dropping hints about a potential M&A deal for months. In July, Chief Executive Officer Ryan Lance said the company was encouraged by the low premiums needed for acquisitions in the shale sector, citing Chevron’s deal to buy Noble.

“We’re looking at asset deals, we’re looking at corporate deals, we look across the board,” he said at the time.

Concho has drilling rights on about 800,000 gross acres in the Permian, according to a September investor presentation. While Houston-based Conoco has lost nearly half its market value this year, it’s held up relatively well compared to peers as oil prices collapsed during the coronavirus pandemic.

A deal between the two companies would make “strategic and financial sense,” JPMorgan Chase & Co. analysts led by Phil Gresh wrote in a note Wednesday, adding that acquiring Concho would be accretive on most metrics and provide “critical mass” to Conoco’s position in the Permian.

Concho’s 2.4% bonds due 2031 rose as much as 5.8 cents on the dollar to 102.1 cents, the biggest intraday increase on record, according to Trace data compiled by Bloomberg.

Last month, Conoco said that it would resume share repurchases, after cutting production and curbing spending to conserve cash in the first half of 2020.

Concho and Conoco together produced about 1.3 million barrels of oil equivalent a day in the second quarter, according to data compiled by Bloomberg Intelligence, just shy of the output of crude giant Occidental.

— With assistance by Simon Casey, and Allison McNeely

Tuesday, October 13, 2020

Libya Ups Production

Libyan oil fields, pipelines, refineries and storage 

Production out of OPEC member Libya has risen by 20,000 bpd since last week, reaching 290,000 bpd, according to Reuters report on Monday. On September 22, National Oil Corp (NOC) announced the lifting of force majeure at the Zueitina port and oil fields.

The country has faced many challenges over the year with fighting and blockades near oil installations around the country. Post the 2011 uprising in Libya, the country has struggled to get production up to pre-war highs, but at one point reached 1.2 million bpd of production.

NOC continues to evaluate the situation and is hoping to re-open the Ras Lanuf and Es Sider oil terminals.

Libya is not bound to any OPEC productions cuts.

Monday, October 12, 2020

The Oil And Gas Industry Revolved Around a Tiny Oklahoma Town. Then Houston Took Over.

Screenshot of the National Pipeline Mapping System Public Viewer

The National Pipeline Mapping System (NPMS) Public Viewer from the Pipeline and Hazardous Materials Safety Administration allows users to view pipelines and related information by individual county for the entire United States. The map includes:

  • Gas and hazardous liquid pipelines
  • Liquefied natural gas (LNG) plants
  • Breakout tanks (tanks used for storage or flow relief)
  • Pipeline accidents and incidents going back to 2002

Users can click on individual pipelines to find operator information and contact details, pipeline status and length, and the commodity being carried by the pipeline. For accidents, available information includes the date of the accident, the name of the operator, the material released, the total volume lost and recovered, and the cause of the accident.

The map does not include gathering or distribution pipelines, so it does not show pipelines that deliver gas to people's homes. The minimum accuracy of the pipeline information on the viewer is +-500 ft. For higher precision in locating pipelines, more information, and contact details for the NPMS, visit the NPMS FAQs.

Click here to access the interactive map.

I wrote this message last night but chose to send it today because I wanted to be considerate of your Saturday.

Your comment about when we are splitting the T mobile bill speaks volumes of how you do not care about us.

Since we've been in Charleston for a year, we NEVER have never made you care about us or our well being. Never told you or complained about our situation. I asked you to send me the MRE meal supply November of last year only because we actually needed the food. We had just moved in and it took 2 months to get back on our feet from pay for a t-mobile/rent/expenses & life here. Michael had to literally take food from a grocery store because that's how little $ we had. 

