Oil Market Falls Deeper Into Abyss

By Tom Kool

The oil market is “troubled by both rising demand worries and rising fuel stocks,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S in Copenhagen. “It’s going to take a firm commitment by OPEC+, or rising geopolitical tensions, to achieve a sustained recovery.”

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Oil posted its largest monthly loss since May 2019, as fears of the coronavirus continue to rise. The 15 percent price decline is also the worst January performance since 1991, according to Bloomberg.

Bernstein: Chinese oil demand growth at just 100,000 bpd. China’s oil demand could grow at just 100,000 bpd this year due to the coronavirus, according to Bernstein. That would make it the slowest expansion in consumption in nearly 20 years. The firm previously predicted 350,000 bpd of growth.

U.S. GDP slowed to 2.1 percent in fourth quarter. U.S. GDP growth slowed to 2.1 percent in the fourth quarter, and 2.3 percent for the full-year in 2019. It was the slowest expansion in three years.

Chemical margins shrink. Fourth quarter earnings from the oil majors deteriorated, in part because of narrower chemical margins. New Gulf Coast chemical capacity has dragged down profitability.Related: Traders Increase Short Interest In Big Oil Stocks

Weak earnings from Exxon and ChevronExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) both reportedly slightly disappointing earnings Friday morning. Exxon earned $5.69 billion in the fourth quarter, down from $6 billion a year earlier. But that number was made better by a one-time $3.7 billion divestment in Norway. Notably, Exxon’s Permian production appears to have stalled at the end of the year, even as operations in Guyana started up. Meanwhile, Chevron reported its largest quarterly loss in a decade after writing down $10.4 billion, largely related to its Appalachian shale gas assets.

Investors warn industry not to move on Trump’s deregulation. A group of 58 companies, including institutional investors, representing around $113 billion in assets, warned the energy, timber and mining industries not to move aggressively to take advantage of the Trump administration’s wide-ranging deregulatory campaign. The investors said that doing so would put investors at “significant risk of public backlash and stranded assets, should these actions be legally challenged or protections be restored by the courts or by future administrations.”

Shell’s earnings fall by halfRoyal Dutch Shell (NYSE: RDS.A) saw its fourth quarter earnings fall in half from a year earlier, weighed down by lower oil and gas prices, as well as weaker refining and chemical margins. “All macroeconomic indicators are working against us,” Shell CEO Ben van Beurden said. The disappointing results could slow the pace of share buybacks and result in more asset sales. Shell’s reserve life declined for the sixth year in a row, now only sitting on eight years’ worth of reserves.

Tesla’s shares surge on earnings beat. Tesla (NASDAQ: TSLA) saw its stock surge past $600 per share this week, having gained 80 percent in the last three months.

Will Chesapeake Energy survive? Natural gas prices are well below $2/MMBtu, putting Chesapeake Energy’s (NYSE: CHK) future in doubt. It’s not clear that the company can financially engineer its way out of the mess. Meanwhile, a contractor was killed at a Chesapeake drilling site this week.

Refiners cut back on insurance. Refiners and petrochemical facilities have cut back on insurance because it has become too costly, which is the result of a string of explosions and accidents in recent years. Running without insurance puts them at risk of tens of millions of dollars of liabilities. In some cases, insurance rates have increased 100 percent, according to Reuters.

Texas and Iowa record wind installations in 2019. Texas and Iowa are the largest states in terms of wind power in the United States, and last year was a record year for installations in both. Texas added 4 GW and Iowa added 1.9 GW.Related: 5 Niche Energy ETFs You’ve (Probably) Never Heard Of

Pemex lays claim to Talos discovery. Mexico’s state-owned Pemex is laying claim to the country’s largest private oil discovery, the Zama field. Pemex says the discovery, recorded by Talos Energy (NYSE: TALO) is mostly the property of Pemex. “In Pemex’s analysis, we consider that we have the largest portion of the field,” Pemex CEO Octavio Romero Oropeza said. “Independently of who has what, Pemex will drill exploratory wells to confirm this information.”

UPS to buy 100,000 electric trucks. UPS (NYSE: UPS) said it would purchase 100,000 electric trucks from UK-based Arrival. The deal would be worth $440 million over five years.

Equinor, Shell buy Schlumberger’s stake in Vaca MuertaEquinor (NYSE: EQNR) and its partner Royal Dutch Shell (NYSE: RDS.A) each paid $177.5 million to jointly acquire Schlumberger’s (NYSE: SLB) 49 percent stake in a Vaca Muerta project in Argentina.

China turns to Saudi Arabian oil. China’s imports of oil from Saudi Arabia shot up by 47 percent in 2019, while imports from the U.S. fell in half.

By Tom Kool for Oilprice.com