Goldman says refineries to shut on less demand, new projects By Bloomberg | July 3, 2020, 7:34 a.m. | Share: � �Covent refinery Image: Shell The global refining industry is entering a consolidation phase as slowing oil demand growth is set to coincide with large-scale projects that will start coming online next year, according to Goldman Sachs Group Inc. The demand hit from the coronavirus is yet to cause any delays in a number of mega-refining projects, most of which are in China and the Middle East, that will start operations from 2021 to 2024, the bank said in a note. This will cause global utilization rates to be 3% lower over this period than in 2019. “We expect competition to intensify leading to below consensus – and mid-cycle – refining margins over 2021-22 and potential refinery closures in developed markets,” analysts including Nikhil Bhandari said in the note. Global oil demand will return to pre-virus levels by 2022, they said. Emerging markets will provide the bulk of oil consumption growth in the first half of this decade and the new mega-refineries will be located close to where the demand is, according to Goldman. This means refinery closures will be more likely in developed nations. Among oil products, gasoline will lead the recovery in fuel demand, the lender said. The outlook for distillates is more challenging as jet fuel’s recovery will be slower and diesel consumption will be hit by the uptake of electric vehicles in the medium term. In addition, the new mega-refineries are distillates heavy. Gasoline and diesel consumption will return to 2019 levels by next year, while jet fuel is unlikely to get there until at least 2023, the analysts said. Liquefied petroleum gas and naphtha will be key long-term growth drivers on the back of growing petrochemical consumption, while overall oil demand won’t peak before 2030, they said. © 2020 Bloomberg L.P.

OPEC cuts output to lowest since 1991 as virus slams oil demand By Bloomberg | July 3, 2020, 7:37 a.m. | Share: � � OPEC slashed oil production to the lowest level since the Gulf War in 1991, as it escalated efforts to revive global markets just as a resurgence of the coronavirus is threatening demand again. Saudi Arabia faithfully delivered the extra curbs promised in June, and the laggards, though still trailing in implementing the cuts, stepped up their performance, according to a Bloomberg survey. OPEC and its partners’ record output cuts since May have helped revive the oil market, but a recent surge of Covid-19 infections in countries including the U.S. is highlighting the fragility of the revival. The Organization of Petroleum Exporting Countries cut production by 1.93 million barrels a day to 22.69 million a day last month, according to the survey. That’s the lowest since May 1991, though membership changes since then affect the comparison. The survey is based on information from officials, ship-tracking data and estimates from consultants. The intervention by OPEC+, the coalition that spans the cartel plus outsiders such as Russia, has helped more than double benchmark Brent crude from the lows of April, when the virus outbreak is estimated to have taken out about a third of global demand. Prices were above $41 a barrel on Wednesday. Yet the pullback in the group’s output to the lowest in almost three decades illustrates the scale of the sacrifice involved. OPEC+ pledged 9.7 million barrels a day of cuts at a meeting in April – about 10 per cent of global supplies – and some of its Middle East members then promised to voluntarily cut even deeper in June. Saudi Arabia, the group’s biggest member, cut back by 1.13 million barrels a day to 7.53 million in June, fully implementing its additional voluntary reduction. Fellow Persian Gulf exporters Kuwait and the United Arab Emirates met their OPEC-mandated targets, but fulfilled only a small part of the extra curbs. Varying Compliance Overall, OPEC delivered all of the reduction pledged in the April agreement, though rates of compliance vary significantly between members. While Iraq, Nigeria and Angola are still lagging behind, their performances improved last month. Iraq implemented 70% of its quota, Nigeria 77 per cent and Angola 83 per cent. At a meeting in early June, the countries agreed to make up for earlier cheating by making extra curbs in the coming months. Compliance from countries outside OPEC has been stronger than usual, as the scale of the demand collapse and risk of a renewed price decline encourage adherence. Russia pumped close to its target for a second month, and Kazakhstan was on track to hit its quota. The slump in OPEC’s output also reflects the long-term decline in several members -- most notably Venezuela. While exempt from having to make deliberate cuts, Caracas is nonetheless seeing output dwindle as U.S. sanctions and prolonged economic recession slam its petroleum industry. It pumped just 340,000 barrels a day last month, the survey showed. © 2020 Bloomberg L.P.

Exxon’s historic losses multiply on virus-driven crude slump By Bloomberg | July 3, 2020, 7:03 a.m. | Share: � � Exxon Mobil Corporation incurred an unprecedented second straight quarterly loss as almost every facet of the oil giant’s business slumped amid COVID-19 lockdowns that stunted economic activity. The explorer’s oil and natural gas unit took a hit of as much as $3.1 billion as prices for those commodities slumped, according to a regulatory filing on Thursday. Margins in Exxon’s refining business contracted by almost $1 billion while the chemical unit teetered on the edge of a loss. The guidance suggests the company will post a per-share loss of 69 cents at the midpoint range, excluding certain items, according to Cowen & Co. That would be worse than the 55-cent adjusted average loss forecast in a Bloomberg survey of 16 ana “Given the current environment, XOM will likely need to continue defending its long-term view of energy growth that underpins its counter-cyclical capex program that could ramp back up next year,” Cowen analysts including Jason Gabelman wrote in a note to clients. Major oil and gas producers from Norway to the U.S. saw profit plunge in the opening three months of the year. Exxon reported its first quarterly loss in modern history during the January-to-March period, and that was only the result of the initial spread of the coronavirus. Things got even worse in the second quarter after the global pandemic and the aftermath of a Saudi-Russian market-share war temporarily pushed oil prices into negative territory. Exxon’s challenges extend beyond the full quarterly results it’s scheduled to release on July 31. The company’s debt load is expected to swell to a record $57 billion as it relies on borrowed money to sustain dividend payouts amid negative cash flow, Goldman Sachs Group Inc. said on Wednesday. © 2020 Bloomberg L.P.