Oil prices appear to be waiting for the presidential election before making any major moves, with prices falling due to rising Libyan oil production before climbing on positive news out of China
Chart of the Week
– Oil production outages have increased in 2020, cutting into global supply.
– In 2020, oil disruptions have averaged 4.6 mb/d, reaching 5.2 mb/d at its deepest point in June. Outages averaged 3.1 mb/d in 2019.
– Much of the increase in outages came from Libya, Venezuela and Iran. Supply “disruptions” does not include production shuttered because of economic reasons.
Market Movers
– ExxonMobil (NYSE: XOM) was upgraded by Goldman Sachs to a Neutral rating after the oil major’s shares have declined so significantly. The company’s headwinds are now priced in, Goldman says.
– BP (NYSE: BP) launched production from a giant Oman gas field.
– Hi-Crush (OTCMKTS: HCRSQ), a prominent frac sand supplier, exited chapter 11 bankruptcy.
Tuesday, October 13, 2020
Oil prices sank on Monday on concerns of a return of supply from Libya, although the decline was also a correction after strong gains last week. In early trading on Tuesday, prices were back up on some positive oil import news from China.
Oil rises on Chinese imports. China’s customs data shows monthly crude imports rose 2.1 percent in September, a stronger figure than expected. But the data could be less bullish than at first glance as the increase can be chalked up to the clearing of a shipping bottleneck. Looking forward, analysts see imports easing. “We find that China’s record haul of crude growth is poised to cease as independent refineries have nearly fully utilized their state-issued import quotas and companies struggle with extremely high crude inventories,” Rystad Energy said in a statement.
Oil stuck below $43 until the election. The international oil benchmark Brent Crude will likely range-trade in the $40 to $43 a barrel band until after the U.S. election on November 3, according to OCBC Bank.
EQT upgraded on tight winter supply picture. Morgan Stanley upgraded EQT (NYSE: EQT), the largest natural gas producer in the U.S., noting that the upcoming winter could create the tightest supply picture in a decade. The bank upgraded EQT to an Overweight rating.
OPEC lowers 2021 demand. OPEC cut its demand forecast for next year by 80,000 bpd, noting rising coronavirus cases.
IEA: Demand hit permanently from COVID. The IEA released its annual World Energy Outlook, which offers analysis on long-term energy scenarios. One of the main takeaways is that oil demand suffers a long-lasting hit from the pandemic. The agency sees demand returning to pre-pandemic levels by 2023 or 2025 in a more delayed scenario, but either way, demand peaks sooner and at lower levels than previously thought. The most oil-friendly scenario sees demand plateauing by 2030. “The era of global oil demand growth will come to an end in the next decade,” IEA Executive Director Fatih Birol said.
