China, Opec, United States discussed on World Oil's Daily Brief
Welcome to the daily brief the world. Oil podcast network daily review of market news emerging trends new technologies and the people who are advancing the oil and gas industry. Here's Cameron Wallace with your top news. Stories of the day. Good afternoon and welcome to the World. Oil Daily brief podcast. I'm Cameron Wallace and easier. Top Oil and gas headlines for Tuesday February the eleventh today. We'll take a look at corona viruses impact on Chinese gas demand in the US. Natural gas prices fall to a four year. Low and oil is holding fifty dollars a barrel as it appears that OPEC won't take any emergency action. I up the impact of the novel. Corona virus on Chinese gas demand will depend on both the severity and length of time required to contain the outbreak. Wood Mackenzie Research Director Robert. Sims estimates gas demand lost China has reached two billion cubic meters by the end of the first week in February with more than half of this loss concentrated in the Industrial Sector. Though many international airlines have suspended travel to and from China through March and April Sims expects domestic flights to resume in February with the resumption economic activity although limited wood Mackenzie estimates a full year. Gas Demand Reduction of between six and fourteen billion cubic meters at twenty twenty depending on the length of time required to contain the outbreak. You're on your growth. Rates dropped six percent and four percent respectively mostly the result of downgrades as compared to pre corona virus outlooks of eight percent of growth domestic upstream. Gas Production is affected by preventive measures to control the virus and travel restrictions have reduced manpower onsite however as baseload pipeline gas can be delivered in closed off operations. It is less affected. Wood Mackenzie is forecast domestic supply to be lower by between one point six and two point nine billion cubic meters ellen g will bear the brunt of this reduction domestic gas demand although some disruption to domestic gas supply is also expected to travel restrictions and reduced operations. Wood Mackenzie currently estimates the downside impact Chinese Ellen. G demand as between two point six million tonnes in the best case with recovery by April and six point three million tonnes in a more prolonged case with slow return to normal. The Corona virus outbreak and his impact on Chinese gas demand could have come at a worse time for the already oversupplied Global Ellen. G MARKET DISAPPOINTING. Apec demand growth contributed to the having LNG prices through two thousand nineteen and further new volumes emerging from US producers. Wood Mackenzie was already anticipating lower prices through two thousand twenty prior to the corona virus. They had expected the Pacific market to absorb nineteen million tons of the approximately twenty seven million tons of new supply. Growth in twenty twenty. This assessment was based on the view with the Pacific demand. Growth would rebound significantly from last year. However warm weather through December and January in northern Asia has already put pressure on inventory levels in China South Korea and Japan and further weakening already soft North Asian spot market with too much ellen g and nowhere left to place it. It looks like a supply correction is needed to balance the market. Would Mackenzie is expecting supply response in some markets like Egypt and potentially eastern Australia? We're the likes of shell an AP L. G. could attempt to sell gas into the domestic Queensland gas market however it is us Gulf producers who have the highest marginal cost of supply and the most flexibility. The Chinese government said would offer support for companies seeking to clear force Missouri on international contracts. The first such reported notes were sent by last week to Ellen G SUPPLIERS AND CNPC and sign a PEC could follow suit entering force. Measure is rare in LNG markets and. We'll be contractually complex contract. Wording will need to explicitly include epidemics as force majeure events demand-reduction on its own or noticed by relevant Chinese government. Authority will likely be insufficient in addition prior to being released from their obligations to receive cargo. Buyers would need to follow contract procedures proving that actions had been taken to minimize overcome the impact of the force majeure event total contracted volume into China in two thousand twenty is fifty four million tons per annum still less than the two annual demand scenarios presented Mood Mackenzie's best case and prolong case so while major Chinese buyers may call for force. Major suppliers may insist on trying to deliveries to later in the year once demand impact of Corona virus has diminished given the widespread between high contractor prices and low spot market prices expected to persist through twenty twenty. There is a strong commercial incentive for each side to resist the actions of the other. If buyers do succeed exercising force measure the revenue impact on sellers could be significant. The approximate price for many of these oil index contracts is around fourteen point five percent of oil range equivalent to eight dollars and eighty three cents per million. British thermal units this compares with spot prices of around three dollars and fifteen cents per million. 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According to Commodity Whether Group LLC mild temperatures are poised to blanket the eastern half of the country February a shift from previous outlooks that showed lingering chill. Unusually warm weather has wreaked havoc on gas demand allowing an onslaught of supply from shale basins to overwhelm the market American liquefied natural gas cargoes a key outlet for production are at risk of being curtailed as the corona virus outbreak in China curbs consumption the resulting collapsing. Gas prices is squeezing profits for us. Exporters the gas glut has been especially severe in the Permian Basin. Local prices for March delivery dropped below zero output from the West Texas New Mexico shale play or gases extracted as a byproduct of oil drilling is increasing so fast that there isn't enough space on pipelines to take it away guess futures for March delivery slid five percent the lowest settlement since March ninth two hundred sixteen the premium for April gas over the March contract widened to three point. Eight cents a sign that traders don't expect an end of winter supply crunch finally today. Oil is holding near fifty dollars a barrel in New York on signs that OPEC and its allies. Probably won't go ahead with a much touted. Emergency meeting even as global oversupply piles up. While the coalition's technical experts have recommended a production cutback as corona virus batters demand Azerbaijan's energy minister told. Ria Novosti news wire that the group is unlikely to holding early meeting Saudi Arabia's pushing for action yet key partner Russia has so far resisted as the alliance dithers conditions in Global. Crude markets are deteriorating a discount on prompt crude which appeared in Brent Front month contracts last week for the first time in a year is taking hold in the futures market the pattern which is known as tango and usually indicates oversupply now extends all the way through September contracts oil short-selling has more than doubled in just two weeks hedge funds boosted bears wagers against WTI crude by forty one percent in the week ended February fourth following a fifty two percent surge a week earlier another indicator closely watched by traders. The so-called red spread between December contracts and consecutive years is also shifting towards tango after collapsing from a dollar thirty one a barrel and late January to just four cents on Monday OPEC and its allies. Have shown some readiness to intervene with a committee of technical experts counseling last week that the coalition which pumps about half of the world's oil should deepen existing production cuts by an additional six hundred thousand barrels a day during the second quarter yet Russia. The biggest crude producer within the group hasn't yet announced whether it will back the policy or meeting before the group scheduled early March gathering to make it happen. Prices could come under further pressure if talks aimed at ending the conflict in Libya were blockade of ports has pushed production to the lowest level since two thousand eleven lead to a restoration of output. A two day meeting started. Sunday is being closely watched for any sign of a deal that could restore over one million barrels a day of output to global markets. And there you have it our top oil and gas new stories for Tuesday February. The eleventh content is courtesy of world oil magazine and Bloomberg News Service. Treat more on. Today's topic's please visit world oil dot com slash news. I'm Cameron Wallace. Thanks for listening today. Thanks for listening to the daily brief on the world oil podcast network. If you have any questions or comments on the program please email editorial at world oil dot com and check the show notes for more information about today's episode. Don't forget to subscribe either on Apple podcasts. Or wherever you get your podcast also be sure to visit world oil dot com for more information about today's stories and sign up for our free daily.