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(Bloomberg) -- The U.S. cut its 2020 oil production forecast by more than 1 million barrels a day, as collapsing crude prices and plummeting demand threaten to shutter production in the country’s biggest fields.Production is expected to average 11.76 million barrels a day through December, down from a previous forecast of 12.99 million barrels, the Energy Information Administration said on Tuesday. The agency also trimmed its 2021 output expectations by 1.6 million barrels a day to just over 11 million daily barrels.The report comes just days before OPEC, Russia and other producers meet to negotiate a round of coordinated output curbs meant to stem crude’s historic plunge. President Donald Trump, who has been trying to broker a deal to end the price war between the Saudis and Russians, faces pressure from his counterparts to join in a global supply-cut agreement after prices plunged to their lowest levels in almost two decades.The latest forecasts reinforce comments that Trump made just a day ago about low oil prices already forcing U.S. oil producers to cut back.“The cuts are automatic if you’re a believer in markets,” he told reporters late Monday. “They’re already cutting. If you look, they’re cutting back. It’s the market. It’s demand. It’s supply and demand. They’re already cutting back and they’re cutting back very seriously.”Massive SurplusThe EIA also slashed its 2020 global petroleum supply forecast by 2.7 million barrels a day, and reported a looming supply surplus of 11.4 million daily barrels in the second quarter. That would eclipse the 10 million barrel-a-day production cut Trump has suggested OPEC+ shoulder in a bid to resuscitate the market.The agency’s 2021 forecast bottoms out at 10.91 million barrels a day in March 2021. That would amount to a production cut of almost 2 million barrels a day from the all-time high of 12.87 million barrels in November 2019.The Energy Department attributed its gloomy production outlook to “unprecedented worldwide demand impacts of Covid-19 coupled with the disruptive actions of the ongoing dispute between OPEC + nations,” agency spokeswoman Shaylyn Hynes said in a statement. “The Secretary is confident that both of these forces are temporary, and the market will recover,” she said, referring to Energy Secretary Dan Brouillette.The market rout -- spurred by coronavirus-related lockdowns and a price war for market share between the Saudis and Russians -- has already forced shale explorers to pare back their budgets. With storage rapidly filling up and nowhere for excess barrels to go, some companies are already starting to shut in wells.Net Importer“The U.S. oil industry is being wrestled to the ground by the Russians and Saudis,” Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts, said before the report was released. “Involuntary participation is the best way to put it.”EIA forecasts that the U.S. will return to being a net importer of crude oil and petroleum products in the third quarter of 2020 and remain a net importer in most months through the end of the forecast period. The agency expects Brent, the global benchmark crude, to average $33.04 a barrel this year, down from earlier expectations of $43.30.The U.S. will join in a discussion of energy ministers from the Group of 20 industrialized nations on Friday that will follow the OPEC + meeting, the Energy Department said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Bargain-hunting Chinese buyers have snapped up very cheap and sometimes obscure crude oil grades, mostly from Europe, where the impact of lockdowns to halt the new coronavirus has devastated demand. "If there is a buyer in Europe now, it is China," a Mediterranean oil trader said on condition of anonymity.
