March 18, 2020

March 18, 2020
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  • WTI is down $2.33 to $24.62/Bbl, and Brent is down $1.28 to $27.45/Bbl
  • Oil fell to the lowest level in 17 years on Wednesday morning as the viral pandemic shuts down much of the global economy, destroying demand
    • The number of confirmed coronavirus infections past 200k, more than doubling over the span of two weeks
    • Global travel restrictions and home quarantines have raised the prospect of a the economy moving into a recession
  • Halliburton will furlough about 3,500 workers at its headquarters in Houston as oil trades in the $20’s
    • The affected employees will alternate working one-week on and one-week off during the two-month period
    • Benefits will be kept during the furlough, but workers will not be paid for the weeks not worked
    • Many of the company’s customers have slashed capex this month between 25-50% in the face of low oil prices
  • EIA weekly data is due at 9:30 AM CST
    • U.S. Crude Inventories:                  +     4,405 MBbls (Avg. Bloomberg surveys)
    • U.S. Gasoline Inventories:             –      3,643 MBbls
    • U.S. Distillate Inventories:             –     3,492 MBbls
    • U.S. Refinery Utilization:               –     0.01% change
  • Natural gas is down 9.7c to $1.632/MMBtu
  • The total HDD count for March is currently estimated at 515, good enough to be the third warmest March of all time (Commodity Weather Group)
    • While it may be early, April’s total HDD forecast is currently at 317, good enough to be just outside the top-ten warmest Aprils of all time
  • Despite the collapse of oil prices, oil-indexed LNG contracts are unlikely to see a boon in demand
    • For many Asian LNG contracts, they are tied to the Japan Crude Cocktail (JCC) which determines its price through a blend of oil prices that operate on a two-to-three-month lag
    • LNG does, however, face a risk from slowing industrial demand around the world and high global stocks following this past warm winter
  • ConocoPhillips announced they will be reducing capital expenditures by $700 million, a reduction of roughly 10%, and will be reviewing capital and operating plans moving forward
    • They will also slow their share buyback program, saving roughly $2.2 Billion in cash for 2020
    • Parsley is reducing CAPEX from $1.6-$1.8 Billion to less than $1.0 Billion

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