The Shale Daily Update – 7.8.2020

A new report from advisory firm Deloitte finds that the oil and gas industry today might well be facing the greatest challenge in its history.

What You Should Know About Oil and Gas Today

The Big Story

Oil prices could spike back up to $66 per barrel by mid-2021. That’s according to Amrita Sen, co-founder and director of research for international consultancy Energy Aspects. In a presentation reported by Bloomberg, Ms. Sen says the bounce in demand will outstrip the ability of producers to restore supply, resulting in average Brent oil prices rising from about US$43 per barrel this year to US$66 next year and US$83 in 2023.

In another bit of very interesting news, Ms. Sen also said that the drop in global oil demand bottomed out during April at 18 million barrels of oil per day. This is a much smaller drop than the levels her firm and others had projected would max out at 25-28 million bopd.

That new reality, coupled with massive loss of overall production in the U.S., Canada and other big non-OPEC producing countries will logically make it very difficult for the global industry to ramp supplies back up if demand rapidly returns over the fall and winter, as most now expect. Given all of that Ms. Sen’s price projection could end up being quite conservative.

Onto Other News….

Warren Buffett’s Berkshire Hathaway expanded its energy holdings this week, announcing a $4 billion acquisition of Dominion Energy’s gas pipeline and storage assets. It’s the largest sale of U.S. energy assets thus far this year.

Sergio Chapa at the Houston Chronicle reports that the Texas oilfield service sector cut another 8,600 jobs in the month of June. While that is a terrible number, the story also notes that that is far lower than the 60,000 jobs that were cut during the month of April. At its height in October 2014, the service sector nationally employed 941,000 workers. Today, after two major busts in just five years, that number stands at about 671,000. Ugly.

Mr. Chapa also reports that Sugar Land-based pipeline company Rangeland Midstream Canada just completed a 53-mile oil pipeline up in Canada. So, at least one North American country still allows pipelines to be built. That’s good to know.

Typical congressional buffoonery: Let’s ban something that does not exist. New Jersey Democrat Frank Pallone did his leftist virtue-signaling duty yesterday by announcing that the House Democrats’ appropriations bill for the fiscal year 2021 would ban offshore drilling in the Atlantic Ocean. Presumably, congressional Democrats will next propose banning the hunting of Unicorns and discrimination against Leprechauns.

Federal Judge James Boasberg, an Obama-appointee, denied an emergency request by Energy Transfer, the operator of the Dakota Access oil pipeline (DAPL) to reconsider his order to shut and drain the 570,000 barrel-a-day line within a month. The decision sets the stage for Energy Transfer to file an emergency appeal to the DC Circuit Court of Appeals for a stay on the judge’s order, which the company promised to pursue on Monday.

E&E News reports that Chad Holliday, the chairman of Royal Dutch Shell PLC, one of the world’s largest oil producers, said yesterday, “I think you’ll see Shell as more of a power company than an oil company.” “I don’t think it’s too long before you’ll see that transition,” he added, speaking at Stanford Global Energy Dialogues, a webinar series hosted by Stanford University in California. *sigh*

That’s enough for today.












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