#OPEC+ #Oil Cuts Deal: @BMO Sees Best outcome of Prices Stabilizing between $20-30 as demand rebuilds

From BMO:

 CONCLUSION:. On the positive side, the agreement avoids a price collapse as it reduces the risk of filling up the global storage capacity completely and most importantly it ends the price war between Russia and Saudi Arabia.  Our research team expects the price of oil to remain between $20 and $30 through June while the market assesses the compliance and more importantly the potential rebound in demand at some point. As of this morning, the market reaction has been somewhat muted with Brent and WTI relatively unchanged.

1- TOTAL CUTS OF 13.4Mb/d if you had OPEC at 6.1M b/d, OPEC+ members mostly Russia at 3.6Mb/d and G-20 cuts monastery US/Canada/Brazil at 3.7Mb/d. The cuts are focused on the May-June period then they go down to 8M b/d for July-dec.

2- AVOID PRICE COLLAPSE DUE TO LACK OF STORAGE- Demand destruction is estimated at 17Mb/d for 2Q ( compared to a 13.4M b/d cut but an actual cut from the March level of ONLY 7Mb/d for OPEC+ members). So this means inventories will go up by about 984M barrels versus a total storage capacity including floating storage left of 1.2 billion barrels.

3- END OF THE PRICE WAR- probably the most positive is all this is the end of the price war between Russia and Saudi Arabia

4- CUTS BY THE G-20? US/Canada/Brazil but allows Norway are talking about cutting 3.7M b/d of supply but it is not very clear how. It will  be mostly through Strategic Petroleum Reserves ( SPR) purchases, shut-ins and natural declines.

5- THE TEXAS RAILROAD COMMISSION ( RRC) meets tomorrow Tuesday to discuss production cuts. Based on recent discussions we are doubtful a serious official cut will come out of the US as most of the large producers like Exxon and Chevron have come against it.

6- IDEAL PRICE- we continue to think that $40 WTI is where the Saudis and the Russians want to oil price which is enough to kill US Shale's economics while helping the local budgets of each closer to balance.



Oil & Gas IN Fact Living on the Edge: Historic Deal With a Lot of Unknowns Randy Ollenberger • Oil & Gas (403) 515-1502 Phillip Jungwirth, CFA • Oil & Gas (303) 436-1127 Bottom Line: OPEC+ has reached an agreement to reduce production by 9.7 million b/d in May and June and roughly six million over the balance of the year. The G20 group acknowledged the need to stabilize oil markets and has reportedly agreed to reduce production by 3.7 million b/d. The OPEC+ cut (if adhered to) plus expected shut-in production due to low oil prices could be just enough to keep inventories from breaching capacity. We expect crude oil prices to trade in a $20-30/bbl range through May as the market waits to see if the production cuts materialize and are large enough to stave off disaster. Key Points OPEC+ capitulates. OPEC and its non-OPEC partners have agreed to reduce production by 9.7 million b/d in May and June and by roughly six million b/d for the remainder of the year. The baseline for the determination of production levels is October 2018 except for Saudi Arabia and Russia, which have baselines of 11 million b/d. The group will meet again on June 10 to determine if additional action is required. No commitments but uneconomic shut-ins elsewhere. The broader G20 group did not explicitly commit to any reductions in supply but acknowledged the need to stabilize oil markets and has reportedly agreed to reduce supply by 3.7 million b/d through declines and shut-in of uneconomic production. The OPEC+ cuts are not contingent on commitments from the U.S. and others to reduce supply. We anticipate a drop in non-OPEC production of 1.8 million b/d in the second quarter and growing over the balance of the year due to the drop in activity levels. Level of demand destruction unknown. We believe that global oil demand could be down more than 17 million b/d year over year in the second quarter to roughly 82 million b/d, which would represent the lowest level of demand since 2004. Taking the OPEC+ cuts into consideration we anticipate a year-over-year decline in production of 7 million to 92.8 million b/d, which implies a build of approximately 984 million barrels. We estimate remaining available global storage capacity (including floating storage) is roughly 1.2 billion barrels. While this means there could be adequate storage room there is not much room for error. Pricing in uncertainty. We expect crude oil prices to remain relatively weak through April and May as the market assesses the risk that the level of demand destruction could be higher than expected, leading to the possibility that there is not enough storage available. We also expect regional dislocations where storage fills up leading to wider price differentials in some markets. View Comment >

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#Oil: Energy companies feel the pain of #Saudi Arabia’s price war

Energy companies feel the pain of Saudi Arabia's price war
'This is the financial crisis for oil — except the producers are not too big to fail'

From the shale fields of Texas to deepwater projects in the North Sea, the price war launched by Russia and Saudi Arabia sent shockwaves across the entire energy industry and triggered the biggest sell-off since the global financial crisis.  

