Author Topic: How a barrel of oil came to be worth less than nothing  (Read 366 times)

Offline thaiga

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How a barrel of oil came to be worth less than nothing
« on: April 22, 2020, 11:45:23 AM »
How a barrel of oil came to be worth less than nothing

Something bizarre happened in the oil markets on Monday: Prices fell so much that some traders paid buyers to take oil off their hands.

The price of the main US oil bench mark, West Texas Intermediate, fell more than $50 a barrel to end the day about $30 below zero, the first time oil prices have ever turned negative. Such an eye-popping slide is the result of a quirk in the oil market, but it underscores the industry’s disarray as the coronavirus pandemic decimates the world economy.

Demand for oil is collapsing, and despite a deal by Saudi Arabia, Russia and other nations to cut production, the world is running out of places to put all the oil the industry keeps pumping out — about 100 million barrels a day. At the start of the year, oil sold for over $60 a barrel but by Friday it hit about $20.

Prices went negative - meaning that anyone trying to sell a barrel would have to pay a buyer $30 - in part because of the way oil is traded. Futures contracts that require buyers to take possession of oil in May are expiring on Tuesday, and nobody wanted the oil because there was no place to store it. Contracts for June delivery were still trading for about $22 a barrel, down 16% for the day.

full article bangkokpost.com
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Offline thaiga

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Re: Turning oil wells again on is trickier than shutting them off
« Reply #1 on: May 10, 2020, 12:24:00 AM »
Turning oil wells again on is trickier than shutting them off

With hundreds of oil wells choking again or fully shutting off manufacturing, firms already are waiting for what could show to be a good larger problem: turning wells again on.

U.S. and Canadian oil producers are curbing as a lot as 4.5 million barrels of each day provides, in line with Plains All American Pipeline LP. In the U.S. alone, drillers have introduced plans to halt greater than 600,000 barrels of each day output this month and subsequent, mentioned Rystad Energy AS. Old-style, standard wells had been the primary to go down and the closures are increasing to a few of the horizontal gushers that characterize shale drillers’ prize belongings.

Although shutting down a properly is usually a comparatively easy — and even remote-controlled — course of, business executives and their engineering groups aren’t altogether positive how easily an idle properly could be restarted.

“When you shut in wells, especially for a long period of time, you have a lot of surprises,” Clay Bretches, an government vice chairman at Apache Corp., mentioned throughout a convention name with analysts on Thursday. “Some of them are good and some of them are bad.”

Executives are cautious about disclosing which wells are being curtailed — which entails squeezing again on the amount of crude flowing out of the properly — versus these which might be fully shut down. That’s as a result of reversing a complete shutdown presents a tougher set of duties and prices.

Houston-based Apache has shut about 2,500 wells, and Bretches mentioned the corporate is taking “great pains” to verify they’re being preserved. That consists of stopping corrosion and sustaining tools that sits atop the properly in distant fields.

WPX Energy Inc., which plans to close in a complete of about 45,000 barrels of oil a day this month and probably subsequent, mentioned it could possibly be so simple as remotely opening up valves or rushing up electrical pumps put in on the backside of some wells. But the corporate cautioned in opposition to the expectation that it could possibly be performed shortly.

Restoration Costs

“It wouldn’t be as simple as ‘just give us a couple days and we’ll be back up running at 100%,’” mentioned WPX Chief Operating Officer Clay Gaspar. “Anybody who says that, they’re probably short-changing their field organization just a touch.”

That’s why deciding whether or not to close a properly entails extra than simply evaluating working prices and oil costs, in line with Rystad. Producers additionally should weigh the associated fee and mechanical issue of restoring these wells again to pre-curtailed volumes.

“When you start back up from the level we’re at, we do expect to have some start-up capital,” mentioned Jeff Alvarez, head of investor relations of Occidental Petroleum Corp., which is shutting down about 5% of its manufacturing subsequent month. “It’s things like, just when I spend $1 today, I don’t get production for a couple of months from that.”

