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U.S. Oil Bankruptcies Shoot Up In Q1 2021

U.S. Oil Bankruptcies Shoot Up In Q1 2021

The number of North American producers that filed for bankruptcy protection in the first quarter of 2021 reached the highest number for a first quarter since 2016, yet the wave of bankruptcies has significantly slowed since the peaks in the second and third quarter of 2020, law firm Haynes and Boone said in its latest tally to March 31.

The Oil Patch Bankruptcy Monitor showed that eight producers filed for bankruptcy this past quarter, which was the highest Q1 total since 2016 when 17 oil producers in North America sought protection from creditors.

Texas accounted for 50 percent of the total producer filings in the first quarter of 2021, with four in total, Haynes and Boone said.

The law firm noted that there were no producers with billion-dollar bankruptcies in Q2 2021, which had not happened since the third quarter of 2018.

The total debt for producers that filed in the first quarter was just over $1.8 billion—the second-lowest total for a Q1 after $1.6 billion in Q1 2019, according to Haynes and Boone.

Even though the number of first-quarter 2021 bankruptcies was the highest for a Q1 since 2016, it showed the trend of slowing filings after 18 oil and gas producers filed in the second quarter of 2020 and another 17 in the third quarter, the two quarters in which the oil price crash and the crisis were most severely felt by indebted producers.

Apart from eight producers, the first quarter of 2021 also claimed five oilfield services companies that filed for bankruptcy, Haynes and Boone data showed. This number is the third-lowest Q1 total since 2015, and much lower than 27 filings in Q3 2020 and another 17 filings from oilfield services companies in Q4 2020.

The aggregate debt for oilfield services companies that filed in Q1 2021 was over $7.2 billion—the third-highest Q1 total since 2015, but one company, Seadrill Limited, accounted for 99.8 percent of the aggregate debt for the quarter, Haynes and Boone said.

What To Expect From Today’s OPEC+ Meeting: Another Saudi Surprise?

What To Expect From Today’s OPEC+ Meeting: Another Saudi Surprise?

After Wednesday’s JMMC meeting ended without reaching a recommendation (as is customary and expected), the key decision-making OPEC+ meeting – where ministers will hammer out May’s output quotas – begins at 1pm London Time. As Newsquawk notes, market expectations are skewed towards an extension of current cuts, but a clear stance from Saudi – who have a tendency to surprise in recent months – remains to be seen, namely on the decision regarding the extra 1MM barrels the Kingdom has kept offline since the start of the year.

Commenting on today’s key event, Bloomberg’s Jake Lloyd-Smith reminds us that Saudi Arabia has sprung some big surprises in the oil market already this year, and may do so again today as OPEC+ grapples with a thorny decision on supply. That could make for a volatile session before the long weekend, and already has with oil whipsawing from gains to losses in jittery trading, amid market rumors that OPEC+ is i) considering a return to phased monthly oil-output hikes and ii) is also considering maintaining current cuts, according to a delegate… which pretty much covers every base so is completely useless.

As such, while the consensus view is the grouping will stick with deep output curbs to safeguard crude’s recovery, there’s an outside chance of alternative outcomes. These span the twin extremes, from releasing barrels to tightening further.

At issue is the varied recovery across key regions. For every rosy demand metric from the U.S. or China, there’s a poor one from Europe as lockdowns make a comeback. In addition, Riyadh faces a headache from rival Iran, which has been pushing clandestine barrels into China despite U.S. sanctions…

…click on the above link to read the rest of the article…

opec+, oil and gas industry, zerohedge, saudi arabia, russia, iran, china, united states, economic sanctions, oil, oil price, bloomberg

Shale Giants Proving OPEC Right

Shale Giants Proving OPEC Right
Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one – for now, at least.

(Bloomberg) — Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one — for now, at least.

A round-up of data on shale drillers shows they’re sticking to their pledge to cut costs, return money to shareholders and reduce debt. If they stay the course, it would validate the OPEC+ alliance’s high-stakes wager that it can curb output and drive crude prices higher without unleashing an onslaught of supply from U.S. rivals.

