Libya's Oil Blockade Will Help Clear The Global Supply Glut - OilPrice.com

Libya's Oil Blockade Will Help Clear The Global Supply Glut - OilPrice.com


Libya's Oil Blockade Will Help Clear The Global Supply Glut - OilPrice.com

Posted: 09 Aug 2020 12:00 PM PDT

Libya's port blockade is set to keep the North African country's oil off the market until at least the fourth quarter of 2020, which, as devastating as it will be for Libyan oil revenues, could help reduce the expected global production glut by 65 percent, Rystad Energy said on Friday.

Currently, oil production in Libya is around 100,000 barrels per day (bpd). This figure is dramatically down from 1.2 million bpd at the start of the year, just before paramilitary formations affiliated with the Libyan National Army (LNA) of eastern Libyan strongman General Khalifa Haftar occupied Libya's oil export terminals and oilfields.  

With Libya's conflict escalating, the country's crude oil exports are expected to be just 1.2 million barrels in August, a 40-percent plunge from July, Bloomberg reported earlier this week, citing an initial loading program it has seen.

With no immediate return of Libyan oil on the market, the expected global production surplus later this year could be just 58.6 million barrels or about one-third of Rystad Energy's previous forecast.

Even if Libya resumes most of its production soon, in the most optimistic scenario by Rystad, Libya's 2020 exit production rate will be between 700,000 bpd and 800,000 bpd. The country, however, will need another up to four months to ramp the production up to 1 million bpd.  Related: Venezuela's Rig Count Officially Falls To Zero

NOC's chairman Mustafa Sanalla has recently said that "The illegal oil blockade has had disastrous effects on our national economy and damaged the living standards of Libyans. Our reservoirs are suffering permanent damage, and stagnant fluids are corroding our pipelines, which will cost us huge amounts to repair."

According to Bjornar Tonhaugen, Rystad Energy's Head of Oil Markets, Libya will inadvertently help reduce the production surplus on the global oil market.

"Our latest global liquids balances report still suggests there will be a shift towards a surplus from August and for the ensuing three months, but it is less precarious than previously estimated and developments in Libya have a lot to do with this revision," Tonhaugen said.

By Charles Kennedy for Oilprice.com

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Oil climbs on positive China data, rising demand - Reuters

Posted: 09 Aug 2020 05:34 PM PDT

LONDON (Reuters) - Oil rose on Monday, supported by an improvement in Chinese factory data and rising energy demand as countries eased coronavirus-related lockdowns, but traders remained cautious due to U.S.-China tensions and uncertainty over a U.S. stimulus package.

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

Brent crude LCOc1 rose 54 cents, or 1.2%, to $44.94 a barrel by 0852 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 was up 69 cents, or 1.7%, to $41.91 a barrel.

Saudi Arabian Aramco (2222.SE) Chief Executive Amin Nasser said on Sunday that he sees oil demand rebounding in Asia as economies gradually open up.

China's factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world's second-largest economy.

"With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivize strong production growth in the United States, the oil market remains undersupplied," UBS analyst Giovanni Staunovo said.

Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months. The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+.

"This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts," Commerzbank analyst Eugen Weinberg said.

However, uncertainty over U.S. fiscal stimulus put some pressure on prices. President Trump signed a series of executive orders to extend unemployment benefits after talks with Congress broke down.

U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin said on Sunday they were open to restarting the talks.

"The longer this drags on the worse it is for the demand scenario," said Michael McCarthy, market strategist at CMC Markets and Stockbroking.

Adding to the uncertainty were ongoing tensions between Washington and Beijing. Trump signed two executive orders banning WeChat and TikTok in 45 days' time while announcing sanctions on 11 Chinese and Hong Kong officials.

Markets will now keep an on a China-U.S. meeting on trade talks scheduled for this weekend.

Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne, editing by Louise Heavens

The Oil And Gas Industry Is Going Remote - OilPrice.com

Posted: 09 Aug 2020 04:00 PM PDT

If there was one thing the last oil price crisis proved, it was this: despite the devastation that low oil prices can wreak on an industry, they can also make oil and gas production more efficient for less money. If there is one thing this crisis is proving, it is that oil and gas companies can do this remotely. In what could well be the industry's next step towards digitalization, oilfield service providers have been moving more and more of their operations to remote offices—some are even moving some operations to the homes of their employees. And once again, they have been doing more with less, prompted by oil prices falling off a cliff this spring.

Home Oilfield

The Wall Street Journal's Colin Eaton reported earlier this month that Baker Hughes and Schlumberger both had two-thirds of their drilling activity supported by remote work during the second quarter of the year. For Schlumberger, this was up 25 percent from the first quarter. For Baker Hughes, it was up 20 percent.

Eaton also quoted a Halliburton executive as saying the move from the field to the remote operations center or the home has been an eye-opener in that it has shown the industry that remote work was not as much of a challenge as previously believed.

And this means the trend could become a stable one, just like it has for Big Tech.

Google and Facebook were among tech companies that extended their work-from-home policies until at least the summer of 2021. Some, such as Twitter, have told employees they could keep working remotely forever. But drilling an oil well requires the physical presence of a crew. It is not all done on a computer… except it increasingly is.

