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Some oil news ICYMI – US shale producers to boost oil output by 500,000 bpd by month-end

Reuters report on what analysts & some in the industry are expecting

  • Larger producers are re-opening the taps in low-cost plays in Texas, but also in expensive shale basins in North Dakota and Oklahoma.
  • “With prices where they are now, if they stay above $30, I wouldn’t expect any significant curtailments from us in Q3 or beyond,” Devon Energy Corp Chief Executive David Hager said at a J.P. Morgan energy conference on Tuesday.
This would be a rapid (albeit partial) bounce back from prior supply cuts in shale. It’ll add pressure back onto OPEC+ who recently agreed to extend their their output cuts. Supply coming back on line as prices rise … pretty textbook economics this.
Here’s the link to Reuters for more
Reuters report on what analysts & some in the industry are expecting

More on oil – grim outlook

Scanning across some notes on OPEC and crude, some snippets … not optimistic:

Via RBC:
  • OPEC+ is apparently in crisis management mode
  • We think OPEC+ may make more headway by sharpening its compliance messaging, particularly around perennial underperformers, most notably Russia.
  • we think Saudi Arabia may be amenable to dropping production even further
  • none of these measures will arrest the immediate demand destruction and storage saturation problems that are weighing so heavily, particularly on US prices, they could potentially help ensure a better back half of the year if the COVID-19 crisis is contained
(Bolding above is mine)
Via TD:
  • Although we don’t expect negative prices to remain  …  the imbalance in the offer vs. demand and storage capacity issues could see a repeat of this issue.

OPEC presidency urged an emergency meeting on collapsing prices, members said no.

Algeria currently holds OPEC’s rotating presidency, urged convening a panel to consider assesses market conditions and falling prices.

Bloomberg cite an unnamed official as saying the request did not get enough backing to go ahead.
  • Key player Saudi Arabia said to be opposed.
Algeria asked OPEC’s secretariat to convene a teleconference meeting of the Economic Commission Board.
Algeria currently holds OPEC's rotating presidency, urged convening a panel to consider assesses market conditions and falling prices.

OPEC cuts 2020 global oil demand growth forecast by 920K bpd

The latest from OPEC

In other times that would be a shocking drop but now it sounds behind the curve. Obviously demand is going to fall much more in a global pandemic.
  • Saudi Arabia pumped 9.68 mbpd in Feb
  • Cuts non-OEPC supply estimate by 490K bpd to 1.76 mbpd
WTI crude oil is down $1.18 to $33.17 today and is just off session lows. There’s been no reaction to this news.

OPEC reportedly discussing additional output cut of up to 1 mil bpd now

Reuters reports, citing OPEC sources on the matter

OPEC

This is similar to the story reported by the FT earlier today here. It is said that several OPEC members, including Saudi Arabia, are leaning towards a deeper oil output cut because of the coronavirus outbreak.

Yeah, I’m not sure if Russia is going to get on board with that. In any case, Saudi Arabia is likely going to have to do the bulk of the heavy lifting here to push this through.
Even then, I’m not sure if it would be enough to turn sentiment around in the oil market as the virus outbreak continues to be more widespread across the globe.

FT: Saudi Arabia is pushing to make a substantial cut in oil production when Opec meet

OPEC meet 5 and 6 March in Vienna, the Financial Times says Saudi Arabia  is asking producers including Russia for a production cut of an additional 1m barrels a day

FT citing five people familiar with the talks,
Under the proposal, Saudi Arabia would account for the bulk of the new 1m b/d cut
  •  Kuwait, the United Arab Emirates and Russia would split the rest
  • Deal not yet been agreed
  • Moscow still hesitant
This proposal is up from the 600k bpd proposal previously floated.
OPEC meet 5 and 6 March in Vienna, the Financial Times says Saudi Arabia  is asking producers including Russia for a production cut of an additional 1m barrels a day

OPEC+ close to dropping the idea of an emergency meeting – report

So much for that hope

OPEC+ is close to dropping the idea of an emergency meeting this month and will stick with March meeting dates, according to delegates cited by Bloomberg. They say the Saudis may still push for hte Feb meeting.
Oil has climbed this week for the first time since Jan 3…at least for now. The March contract just expired.
So much for that hope

OPEC+ said to be considering additional 500k bpd oil output cut due to virus impact

Reuters reports, citing two unnamed OPEC sources on the matter

The sources say that most OPEC members agree on the need to cut oil output further and that they are considering to have a meeting on 14-15 February now. Just one to keep in mind as such a move may provide some relief to oil prices in the near-term.

That said, once again it will be an issue on compliance to see how effective these cuts are. Oil is getting a bit of a pop on the headlines, with WTI crude now up 0.4% to $51.80.

How coronavirus will impact oil markets – OPEC considering production cuts

The terrible human toll continues to increase.

Taking a look at oil though, this via Platts (S&P Global Platts is an energy and commodities information house).
Latest (in brief):
  • forecasting a drop of 200,000 b/d in oil demand for the next two to three months, reflecting roughly 15% of the expected oil demand growth in 2020
  • If the coronavirus is as bad as the Sudden Acute Respiratory Syndrome (SARS) outbreak in 2003, oil demand could fall by 700,000-800,000 b/d, reflecting more than half of the expected demand growth for 2020
  • OPEC members are considering deeper production cuts, or extending their existing deal, in response to a slump in oil prices, according to a source in the group.”The next two weeks are very critical for not only the oil market but the global economy,” the OPEC source said Monday, speaking on condition of anonymity.
Bolding above is mine.
oil markets - OPEC said to be considering production cuts

OPEC’s Barkindo reportedly confirms next OPEC+ meeting to be held in March

RIA reports, citing remarks by OPEC secretary general Barkindo

Barkindo

It appears that Barkindo has shot down rumours of the OPEC+ meeting potentially being postponed to June, with the headlines also saying that none of the OPEC+ members had asked for a different time for the meeting.

In any case, it’s only the end of January now. Two months is an extremely long time in OPEC world so just be mindful that they could still easily change their minds on this.