The Shale Daily Update – 6.2.2020

Drone inspection. Operator inspecting construction building turbine power plant

What You Should Know About Oil and Gas Today

The State of Play

The OPEC+ member countries will apparently meet a week earlier than expected as Russia and Saudi Arabia near a deal to extend the group’s deep initial supply cuts for “a month or two” longer. Originally scheduled for June 11, OPEC+ representatives seem set to meet via video-conference on June 4, just two days from now.

Reuters reports that the main reason for moving the meeting forward by a week is to facilitate oil volume nominations for July sales by countries like Saudi Arabia, Iraq and Kuwait. With the current deep cuts scheduled to phase out at the end of June, those countries and others obviously need to understand what their July production quotas will be in order to execute their deals appropriately. Makes sense to me.

Pleased by the prospect of extended deeper supply cuts, crude traders have reacted by raising oil prices, with WTI up over $36 per barrel for the first time since early March as of this writing.

The rising crude prices come not a moment too soon for the State of Texas, which, according to State Comptroller Glen Hegar, has seen its sales tax receipts for May decline by 13% as a result of the oil bust. “Significant declines in sales tax receipts were evident in all major economic sectors, with the exception of telecommunications services,” Hegar said in a statement. “The steepest decline was in collections from oil and gas mining, as energy companies cut well drilling and completion spending following the crash in oil prices.”

In the same statement, Hegar also reported declines of 38% n motor vehicle sales and rental taxes, and of 30% in motor fuel taxes. Yikes.

The impacts of this self-imposed recession are equally severe in other states. In Louisiana, for example, a new analysis from Rystad Energy indicates that Haynesville Shale-sourced LNG exports are set to decline by 20% through 2023. That’s a big hit from such a prolific gas-producing basin.

Chris Helman at Forbes reports that at least one industry analyst believes the worst part of this bust is now over. “The bottom is past and a long recovery now underway,” wrote Credit Suisse oil analyst Bill Featherstone in a research note Friday. Let’s hope he’s right.

It didn’t make much news, but apparently President Trump and Russian President Vladimir Putin had a discussion about the energy situation on Monday. As reported by Argus media, The Kremlin said that Vladimir Putin and Donald Trump “noted that this multilateral agreement, reached with the active support of the presidents of Russia and the US, leads to a gradual recovery of demand for oil and to stabilisation of prices.” It gave no further details other than that the two leaders’ conversation was “constructive, businesslike and informative”.

Ok, cool.

This will make New York Governor Andrew Cuomo angry: The Trump Administration moved yesterday to limit the power of states to stop interstate pipeline projects under Section 401 of the Clean Water Act. Cuomo has abused that part of the CWA to block several pipelines that would carry Marcellus shale gas to the New England states. The result of Cuomo’s abuses has been the spectacle in recent winters of LNG tanker ships carrying Russian natural gas sailing into Boston Harbor, and New Englanders paying exorbitant prices to heat their homes.

Cuomo can’t do anything about this one. The Canadian Broadcasting Company reports that the Trans-Mountain pipeline that will carry Alberta and British Columbia crude to the west coast markets reached a key milestone. “…construction on a seven-kilometre section of the line has begun in Kamloops, B.C. It says a crew of up to 50 is preparing the area, but the workforce will grow to about 600 during peak construction later this summer or early fall.”

Reuters reports that the Trump Administration also announced on Monday that it is cancelling or delaying several planned federal lease sales due to the COVID-19 pandemic’s depressing the market. Upcoming sales scheduled for this month in Nevada, Utah and Mississippi got the ax yesterday, but later sales scheduled for Colorado and Wyoming are still alive for now.

That’s all for today.












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