Crude Rises on U.S. Stockpiles Draw, Coronavirus Vaccine Hopes
SECTOR COMMENTARY
Energy stocks are higher, following the trajectory of broader markets after stock futures popped on positive vaccine news from Moderna and a blowout quarter from Goldman Sachs. However, the U.S. has reported an average of about 62,210 new cases per day over the past seven days, more than triple the average just a month ago.
Oil is up more than 1% on a bullish API crude stockpile draw alongside positive headlines on vaccines for COVID-19. Meanwhile, the OPEC+ JMMC meeting is underway where the group will discuss compensation cuts in the coming months for those that missed agreement levels in May/June and review current output reduction levels. Reports are that 5 OPEC+ sources have said no recommendations have been made to prolong the 9.6M bpd of cuts into Aug, which will go down to 7.7M bpd at that time.
Natural gas futures are flat ahead of the EIA weekly storage data due tomorrow with consensus expecting a build of +46 Bcf versus the 5 yr average of +63 Bcf.
INTERNATIONAL INTEGRATEDS
(Late Tuesday) Reuters - BP delivered 3 million barrels of Iraqi oil to the Shanghai International Energy Exchange (INE) this month, becoming the first major global trader to make a physical delivery since China launched the futures market in 2018.
(Late Tuesday) Reuters - Petrobras said that four platforms in the Buzios field located in the Santos Basin, off the coast of Rio de Janeiro, achieved a daily record output on Monday. The platforms, called P-74, P-75, P-76 and P-77, produced a combined 674,000 barrels per day of oil and 844,000 barrels of oil equivalent per day. The Buzios field is considered the largest deepwater oilfield in the world.
(Late Tuesday) Reuters - Petrobras will keep its gross debt targets for 2020 amid the new coronavirus pandemic, but may eventually reduce it to lower levels depending on market conditions. The company aims to reach $60 billion, he said, not specifying a timeline. Castello Branco said the company should announce new divestments in the coming months, despite delays in the process imposed by the health crisis.
Reuters - Total reported Q2 variable cost margin, European refining USD 14.3 per tonne versus USD 26.3 per tonne in Q1.
U.S. E&PS
MKM Partners upgraded Antero Resources to ‘Neutral’ from ‘Sell’.
(Late Tuesday) Press Release - Diamondback Energy provided an operational update for the second quarter of 2020 and announced revised full year 2020 guidance. Q2 2020 average production of 176.3 MBO/d (294.1 MBOE/d). After voluntarily curtailing 9.0 MBO/d (16.1 MBOE/d) of total Q2 2020 production, primarily in May, Diamondback elected to return this curtailed production in June, with nearly all curtailed production back online today. Q2 2020 average realized hedged prices of $35.21 per barrel of oil, $7.17 per barrel of natural gas liquids and $0.33 per Mcf of natural gas, resulting in a total equivalent price of $22.95 per BOE. Diamondback realized total hedging gains of $211 million in the second quarter, including $11 million of realized gains from the early termination of 10.0 MBO/d of Q3 2020 oil hedges.
(Late Tuesday) Press Release - Viper Energy Partners, a subsidiary of Diamondback Energy, provided an operational update for the second quarter ended June 30, 2020. Q2 2020 average production of 14,453 bo/d (24,508 boe/d). Q2 2020 hedged realized prices of $22.39 per barrel of oil, $7.69 per barrel of natural gas liquids and ($1.01) per Mcf of natural gas, resulting in a total equivalent price of $13.60 per boe. Viper realized total hedging losses of ($2.1) million. Q2 2020 unhedged realized prices of $21.00 per barrel of oil, $7.69 per barrel of natural gas liquids and $0.46 per Mcf of natural gas, resulting in a total equivalent price of $14.55 per boe.
OILFIELD SERVICES
Cowen upgraded Halliburton and Schlumberger to ‘Outperform’ from ‘Market Perform’.
MLPS & PIPELINES
Reuters - Cheniere Energy repurchased about $844 million of its outstanding 4.875% convertible senior notes due 202. Unit converted 100% of its outstanding 11.0% convertible senior secured notes due 2025.
MPLX was downgraded to equal-weight from overweight at Morgan Stanley.
Williams Companies and Enbridge were upgraded to overweight from equal-weight at Morgan Stanley.
MARKET COMMENTARY
Wall Street futures rose along with world shares following reports of progress in developing a COVID-19 vaccine, offsetting rising tensions between the United States and China. Risk sentiment pushed the dollar down. Gold prices were lower but held above the $1,800 level. Oil gained following a sharp drop in U.S. crude inventories, with the market waiting for OPEC and its allies to decide on the easing of output curbs later in the day as the global economy slowly recovers from the COVID-19 pandemic. U.S. industrial production and import prices data for June is scheduled for release later in the day.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 1/8/20 – CNBC’s Squawk Alley: Oil market reaction to US-Iran tensions
- 1/8/20 – Bloomberg Day Break – Steady escalation of US-Iran tensions
- 12/5/19 – Bloomberg Balance of Power – OPEC's Limited Efficacy
- 9/17/19 - Oil's New Risk Premium Discussion on CNBC TV
- 9/16/19 - Discussion on Bloomberg TV about Impact of Abqaiq Attack
Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services – the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner.
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