That’s still a big “if,” one that’s keeping the oil market on edge as crude’s rally makes it more tempting for shale producers to go back on their word. But the U.S. shale patch is showing little sign of a true comeback so far, and even a dramatic boost in activity would leave oil output below pre-pandemic levels until late next year. Drillers that have shown signs of straying from the script and boosting production have been punished by investors.

Publicly traded explorers that are remaining disciplined on output are helping to keep crude prices aloft, said Michael Tran, managing director for global energy strategy research at RBC Capital Markets. The motives of closely held producers, on the other hand, remain “an open-ended question,” he said. The number of oil rigs has already jumped 80% after bottoming out in August, Baker Hughes data show.

The more restrained shale drillers are this year, “the more they can potentially grow production at higher prices next year and beyond,” Tran said.

…click on the above link to read the rest of the article…

Bloomberg, M.Tobin, D.Wethe, K.Crowley, oil price, oil, crude oil, saudi arabia, shale oil, opec+, rigzone.com

Happy Days At The Gas Pump Are Over As Prices Soar 

Happy Days At The Gas Pump Are Over As Prices Soar 

When the virus pandemic first hit early last year, Americans were locked down in their homes as gasoline demand plunged and prices crashed. Last April, the nationwide average for gasoline was around $2. According to AAA, prices are surging nationwide, up 32 cents in the previous month to $2.796 for regular.

On Monday, regular gasoline in Los Angeles County rose for the 27th consecutive day and 47th time in 48 days, increasing to $3.81, the highest since Dec. 3, 2019. Average prices for crude products in the metro area have been on a tear, resulting in a price shock for many consumers who are still battling food and housing insecurities, along with job loss as they wait for the next round of stimulus checks.

Happy times at the pump are over as crude product prices continue to rise. 

GasBuddy analyst Patrick DeHaan told Fox News that one reason for the jump in prices is due to increased demand. Still, more importantly, he said the Organization of the Petroleum Exporting Countries (OPEC) “is not opening the spigot.”

Last week, OPEC leaders maintained production cuts for all countries except Russia and Khazakstan. The news caused West Texas Intermediate and Brent to surge.

OPEC’s decision last week inspired Goldman’s Damien Courvalin to raise his Brent forecast by $5/bbl, to $75/bbl in 2Q and $80/bbl in 3Q21: “This increase in our price forecast reflects stronger time spreads, with our updated inventory path consistent with $5/bbl additional backwardation over the next six months relative to our prior forecast.”

…click on the above link to read the rest of the article…

 

Brace For Oil Surge: Saudi Oil Tank In Ras Tanura Port Hit In Houthi Drone Attack

Brace For Oil Surge: Saudi Oil Tank In Ras Tanura Port Hit In Houthi Drone Attack

It’s not as if oil – the best performing class of 2021 – behind bitcoin of course – needed any more reasons to surge higher (for the latest tally please read “Saudis + Commodity Funds = Energy Stock Explosion“), but it got it moments ago when Saudi Arabia said that it had intercepted missiles and a barrage of drones launched from neighboring Yemen and which targeted Dhahran, where Saudi Aramco, the world’s biggest oil company, is headquartered, which eyewitnesses said was rocked by an explosion.

According to Bloomberg which quotes witnesses on the ground, the blast shook windows in Dhahran, which hosts a large compound for Aramco employees.

While Bloomberg was cautious with reporting of what had happened, Saudi journalist Ahmed al Omaran who previously worked with the FT, said that “Saudi oil tanks in Ras Tanura Port hit in drone attack and Aramco facilities targeted with ballistic missile” quoting an energy ministry statement

An official spokesman at the Ministry of Energy said that “one of the petroleum tank farms at the Ras Tanura Port in the Eastern Region, one of the largest oil shipping ports in the world, was attacked this morning by a drone, coming from the sea”

Yemen’s Houthis claimed a series of attacks on Sunday including on a Saudi Aramco facility at Ras Tanura in the east of the kingdom. The group launched eight ballistic missiles and 14 bomb-laden drones at Saudi Arabia, a spokesman for the Houthis, Yahya Saree, said in a statement to Houthi-run Al Masirah television.

“There are reports of possible missile attacks and explosions this evening, March 7, in the tri-city area of Dhahran, Dammam, and Khobar in Saudi Arabia’s Eastern Province,” the U.S. consulate general in Dhahran said in a statement.

