CORONAVIRUS CAUSING OIL PRICES TO DROP

[Pitcher]

I read an article earlier today that stated the Coronavirus has almost peaked in Wuhan.

Maybe so but if 5 million residents from Wuhan fled before the lockdown then China is no where near being over this horrible epidemic.   

[Pitcher]

https://www.thebaghdadpost.com/en/Story/45877/Coronavirus-death-toll-overtakes-SARS-epidemic
 

Coronavirus death toll overtakes SARS epidemic

The number of confirmed deaths from China's coronavirus outbreak has risen to 361, with Hubei province — the center of the outbreak — reporting 57 new deaths on Monday, according to the National Health Commission.

The death toll exceeds that of the 2002-03 SARS outbreak, which killed 349 people in mainland China. The commission also confirmed 2,829 new cases of the virus nationwide on Sunday, bringing the total number of people infected within China to 17,205. The total number globally is 17,300. 

Read more: Is it a cold, the flu or coronavirus? How to tell the difference

The World Health Organization has said the number of confirmed cases will keep growing because thousands of specimens from suspected cases have yet to be tested.

Chinese stocks plummeted by almost 9% at the start of trade on Monday as investors returned from the Lunar New Year break, which was extended due to virus fears. The benchmark Shanghai Composite Index nosedived 8.73%, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, sank 8.99%. 

[Pitcher]

It was just reported on CNN that 40,000 people world wide have been infected. 

A 5 day old infant has been infected in Wuhan.  

 

Geez,  This is a scary very very contagious disease.  It’s only getting started imo.  

[Theseus]

3 hours ago, Pitcher said:

It was just reported on CNN that 40,000 people world wide have been infected. 

A 5 day old infant has been infected in Wuhan.  

 

Geez,  This is a scary very very contagious disease.  It’s only getting started imo.  

Through my research, anyone with the common cold has a variation of the coronavirus. What makes the current situation different is the type of strain of the coronavirus. This is why people use the 2019-nCOV abbreviation for this particular strain. 2019 is used to designate the year the first case was reported although the first case was reported on the last day of 2019. The name is the novel coronavirus to designate the strain of coronavirus. Coronavirus has been around for a very long time and since it is contagious would make it an excellent choice for a weaponized strain. 

 

Here are some fun tidbits

 

- A Washington Post article on January 29, 2020 states that there is no link between nCOV and weapons research, although, three days earlier WaPo alleged the link in a previous article (Jan. 26, 2020).  

 

- Politifact states in a  January 26, 2020 article that bloggers are behind the conspiracy theory for the rumor that China stole the coronavirus  from Canada's National Microbiology Laboratory in Winnipeg and then weaponized it. The website Great Game India's original article focuses on a 2013 story that scientists at the Winnipeg were studying a new coronavirus to have originated in Saudi Arabia. This story was picked up by a blogger known for publishing false information.

 

- Both articles state there is no link but scientists are still trying to determine the cause of the outbreak.

 

From Fortune (as of Feb 6, 2020)

Here are places with known major constraints on travelers or China travel.

Australia

Foreign nationals in mainland China will not be allowed to enter Australia until 14 days after they have left or transited through China, the government said. Australian citizens, permanent residents and their families are still able to enter but must isolate themselves for 14 days if they’ve recently been to mainland China. The government has advised against any travel to mainland China.

Hong Kong

The city will quarantine anyone arriving from mainland China, including Hong Kong residents and visitors entering through the international airport, from Feb. 8 at midnight. The large Kai Tak cruise terminal in Victoria Harbor will close as crew and passengers on a cruise ship remain under quarantine. Most border crossings with mainland China are already closed.

India

Existing visas are no longer valid for any foreign national traveling from China, according to India’s health ministry. Anyone traveling to China will be quarantined on their return.

Indonesia

Direct flights to and from mainland China have been banned, and Indonesia has also suspended visas on arrival for Chinese citizens.

Japan

Foreigners who have visited China’s Hubei province within the past 14 days have been denied entry into Japan since Feb. 1. Prime Minister Shinzo Abe said he’s considering an expansion of immigration curbs.

New Zealand

A ban on anyone traveling from China came into effect Feb. 3 and lasts as long as 14 days. The government has also raised its travel advice about all of mainland China to “do not travel,” the highest level.

Philippines

The Philippines has widened a travel ban previously imposed on visitors from Hubei province to all of China, including Hong Kong and Macau. President Rodrigo Duterte has imposed a 14-day quarantine for Filipinos coming from China, while also temporarily barring travel to China, Hong Kong and Macau.

Saudi Arabia

Citizens of Saudia Arabia and foreigners living in the country are banned from traveling to China. Expats who have been to China won’t be allowed to return, according to the state-run Saudi Press Agency.