Our past experience from Chile to Texas, I put it all on myself and made ME responsible for it. But let's be clear if it INDEED worked out you would have benefited from it fully not just us. We did the work and you would be equitably compensated as 50/50 partners (Michael & Jess 50% / Jr. 50%). You demanded that split. As we evolved and we found out my truth, you always believed you were entitled to be the "golden caboose". I am NOT living my truth on the outside yet so you don't belive my truth is real. We have nothing to seemingly offer (apartment / car or anything shiney) so we don't matter. 

What you gave in the past was NOT just purely for the goodness in your heart. 

I reiterate here that we have not made you care about us since being here in CHS. You are on your own path and are use to receiving full support from the Government.... so you are used to being "taken care of" and not responsible for anyone but yourself. 

I don't ask for anything from you.You don't care about what we have or don't have. Or how anything affects us, re: your insensitive comments. I count my blessings but I never tell you how it's been a struggle or how much pain I'm in. 
Mean while the past 10 years, your pain was ALWAYS my pain. And don't just say it was the past 6 years. Especially 

Above all, you totally exempt ME being anything of significance...forget about even mentioning the G word. I am NOT the living G in your life. You care more about Heinz the dog then me.

So what, if you have to go without olive garden or drinks with friends to help pay the T mobile Bill. 

We don't have a reoccurring salary. 

Friday, October 9, 2020

Church Of England Dumps All ExxonMobil Stock

Canterbury Cathedral |, 

The Church of England Pensions Board divested this week all its shares in ExxonMobil since the U.S. supermajor has failed to set targets to cut Scope 3 emissions—those generated by the products it sells—a spokesperson for the board told Bloomberg on Thursday. 

The Church of England Pensions Board, which manages more than US$3.62 billion (2.8 billion British pounds) in assets, has been one of Exxon’s shareholders that has consistently called on the oil giant to report emissions and provide a pathway to reduce emissions from its operations and the products it sells to customers.  

“Exxon failed to meet the index criteria which embeds the latest assessment by the Transition Pathway Initiative (TPI), and as a result the board is disinvested from Exxon,” the spokesperson for the board told Bloomberg.

While European oil majors have started to report the so-called Scope 3 emissions and have committed to reduce them over the next decades, Exxon hasn’t done that, drawing criticism from its investors, including the Church Commissioners for England and BlackRock.

BlackRock, for example, pushed for more climate action and transparency at Exxon and Chevron, after the world’s biggest asset manager said earlier this year that it would place sustainability at the center of its investment approach.

“As we have discussed during our most recent conversations with Exxon Mobil Corporation (Exxon), we continue to see a gap in the company’s disclosure and action with regard to several components of its climate risk management,” BlackRock said in its rationale for voting contrary to Exxon’s board’s recommendations at its shareholders’ meeting this year.

After Exxon’s meeting, Edward Mason, Head of Responsible Investment for the Church Commissioners for England, said:

“Exxon needs to join its peers and set out a strategy for transition to net zero emissions. Investors will not tolerate a board that is not capable of steering a course consistent with the goals of the Paris Agreement.”

By Charles Kennedy for

Thursday, October 8, 2020

RPT-Venezuela's PDVSA to install ship-to-ship hub away from shore -sources 

(Reuters) - Venezuela’s state-run oil firm PDVSA is informing customers about a new hub for doing ship-to-ship transfers for exports in a location away from shore, a shift that could mean higher costs and less supervision, according to three sources.

More than two-thirds of Venezuela’s oil exports leave from the Jose terminal on the country’s eastern coast, a large and heavily supervised facility with two monobuoys for exports and connected through pipelines to several crude upgraders.

But with U.S. sanctions, PDVSA has since 2019 facilitated more crude exports via tanker transfers at Caquetios, an authorized ship-to-ship (STS) hub off the western coast near its Amuay refinery.

Some customers that were receiving Venezuela’s western crude grades off Amuay are now being directed to a spot about 12 miles north of Los Monjes islands in the Gulf of Venezuela, near the maritime border with Colombia and in front of the island of Aruba, according to the sources.