…click on the above link to read the rest of the article…

 

Oil Flirts With $70 After The OPEC+ Surprise

Oil Flirts With $70 After The OPEC+ Surprise

Brent is now flirting with the $70 mark after OPEC+ shocked markets once again by refusing to bring more oil production online.

In this week’s Global Energy Alert, our trading team delves into how an inflationary environment will impact oil stocks. Sign up today to get breaking news, expert analysis, and trading tips.

Friday, March 5th, 2021

Oil skyrocketed on Thursday after OPEC+ decided to hold off on easing production cuts for another month, surprising the oil market. WTI and Brent shot up more than 4%. During early trading on Friday, Brent surpassed $69 per barrel,

OPEC+ extends cuts, surprising market. OPEC+ extended the cuts through April, aside from a slight increase allowed for Russia and Kazakhstan, due to seasonal consumption patterns. Even Saudi Arabia decided to keep its 1 mb/d of voluntary cuts in place. The surprise news led to a price surge. “One of the reasons the market is continuing to react positively today could be that OPEC’s own balances suggest very steep draws,” Rystad Energy said in a statement.

Oil majors expect record cash flow. Big Oil is looking at 2021 with increased optimism, mostly because oil prices have rallied in recent weeks. Moreover, the ultra-conservative capital spending plans and the huge cost cuts have allowed international oil companies (IOCs) to materially lower their cash flow breakevens. These factors are set to result in a record cash flow for the biggest oil firms this year if oil prices average $55 per barrel, Wood Mackenzie said in new research.

Oil majors going green? Speaking from the annual CERAWeek by IHS Markit energy conference, Big Oil chief executives from Exxon Mobil (NYSE:XOM)Chevron Corp.(NYSE:CVX)Occidental Petroleum (NYSE:OXY) and ConocoPhillips (NYSE:COP)have all spoken about the industry’s transition to a lower-carbon world, with OXY even branding itself a ‘carbon management’ company that wants to set the industry standard for the production of net-zero carbon oil…

…click on the above link to read the rest of the article…

 

Bank Of America Expects Fastest Oil Price Rise In 30 Years

Bank Of America Expects Fastest Oil Price Rise In 30 Years

Oil prices are set to rise by the fastest rate since the 1970s over the next three years, Bank of America said in a new report, joining the growing group of analysts forecasting a return of oil to three-digit territory.

The average price of Brent over the next five years, however, will be between $50 and $70 per barrel, according to the bank, as quoted by The National.

The bank also said OPEC+ might decide to reverse its production cuts now that Brent is trending above $60, but added that a slow return of U.S. shale to international markets might lead to an extension of the production cut agreement to make sure prices stay higher.

“We believe that slower shale growth and oil price stability will likely require a continuation of Opec+’s market management beyond April 2022,” the bank’s analysts said.

OPEC+ is meeting next week to discuss the progress of its agreement in an environment of much tighter supply, and expectations are that some members may push for a production increase. The increase, however, will be moderate, at 500,000 bpd, according to reports.

The last Joint Ministerial Monitoring Committee of OPEC+ met in the first week of February, and the meeting ended without many surprises. For the month of February, another 75,000 bpd was added to the quotas—65,000 bpd to Russia and 10,000 bpd to Kazakhstan. For the month of March, production quotas were eased again by the same amount, with the same distribution of the additions.

Russia is one of the extended cartel’s members that will likely call for a further increase in production. Moscow has a tradition of budgeting for pessimistic oil prices, which increases the benefits from each additional dollar benchmarks gain. Saudi Arabia, on the other hand, might like to see much higher prices as its breakeven level, despite the lowest production costs in the world, remains quite high.

 

Finding A Way Around The World’s Largest Oil Chokepoint

Finding A Way Around The World’s Largest Oil Chokepoint

Oil is sometimes referred to as ‘black gold’. The discovery and export of fossil fuels have led to tremendous wealth creation for certain countries. In this sense, no region in the world is more blessed than the Middle East. Especially the countries surrounding the Persian Gulf are rich in oil and gas deposits. Unfortunately, political instability is almost a synonym for the Middle East. The risk of supply disruptions is a significant threat for those heavily reliant on fossil fuel sales. Therefore, risk mitigation is an important part of the business.