Singapore

Singapore has blocked the entry and transit of people who had traveled to mainland China in the previous 14 days, starting from Feb. 1. Visas of China citizens to visit Singapore have been suspended, including those already issued.

South Korea

From Feb. 4, South Korea barred the entry of foreigners who have visited or stayed in Hubei in the previous 14 days. Seoul also suspended its no-visa favor for Chinese tourists to Jeju Island.

Taiwan

All Chinese residents, excluding those from Hong Kong and Macau, will be banned from entering Taiwan from Feb. 6. Travelers who have visited Hong Kong and Macau will be quarantined at home and must monitor their health for 14 days, the Taiwan Centers for Disease Control said.

U.K.

The government has recommended British nationals leave China and advised against all but essential travel to mainland China.

U.S.

The U.S. has temporarily barred entry to foreign nationals who have visited China and pose a risk of spreading the illness, unless they are immediate relatives of U.S. citizens or permanent residents. The State Department issued its highest level do-not-travel advisory for China.

Vietnam

The government has banned all foreigners who have spent time in China in the previous two weeks from entering Vietnam. The country has already quarantined about 900 people, most of them Vietnamese, who arrived from China.

Edited February 10, 2020 by Theseus

[Theseus]

4 hours ago, Pitcher said:

Geez,  This is a scary very very contagious disease.  It’s only getting started imo.  

WHO is reporting that there are signs there is a slow down of new cases being reported. Probably due to quarantine protocols currently being implemented and less people willing to travel at this time.

[Pitcher]

https://oilprice.com/Energy/Natural-Gas/Shale-Gas-Drillers-Are-Facing-A-Perfect-Storm.html
 

Shale Gas Drillers Are Facing A Perfect Storm

By Nick Cunningham - Feb 12, 2020, 5:00 PM CST

Natural gas prices under $2/MMBtu have hit Appalachian shale gas drillers hard, but the longer the gas glut wears on, the deeper the problems will become.

close [x]

 

With each passing week, the shale industry reveals more financial stress.

On Monday, analysts at Piper Sandler downgraded their near-term outlook for Range Resources and Gulfport Energy, two Appalachian drillers, to Neutral from Overweight, citing a “deteriorating” outlook. An analyst with the firm pointed to the global glut for LNG, the coronavirus, collapse of prices and force majeure declarations.

U.S. nymex natural gas prices have been trading below $2/MMBtu since January, leading to a selloff in the sector, with particular pain on Appalachian gas drillers. EQT, the largest gas producer in the country, has seen its share prices fall by half since the start of the year, and it is down by 75 percent since late 2018.

Gas production in Appalachia appears to be slamming on the brakes because of the fall in prices, and it will take some time to rebound. “Of course, we may see growth being restored in the medium term, but in our view a sustainable Henry Hub gas-price environment of at least $2.5 per MMBtu is needed for this to happen,” Rystad Energy said in a new report.

The problem for Appalachian gas drillers is that gas output in the Permian is still growing, and it is almost entirely unresponsive to price signals. Shale companies are focused on drilling for oil, and ever-increasing volumes of associated gas are coming out of the ground. At the same time, flaring continues to soar.

Permian gas production growth may begin to slow down, but only because WTI prices have slumped and financial stress continues to sweep over the industry. In other words, low oil prices could cut into gas production. “We expect Permian gross gas production to increase by more than 4.5 billion cubic feet per day between the fourth quarter of 2019 and the fourth quarter of 2021, with the volumes gradually becoming visible in the market when the Permian Highway and Whistler pipelines enter into service or when Mexico is able to absorb a bit more of Permian gas,” Rystad said. Related: Global Oil Demand Growth Is Evaporating

Regardless of production, the financial stress continues, and not just for Appalachia. The entire shale complex is really on shaky ground. Just a quick scan of announcements reveals quite a bit.

On Tuesday, Noble Energy took a $1.1 billion write-down in its natural gas assets in the Eagle Ford, resulting in a fourth-quarter loss of $1.21 billion. The company cut 2020 spending by $400 million compared to an earlier spending plan. Shares were down by 2 percent during midday trading.

Whiting Petroleum, a large Bakken producer, saw its shares crash on Tuesday and trading of its shares were even frozen for a period of time because of extreme volatility. Seeking Alpha reported that there is “speculation that [Whiting] will hire advisors to review its capital structure.” Whiting’s shares were down more than 22 percent during midday trading on Tuesday.

Occidental Petroleum said on Tuesday that it expects to take a $1.7 billion impairment related to some assets that it swallowed up after its $38 billion takeover of Anadarko Petroleum. Occidental’s stock is down by nearly a third since the acquisition.

Even the largest oil companies are under scrutiny. Bloomberg reported that ExxonMobil is cracking down on employee travel, which comes after the oil major reported its worst quarterly profit in nearly four years. Bloomberg says the “austerity measures are unusual,” but it is also a sign of the times.

