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First Look

March 24, 2020

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By March 24, 2020 No Comments
  • WTI is up 62c to $23.98/Bbl, and Brent is up 81c to $27.84/Bbl
  • Oil surged as much as 5% in earlier morning trading, supported by efforts by the U.S. Federal Reserve to buoy the economy (Reuters)
    • Prices have since given back much of the overnight gains as the market nears open
    • Lawmakers in Washington continue to work on passing a $2 trillion coronavirus aid package
  • Refineries in the U.S., and globally, are beginning to pull back operations amid a plunge in product demand
    • Nearly 10% of the U.S. fuel-making capacity have cut run rates (Bloomberg)
    • Crack spreads, the overall pricing difference between a barrel of crude oil and the petroleum products refined from it, have neared zero in some cases
    • The U.S. gasoline crack spread went negative on Monday, the first time since 2008
      • Over the past two years, the gasoline crack spread has generally been between $10-15 dollars per barrel on average
  • Harris County, where the city of Houston resides, is expected to order a “stay-at-home” at 8:15 AM on Tuesday, according to the Houston Chronicle
    • Following other large U.S. counties and cities, Harris County Judge Lina Hidalgo will likely order residents to stay home except for groceries and errands, or if they work in in essential industries
    • The order would take effect at 11:59 PM Tuesday and would restrict businesses deemed non-essential through April 3
  • Natural gas is up 4.5c to $1.647/MMBtu
  • Low crude prices are not only set to impact the revenue of LNG suppliers who rely on oil-linked contracts, roughly 70% of contracts are oil-linked, but many final investment decisions could get pushed to next year for new terminals
    • Many oil-linked contracts are on a three-month lag meaning, that while profits remain strong now, prices could considerably weaken for some contracts this summer
    • JKM prices, the Asian LNG benchmark, show signs of improvement as China both slowly starts to ramp up activity and Europe sees increased demand loss amidst the COVID-19 outbreak
  • Chevron is cutting capital expenditures from $4 to $16 Billion, $2 Billion of those cuts will primarily come from the Permian
    • In total, CapEx cuts represent a roughly 20% decrease from the 2020 guidance
    • The company expects production to be relatively flat compared to 2019