Russian governement tries to steady battered oil industry

Oilprice.com writes:

"Russia’s President Vladimir Putin has tasked the government with implementing a set of measures aimed at supporting the oil industry for the duration of the OPEC+ production cut agreement.

According to a document published on the website of the Russian presidency, the measures include a prescription not to sanction companies that stray outside their production quotas and a temporary lifting of penalties for state oil companies for not sticking to their 2020/2021 investment programs.

The document also lists “special rates” to be implemented by pipeline operator Transneft and Russian Railways for transporting crude oil and oil products for the duration of the OPEC+ deal."

You can read the rest of the piece via the below link:

https://oilprice.com/Energy/Crude-Oil/Putin-To-Bail-Out-Russian-Oil-Industry.html 

    

China buys up cheap oil in large amount

Oilprice.com reports:

"While the rest of the world is tentatively coming out of lockdowns, China is taking advantage of the cheapest crude oil in years to stock up as demand is starting to return in the world’s largest oil importer, Bloomberg reported on Friday, citing tanker-tracking data it has compiled. At present, a total of 117 very large crude carriers (VLCCs) – each capable of shipping 2 million barrels of oil – are traveling to China for unloading at its ports between the middle of May and the middle of August. If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months, according to Bloomberg. The fleet en route to China could be the largest number of supertankers traveling to the world’s top oil importer at one time, ever, Bloomberg News’ Firat Kayakiran says.

Many of the crude oil cargoes are likely to have been bought in April, when prices were lower than the current price and when WTI Crude futures even dipped into negative territory for a day."

You can read the rest of the piece via the below link:

https://oilprice.com/Energy/Energy-General/A-Huge-Fleet-Of-117-Tankers-Is-Bringing-Super-Cheap-Crude-To-China.html 

The consequences of saturated oil storage on US production

Goehring & Rozencwajg give a gloomy forecast on US oil production:

"According to the EIA weekly inventory figures, US production has fallen by nearly 1 mm b/d or 7% in only five weeks – the second-sharpest decline in US production ever outside of hurricane-related activity.

Most of these “involuntary” cuts will never come back online. In some cases, shutting in a well for a prolonged period will irreparably damage the wellbore or reservoir. The stripper wells meanwhile were only marginally economic to begin with on an operating basis and would never justify the capital cost to drill through the cement plugs used to cap them. While offshore production is accustomed to shutting in production for short periods during hurricanes, longer-term curtailment requires the well to be permanently sealed making re-entry nearly impossible."

You can read the rest of the piece via the below link:

http://blog.gorozen.com/blog/oil-production-cuts-and-their-long-lasting-repercussions 

Geopolitical challenges of Covid-19 and oil price plunge

Interesting insights and analyses by Meghan O'Sullivan for Bloomberg:

"As history has shown, a big change in energy markets often precipitates a big change in geopolitics. For instance, the shift from coal to oil catapulted Middle Eastern countries to strategic significance. And the recent technology-driven boom in shale oil elevated the United States to net oil exporter status, changing its outlook on the importance of oil in global affairs. We now face a disruption of such proportions that it, too, will reorder some power relationships.

Right now, the focus in Washington is on how to save the U.S. oil industry, much of which is under enormous pressure given the drop in prices. While this is understandable and necessary, Washington needs to make room on its list of priorities for a number of strategic shifts that the crisis has created. For starters, policy makers should consider four challenges and opportunities that are already manifest."

You can read the rest of the piece via the below link:

https://www.bloomberg.com/opinion/articles/2020-04-29/covid-19-oil-collapse-is-geopolitical-reset-in-disguise

The repercussions of the oil glut on russian foreign policy

The magazine The American Interest analyzes the impact of the oil glut on strategic aspects of russian foreign policy: 

"While the economic pain may have yet to cross Putin’s threshold, Russia, like every other country, will succumb to this new reality. Putin’s official popularity ratings have dropped to the low 60 percent range and, perhaps more importantly, for over a year polls have shown that a large majority of the Russian people think the country is going in the wrong direction. They also think that more resources should be spent on domestic problems and that Russia should pursue policies that improve relations with the West.

Putin, of course, is no democrat; he can choose to ignore public opinion. But with oil prices at inconceivable lows, the Kremlin will have to make serious decisions on where to invest what will be increasingly limited resources. Russia’s military has historically been more active when fossil fuel energy prices soar and less so when they fall. When the economic crunch hits, Russia tends to cut back on training and exercises (often with devastating consequences) before it disrupts actual operations. But this is no ordinary shift in market forces. It is a combination of Putin’s hubris in starting an oil war he thought he could win combined with a crisis nobody saw coming. Something will have to give. Recovery will be difficult for almost every country, but especially so for a country almost solely dependent on carbon earnings."

You can read the rest of the piece via the below link:

https://www.the-american-interest.com/2020/04/22/how-the-oil-shock-will-contain-putin/