The next few days could add to the string of negative announcements. Fourth quarter earnings will be made public by Antero Resources, Cabot Oil & Gas and EQT. “I think we’ve seen a good number of write-downs and I think we will see more as people start to factor in lower for longer prices,” Richard Soultanian, president of energy-consulting firm NUS Consulting, told Reuters.

[Pitcher]

https://oilprice.com/Energy/Natural-Gas/Shale-Gas-Drillers-Are-Facing-A-Perfect-Storm.html
 

Shale Gas Drillers Are Facing A Perfect Storm

By Nick Cunningham - Feb 12, 2020, 5:00 PM CST

Natural gas prices under $2/MMBtu have hit Appalachian shale gas drillers hard, but the longer the gas glut wears on, the deeper the problems will become.

close [x]

 

With each passing week, the shale industry reveals more financial stress.

On Monday, analysts at Piper Sandler downgraded their near-term outlook for Range Resources and Gulfport Energy, two Appalachian drillers, to Neutral from Overweight, citing a “deteriorating” outlook. An analyst with the firm pointed to the global glut for LNG, the coronavirus, collapse of prices and force majeure declarations.

U.S. nymex natural gas prices have been trading below $2/MMBtu since January, leading to a selloff in the sector, with particular pain on Appalachian gas drillers. EQT, the largest gas producer in the country, has seen its share prices fall by half since the start of the year, and it is down by 75 percent since late 2018.

Gas production in Appalachia appears to be slamming on the brakes because of the fall in prices, and it will take some time to rebound. “Of course, we may see growth being restored in the medium term, but in our view a sustainable Henry Hub gas-price environment of at least $2.5 per MMBtu is needed for this to happen,” Rystad Energy said in a new report.

The problem for Appalachian gas drillers is that gas output in the Permian is still growing, and it is almost entirely unresponsive to price signals. Shale companies are focused on drilling for oil, and ever-increasing volumes of associated gas are coming out of the ground. At the same time, flaring continues to soar.

Permian gas production growth may begin to slow down, but only because WTI prices have slumped and financial stress continues to sweep over the industry. In other words, low oil prices could cut into gas production. “We expect Permian gross gas production to increase by more than 4.5 billion cubic feet per day between the fourth quarter of 2019 and the fourth quarter of 2021, with the volumes gradually becoming visible in the market when the Permian Highway and Whistler pipelines enter into service or when Mexico is able to absorb a bit more of Permian gas,” Rystad said. Related: Global Oil Demand Growth Is Evaporating

Regardless of production, the financial stress continues, and not just for Appalachia. The entire shale complex is really on shaky ground. Just a quick scan of announcements reveals quite a bit.

On Tuesday, Noble Energy took a $1.1 billion write-down in its natural gas assets in the Eagle Ford, resulting in a fourth-quarter loss of $1.21 billion. The company cut 2020 spending by $400 million compared to an earlier spending plan. Shares were down by 2 percent during midday trading.

Whiting Petroleum, a large Bakken producer, saw its shares crash on Tuesday and trading of its shares were even frozen for a period of time because of extreme volatility. Seeking Alpha reported that there is “speculation that [Whiting] will hire advisors to review its capital structure.” Whiting’s shares were down more than 22 percent during midday trading on Tuesday.

Occidental Petroleum said on Tuesday that it expects to take a $1.7 billion impairment related to some assets that it swallowed up after its $38 billion takeover of Anadarko Petroleum. Occidental’s stock is down by nearly a third since the acquisition.

Even the largest oil companies are under scrutiny. Bloomberg reported that ExxonMobil is cracking down on employee travel, which comes after the oil major reported its worst quarterly profit in nearly four years. Bloomberg says the “austerity measures are unusual,” but it is also a sign of the times.

The next few days could add to the string of negative announcements. Fourth quarter earnings will be made public by Antero Resources, Cabot Oil & Gas and EQT. “I think we’ve seen a good number of write-downs and I think we will see more as people start to factor in lower for longer prices,” Richard Soultanian, president of energy-consulting firm NUS Consulting, told Reuters.

[coorslite21]

2 minutes ago, Pitcher said:

https://oilprice.com/Energy/Natural-Gas/Shale-Gas-Drillers-Are-Facing-A-Perfect-Storm.html
 

Shale Gas Drillers Are Facing A Perfect Storm

By Nick Cunningham - Feb 12, 2020, 5:00 PM CST

Natural gas prices under $2/MMBtu have hit Appalachian shale gas drillers hard, but the longer the gas glut wears on, the deeper the problems will become.

close [x]

 

With each passing week, the shale industry reveals more financial stress.

On Monday, analysts at Piper Sandler downgraded their near-term outlook for Range Resources and Gulfport Energy, two Appalachian drillers, to Neutral from Overweight, citing a “deteriorating” outlook. An analyst with the firm pointed to the global glut for LNG, the coronavirus, collapse of prices and force majeure declarations.

