New base energy news 19 april 2020 issue no. 1331 senior editor eng. khaled al awadi

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NewBase Energy News 19 April 2020 - Issue No. 1331 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
U.S.A: Texas Oil at $2 a Barrel Raises Specter of Negative Prices
Bloomberg - Sheela Tobben
Crude prices in America’s oil capital are getting dangerously close to zero.
Buyers bidding for crude in Texas, the birthplace of the shale revolution, are offering as little as $2 a
barrel for some oil streams, a precipitous markdown from a month ago. The slumping value of
physical barrels is raising the possibility that Texas producers may soon have to pay customers to
take crude off their hands.
Negative prices have already hit more obscure corners of the American oil market amid a bearish
trifecta of collapsing demand, swelling supplies and limited storage capacity. The first U.S. grade to
bid under zero was a small landlocked crude stream known as Wyoming Asphalt Sour, which went
for negative 19 cents a barrel last month.
In Texas, prices are heading in that direction. A subsidiary of Plains All American Pipeline bid
just $2 a barrel for South Texas Sour on Friday, while Enterprise Products Partners
LP offered $4.12 for Upper Texas Gulf Coast crude this week, according to pricing bulletins.
Offers could fall further if benchmark West Texas Intermediate crude futures -- which have lost
three-quarters of their value this year -- continue to tumble. WTI closed below $20 a barrel this week
for the first time since 2002. That bodes ill for producers locked into contracts with suppliers, as the
daily price they earn for their crude moves with the broader market.
www.linkedin.com/in/khaled-al-awadi-38b995b

“I’ve never seen Texas crude oil transition to negative price” but it’s possible, said Andy Lipow,
president of Lipow Oil Associates LLC in Houston. “It’s happened in the natural gas market at the
Waha hub in west Texas,” Lipow added.
Fast depleting storage is still a major issue against a backdrop of unprecedented demand
destruction from the coronavirus pandemic, and these could pressure prices below zero fast, Lipow
added.
There is still at least 150 million barrels of available capacity. “But it’s the fill rate that is likely
alarming the market, said Reid I’Anson, a global energy economist at Kpler, an industry research
firm. Stocks at the key storage hub at Cushing, Oklahoma, have risen 18 million barrels in three
weeks, which is 20% of shell capacity, he added.
The good news is that negative prices -- if they do occur -- will probably be “extremely temporary,”
said John Auers, executive vice president at energy consultant Turner Mason

Oman:New gas production, diversification to buoy Omani economy
Oman Observer - Conrad Prabhu
An anticipated contraction in the Omani economy in 2020, attributable to the oil price downturn and
the public health response to the novel coronavirus (COVID-19) pandemic, is expected to give way
to a recovery in 2021-22, according to the World Bank.
The international financial institution said in its latest ‘Economic Update’ for the Sultanate that the
uptick will be spurred by an increase in gas output as well as infrastructure spending.
“Significant new gas production in 2021 along with diversifying the economy in sectors such as
manufacturing, tourism and fishing will support the growth momentum and lessen the risks,” the
Washington DC-headquartered body said in its report for April.
But the slump in international oil prices will weigh on the economy this year, the global organisation
warned. “Low oil prices and the spread of COVID-19 are the key challenges that Oman will need to
navigate in the short-run. With oil prices in the mid-$30s in 2020 and constrained oil demand, growth
is expected to contract by 3.5 per cent,” it said.
Also disadvantageous in the present circumstances is the Sultanate’s exposure to the Chinese
market, which accounts for 45 per cent of total Omani exports (or 21.7 per cent of GDP), mostly in
the form of oil exports, the WB report noted. With China in the throes of a slowdown fuelled by the
pandemic, imports have dramatically fallen in recent weeks and are expected to maintain a
downtrend this year.
Significantly, both the hydrocarbon and non-oil sectors of the Omani economy are expected to
witness a contraction this year owing to the slump in oil prices as well as the impacts of the
pandemic, says the World Bank.