(Bloomberg) -- Oil held on to small gains as investors searched for signals that the world’s biggest producers will be able to strike a deal to end a price war and stabilize energy markets.Futures in New York rose more than 4% on Tuesday before trading close to little changed. Saudi Arabia and Russia are hammering out terms to a production agreement with OPEC+ talks planned for Thursday and a G-20 meeting of energy ministers set for Friday, according to people familiar with the matter.“There is uncertainty over whether a deal would be reached among OPEC+,” said Gene McGillian, vice president of market research at Tradition Energy. “That’s why we are seeing the market come off a bit.”Meanwhile, timespreads for West Texas Intermediate crude futures are at the weakest since 2011. Supplies at the key Cushing, Oklahoma, supply hub are sitting at the highest since November and concern over a further increase in U.S. supply is also keeping any large price rally at bay.U.S. crude futures are hovering just above $26 a barrel, down more than 50% so far this year. Shale drillers are reacting to the price environment: Continental Resources Inc. is cutting production this month and next, while Exxon Mobil Corp. is slashing $10 billion in spending.An effective supply deal will require all of the three top producers -- the U.S., Saudi Arabia and Russia -- to participate. While Riyadh and Moscow are set to cut output significantly, according to people with knowledge of the negotiations, Washington is more likely to offer up gradual reductions. The G-20 may be a more acceptable forum to bring on board the U.S. and other big producers outside the OPEC+ alliance, such as Canada and Brazil.Even if a production-cut deal is reached, the bigger question is whether reductions would be enough to offset a demand meltdown spurred by the Covid-19 outbreak.See also: In the Big OPEC++ Output Deal, Who’s In and Who’s Out?Meanwhile, some old-guard Texas oil drillers are urging state regulators to clamp down on crude output. The largest U.S. oil-producing state hasn’t restricted production in almost 50 years but a growing chorus of explorers and related industries are advocating just such a move.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Russia on Tuesday confirmed its participation in the meeting of leading oil producers set for April 9, joining Saudi Arabia and the rest of the OPEC members. The conference, due to be held via a video link, had been initially scheduled for April 6 but was delayed amid a war of words between Russia and Saudi Arabia. "Oil prices are holding their ground with market expectations building on an agreement for an output reduction of 10 million barrels per day (bpd), or at least close to 10 million bpd," BNP Paribas (PA:BNPP) analyst Harry Tchilinguirian told the Reuters Global Oil Forum.
Traders seeking to store oil have put their plans on hold this week after prompt Brent crude futures surged against future months and made storage uneconomical, despite overwhelming supplies in the market, industry sources said on Tuesday. Front-month Brent crude prices have jumped since Friday on expectations that Saudi Arabia and Russia may strike a deal to cut output and support prices. "Demand has collapsed and supply is gushing," said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore.
Additionally, gold futures rose 0.7% to $1,705.10/oz, after earlier climbing to a new seven-year high of $1,742.20, while EUR/USD traded at $1.0875, up 0.8%.
(Bloomberg) -- From Russia’s northeastern coast of Sakhalin to the Permian basin in the U.S., oil is going cheap as sellers slash prices in a desperate attempt to attract buyers.Refiners across the world have made deep cuts to crude-processing rates due to slumping consumption and a growing fuel glut, leaving producers struggling to find buyers for their cargoes. Sellers, meanwhile, are aggressively dropping the price of their oil while they tussle for the remnants of demand, with the prospect of forced output cuts looming as global storage swells.In recent days, benchmark crude prices have rallied in the financial markets, primarily due to speculation that the world’s largest producers might reach some sort of truce to halt the price war. However, gloom persists in the physical markets, where actual barrels of oil are bought and sold, with crude still trading well below benchmark levels.For example, the spot differential for Russia’s Sokol was at a discount of about $8 a barrel against Dubai crude this week, according to traders who asked not to be identified. That’s the lowest in more than five years and a whopping $11 less than the last reported deal for the grade. Australia’s Varanus traded at a discount of between $13 and $14 against London’s Dated Brent, compared with a 50-cent premium for the previous cargo.U.S. crudes have declined to multi-year lows against benchmark Nymex crude oil futures because suppliers are running out of space to store barrels.Last week, the discount for West Texas Intermediate crude trading in Midland, Texas, America’s shale capital, fell to the lowest level since 2018. Offshore grade Heavy Louisiana Sweet oil plunged to the weakest discount to oil futures in data going back to 1991. Another offshore crude Mars Blend, a regional sour benchmark, tumbled to the lowest level in over a decade.Storage tanks the world over are filling fast, including at the 45 million-barrel Saldanha Bay terminal, a key hub in Africa. Scores of supertankers have also been charted for long-term plays, to be used as floating storage.