U.S. nymex natural gas prices have been trading below $2/MMBtu since January, leading to a selloff in the sector, with particular pain on Appalachian gas drillers. EQT, the largest gas producer in the country, has seen its share prices fall by half since the start of the year, and it is down by 75 percent since late 2018.

Gas production in Appalachia appears to be slamming on the brakes because of the fall in prices, and it will take some time to rebound. “Of course, we may see growth being restored in the medium term, but in our view a sustainable Henry Hub gas-price environment of at least $2.5 per MMBtu is needed for this to happen,” Rystad Energy said in a new report.

The problem for Appalachian gas drillers is that gas output in the Permian is still growing, and it is almost entirely unresponsive to price signals. Shale companies are focused on drilling for oil, and ever-increasing volumes of associated gas are coming out of the ground. At the same time, flaring continues to soar.

Permian gas production growth may begin to slow down, but only because WTI prices have slumped and financial stress continues to sweep over the industry. In other words, low oil prices could cut into gas production. “We expect Permian gross gas production to increase by more than 4.5 billion cubic feet per day between the fourth quarter of 2019 and the fourth quarter of 2021, with the volumes gradually becoming visible in the market when the Permian Highway and Whistler pipelines enter into service or when Mexico is able to absorb a bit more of Permian gas,” Rystad said. Related: Global Oil Demand Growth Is Evaporating

Regardless of production, the financial stress continues, and not just for Appalachia. The entire shale complex is really on shaky ground. Just a quick scan of announcements reveals quite a bit.

On Tuesday, Noble Energy took a $1.1 billion write-down in its natural gas assets in the Eagle Ford, resulting in a fourth-quarter loss of $1.21 billion. The company cut 2020 spending by $400 million compared to an earlier spending plan. Shares were down by 2 percent during midday trading.

Whiting Petroleum, a large Bakken producer, saw its shares crash on Tuesday and trading of its shares were even frozen for a period of time because of extreme volatility. Seeking Alpha reported that there is “speculation that [Whiting] will hire advisors to review its capital structure.” Whiting’s shares were down more than 22 percent during midday trading on Tuesday.

Occidental Petroleum said on Tuesday that it expects to take a $1.7 billion impairment related to some assets that it swallowed up after its $38 billion takeover of Anadarko Petroleum. Occidental’s stock is down by nearly a third since the acquisition.

Even the largest oil companies are under scrutiny. Bloomberg reported that ExxonMobil is cracking down on employee travel, which comes after the oil major reported its worst quarterly profit in nearly four years. Bloomberg says the “austerity measures are unusual,” but it is also a sign of the times.

The next few days could add to the string of negative announcements. Fourth quarter earnings will be made public by Antero Resources, Cabot Oil & Gas and EQT. “I think we’ve seen a good number of write-downs and I think we will see more as people start to factor in lower for longer prices,” Richard Soultanian, president of energy-consulting firm NUS Consulting, told Reuters.

Whole towns of millions are completely shut down in China.......

[Pitcher]

And factories, restaurants, and many many businesses are closed. These giant cities of 5-12 million people are basically ghost towns.  People are afraid to go out in public. Those factories burn a lot of oil.  

[Pitcher]

https://oilprice.com/Energy/Crude-Oil/The-Coronavirus-May-Mark-The-End-Of-Russia-OPEC-Cooperation.html
 

The Coronavirus May Mark The End Of Russia-OPEC Cooperation

By Fares Kilzie - Feb 13, 2020, 6:00 PM CST

A week ago, at an emergency meeting of the OPEC’s Joint Technical Committee, Russia refused to agree to the cartel’s proposal to reduce production by an additional 600 000 barrels per day (bpd). Explaining Russia’s position, Energy Minister Alexander Novak saidthat in order to make such a decision, it takes time to evaluate the effect of coronavirus on the oil market.

It is really not yet clear how much the coronavirus will reduce global demand for crude oil. In February, amid the unfolding epidemic, OPEC lowered its demand growth forecast for 2020 by 230 000 bpd to 0.99 million bpd. The Oxford Institute for Energy Studies is more pessimistic: according to its estimates, in China alone, demand in Q1 2020 will decrease by at least 500 000 bpd. Russian Energy Minister Novak, on the other hand, retains moderate optimism, believing that the global decline will not exceed 200 000 bpd.