It is not clear if the Caquetios STS area will remain in service.

PDVSA and Venezuela’s oil ministry did not reply to requests for comment. The nation’s maritime authority INEA did not immediately respond to requests for comment.

The first vessel scheduled to receive crude at Los Monjes STS area is the Cape Bella V, which has remained outside Venezuelan waters waiting for a loading window, according to two of the sources and Refinitiv Eikon vessel tracking data.

It intends to load up to 1 million barrels of Venezuelan Merey crude bound for an undisclosed destination, the sources added.

Edge Maritime Inc, owner and commercial manager of the Cape Bella V, could not be reached for comment.

Some of PDVSA’s customers have so far rejected the company’s proposal of moving their scheduled loading site from Amuay to Los Monjes because it is further from Venezuela’s shore, which increases the costs of tugboat services, maritime fuel and mandatory inspections, and also because is near the maritime border with Colombia, which could cause diplomatic conflict, the two sources said.

The Colombian government did not respond to a request for comment.

But some shipowners not willing to load in Venezuelan waters might prefer this option to circumvent U.S. sanctions, the sources added.

The U.S. State Department and the U.S. Treasury Department, which oversees sanctions, did not immediately respond to requests for comment.

The U.S. measures have been tightened this year in a bid to force Venezuela’s President Nicolas Maduro out of power after his 2018 re-election was considered a sham by most Western nations. They drove PDVSA’s oil exports from June through August to their lowest levels in almost 80 years.

But shipments have picked up in recent weeks, pushed up by long-term customers lifting as many crude cargoes as possible before a deadline imposed by Washington to wind down trade with Venezuela and a myriad of mostly inexperienced firms receiving PDVSA’s oil, according to the Eikon data and company documents. (Reporting by Marianna Parraga in Mexico City and Mircely Guanipa in Maracay, Venezuela. Additional reporting by Luc Cohen in New York, Oliver Griffin in Bogota, Angeliki Koutantou in Athens, and Daphne Psaledakis and Humeyra Pamuk in Washington Editing by Daniel Flynn and David Gregorio)

Venezuela sends two more of its own oil tankers to deliver exports: data

 © William Gonzalez / 

(Reuters) - Two Venezuela-owned oil tankers are crossing the Atlantic Ocean jointly carrying about 1.2 million barrels of heavy crude, vessel tracking data from Refinitiv Eikon showed on Tuesday, as the South American nation turns to its own fleet in the face of U.S. sanctions.

Venezuela’s state-run oil company PDVSA is resorting to using its own tankers to deliver exports as tightening sanctions by Washington deter shipowners and managers from visiting the South American nation’s oil ports.

The tankers Colon - previously known as Arita - and Parnaso set sail in September from PDVSA’s terminals, but had not turned their location transponders on until this week, the data showed.

They are now following the route of another Venezuela-owned vessel, the Maximo Gorki, which departed in early September carrying about 2 million barrels of crude bound for Asia.

The Colon was signaling its destination as Asia, the data showed.

PDVSA in August began offering to deliver oil to some of its customers in its own tankers, factoring in freight costs in supply deals, to help buyers struggling to hire vessels to carry Venezuelan oil due to U.S. sanctions.

Since June, the United States has blacklisted vessel owners and threatened to sanction any tanker facilitating the export of Venezuelan oil as a way to increase pressure on President Nicolas Maduro, whose 2018 re-election was branded a sham by most Western countries.

Even though most of PDVSA’s aging tanker fleet is not in any condition to navigate international waters, the firm is using a handful of vessels that have up-to-date insurance and certifications, as well as tankers under time-charter contracts, according to company sources and internal documents seen by Reuters.

As part of the move, the state-run company has recently changed some of its vessels’ names and flags, according to Eikon and other shipping databases.

PDVSA did not respond to a request for comment.

