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Oil Prices Crash on Weak Demand - OIR 080920

Sep 08, 2020   •   by   •   Source: Proshare   •   eye-icon 1093 views

Tuesday,September 08, 2020   /06:40 PM / by Josh Owens of Oilprice.com /Header Image Credit: Oilprice.

 

Proshare Nigeria Pvt. Ltd.


Today, we will take aquick look at some of the critical figures and data in the energy markets thisweek. 

We will then look at some of the key market movers early this week beforeproviding you with the latest analysis of the top news events taking place inthe global energy complex over the past few days.

Proshare Nigeria Pvt. Ltd.

Chart of the Week
Proshare Nigeria Pvt. Ltd.

Chart of the Week

  • U.S. gasoline prices over Labor Day weekend averaged $2.22 per gallon nationwide, the lowest pricefor this time of year since 2004.
  • Gasoline consumption fell to 5.85 mb/d in April 2020, butrebounded to 90 percent of year-ago levels by the end of June. 
  • However, demand has plateaued since then. Gasoline demandremains 9 percent below the five-year average. 


Market Movers

  • Hess (NYSE: HES) and ExxonMobil(NYSE: XOM) announced their 18th oil discovery in Guyana.
  • CNX Resources (NYSE: CNX) increasedits free cash flow guidance from $300 million to $350 million for 2020.
  • Royal Dutch Shell (NYSE: RDS.A) restarted its Prelude LNG project, which has beenoffline since February due to technical issues.


Tuesday, September 8, 2020

Oil prices fell sharply on Tuesday, dragged downby a broader selloff in tech stocks but also from a darkening demand outlook.Brent dipped below $40 per barrel for the first time since June. Brent'sthree-month timespread has widened to its largest contango since May, a symptom of anincreasingly weak market. "Today's oil-price move is a clear sign that themarket now seriously worries about the future of oil demand," said PaolaRodriguez-Masiu, an oil market analyst with Rystad Energy.

Saudi Arabia cuts oil prices. Saudi Arabia cut the price for its oil that it ships to Asia, aclosely-watched price marker that often sets the tone for the global market.Saudi Aramco cut the price for its Arab Light for October delivery by $1.40 perbarrel. The price cut suggests demand is weak. A Bloomberg survey found thatonly 4 in 10 refiners in Asia said they were interested in buying more Saudicrude.

IEA: Oil demand has stalled. The IEA joined the growing chorus of voices who see the oil demandrecovery stalling out. "It doesn't seem like a massive stock draw seems to behappening yet," Keisuke Sadamori, Director of Energy Markets and Security atthe IEA, told Reuters. "We are not seeing a robust pickup in refining activity,and jet fuel is the big problem".

Hedge funds turn bearish on oil. Hedge funds and other money managers recently swung in a bearish direction. For the week ending onSeptember 1, investors sold the equivalent of 40 million barrels in the sixmost important petroleum futures and options contracts, according to Reuters. 

ExxonMobil's financial pressure mounts. ExxonMobil(NYSE: XOM) faces a cash shortfall of about $48 billion through 2021, according to aReuters analysis. The widening cash flow gap may require deep spending cuts,asset sales, and/or more debt. Exxon has already added $23 billion in debt thisyear. Analysts are even beginning to see the sacrosanct dividend as no longeruntouchable. 

Tesla's shares plunge after missing S&P 500. Tesla's(NASDAQ: TSLA) shares plunged by nearly 20 percent during midday trading on Tuesdayafter missing out on being included in the S&P 500. It was the largestsingle-day loss since February. As of last week, Tesla's shares likely pricedin the inclusion in the S&P, according to Bloomberg. 

ESG scrutiny heightens on metal miners. The ESG (environmental, social, and governance)investment trend is gaining popularity, but with that comes more scrutiny. Bankof America estimates that $600 billion in market value was erased fromcompanies after "ESG controversies," such as revelations on poor labor orenvironmental practices. Reuters reports that investment banks and analysts are increasing theirscrutiny on cobalt miners in the Democratic Republic of Congo. 

China to fast-track hydrogen cars. China is rolling out a package of policies aimed at boosting sales ofhydrogen fuel cell technologies and developing the supply chain. The strategyis focused on long-haul trucks. 

Shale producers race for permits ahead of elections. U.S. shale companies are racing to scoop up drilling permits on federal land ahead ofthe presidential election. Democratic Presidential candidate Joe Biden has saidhe would put a halt to new drilling on public lands. Permitting on federal landhas jumped by 80 percent in the Permian in the last three months. ThroughAugust 24, drillers have secured 974 permits on federal land in the Permianthis year, compared to 1,068 permits for all of last year. 

LNG investment dries up. No new LNG export projects could be approved this yearfor the first time in two decades, according to Reuters. Some analysts say it is possible that one or two projectsgo forward, while others say none will receive FID. Before the pandemic,analysts expected as much as 70 million tonnes per year of new capacity toreceive the go-ahead.

China looks to build an espionage hub in Iran. A 25-year deal between China and Iran will include a large-scaleroll-out of electronic espionage and warfare capabilities focused around theport of Chabahar. Iran is increasingly becoming a client state of China. 

Colombia's oil industry shows signs of recovery. Colombia's oil industry appears to be recovering, posting the third consecutive month of rig count increases,according to Baker Hughes. 

Germany threatens to pull the plug on Nord Stream 2. Germany's foreign minister declined to rule out sanctions on the Nord Stream 2 pipeline if Moscow did not providemore answers on the poisoning of Russian opposition leader Alexi Navalny. "Ihope...that the Russians do not force us to change our position on Nord Stream," Heiko Maas said.


Credit:

The post Oil Prices Crash on Weak Demandfirst appeared in Oilprice.com on September 08, 2020.

 

Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.


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