An Elusive Asian Market

However, even if the coronavirus turns out to cause more damage than the most pessimistic estimates, Russia should still not further reduce its oil production - on the contrary, it’s time to start preparing for a phased exit from the OPEC+ deal. This is first of all, due to increasing competition in the Asian market, where Russian companies have redirected exports in recent years. According to BP, from 2016 to 2018, Russia reduced oil supplies to Europe by 14 percent (from 177.4 million to 153.3 million tons), while increasing exports to China and India by more than a third (from 52.8 million to 73.8 million tons). A similar strategy was employed by Saudi Arabia, which over the same period managed to compensate for the reduction in supplies to Europe (by 1.7 million tons) with their total increase to India and China (by 4.7 million tons). The same applies to the United States, which last year reduced its exports to China by more than twice their original value due to trade war (5.8 million tons compared to 12.6 million tons in 2018, according to Refinitiv). In the next couple of years, the U.S. will inevitably increase exports, as a result of the Phase 1 trade deal, in which China pledged to purchase $52.4 billion worth of oil, liquefied natural gas (LNG), and other energy products from the United States by the end of 2021. Related: A Third Of Fossil Fuel Assets May Soon Be Stranded

The increasing competition will complicate entry into Asian markets for Russian companies that intend to monetize East Siberian oil reserves through exports. This is not only the Kuyumbinskoye field of Gazprom Neft and the Yurubcheno-Tokhomskoye field of Rosneft, but also the Lodochnoye, Tagulskoye, Vankorskoye and Payakhskoye fields, which are the basis of the Vostok Oil project, which in itself is worth 10 trillion rubles (over $157 billion), which will increase Russian GDP by 2% annually, according to the estimates of Rosneft CEO Igor Sechin. The increase in production at these fields will inevitably lead to non-compliance with the OPEC+ output cut deal, which the cartel hopes will keep oil prices above $60 per barrel. However, such a price level is disadvantageous for the Chinese and Indian economies, which in 2019 showed the lowest growth rates over the past 30 and 11 years, respectively (6.2% and 4.8%), according to data from IHS Markit. This, in turn, slows down oil demand - the International Energy Agency predicted a quarterly decline for China back in December (from 13.84 million bpd in Q4 2019 to 13.53million bpd in Q1 2020), when the coronavirus had not yet affected the commodity markets.

The US Market: A Dangerous Alternative

In this regard, the fall in oil prices will certainly spur demand in India and China, and may therefore be beneficial for Russia, for which the Asian market is the only reliable alternative to supplies to Europe. The American market can hardly claim the role of being such an alternative in the long run, even if in 2019, Russia entered the top three largest suppliers of oil and petroleum products to the United States, increasing exports from 9.9 million bpd in January to 20.9 million bpd in October, according to the US Energy Information Administration (EIA). This jump in exports can be credited to the U.S. sanctions on Venezuela, which since July 2019 has not delivered a single barrel of oil or petroleum products to the United States. The same applies to Iran, whose crude exports fell from 1.2 million bpd in January 2019 to 0.1 million bpd in January 2020, according to Refinitiv.

If the geopolitical situation changes, traditional suppliers will surely return to the American market (which is a risk for Russian companies), and at the same time they will face a decrease in US dependence on commodity imports. In reality, this is already happening: in September, American exports of oil and petroleum products exceeded imports for the first time since 1973, when statistical observations began. In November, net exports (exports minus imports) reached 771 000 bpd in the United States - in 2020 it will increase to 790 000 bpd, according to the February forecast by the EIA, and in 2021 this number is expected go up to 1.16 million bpd. It is likely that the actual figures will exceed forecasts, as consolidation has already begun in the American shale industry, which will in turn contribute to its financial recovery. This is evidenced not only by the acquisition of Anadarko by Occidental ($57 billion), which agreed to take over the debt of its former competitor, but also by the recent transactions between relatively small oil-producing companies in the Permian basin - Callon and Carrizo ($2.74 billion), WPX and Felix ($2.50 billion), as well as Parsley and Jagged Peak ($2.27 billion). Related: Global Oil Inventories Set To Soar As OPEC Fails To Take Action

Coronavirus as a Catalyst for Change

Improving financial stability will not only support the growth of oil production, but also future exports. Besides consolidation in the shale patch, increasing investment in the U.S. Gulf Coast export facilities is expected to boost exports to 8.4 million bpd by 2024, according to last year’s IEA forecast. This will help the United States come closer to Russia and Saudi Arabia in terms of export volume (5.5 million and 7.2 million bpd, according to the BP data for 2018). For OPEC and Russia, it is better to prepare for such a turn ahead of time than to wait for the moment when the policy of reducing production will finally lose its economic meaning. In this context, the coronavirus is just a catalyst for processes that have been taking place in the market for a long time. It is self-evident for Russia that it should move towards a phased exit from the OPEC+ deal in order to prevent losing market share to its competitors.

For OPEC, this is nothing new. It has seen its share in global oil production fall from 38.6 percent in Q4 2016 (when the first OPEC + agreement was signed) to 34.1 percent in Q4 2019, according to Refinitiv, while the share of OECD countries grew from 27.6 percent to 32.4 percent. A further decrease in market share will inevitably reduce the cartel's influence on oil prices. Therefore, it is reasonable for Russia to shift the responsibility for reducing oil production entirely to Saudi Arabia, which, within the framework of existing agreements, can expand its own quota for reducing production by 400 000 bpd (up to 900 000 bpd to the level of October 2018).