Reporting by Marianna Parraga in Mexico City; Editing by Daniel Flynn and Marguerita Choy

Wednesday, October 7, 2020

World's Top Oil Trader Is Now A Used Car Salesman 

Vitol Group, the world's largest independent oil-trading firm, has been startled by the prospects of peak oil demand as it must diversify operations today to survive the decade. Vitol recently formed a new business venture called Vava Cars, aiming to become "the most trusted car transaction platform in the world," the company states on its website 

Vitol is a top energy and commodities trading firm globally, with over five decades of operating in financial markets. In 2019, the trading firm bought and sold more than 8 million barrels of oil and petroleum products per day. 

The company is getting into the used-car business with an exclusive launch of its second-hand vehicle transaction platform in Turkey and Pakistan. Further rollouts of the platform are expected in other countries in the coming months.

"Our revolutionary new service takes the hassle out of second-hand trading vehicles and allows consumers to sell and dealers to buy with confidence," Vava wrote on its LinkedIn profile. "We are the future of used car selling and buying."

Bloomberg said Vitol's launch of the platform is a means to diversify its "core business of buying, blending and transporting oil and refined hydrocarbon products amid the transition to greener fuels." The move also outlines the firm sees doom and gloom in energy markets as the peak oil demand could be sometime in this decade: 

"While Vitol has said it doesn't expect global oil demand to peak until at least 2030, it has already moved aggressively to diversify some of its business away from oil. The Rotterdam-based company has made investments in wind, solar, and battery storage while recently beefing up its power trading business. It's invested in one company that converts plastic into diesel and another that uses coal to create hydrocarbon liquids. It's also bankrolling a proposed carbon capture and hydrogen project in the U.K.," said Bloomberg.

The launch of Vava has had perfect timing as used car prices in Turkey have been on a tear this year. Bloomberg explains soaring used car prices is because a shortage of new ones as people are using vehicles to hedge against rapid inflation as the value of the Lira plummets

Vitol's access to low-cost capital will expand Vava to one day become the world's largest used car salesman. As for what the trading firm gets into next, as peak oil demand could be ahead, is anyone's guess...

Tuesday, October 6, 2020

COVID-19's Oil Price War


The year 2020 brought a tectonic shift in oil markets. By early September, COVID-19 had infected over 27.3 million people and caused over 893 000 deaths.

There are approximately 1.6 million cases in the Middle East, with all countries in the region, including the major oil producers, being affected. In essence, COVID-19 launched an oil price war on the entire world, without any diplomatic considerations.

COVID-19 caused a sharp drop in oil demand. Travel was curtailed, and many countries around the world closed down the economic activities that were deemed most likely to spread the virus. In the absence of vaccines and treatments, the main tools available to prevent infection were (and remain) physical distancing, methodical sanitising, and testing. The drop in demand had an immediate impact on the oil industry.

It was impossible to reduce production immediately, which caused major strains on infrastructure. Storage tanks and pipelines filled rapidly, and oil tankers were used increasingly as floating storage. Moreover, refinery optimisation became difficult, given that the structure of demand changed so quickly. Gasoline and diesel demand fell, but jet fuel demand dropped even more precipitously as travel bans were launched and airlines grounded their fleets.

With the world still mired in the COVID-19 pandemic, it is impossible to see the end, and impossible to say what the ‘new normal’ will look like. Even before the virus hit, the oil market was facing change. Oil demand growth was slowing in many countries, and demand was sliding downwards in many of the European countries that had been among the largest importers of Middle Eastern oil. Oil prices had been under steady pressure from oversupply. Light tight oil (LTO) production continued to grow in US shale plays, and the US surpassed Russia and Saudi Arabia to become the largest producer in the world. Middle Eastern producers grew increasingly concerned about lost market share.

