Energy Week

Reaction to OPEC deal
- Not what they wanted, clearly
- US pledged to “cut” for Mexico? How does anyone even expect that to work?
- Cuts take away from the narrative that demand is gone because governments shut down the economy.
- Will this be significant 10-20 years later? Could we see this as the start of a more federal intervention and direction from the oil industry?
- could anyone have foreseen that Mexico would hold up an OPEC+ deal? Stunning development.
- TRC https://rrc.texas.gov/about-us/commissioners/sitton/news/041320a-commissioner-ryan-sitton-statement-in-advance-of-hearing/

U.S., Saudi Arabia, Russia Lead Pact for Record Cuts in Oil Output
https://www.wsj.com/articles/opec-allies-look-to-resolve-saudi-mexico-standoff-and-seal-broader-oil-deal-11586695794?

Oil futures little changed despite record output cut by OPEC+
https://www.reuters.com/article/us-global-oil/oil-futures-little-changed-despite-record-output-cut-by-opec-idUSKCN21U0WQ

Mexico’s secret weapon in the oil price war
https://www.worldoil.com/news/2020/4/10/mexico-s-secret-weapon-in-the-oil-price-war

Trump pledges to help Mexico meet output cuts sought by OPEC
https://www.politico.com/news/2020/04/10/trump-mexico-output-cuts-opec-179275

https://www.forbes.com/sites/ellenrwald/2020/04/13/what-will-oil-autocrats-do-now-to-keep-power/#5e5070e63239

Dr. Dean Foreman, API
- Stunningly weak market in March for U.S. petroleum in API’s MSR
- Data based on weekly surveys of 90% of industry
- Weekly data has a lot of noise, but monthly data provides much more certainty.
- DEmand is DOWN month on month by 900,000 bpd, and year on year 800,000 bpd
- translates to 4-5 m bpd on global basis. This says that based on US data, gasoline down, jet fuel down (but surprising its not worse), diesel up between Feb and March (up month to month). Maybe the demand data aren’t as bad as everyone says?! Everyone is racing to the bottom with estimates and API says maybe demand isn’t so bad.
- On supply side starting to see a response. Both EIA and API data show US production declined in March
- Refineries turned the dial back
- But storage doesn’t fill as fast if production (both crude and product) isn’t as much.
- This is bad, but maybe its not as bad as we think
- SPR storage being made available is helpful at the end of the value chain
- WE normally see stock building in Feb and MArch, so question is how much did stocks rise compared to how much they normally rise
- Because we are seeing responsiveness on supply side, the market is at work. Easy to take one data point and extrapolate but markets are actually responding to compensate.
- Gets to the heart of the Texas pro-rationing issue - if you take a heavy, centralized hand to try and manage the market you may clip off the natural market fluctuations.
- Larger decrease in reformulated gasoline than with conventional gasoline. Greater decrease in transportation in urban areas vs. rural areas.
- WTI-Brent differential flip: Brent went lower than WTI because of discounts offered by OPEC producers to Asia and drove down Brent as opposed to market forces acting on WTI.
- WHy was jet fuel only down 18% year on year in March? Pace of cancellations didn’t pick up until end of March. But also because freight flights picked up even though passenger flights were way, way down. North American foreign flights were up 4%.
- TRC testimony: market is taking care of waste. Texas pro-ration would apply disproportionately to the most productive and efficient areas. Could have negative impacts to future if shut in. Could love productivity. On gas side there are signs that could lose permeability if shut in. Alberta example - in late 2018 when WCS was trading at 50% discount to WTI, they didn’t ride out the low prices and incentivize refiners to take the oil instead put into place pro-rations. For a couple months brought prices up (within 15% of WTI) but now its even worse and have foregone investment. Slippery slope, unintended consequences, drop in investment, etc.

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Trump tweets about oil and WTI moved up 35%
Can the United States regulate oil production?
- would need to pass a law through Congress to give Energy Department authority to regulate oil production
- regulate it through EPA flaring regulations
- BLM could regulate
- regulate through taxes
But all would mean companies would sue

Oil Investors Grow Desperate for Supply Cuts Amid Glut
https://www.wsj.com/articles/oil-investors-grow-desperate-for-supply-cuts-amid-glut-11586088000
- Check out the really awesome throw-back Nintendo graphic on this article
- US joining OPEC? US would be a less reliable partner than Russia

Explainer: Antitrust law won't get in the way of U.S. acting to raise oil prices
https://finance.yahoo.com/news/explainer-antitrust-law-wont-way-215552855.html?
- anti-trust experts Believe that the US could regulate oil production but is it really?
- What if Trump says they should collude but companies are hesitant unless they receive an exemption from anti-trust regulations? And then changes his mind. This happened in 1956 with Eisenhower.