Such a decision could be a first step towards a gradual suspension of the agreements, which will allow Russia to compete in the global oil market, and not just remain a passive witness.

 

[Pitcher]

https://oilprice.com/Energy/Oil-Prices/OPEC-Aims-To-Balance-Oil-Markets-Against-All-Odds.html
 

OPEC Aims To Balance Oil Markets Against All Odds

By Robert Rapier - Feb 13, 2020, 1:00 PM CST

As 2019 came to a close, oil prices were under pressure from the continued surge of U.S. shale oil. Although OPEC and its partners had already cut production by more than 1 million barrels per day (BPD), U.S. oil production had grown by about 2 million BPD from early 2018 to late 2019.

While some are quick to credit soft demand with the assault on oil prices, the reality is that oil demand is still growing each year by over 1 million BPD. The real challenge for OPEC hasn’t been soft demand — it’s the continued onslaught of shale oil production.

Following a failed price war that started in 2014, OPEC’s strategy has been to prop up oil prices by cutting production. The cartel is now in a waiting game with U.S. shale producers, cutting production to keep prices propped up, while holding out for the slowdown of U.S. shale production. When that eventually happens, OPEC will be back in the driver’s seat — assuming it doesn’t take so long that electric vehicles (EVs) are by then cutting deeply into oil demand.

In December 2019, OPEC and Russia attempted to respond to sliding oil prices with new production cuts. Following its December meeting in Vienna, OPEC announced it would increase its production cuts by another 500,000 barrels per day (BPD).

That brought the total production cuts from OPEC and its allies to 1.7 million BPD. But then along came coronavirus, which is a black swan event. At the beginning of 2020, nobody had yet died from the virus. Now, the death total has surpassed that of the SARS virus that caused energy prices to slump in 2003.

China is aggressively attempting to contain the virus, and that is impacting the Chinese economy. (At least one economist is warning that the virus is going to paralyze China). As the world’s largest oil consumer, a slowdown in China’s economy suddenly has a real potential of impacting oil demand growth. Thus, OPEC now has to contend with U.S. shale oil growth and a short-term impact on demand.

Related: A Third Of Fossil Fuel Assets May Soon Be Stranded

The dual-threat caused a 20 percent slide in oil prices from the beginning of the year to early February. Last week OPEC members met with Russia (among others) with the hope of announcing additional production cuts that might stabilize oil’s free fall. This time Russia refused.

As fellow Forbes contributor Ellen Wald pointed out, “Russia has its own reasons for keeping production at current levels—mostly because its oil companies and government need the revenue.”

OPEC had hoped to announced additional production cuts of 600,000 BPD, but with Russia’s refusal to participate, no action is anticipated before OPEC’s next meeting in March.

Meanwhile, the oil price free-fall could continue, if coronavirus continues to spread. At present, that looks likely. How far prices fall at this point will be a function of the spread of coronavirus and OPEC and Russia’s eventual response (or lack thereof).

[Pitcher]

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Oil Sinks To Prices Not Seen Since 2018

By Julianne Geiger - Feb 10, 2020, 5:00 PM CST

Market fears and weak oil demand have prompted a continued oil price slide, with both the Brent crude and WTI crude benchmarks falling on Monday to lows not seen since the end of 2018.

WTI was trading below the $50 per barrel mark, down $0.79 (-1.57%) on Monday afternoon near 4pm. Brent crude was trading down $ 1.20 (-2.20%) at $53.27.

The coronavirus has so far infected more than 40,000 people and claimed the lives of over 900—more than the SARS outbreak of 2002/2003. Travel restrictions to, from, and within China, in an effort to contain the virus and keep it from spreading, have cut into oil demand, as has a slowdown in industrial activities.

Despite the travel restrictions, the virus has reared its ugly head in 25 countries, including the US and Britain—the latter of which declared today the virus an “imminent threat” to public health.

PetroChina and Sinopec, the two largest oil refineries in China, have cut refinery run rates to compensate, alongside independent refineries who have done the same. 

So far, oil has slid 25% off this year’s peak as a result.

OPEC failed to adequately quash market fears on Monday as recommendations by its joint technical committee both to extend the current production cuts to the end of the year and to deepen the cuts did not gain the immediately support of oil behemoth Russia, with the country saying it needed more time to evaluate the market situation and the effect the coronavirus would have on it.

The economic effects of the coronavirus are profound, with analysts downgrading China’s GDP growth for 2020, with most agreeing that the first half of 2020 will drag down the entire year.