OPEC and allied producer countries, working together in what is called the ‘OPEC+’ group, collaborated to support oil prices by cutting production. Saudi Arabia continues to lead this effort. Initially, the OPEC+ group worked to keep oil prices in the vicinity of US$50 – US$60/bbl. When prices sagged, it was often possible for the OPEC+ group to hold a meeting, stoke market interest, and watch prices strengthen again.

The COVID-19 pandemic changed this; it seemed there was nothing left that OPEC+ could say that would prop up prices, and markets witnessed a new phenomenon: the futures price of West Texas Intermediate (WTI) crude dropped into negative territory, closing on the New York Mercantile Exchange (NYMEX) at -US$37.63/bbl on 20 April 2020. The situation remains in flux.

COVID-19 and the Middle East

The COVID-19 pandemic is causing a massive shift in global oil markets, with major impacts on Middle Eastern countries. There are coronavirus cases in each and every country in the Middle East. Indeed, for a time, Iran was one of the critical focal points in global infections. Within the Middle East, Iran is the country with the highest number of cases (391 112) and deaths (22 542). 

Monday, October 5, 2020

NNPC and SEEPCO Sign Gas Monetization Deal for OML 143

Delta cPlans on to maintain four refineries — NNPC chief, Kyariommunities threaten to stop new NNPC recruits from resuming 

The Nigerian National Petroleum Corporation (NNPC) has signed a natural gas deal with Sterling Exploration and Energy Production Company (SEEPCO) that will see the development and commercialization of gas from OML 143. The project is aimed at reducing gas flaring in the country and monetizing this resource.

According to a statement by Group Managing Director of NNPC, Malam Mele Kyari, the deal is a milestone as well as a testament to NNPC’s commitment to facilitating the nation’s transformation into a gas-powered economy. Kyari said that the deal would not only help reduce gas flaring and its environmental hazards but would also promote gas production and utilization in the domestic market.

The Chairman of SEEPCO, Tony Chukwueke, says the deal is an essential partnership that would help the company fulfil the pledge it made to support the efforts of the Nigerian government to eliminate gas flaring by monetizing it. He also commended NNPC and Kyari for ensuring the execution of the agreement which he described central to the achievement of the company’s cardinal objective of boosting the production of Liquefied Petroleum Gas (LPG), condensate and dry gas for the Nigerian market, adding that the company has invested about $600 million for that purpose.

Friday, October 2, 2020

Oil prices likely to continue to struggle in the fourth quarter as demand lags


 Getty Images

  • Oil prices are expected to rise just a few dollars per barrel in the fourth quarter, and OPEC and its partners may have no alternative but to extend deep production cuts to support the market.
  • The fall off in air travel and a warm winter may keep pressure on distillate fuels, an important source of oil demand.
  • “The oil market is taking Covid the hardest of all of the asset classes out there,” said one analyst.

Oil prices are expected to rise just slightly in the final quarter of the year, held back from further gains by a deep chill in global travel and a still healing economy.

Analysts forecast the prices of Brent and West Texas Intermediate should rise to the low to mid-$40s per barrel, but they also see risks tilted toward another drop in oil prices.

“If anything, they’re vulnerable to falling into the low $30s. The oil market is taking Covid the hardest of all of the asset classes out there,” said John Kilduff, partner with Again Capital. “Demand is just not coming back, especially for jet fuel.”

Oil prices have clawed back from a crushing decline earlier this year, as the global economy shut down. Oil futures prices were even temporarily negative, as the market reacted to huge oversupply and a big drop in global demand. WTI futures fell below $40 this week and settled at $38.71 Thursday, falling 3.9% amid worries about the coronavirus and reports of a rise in OPEC output.

“It looks really bleak right now. This was a bust for the ages,” said Kilduff. “The demand just isn’t picking up.”

Bank of America expects oil prices to remain range bound in the mid $40s to year end. “In terms of downside risks, a big second Covid-19 wave was always going to rank first, but a warm winter now ranks second given the persistent surplus in distillate fuels,” according to Francisco Blanch, managing director of commodities and derivatives at Bank of America Merrill Lynch Global Research.