“Real GDP growth is estimated to have decelerated to 0.5 per cent in 2019, down from a recovery
of 1.8 per cent in 2018. This is largely driven by 1 per cent (y/y) decline in oil production, capped by
the since-lapsed OPEC+ production deal.
The non-oil economy is estimated to have been subdued due to the slowdown in industrial activities
and services sector. Inflationary pressures are estimated to remain muted at 0.1 per cent in 2019,
reflecting weak domestic demand and tame food and housing prices.”

Saudi oil official refutes claim that crude exports to the US rose last month
CNBC - Natasha Turak@NATASHATURAK
KEY POINTS
 A Saudi Arabian oil official on Saturday refuted the conclusion of an analytics firm that the
country’s oil exports to the U.S. dramatically increased last month.
 Analytics firm TankerTrackers.com said on Friday that Saudi Arabian oil exports to the U.S.
more than doubled from February to March as oil prices crashed.
A Saudi Arabian oil official on Saturday refuted the conclusion of an analytics firm that the country’s
oil exports to the U.S. dramatically increased in the last month.
TankerTrackers.com said on Thursday that Saudi Arabian oil exports to the U.S. more than doubled
from February to March as oil prices crashed. The firm said its data indicates that the April export
figure is on track to surpass March’s number.
An unnamed Saudi oil official who is familiar with the matter denied both conclusions. The official
told CNBC that Saudi Arabia’s April allocation for the United States is targeted at around 600,000
barrels per day, a figure which the official said is not a significant increase over the first-quarter
monthly average.
TankerTrackers, which uses satellite tracking of VLCCs — the vessels that transport crude — says
that Saudi crude shipments to American ports went from an average of 366,000 barrels per day
(bpd) in February to 829,540 bpd in March — a multiple of 2.27.

TankerTrackers said that satellite tracking indicates 1.46 million barrels per day of Saudi oil shipped
to the U.S. in the first two weeks of April — a figure that would mark four times February’s daily
volume and the highest figure since 2014.
According to Saudi state oil producer Aramco’s website, the company was loading 15 tankers for
its international customers on April 1 — the day a previous OPEC production cut agreement with its
oil-producing allies, OPEC+, expired — supplying the tankers with a record 18.8 million barrels in a
single day.
The boost in exports comes against the backdrop of one of the most dramatic periods in oil market
history: Record oil output from the world’s largest oil producers juxtaposed with eviscerated demand
due to worldwide coronavirus lockdowns as economic activity and global commercial transport
came to a screeching halt.
“Towards the end of March I saw massive boosts in gas flaring in the fields in the Eastern Province,
so they went pedal to the metal and pumped out as much as possible,” Samir Madani, founder of
TankerTrackers.com, told CNBC over the phone Thursday. “It lit up like a Christmas tree, the whole
Eastern Province, all the flares just came back online.”
Saudi Arabia’s Eastern Province is home to the world’s largest oil fields and processing facility, and
the majority of the kingdom’s production.
Ahead of the April 1 expiration of the previous OPEC+ cutting deal, Saudi Arabia slashed its official
selling prices (OSP) to its customers. At the same time, Saudi barrels headed to its top buyer, China,
likely had to be re-routed due to China’s extensive lockdown meant to combat the spread of the
coronavirus in the country.
“I am guessing that was in the immediate aftermath of the failed OPEC+ meeting at the beginning
of March,” Tamas Varga, an oil analyst at PVM Oil Associates, told CNBC. “That’s when Saudis
promised to increase production and exports significantly and cut OSP by several dollars.”