The antagonism between Iran and the U.S. escalated significantly under President Trump. According to sources, Washington came close to acting militarily but the President was dissuaded when informed on the risks and potential losses. Skyrocketing oil prices are one of those consequences as Tehran has repeatedly threatened to close off the Strait of Hormuz in case it is attacked. Approximately 20 percent of the world’s oil travels through the narrow strait separating mainland Iran from Oman and the UAE. Even a short disruption of supplies will most definitely have a devastating effect on prices. Circumventing the Strait, therefore, is essential to maintain exports to markets.

While Iran has been the most vocal when it comes to threats concerning the Strait, it has a contingency plan if the situation escalates. The country is currently building a pipeline from Goreh near the border with Iraq and Kuwait where the majority of the country’s oil is produced to Jask on the Gulf of Oman. The project is slated to be finished in March 2021 and has a capacity of one million barrels per day (mbpd).

…click on the above link to read the rest of the article…

What Oil’s Troubles Mean to the Rest of Us

To the extent that stock prices reflect expectations of future value, investors don’t like the prospects for oil, and oil’s demise signals muted prospects for economic growth.

Exxon-Mobil (XOM) was removed from the Dow Jones Industrial Average this past August, ending a run that began when the Dow expanded to 30 stocks in 1928. This leaves Chevron as the sole oil company in the index. For most of those 92 years, there were three oil majors in the Index (Standard of NJ/Exxon, Texaco, and Standard of CA/Chevron) – now there is one. Should you care?

In one sense, no. The Dow is an actively-managed index, and 11 of the current 30 firms have replaced other names since 2000. (Exxon-Mobil was replaced by Salesforce.) The financial media treats changes in the Dow as measures of overall market levels, but little money is actually invested in DJIA-linked products. There’s an interesting article in all that, but it’s not this one.

On the other hand, the Dow committee likes to include industries and companies that are growing and successful. Removing XOM is a measure of the decline of the economic status of “big oil.” Over the last two months, both XOM and BP have approached their lows from this past March, which were in turn the lowest prices for those stocks since 1994 (BP) or 1997 (XOM). The S&P 500 has grown by a factor of four since 1997.

The WTI price of oil is (as of October 2020) around $40 per barrel, which is the lowest since 2003 on an inflation-adjusted basis except for a brief period at the start of 2016 and a few weeks this spring. This reflects the abundance of oil supplies after the COVID-induced demand collapse, but it also is a price below what’s necessary to operate much of the industry profitably…

…click on the above link to read the rest of the article…

Low prices batter oil industry (and later the rest of us)

Low prices batter oil industry (and later the rest of us)

It is a sign of the times that the largest oil company in the world, Saudi Aramco, the state oil company of the Kingdom of Saudi Arabia, must borrow money to pay its shareholder dividend. I have written about the twice-delayed and often troubled initial public offering of the company previously (here and here).

Now it seems that the cash which the company is generating from operations is far less than the dividend payout—which leaves nothing for new drilling to replace reserves and other capital expenditures needed to keep the company going. Hence, the need to borrow.

All of this is due, in part, to low oil prices. And, the Saudis are not the only ones suffering, of course. U.S. producers, mostly those focused on high-cost shale deposits, continue to head toward bankruptcy or merge with other stronger companies. Another part of the equation is heavy debt. Naive investors kept handing over fresh capital, oblivious to the fact that the shale oil and gas industry as a whole has been free cash flow negative for years. That’s okay for a few years, but as a long-run strategy it means a company is simply consuming the capital of its investors.

So, what does this mean for the economy and society as a whole? Normally, such developments, while bad for the industry, would be interpreted as a boon for the rest of society. After all, cheap energy means cheap fuel for consumers and business owners and more money to spend on other things. It also means lower costs for everything we make and buy since all products require energy to produce.…click on the above link to read the rest of the article…

…click on the above link to read the rest of the article…

Middle East Oil Producers Are Drowning In Debt

Middle East Oil Producers Are Drowning In Debt

Arab Gulf oil producers are losing billions of U.S. dollars from oil revenues this year due to the pandemic that crippled oil demand and oil prices. Because of predominantly oil-dependent government incomes, budget deficits across the region are soaring.