“One could argue that currently there is a disconnect between the futures prices and the physical differentials which is pointing towards a more distressed market,” researchers at the Oxford Institute for Energy Studies said in a report.The study noted that the movement of price differentials -- the gap between the price for physical crude and its benchmark -- has been more extreme than for futures prices. It also highlighted that the weakness in grades like CPC Blend and Murban is due to high yields of jet fuel and naphtha, a component in gasoline production.The consumption of jet fuel to gasoline has plummeted as governments try and curb the spread of the coronavirus pandemic by forcing people to stay at home. While China remains a bright spot as people return to work and factories begin to reopen after a prolonged shutdown, activity at Indian ports has slowed and the nation’s refiners are curbing processing amid a crippling lockdown.See also: Oil’s Apocalyptic April Could Reverberate for Years to ComeHowever, oil traders still have their sights on sending unsold crude to Asia, even as refinery margins in the region swing between profits and losses. The market phenomenon known as super-contango, where prompt crude prices are sharply below cargoes for delayed delivery, means that the cost of chartering a tanker can be offset by such gains, making the strategy viable.Even so, the question is where exactly in Asia can they send their supplies right now to get some relief. Recently, a tanker that was initially booked to send U.S. crude to India, based on fixture reports, was sent to China instead. Indian refineries have issued force majeure notices to defer their crude deliveries because the virus-led quarantines have crushed fuel consumption.(Updates with details on U.S. crude market activity in fifth and sixth and final paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
G20 oil ministers are set to meet on Friday to discuss what could be the biggest ever oil production cut in history, but the effect of the output reduction might not have a large impact on devastated oil markets
Guyana’s political impasse is a major potential threat to the nation’s oil boom and its development and continues to hold the nation in a deadlock
Russia’s oil production dropped slightly in the first days of April, just as it is set to join talks with other majors oil producers about a ‘massive’ production cut
Qatar Petroleum will postpone the start of production from its new gas facilities to 2025 due to a delay in the bidding process, but is not downsizing the world's largest liquefied natural gas project despite concerns of a mounting glut, its chief executive told Reuters. Saad al-Kaabi said the company is not scaling back a plan to build six new LNG production facilities, known as trains, needed for an ambitious domestic scale-up, though commercial bids from contractors and the start of output will be delayed. QP, the state-run LNG producer in the world's top supplier of the fuel, had wanted to lift its output to around 110 million tonnes per annum by 2024 from today's 77 mtpa, as the first phase of its expansion.
The Zacks Analyst Blog Highlights: TC Energy, Imperial Oil, Suncor Energy, Canadian Natural Resources and Kinder Morgan
Saudi Arabia and Russia are close to a deal on oil output cuts to reduce a global glut, a top Russian negotiator said on Monday, while sources in Moscow said it was ready for significant cuts, ahead of talks planned for this week. A supply deal between OPEC, Russia and other producers, a group known as OPEC+, that had propped up oil prices for three years collapsed in March, just as the impact of lockdowns to limit the spread of the new coronavirus destroyed demand. Riyadh and Moscow blamed each other for the failure and launched a battle for market share, sending oil prices to their lowest in two decades.
Russia's major oil companies, Rosneft, Lukoil and Gazprom, are set to resume Urals crude supplies to Belarus refineries in April after a three month suspension after Moscow and Minsk agreed supply terms, four industry sources familiar with supply plans told Reuters on Monday. Russia's oil supplies to Belarus are set at roughly 0.6 million tonnes for April so far, according to the sources. Companies may decide to send more oil to Belarus in April if they find the supplies profitable, they added.
