The oil price crash has attracted all the media attention to the dire state of the U.S. crude oil-producing sector with cash-strapped drillers struggling to make any money at $20 oil. The collapse of the price of oil, however, could be the first step toward higher U.S. natural gas prices as early as next winter, helping the gas-oriented shale firms who survive the next few months to have their gas selling for more than double the current rates.

The U.S. natural gas industry is set to suffer a lot in the short term, but the medium-term gain could be around the corner after the short-term pain, analysts say. The American natural gas market could be yet another example of the saying that ‘the cure for low prices is low prices.’

On Thursday, the benchmark price of natural gas at the Henry Hub closed at $1.733 per million British thermal units (MMBtu), down by 2.8 percent on the day. Earlier in April, the price had dropped to as low as $1.552/MMBtu…CLICK for complete article

Over the past week, I have taken my bullishness on tankers from level 10 to 11. It started with the Saudis busting out of the cartel formerly known as OPEC+ in order to dump oil and crush US shale, but it has progressed far beyond that as various US cities went into lock-down. Fair warning, I’m going to generalize, I’m going to round some numbers and if you’re an empirical purist, you’ll probably be offended.

In big round numbers, the world produces 100 million barrels of oil per day (bbl/d) and consumes roughly the same. As a result, supply and demand are usually balanced to within a few hundred thousand bbl/d at any given time. In fact, we have extreme price volatility when the balance is off by much more than that. The market was roughly balanced at the start of this year, until COVID-19 arrived in China. When the Chinese went into quarantine, their oil demand collapsed by roughly 25% and stayed suppressed for roughly two months. Even today, two months later, demand is still not back to pre-flu levels. With the rest of the world now experiencing COVID-19, I would expect global oil demand to also decline by a similar 25% in affected regions, offset by the partial recovery in China….CLICK for complete article

A dramatic change in oil demand coupled with an unexpected increase in production has upended the industry, Vitol’s chief executive Russell Hardy told Bloomberg in an interview.

At its peak, oil demand could slump by 15 to 20 million bpd over the next few weeks. On an annual basis, Hardy said, this would contribute to a demand decline of 5 million bpd.

“It’s pretty huge in terms of anything we’ve had to deal with before,” Vitol’s chief executive said.

More bad news is coming, too. India’s Prime Minister Narendra Modi just ordered a nationwide lockdown in response to a spike in new coronavirus cases, which, hardy noted, will translate into a further decline in oil demand, and a substantial one, at that.

Asked by Bloomberg about where oil prices will be going from here, Hardy noted that more oil and oil products were being churned out than the world can consume, so stockpiles in the U.S., Europe, and India will rise, with refineries cutting output.

So far, he said, the cuts amount to about 7 million bpd.

Even so, storage is filling up, especially for oil products. While there is some free capacity yet for crude oil, it will likely fill up fast, putting additional pressure on prices…CLICK for complete article

Global oil demand is set to plunge by more than 10 percent from the typical 100-million-bpd consumption, as the raging coronavirus pandemic forces countries into lockdown, according to the world’s biggest independent oil trader, Vitol.

“Demand destruction this year depends on how many countries follow an Italian-style lockdown. The drop in Italian consumption has been dramatic. If you extrapolate it to the rest of Europe, and particularly the U.S., then you can get as bearish as you like,” Giovanni Serio, head of research at Vitol, told Reuters on Friday.

According to the executive at the largest oil trader in the world, a 10-percent drop in U.S. demand would mean a 2 million bpd loss in consumption. Currently, an Italy-style lockdown in the United States is not Vitol’s base case, but if Covid-19 infections spiral out of control, there could be drastic measures coming that would destroy a lot of oil demand.

California, for example, is already under lockdown, after ordering on Thursday its 40 million residents to stay at home unless they have an essential reason to go out.

In Europe, lockdowns in Italy, Spain, and France are crushing oil demand, German traffic is down 40 percent, and if the UK takes more measures to curb domestic travel, around 40 percent of Europe’s 7-million-bpd demand is at risk, Vitol’s Serio told Reuters….CLICK for complete article