Oil set to ‘crater’ Monday as OPEC meeting delayed, tensions flare between Saudi Arabia and Russia
https://www.cnbc.com/2020/04/04/oil-set-to-crater-monday-as-opec-meeting-delayed-tensions-flare-between-saudi-arabia-and-russia.html

OPEC, Allies Set to Debate Oil Cuts as Saudis Delay Pricing Move
https://www.wsj.com/articles/opec-allies-set-to-debate-oil-cuts-as-saudis-delay-pricing-move-11586090711

Oil Producers Race for Output Deal With G-20 at Center Stage
https://www.bloomberg.com/news/articles/2020-04-05/oil-negotiators-race-for-global-pact-with-u-s-role-in-balance?sref=5F8Ao01j

Canada in talks with OPEC, as oil rout continues
https://ca.finance.yahoo.com/news/canada-in-talks-with-opec-as-oil-route-continues-162622627.html

Check out Ryan Sitton’s “interesting” graph of oil demand forecasts https://twitter.com/ryansitton/status/1245430213254807552?s=21

Trump Should Prepare To Be Scapegoated For A Failed Russia-Saudi Oil Meeting
https://www.forbes.com/sites/ellenrwald/2020/04/06/trump-should-prepare-to-be-scapegoated-for-a-failed-russia-saudi-oil-meeting/#37e271f3760d

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Global oil storage fills to the brim despite leap in costs
https://www.reuters.com/article/global-oil-storage/global-oil-storage-fills-to-the-brim-despite-leap-in-costs-idUSL8N2BH3AM
.9-1.8 billion barrels of spare storage in the world
Are we really running out of oil storage space NOW?

Sinopec reporting profit of $57.5 renminbi and increased dividend

The World Is Running Out of Places to Store Its Oil
https://www.nytimes.com/2020/03/26/business/energy-environment/oil-storage.html
- Company called the Tank Tiger, which matches traders or refiners with oil with tank farm owners and people who will store it. Charges 1 cent per barrel

Is the shale industry dead?
- Not dead, but changed. Will be changed forever.
- Super-majors will be prime operators in shale patch

Is there a point at which Saudis and Russians have overplayed their hand?
- Rosneft pulled out of Venezuela, sold assets there to Kremlin
- Russia’s non-oil economy is being hit by Coronavirus so that push them towards a deal

As Saudis Shop Discounted Crude, Refiners Say ‘No Thanks’
https://www.wsj.com/articles/as-saudis-shop-discounted-crude-refiners-say-no-thanks-11585241955?reflink=share_mobilewebshare
- If Saudi Arabia can’t sell its oil in April that will be a turning point.
- Watch the 14 day oil report to see if they are moving that oil or not.

GOP senators urge Saudi Arabia to leave OPEC
https://thehill.com/policy/energy-environment/489666-gop-senators-urge-saudi-arabia-to-leave-opec
- Only by putting the relationship between Saudi Arabia and the US on the line can the US hope to pressure the Saudis to do anything.

Trump says he will speak with Putin to discuss oil market and trade
- mostly discussed Venezuela.

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Russia and Saudi are feeling impact of Coronavirus demand drop on economies but not necessarily within their countries.

Not uncommon for authoritarian governments to “fail” in order to show that they can do something but not actually want a fight.

Small business loans, even at great rates aren’t helpful because there’s no guarantee that will be able to pay it back in the future because there’s so much uncertainty.

Two weeks before we see politicians changing their tune and recognizing the economics of the situations?

Possible American participation with Saudi/Russia?

Will Ryan Sitton go to OPEC in June?

Drastic action by the US against Saudi oil? Not so fast - the fix is not really a fix.
https://www.forbes.com/sites/ellenrwald/2020/03/19/6-reasons-the-us-shouldnt-interfere-in-the-saudi-russia-oil-spat/

Here are some TRC/OPEC articles
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/032020-texas-railroad-commission-chairman-opposes-opec-style-oil-production-cuts

https://www.worldoil.com/news/2020/3/20/opec-secretary-general-invites-texas-rrc-s-sitton-to-vienna-meeting

https://www.bloomberg.com/news/articles/2020-03-20/why-a-texas-oil-regulator-could-play-the-role-of-opec-quicktake

Could the Texas governor declare a state of emergency and send in the national guard to enforce prorationing on oil companies? This is what happened in 1931 when companies did not adhere.