(Bloomberg) -- The oil-price war isn’t doing any favors for Saudi Aramco’s bondholders one year on from the state-owned company’s debut on international capital markets.Trumpeted at the time as one of the most anticipated offerings of the year, the $12 billion of bonds have just clocked an 8.2% loss in March, their worst ever monthly performance, as crude prices more than halved. The outlook isn’t good either. Baltimore-based T. Rowe Price, which manages $1.2 trillion, says the securities will remain under pressure as long as the world’s top oil producers fail to agree on supply curbs.“It’s been, for the market, a reality check,” said Willem Visser, a T. Rowe fixed-income analyst. “Aramco tries to project itself as being a triple-A rated credit that’s bigger and better than the other oil majors, but people forget about the political risk.”Aramco’s $3 billion of bonds due 2029 now trade with a higher yield than the government’s debt of similar maturity.That contrasts with a year ago, when the energy giant issued its Eurobonds. The notes priced with a lower yield than those of the government itself, a rarity in corporate bond markets.Equity investors have also been hit. Aramco listed around 1.5% of its stock in the Saudi capital of Riyadh in December. Its market value has fallen from a peak of $2 trillion to $1.7 trillion. The stock remains below the 32-riyal listing price it surrendered a month ago.Aramco’s assets have still suffered less than those of peers such as Mexico’s state oil company Pemex, said Sergey Dergachev, a senior money manager at Union Investment Privatfonds GmbH in Frankfurt. That’s because it remains “one of the strongest oil and gas names in the emerging-market universe,” he said.While the oil crash has already caused Aramco to slash planned capital expenditure, it will be “very comfortable” with oil at $30 a barrel, chief financial officer Khalid Al-Dabbagh told investors in March. Brent crude prices are around $33 per barrel after rebounding 37% last week on hopes of a deal between producers. However, a meeting of the OPEC+ alliance scheduled for Monday was postponed to Thursday as Saudi Arabia and Russia traded barbs over who was to blame for the collapse in oil prices.“We like Aramco’s fundamentals, but think the valuations are now just fair rather than attractive,” said John Bates, a corporate-bond analyst in London with PineBridge Investments Europe.(Updates prices in sixth, eighth paragraphs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Russia's Sokol crude, which yields more middle distillates like jet fuel and gasoil from refining, has slumped to a record spot discount in the Asia market, two trade sources said on Monday, as fuel demand takes a hit from the coronavirus pandemic. Indian oil explorer ONGC Videsh sold one 700,000-barrel cargo of Russian Sokol crude for loading between June 2-8 at a discount of around $8 a barrel to Dubai quotes via a spot tender that was closed and awarded last Friday, likely to a trader, the sources said. In comparison, last month ONGC sold a Sokol crude cargo loading May 22-28 at a spot premium of around $3.20 a barrel to Dubai quotes to a trader, sources told Reuters at the time.
World stock markets jumped on Monday, encouraged by a slowdown in coronavirus-related deaths and new cases in some of the world's hot spots, while a delay in talks between Saudi Arabia and Russia to cut supply sent oil prices tumbling again. In New York State, Governor Andrew Cuomo said that despite an increase in the number of cases and deaths, a daily decline in number of new hospitalizations and other data suggest a possible plateau in the crisis. Signs of stabilization in New York are "probably the most important thing given the amount of capital that's controlled through managers that live in the area," said Thomas Hayes, managing member at Great Hill Capital LLC in New York, before Cuomo's update.
It’s risk-on early in the day, with COVID-19 numbers supporting riskier assets. Updated figures and news from OPEC will influence later, however.
(Bloomberg) -- President Donald Trump said he doesn’t think he’ll have to impose tariffs on imported oil to blunt the impact of a price war between Russia and Saudi Arabia, but held out the option to protect U.S. oil producers.“I would use tariffs if I have to,” he said at a White House news conference on Sunday, restating his position from Saturday’s briefing. “I don’t think I’m going to have to.”The U.S. has been in talks with Russia and Saudi Arabia about cutting excess production that’s cratered global oil prices, including calls between Trump and the leaders of both nations. But despite Trump’s assertion last week the two countries would cut production by 10 million to 15 million barrels, no agreement has been reached.“We want to save a great industry,” Trump said of the U.S. oil industry. “If they don’t get along, I would do that, yeah, I would do tariffs, very substantial tariffs.”Read more: Negotiators Race for Global Pact With U.S. Role in BalanceOPEC+, the former alliance between the Organization of Petroleum Exporting Countries and Russia, delayed a meeting aimed at ending the price war on Saturday after fresh tension between Riyadh and Moscow over who was to blame. The alliance will tentatively plan to meet virtually on April 9 instead of Monday. Brent futures dropped as much as 12% on Sunday.The International Energy Agency said that the deepest production cuts in the oil industry’s history wouldn’t be able to steady oil markets, where demand has collapsed because of the coronavirus outbreak.“It was the virus that killed it,” Trump said of the industry. He also noted again that low prices have benefits to the U.S. economy, a top oil consumer.