Chinese buyers are ramping up purchases of US crude oil as grades like Mars Sour crude and West Texas Intermediate at Midland trade at record discounts between $6 and $9 per barrel to benchmark prices. However, surging demand for crude carriers has pushed the cost of shipping US oil to China close to $10 per barrel.
The American Petroleum Institute has confirmed that President Donald Trump will hold a meeting on Friday with executives from oil companies, including Chevron, Continental Resources and ExxonMobil, to talk about energy policy. Sources say Jones Act waivers and tariffs on oil imports from Saudi Arabia will be up for discussion.
LNG titan Cheniere Energy buys nearly 10% of US natural gas production every day for its Corpus Christi and Sabine Pass facilities and has helped cut carbon dioxide emissions by 15 million tons by displacing coal with the more than 1,000 liquefied natural gas cargoes it has shipped so far, says CEO Jack Fusco. Fusco believes global LNG demand has potential to reach 500 million tons per year by 2030, with Asia continuing to drive demand growth for the foreseeable future.
US crude stockpiles rose for a 10th consecutive week last week, by 13.8 million barrels, triple analysts' expectations, according to the Energy Information Administration. Gasoline inventories also gained 7.5 million barrels, while distillate supplies were down by 2.2 million barrels.
The global oil refining industry may be forced to cut rates by at least 30% to adjust to plunging fuel demand amid the coronavirus pandemic. While strong diesel demand from trucking has given a much-needed boost to some US refiners, refineries in the US Midwest and Rocky Mountains, which mainly produce gasoline, are facing increased risk of shutdowns as the region runs out of storage space.
Private equity-backed energy companies are hedging aggressively in an effort to soften the blow of oil price volatility during the coronavirus pandemic, says Quantum Energy Partners CEO Wil VanLoh. Separately, a survey conducted by Enverus found that independent oil firms have the most hedges in place and that about 2.5 million barrels per day of US oil output is hedged above $50 per barrel.
The US shale industry's ability to quickly adjust supply and respond to demand changes puts it in a good position to benefit from an increase in oil prices after demand recovers, says Goldman Sachs analyst Damien Courvalin.
BP has announced a 25% reduction to its 2020 capital spending to $12 billion, including a $1 billion budget cut to its shale business. BP's output from US shale is expected to fall by about 70,000 barrels of oil equivalent per day this year.
Diamondback Energy plans to halt completions activity for up to three months, after which it will work to complete 153-180 net wells with average lateral length of 10,000 ft this year. The company expects to produce 295,000 to 310,000 barrels of oil equivalent per day this year, down from an initial guidance of 310,000 to 325,000 boe/d.
The Texas Railroad Commission is aiming for an April 14 open meeting with producers, regulators, economists and others to consider potential production curbs. If the attendees devise a viable plan, the commission could vote on it as soon as April 21, commissioner Ryan Sitton said.
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