In early March, negotiations between OPEC and its allies failed when Russia rejected Saudi Arabia’s
terms to cut production in order to boost prices, leading both states to reverse course and set off a
price war, with the Saudis increasing production and slashing selling prices for its customers.
The move was so destructive to oil markets — particularly the U.S. shale industry — that
U.S. President Donald Trump called on the producers to rein in their output, though he did not do
the same for U.S. shale companies, which are now seeing bankruptcies, capex cuts and production
shut-ins due to market pressure.
At the same time, China’s demand for oil dropped significantly, as it kept its major economic hubs
under lockdown and factories across the country of 1.4 billion remained closed. From February to
March, Saudi oil shipments to China fell by nearly 800,000 bpd, picking up again to about 1.3 million
bpd in the first half of April.
“As the corona outbreak in China peaked in February, less crude import was contracted, and there
is some weeks’ lag between contracting and delivery,” said Per Magnus Nysveen, head of analysis
at Rystad Energy. “In the U.S. the refineries were still running full speed in March and some cargoes
were therefore diverted to the
U.S.”
Ellen Wald, president of
Transversal Consulting and
an expert on Saudi Aramco,
added that this meant that
“more oil was therefore
available to ship to the U.S.,
where Aramco owns the
largest refinery in the
country,” referring to the
Motiva refinery in Port Arthur,
Texas.
For many American
refineries, buying Saudi crude
over American shale is also a
matter of necessity — older
refineries aren’t designed to be able to process the lighter grade crudes coming from U.S. shale
patches, and need medium and heavy grade crudes that Saudi Arabia produces, particularly for
products like diesel.
OPEC and its allies last Sunday finally agreed to join forces to cut a historic 9.7 million barrels per
day from the markets starting in May, in a deal that’s meant to last until 2022 — but oil prices remain
depressed, with benchmark Brent crude down 55% year-to-date on Friday morning and holding its
18-year low amid grim outlooks for demand as the pandemic stretches on.
Despite the deal, Saudi Arabia is still cutting its selling prices to many of its customers for May, for
instance discounting its flagship Arab Light crude to East Asian customers by $4.20 a barrel
compared to April prices. For the U.S., meanwhile, its selling prices are actually increasing to $3 a
barrel for its light crude, after a discount of $3.75 between March and April. Its selling prices to
Europe between April and May will remain unchanged after cutting prices by between $8 and $13
for April.
Saudi flows to the U.S. “might stay relatively high in April, but should drop in May,” PVM’s Varga
said.

U.S Beer may lose its fizz as CO2 supplies shortages hits market
Reuters + NewBase
Dwindling supplies of carbon dioxide from ethanol plants is sparking concern about shortages of
beer, soda and seltzer water - essentials for many quarantined Americans.
Brewers and soft-drink makers use carbon dioxide, or CO2, for carbonation, which gives beer and
soda fizz. Ethanol producers are a key provider of CO2 to the food industry, as they capture that
gas as a byproduct of ethanol production and sell it in large quantities.
But ethanol, which is blended into the nation’s gasoline supply, has seen production drop sharply
due to the drop in gasoline demand as a result of the COVID-19 pandemic. Gasoline demand is
down by more than 30% in the United States.
The lack of ethanol output is disrupting this highly specialized corner of the food industry, as 34 of
the 45 U.S. ethanol plants that sell CO2 have idled or cut production, said Renewable Fuels
Association Chief Executive Geoff Cooper.
CO2 suppliers to beer
brewers have increased
prices by about 25% due to
reduced supply, said Bob
Pease, chief executive
officer of the Brewers
Association. The trade
group represents small and
independent U.S. craft
brewers, who get about
45% of their CO2 from
ethanol producers.
“The problem is
accelerating. Every day
we’re hearing from more of our members about this,” said Pease, who expects some brewers to
start cutting production in two to three weeks.
In an April 7 letter to Vice President Mike Pence, the Compressed Gas Association (CGA) said
production of CO2 had fallen about 20% and could be down by 50% by mid-April without relief, CGA
CEO Rich Gottwald said in the letter. Meat producers are also feeling the pinch, as they use CO2
in processing, packaging, preservation and shipment.
Orion Melehan, CEO of Santa Cruz, California-based LifeAID, a specialty beverage company, said
two of his production partners are looking for alternative CO2 sources. “It does have us up at night
figuring out what our options are,” Melehan said. “It highlights the laws of unintended
consequences.”
A spokeswoman for National Beverage Corp, whose products include LaCroix, said the company
sources from a number of national CO2 suppliers and does not anticipate a supply issue. Coca-
Cola Co, SodaStream owner PepsiCo Inc , wine and beer seller Constellation Brands Inc and
several bottling companies did not respond to requests for comment
Walker Modic, environmental and social sustainability manager for Bell’s Brewery, said the
Comstock, Michigan-based brewing company had “not experienced any curtailments or changes in
the source of our CO2.”