Cimarex Energy Co. mentioned the obstacles to reopening wells principally revolve round velocity and prices, slightly than any threats to the structural integrity of the rocks themselves. The Denver-based explorer held an inner technical session lately that checked out how its reservoirs can be affected by shut-ins, and the outcomes confirmed that they had been more likely to be “just fine.”

Pipeline Capacity

“We think we’re in pretty good shape with our reservoirs to shut them in and bring them back when we need,” CEO Tom Jorden mentioned throughout a convention name.

Oil firms aren’t the one ones who’ve to consider the long-term impacts of shuttered wells. Millions of miles of pipelines crisscross the continent to haul crude from the sphere to refineries and export terminals. As provides drop, so does demand for pipeline capability.

Pipeline operator Targa Resources Corp. was requested Thursday if the wells its system serves would ever ramp as much as earlier volumes.

“I think for the most part, we’d expect the shut-in volumes to come back and perform well,” Targa CEO Matt Meloy mentioned. “Could there be some older, really low-rate vertical wells … which they shut-in and just don’t bring back? I think there could be some amount of those.”

toplivenews.com
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Offline thaiga

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Re: Nigeria stares into the abyss of a life without oil cash
« Reply #2 on: May 11, 2020, 11:19:33 AM »
Nigeria stares into the abyss of a life without oil cash

Africa's most populous nation is getting almost nothing from its massive oil wealth. While headline Brent-crude futures have rallied sharply in the past few weeks - rising above $30 a barrel at one point earlier this week - a glut of Nigerian oil is fetching about $10 less than that. It's a level that means fiscal revenue for the continent's biggest economy has cratered.

"It's now dawned on everyone across the country how severe this threat is," said Andrew Nevin, a partner and chief economist for Nigeria at PricewaterhouseCoopers. "There is a possibility that at least for three to five years, there's going to be no revenue flowing to the government from oil."

Nigeria's plight is playing out across the world: from Venezuela to Iraq and Iran, petrostates are grappling with the same bleak future -- one where their prized commodity is worth a much less than it was, and where private companies often still want their cut.

Nigeria is faced with the twin challenge of dealing with the covid-19 pandemic and a slump in the price of crude, Finance Minister Zainab Ahmed said in a webinar on Tuesday.

"It's a double whammy," she said. "This has set us back significantly."

Global efforts to fight the spread of coronavirus have driven oil prices so low that they no longer cover the cost of pumping barrels for many companies in Nigeria -- let alone providing the government with crucial cash.

Nevin of PwC said at a webinar on April 30 that when oil prices are at around $20 a barrel, Nigeria gets very little for its oil. The commodity normally contributes about half of fiscal revenue.

full article stripes.com
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Re: SET buoyed by rising crude oil, further easing of restrictions
« Reply #3 on: May 16, 2020, 12:05:47 AM »
SET buoyed by rising crude oil, further easing of restrictions

The Stock Exchange of Thailand (SET) Index closed at 1,280.76 today (May 15), up 0.36 points or 0.03 per cent.

Total transactions stood at Bt50.659 billion with an index high of 1,289.24 and a low of 1,278.86.

A Krungsri Securities stock analyst expects the index to rise to 1,290, as crude oil prices climbed by 9 per cent US$27 per barrel after US oil stock was reduced by 700,000 barrels.

“The International Energy Agency expects oil stocks worldwide to reduce by about 5.5 million barrels per day during the second half of this year,” the analyst said, adding that the index also gained from positive sentiment about further easing of restrictions this week.

The government recently decided to lift more restrictions as of May 17.

“However, the index will be under pressure as investors are selling stocks due to the drop in the first-quarter performance of corporates and uncertainty over a second wave of Covid-19 infections,” the analyst added.

The top 10 stocks with the highest trade value today were PTT, CPALL, CBG, BAM, PTTEP, GULF, PTTGC, STA, AOT and ADVANC.

