What You Should Know About Oil and Gas Today
The Big Story
Reuters reports this morning that OPEC+ will indeed scale back its cuts to production and exports beginning on August 1, although deep cuts will remain in place at least through the end of 2020.
Reuters quotes Saudi oil minister Prince Abdulaziz bin Salman as saying that “As we move to the next phase of the agreement the extra supply resulting from the scheduled easing of production cut will be consumed as demand continue on its recovery path.”
The OPEC+ cuts are scheduled to taper down from 9.7 million bopd to 7.7 million bopd as of August 1. However, due to make-up cuts by member countries who have been cheating on their quotas for the past few months, the actual volume reductions for August and September will actually amount 8.54 million bopd. The group has made no decision yet whether to extend cuts into 2021, although it appears likely to do so.
Also, on Tuesday, OPEC announced that it projects global demand recovering by 7 million bpd in 2021 after falling by 9 million this year.
Meanwhile, in other news…
Oil prices for West Texas Intermediate rose back over the $40.50 per barrel mark as a result of a big draw-down in U.S. inventories. API said stocks fell by 8.32 million barrels last week.
Paul Takahashi at the Houston Chronicle reports on a new Rystad Energy study predicting that oil companies around the world will drill the fewest wells in 20 years during 2020. Rystad projects that a little over 55,000 new wells will be drilled this year, compared to more than 72,000 during 2019. Petroleum Economist Karr Ingham told the Chronicle that he was surprised the Rystad projection was not lower considering the massive reduction in active drilling rigs and other industry activity. “If you spin that out, the decline in rig count alone in Texas might suggest the impact on number of wells drilled will be worse,” Ingham said. “The rig count is still going down, so the number of wells drilled will keep going down.”
Permian Producer Diamondback Energy cut its own production forecast on Tuesday. Citing higher-than-expected curtailments and ongoing price volatility, Diamondback said that it plans to produce 290,000 to 305,000 bopd for 2020, lower than its previous forecast of 295,000 to 310,000 bopd.
Sergio Chapa reports that more than $1 billion in loans from the federal Paycheck Protection Program helped to save thousands of jobs in Texas that would have otherwise been lost during the oil bust. An analysis by the Houston Chronicle found that companies used the loans to preserve more than 93,000 jobs in Texas.
That’s all for today.