Blanch expects little price movement even though he expects the oil market could move into a 4.9 million barrel a day deficit, due to OPEC cuts if demand does rise. “Yet diesel and jet fuel/kerosene make up by far the largest petroleum product group in the oil market,” notes Blanch. He said that means crude oil prices cannot gain real traction until distillate demand, including jet fuel, recovers to a more normal level.

The oil industry has been cutting back on production and spending on further development. Royal Dutch Shell, for instance, is looking to slash up to 40% of the cost of producing oil and gas in an effort to preserve cash so it can overhaul its operations and focus more on renewables and power, according to Reuters.

The industry is also debating how much of the Covid-related cutbacks could be permanent.

A recent report from BP supported a longer-term view that fossil fuel demand may have already hit its limit and may not be likely to fully recover from the impact of the virus. The Organization of Petroleum Exporting Countries (OPEC) recently cut back its near-term demand outlook, and now expects demand to average 90.2 million barrels a day in 2020, down 400,000 barrels a day from its last forecast and a decrease of 9.5 million barrels a day from a year ago.

“There are still these serious headwinds for oil in terms of the macro outlook,” said Helima Croft, managing director and head of global commodities strategy at RBC Capital Markets. “OPEC is very focused on compliance. It’s just a question to me of how much more can you get out of these producers in terms of compliance.” 

But news reports this week that OPEC output has risen slightly is raising a red flag. Libya production is now returning to the market, at a time when OPEC has committed to cutting back.

Croft said the agreement to cut back on production by OPEC and other producers, like Russia, will be reviewed again in December. The OPEC+ group is currently holding 7.7 million barrels off the market, but in December they are expected to return some oil to the market and hold back just 5.6 million barrels, she said.

“Looking at the concerns about a second [virus] wave, and I think about some of these OPEC issues, I think there are some downside risks,” said Croft. “I think the question is can OPEC be nimble in response to a changing outlook ... It’s a difficult decision but they shouldn’t put 2 million barrels on the market.”

Citigroup analysts said OPEC members would be hurt by another dip into the $30s or even lower, and will be looking to defend the price above that level. The analysts said they expect OPEC+ to keep a floor under prices.

“Unless there’s a deep recession, we expect their mutual vulnerabilities will continue to provide the gel they need to largely keep their supply discipline intact,” said Citigroup strategists. “What’s more, the longer they wait, the more likely medium-term supply will flounder due to reduced capital spending.”

Blanch said OPEC will have to delay the return of more oil this year, unless demand picks up into the high 90 million barrels a day, not now expected by OPEC.

“If it’s a cold winter, maybe they get saved by the cold winter. If [virus] cases are not skyrocketing everywhere, they’re in better shape,” said Blanch. He noted one bright spot for the oil industry is that there has been no decline in petrochemical demand.

The U.S. industry has dramatically cut back production, from a high of 13.1 million barrels to 10.7 million a day earlier in mid-September. Demand for gasoline remains much weaker than normal at about 8.5 million barrels a day, down from 9.35 million barrels a year ago. U.S. drivers are an important factor in the global oil market, as U.S. gasoline sales normally account for about 10% of world oil demand.

“The economics are still not great for the U.S. but I think one of the big question marks is: ‘If the U.S. started to come back would the Russians just say we’re not going to do this anymore?’ Constrained output is helpful in keeping the Russians on board with OPEC+,” said Croft.

Blanch said another factor for oil prices is the Libyan oil is expected to come back on line. “If they’re back at full throttle, they’ll be back at one million barrels a day. That’s an extra million barrels they don’t need,” Blanch said.

That could also pressure OPEC+ when it looks to return oil to the market. “If demand doesn’t go into the high 90s [million barrels a day], OPEC is going to have some problems and they’ll have to extend the cuts,”  he said.