As of 4.30pm, the price of crude oil rose by $0.68 or 2.47 per cent to $28.24 per barrel, while gold rose by $3.60 or 0.21 per cent, to $1,744.50 per ounce.

Indices in the US and Europe were on the rise, though Asian indices had a mixed day:

Japan’s Nikkei Index closed at 20,037.47, up 122.69 points, or 0.62 per cent.

China’s Shanghai SE Composite Index closed at 2,868.46, down 1.88 points, or 0.066 per cent, while Shenzhen SE Component Index closed at 10,964.89, up 2.74 points, or 0.025 per cent.

Hong Kong’s Hang Seng Index closed at 23,797.47, down 32.27 points, or 0.14 per cent.

South Korea’s KOSPI Index closed at 1,927.28, up 2.32 points, or 0.12 per cent.

Taiwan’s TAIEX Index closed at 10,814.92, up 34.04 points, or 0.32 per cent.

nationthailand.com
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Offline thaiga

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Re: Pandemic punches 1.7-billion-barrel hole in global oil demand
« Reply #4 on: May 16, 2020, 01:26:50 PM »
Pandemic punches 1.7-billion-barrel hole in global oil demand

A fifth of global demand for oil will disappear this quarter. All three of the major forecasting agencies now agree that the world faces its biggest-ever slump in oil consumption, after governments imposed movement restrictions on billions of people to combat the coronavirus. The scale of the demand hit means that despite producers implementing unprecedented output cuts, stockpiles will soar this year.

The International Energy Agency, the Organization of Petroleum Exporting Countries and the U.S. Energy Information Administration have all updated their oil market forecasts in the past week and they have come into much closer alignment in their views of the depth of demand destruction. The pessimistic stance adopted last month by the International Energy Agency has now become the consensus view - the world will use about 1.7 billion barrels less oil this quarter than it did during the same period last year.

In reports published mid-April, the EIA and OPEC both saw demand falling by about 12 million barrels a day in the second quarter, compared with the same period last year. The IEA alone forecast a drop in excess of 20 million barrels a day. It has since become a little more optimistic, as lockdowns are eased and businesses gradually begin to reopen. But the other two forecasters have moved sharply in the opposite direction, seeing much more demand destruction than they did a month ago and catching up with the IEA's more pessimistic view on oil consumption.

All three still see the situation improving dramatically in the second half of the year. Although demand is expected to remain below year-earlier levels throughout 2020, the size of the drop is seen to shrink significantly. The IEA and the EIA see it around 5 million barrels a day below last year's levels in the third quarter, while OPEC is less optimistic, with its forecast still showing a year-on-year loss of more than 8 million barrels a day. The situation is seen improving further in the final three months of the year, with estimates of the demand loss ranging from 2.26 million barrels a day from the EIA to 4.5 million from OPEC.

But, as the IEA warns, the biggest uncertainty is "whether governments can ease the lockdown measures without sparking a resurgence of covid-19 outbreaks." At present, the forecasts assume that they can. If that assumption proves incorrect, then we could be in for another slump in demand as widespread lockdowns return.

Even as the EIA and OPEC have become more pessimistic about the size of the second-quarter demand destruction, the overall mood surrounding the oil market has become more optimistic. In part that's the result of the first signs that the worst of the demand destruction may have passed, but it also reflects optimism about the impact of output cuts that are a necessary part of balancing the market.

The IEA points to "massive cuts" in production from countries outside the OPEC+ agreement, which itself saw 20 countries agree to cut output by an unprecedented 9.7 million barrels a day in May and June from baselines that were mostly set at October 2018 levels. If the OPEC+ countries comply fully with their agreed cuts - which would be a first - the agency sees global oil production in May some 12 million barrels a day below the April level. A further cut of 1.2 million barrels a day by Saudi Arabia, Kuwait and the United Arab Emirates has been pledged for June.