Citi downgraded China’s full year growth forecast from 5.8% to 5.5%, and MacQuarie downgraded its outlook from 5.9% to 5.6%. Meanwhile, Moody’s kept its forecast at 5.8%.

[Pitcher]

https://oilprice.com/Energy/Energy-General/Russia-And-Saudi-Arabia-Fight-For-Market-Share-In-This-Huge-Oil-Market.html
 

Russia And Saudi Arabia Fight For Market Share In This Huge Oil Market

By Viktor Katona - Feb 13, 2020, 5:00 PM CST

One of the last bulwarks of global crude demand, India has been in the thick of national NOCs’ attention – Saudi Arabia will from now on participate in India’s Strategic Reserves and has signed up to build a greenfield 1.2mbpd refinery in the state of Maharashtra, the UAE-based ADNOC has joined Saudi Aramco in its refinery project and is seeking further investment opportunities. Ever since Rosneft bought the 400kbpd Vadinar Refinery (now known as Nayara) from Essar Oil in 2017, Russia has been present on the Indian downstream market – this acquisition turned out to be one of the crucial elements of President Maduro’s survival in Venezuela, as Nayara was the top outlet for PDVSA crude. Three years on, Russia wants a bigger share.

At first sight, India is the ideal place for large-scale downstream investment. Domestic production, currently at around 850kbpd, makes up for a mere 17 percent of the nation’s consumption and has been gradually declining after peaking at 937kbpd in 2011. Whatever upstream breakthroughs India is counting upon in the Mumbai Basin and other maturing basins, be it from enhanced oil recovery at offshore fields or new discoveries, oil production is unlikely to see a reversal (unlike gas). This evidently bothers Indian authorities to the extent that it has set itself a task to reduce oil import dependence by 10 percent by 2022, yet the opposite is happening – India’s crude import dependence has reached an unprecedented 85 percent by the end of 2019.

 

Source: Thomson Reuters.

Thus, any major crude producer with a political background strong enough to back up a commercial proposition would dream of locking up parts of the Indian market – its internal market is massive and demand for oil keeps on growing. Compared to traditional suppliers Saudi Arabia and Iraq, Russia is a relative newcomer to the Indian market – it might be even argued that the two nations’ political rapprochement has actually preceded any substantial energy links. Moreover, most of deliveries in 2015 and 2016 which were technically listed as Russian were in fact Kazakhstani-origin CPC – ESPO was too light and consequently too expensive, Urals too distant for the Indian refiner. Related: How Much Further Can Libya’s Oil Production Fall?

Amidst this relative dearth of past successes comes the recent announcement from the Russian NOC Rosneft that it concluded a term supply agreement with India’s state-owned refiner IOC. Rosneft will provide 40kbpd worth of Urals throughout 2020 – equivalent to 2 million tons per year or roughly 15 Suezmaxes. The deal was signed with a lot of government support as India’s Petroleum Minister Dharmendra Phadran was there to sign it, along with Rosneft CEO Igor Sechin. This contract, universally perceived as India’s initiative to decrease its dependence on barrels passing through the Hormuz Strait, will most probably lead to further developments in the Russia-India energy relationship.

India’s overture towards Russian oil is first and foremost a risk mitigation strategy against any disruption in the Hormuz Strait. India receives a whopping 60 percent of its total crude needs from the Middle East – should any sort of conflagration envelop the region, leading to the closure of the Strait, India would be missing some 2.7mbpd of crude. Two Middle Eastern crude producers stand out – in 2019 India took in 0.846mbpd of crude from Saudi Arabia, lagging only behind the top supplier Iraq, at 1.032mbpd. Hence, one should expect Russian and US exports to the India to be on the increase in 2020-2021, for reasons that eclipse merely financial considerations whilst New Delhi continues to walk the fine line of maintaining a foreign policy equidistant from Russia and the United States.

However, Rosneft’s interest in India will materialize in new forthcoming investments, making the first IOC deal the harbinger of things to come. As a matter of fact, it is not only IOC that has been looking into the possibility of concluding a supply agreement with Russian NOCs – both Hindustan Petroleum and Bharat Petroleum expressed their interest. In the case of the latter it is especially pertinent as Rosneft seems intent to bid for the state’s stake in BPCL (52.98 percent of the refiner) – news which made BPCL shares rally 13 percent in just three days last week. Rosneft still holds the record on the largest-ever foreign investment in India, with the aggregate cost of buying Essar Oil at $12.9 billion. Interestingly enough, Rosneft’s first step to purchase Essar in 2017 was also made by means of a term supply contract, further backed up by a top-level expression of interest. Related: North Dakota’s Crude Oil Production Could Peak Within 5 Years

 

Source: India’s Petroleum Ministry, Thomson Reuters, author’s data.