It has left some companies searching for strategies to protect profits and keep paying dividends. Others are fighting for survival. 

"The price collapse could be the trigger for a new phase of deep industry restructuring — one that rivals the changes seen in the late-1990s," said Tom Ellacott of the consultancy Wood Mackenzie. "Sustained prices below $40 a barrel would trigger a new wave of brutal cost-cutting. More highly-leveraged players will be forced to make the deepest cuts to stave off bankruptcy." 

Nowhere is that more true than in the shale industry, which helped end US dependence on Middle Eastern oil.

See the whole article on the FT here: https://www.ft.com/content/50c289dc-621f-11ea-b3f3-fe4680ea68b5

______________________________
MasterEnergy
@MasterEnergyRSS

US crude #Oil exports increased 45% to ~3MM b/d in 2019 @EIA_gov #OOTT #TWIP

U.S. crude oil exports averaged 2.98 million barrels per day (b/d) in 2019, an increase of 930,000 b/d (45%) from 2018 (Figure 1). 

The number of destinations for U.S. crude oil exports increased from 41 to 44, and Canada continued to receive the largest share (15%, or 459,000 b/d), followed by South Korea (14%, or 426,000 b/d). U.S. crude oil exports to China, the third-largest export destination in 2018, fell by nearly 100,000 b/d to average 133,000 b/d in 2019. Decreased U.S. crude oil exports to China were more than offset by increases to other destinations, resulting in shifting trade patterns. The growth in U.S. crude oil exports was driven by increasing U.S. crude oil production, expanding domestic infrastructure, and increased global demand for light, low-sulfur crude oils.

Sen. Warren’s #Energy Plan Will Kill the #Oil Industry--not just #Fracking

 

If frack­ing were banned-as Sen. Warren is calling for- nat­ural gas prices in the U.S. would jump to some­where be­tween $9 and $15, up from $2.32 per mil­lion BTU on Fri­day, Energy Investment Bank Tu­dor Pick­er­ing es­ti­mates.

Oil would rise to the $80-to-$85 range and could risk shoot­ing to $150 dur­ing mar­ket shocks.

Read the whole story on The Wall Street Journal: Prospect of President Warren Spooks Energy Investors

bit.ly/MasterEnergyBlog

This is why the #USA just doesn’t care too much about #Venezuela .. #Oil #OOTT @EIAgov

This is why the #USA just doesn’t care too much about #Venezuela .. #Oil #OOTT #MasterEnergy @EIAgov pic.twitter.com/q53qmBYHxT

— MasterEnergy (@MasterEnergyRSS) September 3, 2018

We’re Are About to see Millions of Barrels of #Oil get vaporized @Bloomberg

Millions of barrels of untapped oil that U.S. shale drillers discovered during the boom years are about to disappear from their inventories.

Six years ago, the industry pushed the Securities and Exchange Commission to make it easier for companies to claim proved reserves for wells that wouldn’t be drilled for years. Some prospects considered sure-things when crude was $95 a barrel are money losers at today’s $60. When crude
crashed in 2008, 44 U.S. companies wiped 630 million barrels from their books.

Now the stakes are higher. Of all the proved reserves of oil and natural gas liquids found by the 44 companies since 2008, more than half -- 5.4 billion barrels out of the 9.7 billion -- is attributed to wells that don’t exist yet, according to data compiled by Bloomberg.


“We’re going to see a lot of proved undeveloped reserves get vaporized,” said Ed Hirs, a managing director at Houston-based Hillhouse Resources LLC, an independent energy company, who also teaches energy economics at the University of Houston. “It could easily be 10 or 20
years before some of these wells get drilled if prices stay at these levels.”


Read the whole article online here: Millions of Barrels of Oil Are About to Vanish - Bloomberg Business