“I’m seeing 91 cents a gallon out on the road,” he said. “A lot of people are happy. I see very inexpensive jet fuel, we’re trying to save the airline industry.”(Updates with additional Trump remarks beginning in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Saudi Arabia, Russia and other OPEC+ nations are racing to negotiate a deal to stem the historic oil price crash, with the G-20 taking center stage to bring into the fold the U.S. and other energy producers.U.S. Energy Secretary Dan Brouillette held a “productive discussion” over the phone with his Saudi counterpart Prince Abdulaziz bin Salman, the U.S. government said, a further sign that the diplomatic talks continue apace.The talks still face significant obstacles: a meeting of producers from OPEC+ and beyond -- which has been delayed once already -- is only tentatively scheduled for Thursday. Russia and Saudi Arabia want the U.S. to join in, but U.S. President Donald Trump has so far shown little willingness to do so as part of a deal between the Organization of Petroleum Exporting Countries and its allies.As an alternative, oil diplomats are planning an emergency meeting of G-20 energy ministers for Friday, part of an effort to bring the U.S. and other big oil producers outside the OPEC+ alliance -- such as Canada and Brazil -- on board, according to two people familiar with the situation.Brouillette said on Monday that Washington was “going to encourage the Saudis as chair of the G-20 to perhaps convene an energy ministerial toward the end of the week” as a forum to discuss the oil market. “I expect that that’s going to happen later this week,” he said.Crude prices have fallen 50% this year, as the economic effects of the coronavirus pandemic have knocked out about a third of global demand. The price crash is so dramatic that it’s threatening the stability of oil-dependent nations, the existence of U.S. shale producers, and poses an extra challenge to central banks. Industry officials say that if a deal to cut supply in an orderly way isn’t reached, the market will simply force producers to slash output as storage space runs out.The aim of talks, first revealed by Trump last week, is to cut oil production by about 10% -- the biggest ever coordinated reduction. Crude rallied on Trump’s comments but pared those gains as the diplomatic intricacies became clearer. Brent futures fell 2% on Monday, trading near $33 a barrel.Russia and Saudi Arabia are “very, very close” to reaching a deal on oil-production cuts, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, said in an interview with CNBC.However, even if a deal is struck for as much as 10 million barrels per day, that will barely dent the supply glut, which is estimated at as much as 35 million barrels a day. In some corners of the physical market prices have already turned negative, and traders have been putting oil into tankers at a record pace to store it at sea.Jump TogetherSaudi Arabia and Russia both say they want the U.S., which has become the world’s largest producer thanks to its shale revolution, to join the cuts. But Trump had only hostile words for OPEC on Saturday, threatening tariffs on foreign oil, though at a briefing late Sunday he said he didn’t expect he’d have to use them. The G-20 may be an easier forum for the U.S. to embrace than OPEC.“If the Americans don’t take part, the problem which existed before for the Russians and Saudis will remain -- that they cut output while the U.S ramps it up, and that makes the whole thing impossible,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group that advises the Kremlin.Read more: Why OPEC-Russia Blowup Sparked All-Out Oil Price War: QuickTakeIt’s not clear if Russia and Saudi Arabia will require the U.S. to publicly commit to cut production -- a challenge in the private, fragmented American industry -- or if a compromise gesture would be enough. Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank, said Moscow would like the U.S. to lift some sanctions as a compromise.Even a passive role for the American shale industry, whose output is already expected to go into decline at current prices, may be enough for a deal, said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former oil official at the White House.“Russia and Saudi Arabia’s condition that they will only cut production if the U.S. does too is going to be satisfied, because market forces will drive U.S. output down around 1 million barrels a day this year,” said Bordoff.Back ChannelsRussia and Saudi Arabia -- which sparred publicly between themselves over the weekend -- have disagreed about how they would calculate the cuts, according to a person familiar with the talks.Russia favors using an average of the first quarter output as the baseline, while Saudi Arabia wants to use its current April production. The difference is huge: the kingdom pumped 9.8 million barrels a day on average between January and March. In April -- as it wages its battle for market share -- it’s producing more than 12 million.Any agreement will require diplomatic agility at a time when nations are devoting massive resources to fighting the pandemic itself. All three players -- Crown Prince Mohammed bin Salman, Russian President Vladimir Putin and Trump -- appeared to be maneuvering to avoid blame if talks fail. Yet the U.S. president has also said he’s confident there’ll be an agreement between Moscow and Riyadh to cut production.“The chances of a meaningful deal that delivers real production cuts are low but back-channel talks are ongoing,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “Mohammed bin Salman is under heavy political pressure from Trump to demonstrate the Kingdom isn’t trying to bankrupt the U.S. shale industry.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.