Rosneft’s motivation is fairly understandable – already endowed with downstream and retail capacities around the country, it could consolidate its India assets and grow even bigger. Were the Russian NOC to buy BPCL, its retail network would reach almost 25 percent of India’s total. India already is a massive market (despite the state of stagnation it has faced in the past year or so) and with India becoming the world’s youngest nation (average age of 29 years) still holds a lot of promise. In contrast, the Indian government wants tangible results in the short term – Modi’s cabinet has set the target of raising $14.5 billion from privatizing company stakes owned by the state. With April 2020, the start of the new financial year, coming soon and still only less than a quarter of the supposed privatization income available, President Modi really needs a bold story to sell.

Rosneft will have to vie with Middle Eastern national oil companies if it wants to get Bharat Petroleum as Saudi Aramco and ADNOC expressed their interest, too. Initially the Indian government wanted Western oil majors, too, to come onboard, however Total expressed its lack of interest in Indian downstream, BP remains hesitant whether the juice is worth the squeeze and American firms seem to prioritize large-scale investments at home. Given Rosneft’s deep ties to the Russian state, the Russian NOC can offer an upstream quid-pro-quo – offering India a larger share in Arctic Oil, its newest project for which it seeks huge tax breaks. Seems a fair price to pay for BPCL’s three refineries with an aggregate refining capacity for 35.3 million tons per year. 

 

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What Will Oil Prices Do After The Coronavirus?

By Irina Slav - Feb 16, 2020, 2:00 PM CST

The coronavirus outbreak in China has hogged headlines for a month now, battering oil prices and sending OPEC into a frenzy to find a way to stop or at least slow down the decline while smaller U.S. producers struggle with pending debt repayments amid depressed prices.

And it could get worse.

Earlier this week optimism returned to stock markets and oil prices briefly rallied when suggestions began to emerge that the virus could have peaked. And then China changed its methodology of counting the new cases which meant the number shot up considerably, slowing the oil price rally. Stocks may have continued up, but oil has stubbornly remained low.

China is the world’s second-largest consumer of oil after the United States. It is also the world’s largest importerof oil, accounting for a bit more than 20 percent of all global oil exports. No wonder oil prices react to every piece of news coming out of China.

The immediate effect of the coronavirus outbreak on oil prices is easy to see. Quarantines have severely limited travel, dampening demand for fuel. State refiners have cut their processing rates by a tenth this month and will be cutting additionally in March, according to OilX. The combined cut for PetroChina, Sinopec, and CNOOC for February came in at around 940,000 bpd, according to a Reuters report. Private refiners cut even more, with OilX calculating the cut at 25 percent.

In a somewhat surprising turn of events, however, earlier today Bloomberg reported that independent refiners have gone on an oil-buying spree, taking advantage of the low prices.

Now, based on all that, one could argue that the negative effect of the epidemic on oil demand will be temporary and the moment the outbreak begins to die down along with the panic it caused, demand for oil products will begin to improve. Yet the outbreak could damage the Chinese economy enough to lead to a more prolonged period of subdued demand and oil prices, respectively. Related: The Metal Trump Wants More Than Gold

China’s economy could slow down to a growth rate of 5 percent this year because of the coronavirus, Forbes’ Gaurav Sharma wrote this week. That would be 1 percentage point lower than what the International Monetary Fund forecast for the Chinese economy last month. GDP growth of 5 percent would still outperform the global economy, which the IMF sees growing by 3.3 percent this year, but it would be lower than what oil exporters have been hoping for. In an economy this large, every percentage point up or down makes a difference for prices.

In fact, China’s economy has become so essential for the global economy, it is what investors should watch to get investing insights. That and oil prices, MarketWatch’s Ivan Martchev said in a recent story. In it, he noted that the slowdown in the Chinese economy would have global repercussions and would hit energy stocks particularly hard.

“If the price of crude oil does what it did in 2015 — culminating in the January 2016 low of $26 per barrel — there is substantial downside for the stocks of both integrated energy companies and the more leveraged oil service ones,” Martchev wrote, noting that most energy stocks already underperform the indices because of lower investor confidence and persistent challenges coming from prices and the push for an energy transition to less polluting sources.

Not everyone is as concerned, however. Hedge fund legend Ray Dalio, for example, said that while the short-term effects of the coronavirus outbreak would be substantial, these may be exaggerated.

“I think the most likely outcome is that this virus will be a larger version of SARS that will have a significant temporary effect but won’t have a big long term influence, so the downward market price moves related to it are probably becoming exaggerated,” Dalio said in a LinkedIn post.

It is clear enough oil prices will remain subdued until the worst of the outbreak is over. The interesting question, then, is how much upside potential oil will have when this happens? Sadly, with a clear and present overhang in global supply, this may be limited, going on negative if the Libya oil port blockade ends anytime soon. If it continues the current course, however, and if Chinese demand rebounds quickly enough, there will be some good news for oil exporters.