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Last Updated: March 13, 2020
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Headline crude prices for the week beginning 9 March 2020 – Brent: US$31/b; WTI: US$27/b

  • A bloodbath has ensued, as the fragile-but-necessary Saudi Arabia-Russia alliance to stabilise crude oil prices shattered into an all-out price war
  • Following Russia’s refusal to participate in and extend the OPEC+ supply deal to 1.5 mmb/d and to the end of 2020 (as proposed by Saudi Arabia), the OPEC+ alliance is over; Saudi Arabia immediately announced it would raise its production to 12 mmb/d and offering steep discounts on its crude for April
  • The largest discounts offered on Arabian crude was for European markets – directly impacting one of Russia’s largest markets – and the Saudi government is planning to go even further, directing Saudi Aramco to raise output to 13 mmb/d for April, which may involve dipping into stocks
  • Saudi Arabia’s drastic move was joined by some of its OPEC allies – including the UAE – and appears to be intended to punish Russia for its reticence to shoulder responsibility, particularly after Vladimir Putin suggested that Russia was ‘content’ with oil prices at US$50/b
  • The aftermath of the price war’s start was that crude oil prices plunged by 31% in a day to their lowest levels in 3-years, triggering a global panic that caused a severe sell-off in all financial and commodity markets, exacerbating a situation already made desperate by the global Covid-19 pandemic
  • The price war between the two oil giants will claim many victims, including other OPEC members dependent on oil revenue like Iraq and Iran, as well as US shale producers that were already in dire straits due to debt; this, indeed, might be the end goal of the Saudi-Russia tiff
  • Although Russia itself is standing firm against Saudi Arabia’s opening salvo – stating that it will raise its output by 500,000 b/d as well – it also hinted that it remains open to further cooperation, although this olive branch may fall on deaf ears in the Saudi Kingdom
  • As the Covid-19 outbreak begins to accelerate in Europe and the US, the global worst case scenario keeps getting worse and worse, as the possibility of several countries going into full lockdown becomes very real
  • The price war kicked off by Saudi Arabia is poised to decimate the US active rig count; the decline is coming, but the Baker Hughes rig count managed a rare gain last week, adding 3 sites for a total of 793
  • With no sign of the price war ending, and the Covid-19 pandemic spreading far and wide, crude oil prices will remain infected with pessimism, although there will be windows for opportunistic trades; wide swings are expected, with Brent is likely to trade between US32-38/b, and WTI at US$28-34/b


Headlines of the week


  • ExxonMobil announced that it would be slowing its Permian production growth by some 10% over the next two years in the face of the recent havoc on crude prices, in sharp contrast to Chevron that intends to increase Permian output to fund a planned US$80 billion programme of dividends and share buybacks
  • Spirit Energy has sold two ‘non-core’ Danish upstream assets to Ineos, which include its 40% stake in the Hejre and 27.7% stake in the Solsort discoveries
  • ConocoPhillips has sold its US Niobara and Wadell Ranch assets (in the Denver-Julesberg Basin and the Permian Basin) to undisclosed buyers
  • Santos has taken FID on the Van Gogh Infill Development Phase Two project in offshore Western Australia, ramping up production of the heavy-sweet crude produced from the WA-35-L block in the Exmouth Basin
  • Equinor has reported its first oil discovery of 2020, with two wells in the North Sea Sigrun East prospect estimated to contain 7-17 million barrels of oil
  • ExxonMobil and Shell are teaming up to explore for oil offshore Somalia, with a government-approved roadmap converting the companies’ previous concessions into new PSAs under the recently-approved Petroleum Law
  • CNOOC is moving full speed ahead with its seven-year action plan to boost upstream production in China, earmarking US$13.6 billion in CAPEX for 2020


  • PDVSA’s US refining arm Citgo has reached an agreement with Aruba to transfer the ownership of the 209 kb/d San Nicolas refinery to the island’s government, after failure to overhaul the site idled since 2012
  • Sinopec’s 400 kb/d Maoming refinery has exported its first shipment of low sulfur fuel oil, with Chinese refineries grappling with a fuels glut as domestic demand craters amid the shift towards cleaner marine fuels
  • As its spat with Russia over crude oil deliveries continues, Belarusian state refiner Belneftekhim is turning to Azerbaijan’s SOCAR to fuel its refineries
  • China’s largest refinery – Sinopec’s 460 kb/d Zhenhai refinery – will shut down one of its three CDUs in March for maintenance as domestic demand weakens
  • Eni is reportedly mulling closure of its 100 kb/d Milazzo refinery in Sicily as the site might fail to meet the region government’s air quality requirements
  • Liberia has suspended all fuel import licences – including those of France’s Total – for review as the country deals with severe gasoline shortages, with fears that importers had been grossly overstating their inventories
  • The planned 100,000 b/d grassroots Fort Stockton refinery in Texas – which will refine Permian shale crude – has kicked off two months ahead of schedule

Natural Gas/LNG

  • Sempra Energy’s Cameron LNG Train 2 in Louisiana has reached commercial operations, with Train 3 expected in Q3 2020 for a total of 12 mtpa of LNG
  • Cryopeak LNG Solution has completed a 18,000 gallon/29-ton shipment of LNG by truck in Canada, the largest-ever road shipment of LNG in North America as an alternative LNG distribution channel
  • Eni is reportedly the front-runner to acquire most of Chevron’s gas assets in Indonesia, including the Indonesia Deepwater Development project in the Makassar Strait that involves the Bangka, Gendalo and Gehem fields
  • Santos is poised to sell a 25% stake in Darwin LNG and its feed field Bayu-Undan for some US$390 million to SK E&S, in order to developer the offshore Barossa gas field to keep the Darwin LNG plant going

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