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COVID Kills Another Oil Rally

Yet another oil price rally has been cut short by COVID, with cases climbing in both the U.S. and across Europe as hopes of speedy oil demand recovery fade.

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Friday, October 16th, 2020

Oil prices retreated once again on concerns about the second wave in Europe and a third wave in the U.S. France reported more than 30,000 positive cases on Thursday. Many countries in Europe are reporting cases far higher than the peaks they saw during the first wave. Also on Thursday, the U.S. reported more than 60,000 cases for the first time in more than two months.

OPEC+ will guard against a price decline. OPEC+ won’t let oil prices crash again, according to OPEC’s Secretary-General Mohammad Barkindo. “I want to assure you that the OPEC, non-OPEC partnership will continue to do what it knows best, by ensuring that we don’t relapse into this almost historic plunge that we saw,” Barkindo said.

Related: A Biden Presidency Could End The U.S. Oil Boom

OPEC+ cohesion is beginning to fray. OPEC’s top official says the group will guard against another price slide, but tensions within the cartel are mounting. OPEC production cuts compliance is still around 100 percent, but the coming months will see that figure fall.

IEA: Market stabilized but fragile. In its latest Oil Market Report, the IEA said that the oil market has stabilized, with stocks drawing 0.9 mb/d in the third quarter, but that the outlook is fragile. The rising cases of covid-19 in many parts of the world “surely raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth,” the agency said.

EU considers binding methane emissions standards. The European Union is considering methane limits on natural gas that is consumed or imported into the bloc. As a result, it could negatively impact demand for gas from around the world, including the United States. 

Occidental: U.S. oil output has peaked. Occidental Petroleum (NYSE: OXY) CEO Vicki Hollub said that the U.S. won’t see production return to pre-pandemic levels. “It’s just going to be too difficult to replace the 2 million barrels a day of production that we’ve lost, and then to further grow beyond that,” Vicki Hollub said Wednesday at the Energy Intelligence Forum. 

ConocoPhillips looks to acquire Concho Resources. ConocoPhillips (NYSE: COP) is in talks to purchase Concho Resources (NYSE: CXO). Concho’s shares rose 15 percent on the news. If successful, the acquisition will be the second major M&A deal after Chevron’s (NYSE: CVX) purchase of Noble Energy.

Illinois greenlights DAPL expansion. Illinois regulators approved an expansion of the Dakota Access pipeline, even as the pipeline system faces legal hurdles to its continued operation. Energy Transfer (NYSE: ET) is aiming to expand the pipeline’s capacity to 1.1 mb/d.

Chevron and Exxon increase donations to Democrats. Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) have increased political donations to Democrats this year, according to Reuters. With Democratic candidate Joe Biden leading in the polls, contentious issues over environmental regulations and fracking loom. 

Russia may cut 2021 drilling. Russian oilfield service providers see drilling activity falling by as much as 20 percent next year. 

Survey: Investors want a greener industry. A Boston Consulting Group survey of energy investors finds that investors want oil and gas companies to cut their emissions. Simultaneously, investors are souring on the oil and gas sector. 80 percent of investors want companies to cut their emissions, and only one-quarter see oil and gas stocks playing a larger role in their investment portfolios going forward. 

New solar company launches IPO. Array Technologies (NASDAQ: ARRY) went public on Thursday, initially surging by more than 60 percent, but falling back close to its IPO price. Solar stocks have recently hit all-time highs ahead of the presidential election, riding a wave of bullish sentiment anticipating green stimulus.

New IMO regulations are seen as weak. A set of proposed regulations on maritime shipping would do very little in the coming decade to cut emissions. The rules offer minor tweaks, such as cutting engine idling and would not phase in until 2030.

CFTC to establish limits on positions. The Commodity Futures Trading Commission voted on Thursday to adopt position limits for the first time on 16 agricultural, metal, and energy commodities. The rule aims to prevent speculators from contributing to violent price swings that have little to do with underlying fundamentals.

Related: Democrats Want Permanent Ban On Offshore Oil Leasing

BP to cut 10,000 jobs. BP (NYSE: BP) is set to cut 10,000 jobs, only 2,500 of which will be voluntary.

Study: Airborne radioactivity downwind of fracking. Harvard scientists have detected heightened levels of radioactive particles downwind of fracking sites. The same radioactivity is not detected with conventional drilling because the radioactive source is found in rocks that are blasted apart from hydraulic fracturing. 

Hydrogen will provide a massive investment boom. Bank of America says we have reached the tipping point of harnessing this element effectively and economically and predicts the hydrogen marketplace to reach a staggering $11 trillion by 2050. It will also boost other renewables. Chief sustainability strategist at BNP Paribas Asset Management says that the development of green energy will create the biggest investment opportunities for renewables and not hydrogen infrastructure as we might be tempted to think.

Lost oil jobs not coming back. More than 100,000 oil and gas jobs in the U.S. were eliminated between March and August of this year, and 70 percent of those will not return, according to a new study by Deloitte.

By Tom Kool for Oilprice.com 

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