Worst-case and best-case scenarios for oil demand
https://www.investing.com/analysis/oil-demand-signals-15-best-and-worst-case-scenarios-to-watch-200517221

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It’s our 100th Podcast!

Saudi crown prince, UK's PM discuss cutting coronavirus economic impact
https://www.reuters.com/article/us-health-coronavirus-sa-britain/saudi-crown-prince-uks-pm-discuss-cutting-coronavirus-economic-impact-idUSKBN212193
- Who actually trusts Saudi Arabia to lead effort to combat economic effects of Coronavirus?
- But at what point to we stop looking at what happened and really look at how long can this go on?
- Market will be soft during the closures. The question now is afterwards

Strategic Partnership With China Lies at Root of Iran’s Coronavirus Outbreak
https://www.wsj.com/articles/irans-strategic-partnership-with-china-lies-at-root-of-its-coronavirus-outbreak-11583940683?
- CHinese do not honor unilateral sanctions
- Many Chinese workers in Iran working on infrastructure projects and brought virus with them.

Don’t Fear an Oil Price War
https://www.barrons.com/articles/oil-price-war-why-saudi-arabia-and-russia-wont-keep-prices-low-forever-51583942398

Interview with API Chief Economist Dr. Dean Foreman
- Jet Fuel: before people were sequestered at home, they were substituting driving for flying as flying slowed down. Gasoline usage was UP in February year on year.
- Stocks will build.
- February, refiners were at highest throughput. But with this downturn jet fuel stocks will build up. For any airline that didn’t hedge their fuel costs there will be plenty of cheap jet fuel for the future.
- Prices cut in half
- Jet fuel isn’t included in Phase One trade deal agreement as an energy product so China won’t be purchasing it.
- Quarterly API Industry Outlook: backlog of capital projects - lots of pipelines coming online. Key to dynamic of what’s been playing out.
- Can US producers export oil to India? Harder for the US to export to India because farther from the Gulf Coast and shipping costs are higher.
Quarterly Report:
- Expects global oil market to rebalance by Q4 2020. What does that mean?
- Different world where everyone’s hand is forced to produce more for more revenue instead of OPEC adopting a policy of adopting a “balance the market” strategy which OPEC had believed was better.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

Have Russia and Saudi Aramco ruined everything for oil and gas? This week, we investigate the problems of the oil price war and the geopolitical questions surrounding the global oil industry.

Russia Says It Is Ready to Weather the Coronavirus Storm
https://www.wsj.com/livecoverage/coronavirus/card/EsYOOaU3UYHS6KQVDJYY

'Oil price war,' coronavirus could drive gas prices below $2 gallon
https://www.usatoday.com/story/money/2020/03/09/gas-prices-oil-prices-coronavirus-crude-oil-petroleum-opec/4998630002/

Oil crashes by most since 1991 as Saudi Arabia launches price war
https://www.cnn.com/2020/03/08/investing/oil-prices-crash-opec-russia-saudi-arabia/index.html

How Putin spurned the Saudis to start a war on America’s shale oil industry
https://www.latimes.com/business/story/2020-03-08/oil-price-war

Six Thoughts on the Collapse of the Oil Market
https://www.bloomberg.com/opinion/articles/2020-03-09/oil-collapse-6-ways-saudi-arabia-s-move-will-hit-global-markets

- Is this a conspiracy between Russia and Saudi Arabia to take out US shale in retaliation for US sanctions on Nord Stream 2 pipeline? No conspiracy.
- Is a desire To get back at the Americans even a factor in Russia’s decision?
- Shale is collateral damage.
- Russia now in the driver’s seat of the Saudi-Russia relationship, not Saudi Arabia.
- Drilling party!
- March 18 JTC meeting is NOT binding
- Remember that there are more barrels off the market from Libyan that Russia + Saudi Arabia want to put back on the market in April
- Not the end of the US shale industry but if this goes on long enough will there be a fundamental shift in the natural of US shale oil industry?

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

Markets are looking for drama and Coronavirus provides it.