Middle East’s oil exporters rushed to raise taxes and cut spending earlier this year, but these measures were insufficient to contain the damage.

The major oil producers in the Gulf then rushed to raise debt via sovereign and corporate debt issuance. Bond issues in the region have already hit US$100 billion, exceeding the previous record amount of bonds issued in 2019.

Thanks to low-interest rates and high appetite from investors, the petrostates are binging on debt raising to try to fill the widening gaps in their balance sheets that oil prices well below their fiscal break-evens leave.

Saudi Aramco Taps International Debt Market Again

One of the latest issuers is none other than the biggest oil company in the world, Saudi Arabia’s oil giant Aramco, which raised this week as much as US$8 billion in multi-tranche bonds.

Aramco is tapping the international U.S.-denominated bond market for the second time in two years, after last year’s US$12 billion bond issue in its first international issuance, for which it had received more than US$100 billion in orders.

Saudi Aramco prefers to considerably increase its debt to cope with the oil price collapse than to touch its massive annual dividend of US$75 billion, the overwhelming majority of which goes to its largest shareholder with 98 percent, the Kingdom of Saudi Arabia.

Analysts warn that the dividend windfall from Aramco will not be enough to contain Saudi Arabia’s widening budget deficit if oil prices stay in the low $40s for a few more years.

…click on the above link to read the rest of the article…

Oil Price Crash Costs Saudi Arabia $27.5 Billion In Revenue In 2020

Oil Price Crash Costs Saudi Arabia $27.5 Billion In Revenue In 2020

The oil price collapse is depriving Saudi Arabia of US$27.5 billion in oil revenues this year, Saudi Crown Prince Mohammed bin Salman said on Friday, admitting that the current oil income is not enough to cover the Kingdom’s salaries bill.

Saudi Arabia had projected last year that this year’s revenues for the state would be US$222 billion (833 billion Saudi riyals), of which US$137 billion (513 billion riyals) would come from oil, the crown prince said in a speech carried by the official Saudi Press Agency.

However, after the collapse in oil prices, Saudi Arabia’s oil revenues actually dropped to US$109 billion (410 billion riyals), Mohammed bin Salman said.

Thus, the price crash—which Saudi Arabia itself helped to create by flooding the market with oil in April—cost the world’s top oil exporter just over US$27.5 billion in oil revenues this year.

“These revenues alone are insufficient to cover even the salaries bill estimated at 504 billion riyals in this year’s budget, not to mention the difficulty of financing other items which include capital spending by 173 billion riyals and social security benefits by 69 billion riyals as well as operation and maintenance bill estimated at 140 billion riyals and others, which means an economic recession and millions of jobs lost,” Mohammed bin Salman said in his speech.

The collapse in oil prices has forced the Kingdom to take some very unpopular measures such as tripling the value-added tax (VAT), reducing payouts to poorer households, and discontinuing cost-of-living allowances for state workers.

Earlier this week, Fitch Ratings revised down its the outlook on Saudi Arabia’s long-term foreign-currency Issuer Default Rating (IDR) to ‘negative’ from ‘stable’, citing “the continued weakening of its fiscal and external balance sheets, which has been accelerated by the coronavirus pandemic and lower oil prices, despite the government’s strong commitment to fiscal consolidation.”

THE FORMER INDUSTRIAL METAL: The Silver Price Surges As Copper & Oil Get Crushed

THE FORMER INDUSTRIAL METAL: The Silver Price Surges As Copper & Oil Get Crushed

The notion that silver is just an “Industrial Metal” was utterly destroyed today as both the copper and oil prices were crushed as silver surged higher.  This is precisely what I was looking for as a positive sign showing that silver is now disconnecting itself from the INDUSTRIAL METAL BALL & CHAIN.

While analysts will continue to regurgitate that the future silver price depends on industrial demand, we can now take this analysis and throw it into the dustbin.  The world is heading into a new paradigm of “Building Wealth to Protecting Wealth.”  And let me tell you, you cannot protect wealth in most STOCKS, BONDS, or REAL ESTATE.  Those days are over for good.