The IEA and OPEC already see declines in non-OPEC output - including the cuts implemented by Russia and other OPEC allies, as well as the market-driven reductions in countries like the U.S. and Canada - outstripping the effect of the OPEC cuts. All told, they see global oil production more than 8.5 million barrels a day lower than it was a year ago on average in the second quarter, while the EIA sees it down by a little over 8 million barrels. By the end of the year, the IEA and OPEC see producers everywhere pumping in excess of 10 million barrels a day less than they were a year earlier. The EIA sees the reduction at a little over 9 million barrels.

The output cuts, voluntary or otherwise, aren't nearly big enough to offset the collapse in demand during the current quarter. Inventories are expected to build by somewhere between 780 million barrels (OPEC) and 1.12 billion barrels (IEA) over the course of the second quarter. But they should start to come down again in the second half of the year, as demand begins to recover and output cuts get deeper.

Even if the OPEC+ countries implement their output deal as planned and in full, including the additional reductions offered by Saudi Arabia and its closest allies for June, the world's stockpiles of oil will be much higher at the end of the year than they were at the beginning. OPEC's latest forecast shows an increase of about 530 million barrels in global stockpiles, while the EIA's figures show a build of 620 million barrels. The IEA foresees the biggest addition of the three, with worldwide oil inventories ballooning by more than 725 million barrels, a volume that exceeds the U.S. government's strategic crude reserves.

Even if oil demand returns to pre-virus levels in 2021, which remains an optimistic view, oil producers will remain under pressure while excess inventories are drawn down.

houstonchronicle.com
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Offline thaiga

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Thai Oil aims to cut costs, improve performance in wake of outbreak

Thai Oil Plc plans to cut its general expenditure for this year by Bt2 billion to Bt2.5 billion from its total expenditure of Bt10 billion per year, said CEO and president Wirat Uanarumit.

The cuts are in line with the company’s policy to control costs and improve performance amid the Covid-19 pandemic, which has brought down global demand for oil by 20 per cent.

However, he said it was a good sign that the price of crude oil rose to more than US$30 per barrel over May 20 and 21 after bottoming out in April.

Wirat said he expects the company’s refinery business in the second quarter to be better than the first quarter. The company also expects oil stocks to gain in the second half.

nationthailand.com
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Re: Expat flight to follow migrant exodus from Gulf
« Reply #6 on: Yesterday at 12:09:01 AM »
Expat flight to follow migrant exodus from Gulf

More than 3.5 million foreign workers may lose their jobs due to the pandemic and oil crisis

Saudi Arabia’s construction giant Binladin Group has cut thousands of jobs. Flag carriers Emirates and Qatar Airways will reportedly let go of up to 40,000 employees.

In Dubai, the Middle East’s business hub, 70% of companies could go bankrupt within six months.

The scale of the disruption caused by the collapse in oil prices and the Covid-19 pandemic to the Gulf states is unprecedented: employment across the region could fall by about 13%. Local citizens, overwhelmingly employed by the public sector, will be largely spared.

Foreign employees, from construction workers to skilled professionals, lack such safety nets and will be hit hardest. Population loss due to unemployment could exceed 3.5 million people, Scott Livermore, the chief economist at Oxford Economics Middle East, estimated in May.

The region has long mitigated economic downturns by “exporting unemployment” to Asia and Africa, where most of the workers who power its economy originate from. Migration schemes enforced by Gulf governments make citizenship acquisition nearly impossible, turning millions of migrant workers into the first variable for adjusting economic contractions.

But flexible migration policies also put Gulf economies at risk of a downward spiral as foreign laborers whose visas are linked to their jobs leave en masse during sharp recessions. In Dubai, where less than one inhabitant in 10 is an Emirati citizen, the population could shrink by a minimum of 10%, a former director of Dubai’s Department of Finance tweeted.

“When people leave, you end up with less demand for local products and services. Ultimately it creates a big deflationary issue,” Kuwaiti investor and advisor Ali al-Salim told Asia Times.

The International Monetary Fund forecasts non-oil activity in the region to contract by 4.3% this year, reversing the 2.3% growth it had previously projected.

Downsized economies 

full article   asiatimes.com
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