Oil up as hopes of OPEC cut, stimulus counter virus gloom
https://www.reuters.com/article/us-global-oil-idUSKBN20P03B
- there is a real economic demand impact here - 70 airlines changed flights to China

Putin says Russia can handle oil slide but hints at OPEC cooperation
https://www.reuters.com/article/us-china-health-russia-oil/russias-putin-says-current-oil-prices-acceptable-idUSKBN20O1HD
- Russian position is that they don’t need to cut
- Putin is playing it cool, would like extra money but not necessarily

OPEC will 'go beyond' what the market has currently priced in, strategist says
https://www.cnbc.com/2020/03/02/opec-will-go-beyond-what-the-market-has-currently-priced-in-strategist-says.html
- OPEC could deliver a 1.2 million bpd cut
- That’s basically writing off Libyan production
- posturing that doesn’t make sense - especially when its based off of a “source in the know.”

Oil Looks Into Abyss as Coronavirus Threatens Demand Contraction
https://finance.yahoo.com/news/oil-looks-abyss-coronavirus-threatens-200136635.html

Oil Is Still Plunging as Demand Falls. One Big Buyer Is Out There.
https://www.barrons.com/articles/oil-crude-coronavirus-china-demand-51582914201
- RBC claims that preliminary satellite data shows China is increasing oil in storage. But there are other explanations for this! Don’t assume they are buying more, could be regular purchases going into storage.

One of the World’s Largest Energy Summits Canceled on Virus
https://www.bloomberg.com/news/articles/2020-03-01/giant-houston-energy-conference-canceled-on-coronavirus-concerns

Come see Ellen at the Cato Institute on March 4 or watch the live stream here: https://www.cato.org/events/the-iran-crisis-and-american-energy-security

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

China's recent air pollution levels may be telling a story about the coronavirus impact on its economy
https://www.cnbc.com/2020/02/24/coronavirus-chinas-air-pollution-levels-smog-show-hit-to-the-economy.html
- using air pollution levels as a gauge of industrial activity
- pollution levels actually BETTER now than they were 5 years ago
- satellite photos show that barges of coking coal (used for steel production) sitting unused.

Saudis Weigh Breaking Oil Alliance With Russia as Virus Crimps Demand
https://www.wsj.com/articles/saudis-weigh-break-with-russia-over-response-to-coronavirus-11582293904?redirect=amp#click=https://t.co/OoGWIMzltL
- is the #bromance over?
- China and Russia becoming closer trading partners. Huawei is the main Russian supplier of 5G, pipeline.
- Russia-China relationship is more important to Russia than its relationship with Saudi Arabia
- Saudis may be trying to leverage what it can to pressure Russia into agreeing to cut oil production

Teck Pulls Oil Project, Blames Canada’s Climate-Policy Uncertainty
https://www.wsj.com/articles/teck-pulls-oil-project-blames-canadas-climate-policy-uncertainty-11582522432
- uncertainty like this is ruling the market and causing a lot of volatility

API Monthly Statistical Report with Dr. Dean Foreman
https://www.api.org/~/media/Files/News/2020/02/Monthly_Statistical_Report_January_2020.pdf
Coronavirus market takeaways
- dominating headlines and price action
- impact especially in refined products
- will need to look at more data to see full global impact
- expected drop in U.S. Petroleum demand. 2%-3% growth in jet fuel demand disappeared in January
- IMO 2020 also affected demand but in unexpected ways
- production side: very well supplied market. With demand shock from the virus, getting price shock that we are seeing
- despite less drilling hitting oil and natural gas records
- by the time we hit the 4th quarter growth is down to 900,000 bpd, may also see a contraction in gasoline demand by 4th quarter
- Coronavirus is not a pandemic and isn’t as bad as SARS in terms of fatalities. It can have a bad economic impact and bad human impact but at this point it doesn’t look as bad as SARS.
- From a supply perspective, we’ve basically balanced the global oil market. But now Coronavirus is disturbing the equilibrium
- From a financial standpoint and an industry standpoint, there is an argument for OPEC to cut production at its next meeting.
- Will Coronavirus impact Americans’ vacation plans? For example, will people not choose cruise ships because of a fear of getting quarantined.
- Historical impact of election season on oil market - API study on trillions of dollars of negative impact of bans of different flavors on fracking. Within a year could hit triple digit prices and could stay there for a decade.
- US was a net importer of petroleum for January but this looks to be a short

Come watch Ellen at the Cato Institute next week on March 4 on a panel discussing “The Iran Crisis and American Energy Security”
Link to register or watch online here: https://www.cato.org/events/the-iran-crisis-and-american-energy-security

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

Coronavirus: China urged to delay purchase elements of US trade deal as outbreak rocks economy
https://amp.scmp.com/economy/china-economy/article/3051004/coronavirus-china-urged-delay-purchase-elements-us-trade-deal
- China should request a delay on its purchases from the US under the Phase One trade deal: What does this mean for the US economy?
- Dallas men arrested for conspiring to violate US sanctions on Iran to help China buy Iranian oil
- Agriculture purchases will likely be prioritized over energy purchases.