The oil and gas industry has been rather selective in its adoption of digital products to optimize its business. This may be about to change, a survey by analytics and advisory firm Quantzig recently revealed. According to the survey, the industry should go all-in for digital to utilize the potential of information technology, and the time to do it is right now.

Related: Oil Drops As Demand Recovery Stalls "Such a transformation will require organizations to implement a focused digital strategy backed by technology adoption," said Quantzig. "It will also need investment and commitment to revisit and revamp processes, infrastructure, and systems. All the enablers required for a successful transformation will have to come into play for the industry to harness the true potential of digitalization."

Jobs Gone Forever

Automation is a big part of the digitalization of the oil industry. It will eventually render many jobs in the field—manual jobs—obsolete. This means that some jobs lost now to the oil price collapse will not be coming back.

Back in February, Baker Hughes' VP of Ventures and Growth, Taylor Shinn, told Oilprice.com in an interview that digitalization did not necessarily mean the loss of jobs. It would actually make it easier to retrain employees and re-assign them, he said. But this was before the pandemic struck, obliterating more than 40,000 jobs in Texas alone, according to data from the Texas Alliance of Energy Producers.

In the perfect storm of low prices and low demand, job losses were inevitable from the start. Going remote and going digital will make more job losses inevitable. Yet it is very likely that they will create new ones, too.

The rise of the digital worker

In December last year, the Houston Chronicle's Sergio Chapa reported on the rising number of tech labs set up by oil and gas companies to drive forward the digitalization of the industry. These labs were hiring people for positions that had words like "data", "agile", and "cloud" in their names.

As Chapa noted in that report, it was not only a way to take advantage of what many are calling the fourth industrial revolution. It was also a way to make work in oil and gas more appealing to a generation that is more hostile to this industry than those before it as a talent shortage loomed on the oil horizon. 

Related: Oil Market Contango Returns In A Sign Of New Glut

Yet this shift is first and foremost about bringing oil and gas in the digital era more comprehensively. Drillbit sensors are fine, and so are 3D printed turbines, but the industry is moving towards comprehensive digitalization, it seems, and the pandemic is speeding up the process because remote is safe.

Geo-data major Fugro recently said it had completed the first fully remote inspection of an offshore platform in the North Sea. It used a remotely operated vehicle and its remote operations center in Aberdeen. This is just the first instance of what is likely to become standard practice, also featuring virtual reality products such as Baker Hughes' Phantom View, drones, and smart drills.

Baker Hughes told the WSJ's Eaton that 40 percent of the users of its remote operations services since the start of the year were first-time users. Schlumberger reported that it planned to boost its digital business substantially in what is becoming the new normal for the industry. Halliburton last month struck a deal with Microsoft and Accenture to advance its digital capabilities.

The big three are going digital. It will cost thousands of jobs, but it may yet create thousands more.

By Irina Slav for Oilprice.com

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Oil prices tumble 6% amid fading hopes for a smooth improvement in global demand - Business Insider

Posted: 30 Jul 2020 12:00 AM PDT

Cabot Oil & GasSpencer Platt/Getty Images

  • Oil futures sank on Thursday as dire economic data releases pointed to a demand recovery lasting longer than expected.
  • West Texas Intermediate crude fell as much as 6.3%, to $38.72 per barrel. Brent crude slid 5.4%, to $41.38, at intraday lows.
  • Thursday reports showed US GDP sliding the most on record and jobless claims notching a second-straight week of increases.
  • Vopak, the world's largest independent oil storage company, warned in a Wednesday earnings call the market's demand recovery will likely take at least the rest of 2020.
  • Watch WTI crude trade live here.
  • Watch Brent crude trade live here.

Oil futures plummeted on Thursday amid revived fears of a long-term demand shock.

West Texas Intermediate crude slid as much as 6.3%, to $38.72 per barrel. International standard Brent crude tumbled 5.4%, to $41.38, to its intraday low as of 11:05 a.m. ET. Both reached their lowest point since late June.

The world's most-traded commodity stabilized near $40 per barrel through the summer after rallying in the second quarter. Thursday's session wiped out that support for WTI and threatened to plunge Brent futures below the key threshold. Oil volatility rocketed higher after touching its lowest point in five months.

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Economic data released Thursday morning added to the oil market's worries. US gross domestic product fell at an annualized rate of 33% in the second quarter, confirming the coronavirus drove the biggest economic slump on record. Jobless claims for the week ended Saturday increased for the second week straight. The uptick arrives after months of steady declines and suggests the US labor market may stabilize at a historically high level of unemployment until the virus threat subsides.

Industry experts are also preparing for oil demand to stay weak. Vopak, the world's largest independent oil storage company, said in a Wednesday earnings call that it expects a slower demand recovery that lasts at least through 2020. CEO Eelco Hoekstra also warned that inventories were steadily increasing and threatening a storage crisis similar to the one that pushed prices below zero in April.

"If crude demand continues to show further signs of weakness, producers will have to look elsewhere for storage as Vopak's capacity is fully rented out. Another historic oil price collapse is unlikely but oversupply risks will definitely keep crude heavy," Edward Moya, senior market analyst at OANDA, said in a note.

WTI futures traded at $39.76 per barrel as of 11:05 a.m. ET Thursday. Brent contracts traded at $42.47.

Now read more markets coverage from Markets Insider and Business Insider:

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