Unfortunately, 99% of investors still haven’t figured that one out yet… but they will.

Today, it was quite an impressive day for silver (and gold) as the metals surged higher while copper, the king industrial metal, got destroyed.  Here is a chart of the copper price versus silver.

As we can see, copper is down 5% while silver is up 2%.  Thus, the leading indicator of the global economy, COPPER, just put out a very BAD SIGNAL, indeed.  Now, if silver was just a mere industrial commodity, why didn’t it’s price follow along with copper???

And, if that isn’t bad enough, take a look at the WTI Oil price.  The West Texas Intermediate oil price was down 5% as well.

With the U.S. oil price falling $2 in one day, that just wiped out $21 million in oil revenues to the oil companies.  This is also terrible news for the U.S. Shale Oil Industry is being held together by DUCT TAPE, BAILING WIRE, and ELMERS GLUE.

Today, I also posted the broad selloff in oil on my SRSrocco Report Twitter feed:

…click on the above link to read the rest of the article…

The Debt Crisis Is Mounting For Oil Economies

The Debt Crisis Is Mounting For Oil Economies

Dubai. Abu Dhabi. Bahrain. And, of course, Saudi Arabia. The two emirates this year issued debt for the first time in years. So did Bahrain. Saudi Arabia stepped up its debt issuance. The moves are typical for the oil-dependent Gulf economies. When the going is good, the money flows. When oil prices crash, they issue debt to keep going until prices recover. This time, there is a problem. Nobody knows if prices will recover.

In August, Abu Dhabi announced plans for what Bloomberg called the longest bond ever issued by a Gulf government. The 50-year debt stood at $5 billion, and its issuance was completed in early September. The bond was oversubscribed as proof of the wealthiest Emirate’s continued good reputation among investors.

Dubai, another emirate, said it was preparing to issue debt for the first time since 2014 at the end of August. Despite the fact the UAE economy is relatively diversified when compared to other Gulf oil producers, it too suffered a hard blow from the latest oil price crash and needed to replenish its reserves urgently. Dubai raised $2 billion on international bond markets last week. Like Abu Dhabi’s bond, Dubai’s was oversubscribed.

Oversubscription is certainly a good sign. It means investors trust that the issuer of the debt is solid. But can the Gulf economies remain solid by issuing bond after bond with oil prices set to recover a lot more slowly than previously expected? Or could this crisis be the final straw that tips them into actual reforms?

…click on the above link to read the rest of the article…

“It’s Happening Again” – Traders Store Oil At Sea As Recovery Falters

Crude prices slid Thursday as the stalled global economic recovery from the virus pandemic triggers a “second wave” of demand fears and sparks renewed interest in floating storage as the oil market flips bearish.

Reuters said a “fresh build-up of global oil supplies, pushing traders including Trafigura to book tankers to store millions of barrels of crude oil and refined fuels at sea again.”

Floating storage, onboard crude tankers, comes as traditional onshore storage nears capacity as supply outpaces demand.

Total Oil Inventories 

Refinitiv vessel data shows trading house Trafigura has recently chartered at least five crude tankers, each capable of 2 million barrels of oil.

The inventory build up, driving up demand for floating storage comes as OPEC+ recently trimmed supply curbs from earlier this year on expectations demand would improve. Though with the peak summer driving season in the US now over, demand woes and oversupplied markets are pressuring crude and crude product prices.

Very large crude-oil carrier (VLCC) storage has started to rise once again.

“Despite the recent slide in oil prices, we think that the OPEC+ leadership will continue to direct its efforts towards securing better compliance rather than pushing for deeper cuts at this stage,” RBC analysts said.

Another catalyst for the bearish tilt in crude markets is that China’s oil imports are likely to subside as independent refineries have reached maximum annual oil import quotas.

Reuters notes, in a separate report, that other top commodity traders are booking tankers to store crude products at sea, including diesel and gasoline.

Refinitiv vessel data also shows Vitol, Litasco, and Glencor have been booking tankers in the last several days to store diesel for the next three months.

“The market is soft and bearish, and floating storage is returning again,” a market source told Reuters.

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