OIL PRICE INTELLIGENCE REPORT

-    The EIA forecasts that the U.S. will end the 2019-2020 winter heating season with 1,935 billion cubic feet (Bcf) of natural gas in storage, or 12 percent higher than the five-year average.

-    The EIA attributes the inventory build to a mild winter season and strong production.

-    The agency says that in the upcoming “injection season” (April through October), gas inventories could rise to 4,029 Bcf, which will be a record high.

Market Movers

-    Canadian police dismantled a blockade at a Canadian National Railway (NYSE: CNI) site outside of Toronto. TC Energy’s (NYSE: TRP) Coastal GasLink pipeline has sparked protests across the country.

-    Petrofac (LON: PFC) warned that revenues would continue to decline this year as it failed to win new orders in Saudi Arabia and Iraq, two key markets.

-    Equinor (NYSE: EQNR) scrapped plans for an oil project in the Great Australian Bight, a pristine part of Australia’s southern coastline. The Norwegian oil company said the project is “not commercially viable.”

Tuesday, February 25, 2020

Oil prices fell again in early trading on Tuesday, following a meltdown a day earlier. The spread of the coronavirus to several other countries has reignited fears of a global economic slowdown while OPEC+ seem reluctant to increase production cuts.

IEA: Oil demand could fall further. The IEA said that its oil demand forecast is at its lowest in a decade, and it could fall further. “We certainly see the lowest oil demand growth in the last 10 years and we may need to revise it ...downwards,” IEA executive director Fatih Birol told Reuters at an energy conference in London. The agency sees demand rising by 825,000 bpd in 2020, although suffering an outright contraction of 435,000 bpd in the first quarter.

Teck Resources scraps $15 oil sands project; could be Canada’s last. Teck Resources (TSE: TECK.A) pulled the plug on its $15.5 billion oil sands project, citing a combination of headwinds, including the lack of pipelines, low oil prices and the prospect of weak demand in the long run. It could also mean that no new greenfield oil sands projects move forward again. “This may be the nail in the coffin,” Laura Lau, an asset manager at Brompton Corp. in Toronto, told Bloomberg. “I would expect some smaller projects would have a better chance going through.”

Iran, Italy and South Korea hit by virus. The number of cases in South Korea neared 1,000 overnight, and the U.S. warned against non-essential travel to that country. Korea has emerged as a larger buyer of U.S. crude oil this year. In 2019, South Korea bought 375,000 bpd from the United States. The Iranian government is struggling with credibility in its response as the number of cases rise. In Italy, several small towns were on lockdown.

Pakistan considers canceling LNG contract. In a sign of a worsening global LNG glut, Pakistan is considering canceling two long-term contracts because spot prices are so much cheaper. State-owned Pakistan LNG Ltd. has two contracts with Eni (NYSE: E) and Gunvor Group.

ExxonMobil hits 15-year low. ExxonMobil (NYSE: XOM) saw its share price fall to its lowest level in 15 years on Monday, falling below $57 per share. Next week, CEO Darren Woods is scheduled to present the oil major’s long-term strategic plan to investors.

JPMorgan outlines climate initiatives. JPMorgan Chase announced a range of climate initiatives on Tuesday, including restrictions on financing for coal mining, Arctic drilling as well as $200 billion in financing for sustainable projects. Environmental groups said the moves are welcome, but insufficient. JPMorgan is one of the largest financiers of fossil fuel projects.

Investors retreat from energy sector. U.S. energy stocks have underperformed the S&P 500 by the largest margin since the Pearl Harbor attack in 1941, the FT reports. The Wall Street Journal also reported on the phenomenon, noting that the energy sector has been the worst-performing sector of the S&P500 for the past decade. “Valuations are telling us that investors are losing confidence in the oil and gas sector,” Nick Stansbury, head of commodity research at the U.K.’s largest asset manager Legal & General Investment Management, told the WSJ.

Methane could be worse than thought. The oil and gas industry could be responsible for a far larger share of methane emissions than previously thought, according to new research. Methane emissions from fossil fuels could actually be 25 to 40 percent higher.

Schlumberger: U.S. shale to slow. U.S. shale production growth could slow to 600,000 to 700,000 bpd this year and grow by just 200,000 bpd in 2021, according to Schlumberger (NYSE: SLB). Notably, he does not see the growth rate picking up again. “Shale production growth will go to a new normal ... unless technology helps us crack the code,” Olivier Le Peuch told Reuters.

Aramco to invest $110 billion in shale gas. Saudi Aramco said that it would invest $110 billion in the Jafurah gas field, which could hold as much as 200 trillion cubic feet of unconventional gas.

U.S. Supreme Court heard arguments on Atlantic Coast Pipeline. The Supreme Court heard arguments on Dominion Energy’s (NYSE: D) Atlantic Coast Pipeline, which would carry Marcellus shale gas to the U.S. southeast. The case hinges on permits granted to the project that would allow it to cross the Appalachian Trail. The justices seemed inclined to favor the project.

Chevron’s reserves decline. Chevron (NYSE: CVX) replaced just 44 percent of the oil and gas it produced last year, according to a regulatory filing. That was the worst performance in replacing reserves since 2010 for the oil giant.