Saudi Arabia and Russia Should Want Democrat to Ban Fracking
https://www.forbes.com/sites/ellenrwald/2019/09/10/why-russia-and-saudi-arabia-secretly-want-the-democrats-to-beat-trump/

Exclusive: Qatar delays partnerships for natural gas expansion amid price collapse
https://uk.mobile.reuters.com/article/amp/idUKKBN20B00Y
- Is this a bad indication of future natural gas prices?

Crossing the Line: A Scientist’s Road From Neutrality to Activism
https://insideclimatenews.org/news/11022020/hunger-strike-nathan-phillips-natural-gas-compressor
- Professor from Boston University engages in a hunger strike to protest building a natural gas compressor being built in Weymouth

UAE's nuclear power plant to start operations in 'near future' after reactor licence issued
https://amp.arabianbusiness.com/amp/article_listing/aben/energy/440374-uaes-nuclear-power-plant-to-start-operations-in-near-future-after-reactor-licence-issued
- Could provide 25% of UAE’s power needs
- UAE went about this the right way with all the correct diplomatic negotiations
- could be a good precedent for other Gulf countries, good example. Especially for Saudi Arabia

Oil traders rent South Korean storage after virus hits China demand
https://in.mobile.reuters.com/article/amp/idINKBN20B0OH
- buying storage leases for 2-6 months in South Korea because of demand drop due to Coronavirus
- should we increase global storage capacity?

Kuwait minister says neutral zone output to reach 550,000 b/d by year-end
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/021720-kuwait-minister-says-neutral-zone-output-to-reach-550000-bd-by-year-end
- Most analysts think this is a wildly optimistic

March 4 Panel in DC! The Iran Crisis and American Energy Security
https://www.cato.org/events/the-iran-crisis-and-american-energy-security

Chinese Refiners Go on Buying Spree as Oil Too Cheap to Ignore
https://www.bloomberg.com/news/articles/2020-02-14/chinese-refiners-go-on-buying-spree-as-oil-too-cheap-to-ignore

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Iraqi Officials: US Will Grant Vital Iran Sanctions Waiver
https://www.nytimes.com/aponline/2020/02/10/business/bc-ml-iraq-us-sanctions.html
- waiver to be extended for another 3 months. Why? Because Iraq has FINALLY moved towards investments in its own natural gas and electricity development

Parsley Energy CEO debuts ‘shale new deal’ in appeal to Generation Z
https://www.houstonchronicle.com/business/article/Parsley-Energy-CEO-debuts-shale-new-deal-in-15033627.php
- perception, pollution, profits. Can shale companies even make profits?

Plains sees Permian oil output growth slowing to 400,000 b/d by year end
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/020520-plains-sees-permian-oil-output-growth-slowing-to-400000-bd-by-year-end
- pipelines for days in the Permian
- spare capacity means that the pipeline companies can’t charge as much.
- some companies aren’t talking about slowing down at all

Failed OPEC Response To Coronavirus Shows Russia Is In Charge
https://www.forbes.com/sites/ellenrwald/2020/02/06/failed-opec-response-to-coronavirus-shows-russia-is-in-charge/
- Why restart the neutral zone between Kuwait and Saudi Arabia when also trying to curb production

Posthaste: Why pipeline protests in Canada have taken an ugly turn and could disrupt the wider economy — at the worst possible time
https://business.financialpost.com/executive/posthaste-why-pipeline-protests-in-canada-have-taken-an-ugly-turn-and-could-disrupt-the-wider-economy-at-the-worst-possible-time?utm_

What’s Next For The U.S. Oil Market And Energy Policy?
https://www.investing.com/analysis/whats-next-for-the-us-oil-market-and-energy-policy-200505083
- do we really need more energy production?
- president trump needs to be careful because oil producers are in his base and they want higher prices.

What the Coronavirus Means for OPEC and Aramco
https://energyjournal.cmail19.com/t/ViewEmail/d/177DFBD2E9EC26F32540EF23F30FEDED/312F2B9CF0AAEE08A10BC276F201ED4B

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com