Chinese Oil Refiners Snapping Up Bargains as Activity Resumes
Bloomberg
Chinese refiners are snapping up low-price oil from all over the world as Asia’s largest economy
emerges from a virus-driven slump.
Varieties such as Alaska North Slope, Canada’s Cold Lake and Brazil’s Lula have been offered at
steep discounts to global benchmark prices over the past week as sellers scrambled to secure
buyers. Processors in China -- where throughput is back to pre-virus levels -- are snagging many of
the bargains as much of the rest of the world remains in lockdown.
Spot supplies of Cold Lake were sold by a European trader at a discount of between $8 and $9 a
barrel to Brent on a delivered basis, while an oil major sold a shipment comprising Alaskan North
Slope and Brazilian grades at a $5.50 to $6 discount, said traders who buy and sell crude in Asia.
The cargoes were purchased by Chinese independent refiners, known as teapots, which have
staged a strong comeback from run-rate cuts and closures in February.
As for oil that’s produced closer to Asia, Chinese state-owned refiners have been buying
Russia’s Sokol crude for significantly less than Dubai benchmark prices. The spot purchases were
made on top of crude bought via long-term supply contracts with Saudi Arabian, Iraqi and Kuwaiti
producers. At least five Chinese processors sought full contracted volumes from Saudi Aramco this
week after it slashed official prices for Asian customers for a second month.
Major producers are still struggling with a large overhang of physical cargoes despite the agreement
this month by OPEC and its allies to curb output by almost 10%. Meanwhile, storage -- both on land
and at sea -- is rapidly filling up. Brent crude has remained in a steep contango, a bearish market
structure where prompt oil is cheaper than later supplies, even after the OPEC+ deal.

NewBase April 19-2020 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil mixed as weak Chinese data, growing U.S. supplies offset
Trump plan to ease lockdown
Reuters + NewBase
Oil prices were mixed on Friday, with weak Chinese economic figures and rapidly filling U.S. crude
storage offsetting bullishness built on U.S. President Donald Trump’s outlines for the U.S. economy
to emerge from the coronavirus shutdown.
U.S. crude futures hit a more than 18-year-low, extending their losses in comparison to global
benchmark Brent, in part due to the coming expiration of the current May contract.
However, later-dated futures contracts were also down as the country’s storage rapidly fills, and
producers and traders expect output cuts in coming months.
Oil prices have remained weak even after the Organization of the Petroleum Exporting Countries
and other producers last weekend announced a deal to cut output by nearly 10 million barrels per
day (bpd) in response to weak demand.
Oil price special
coverage

Brent futures LCOc1 rose 26 cents, or 0.9%, to settle at $28.08 a barrel while West Texas
Intermediate crude contract (WTI) for June CLc2, which became the day’s more active contract,
ended the session down 50 cents, or 2%, at $25.03.
The less active prompt WTI for May delivery CLc1 tumbled by $1.60, or 8.1%, to $18.27, ahead of
its April 21 expiration as investors rapidly switched out of that contract into June futures. The
contract slumped to a low of $17.31 a barrel during the session, the lowest since November 2001.
May WTI futures slumped nearly 20% on the week, based on last Thursday’s settle, while Brent
dropped nearly 11%. Markets were closed last Friday for Good Friday.
China’s economy shrank 6.8% year-on-year in the three months to March 31, the first such decline
since quarterly records began in 1992. The nation’s daily refining output fell to a 15-month low,
though there are some signs of recovery as the country begins to ease coronavirus containment
measures.
Prices found some support as the U.S. plans to ease lockdown measures after Trump laid out new
guidelines for states to emerge from a coronavirus shutdown in a three-stage approach, but the
early boost to Brent prices was largely short-lived.
Lending further support, U.S. drillers cut 66 oil rigs this week, the biggest weekly cut since 2015 and
bringing the total down to 438, the lowest since October 2016, energy services firm Baker Hughes
Co BRK.N said.
Still, fuel demand worldwide is down by roughly 30%. That prompted major producers including
Russia, a grouping known as OPEC+, to agree to cut output by 10 million bpd last weekend.
“If more of the global economy enacts plans to reopen and restores some sense of normality, that
could help oil prices find a firmer floor in May, aided by the OPEC+ supply cuts kicking in,” said
FXTM analyst Han Tan.
U.S. GLUT TO PERSIST
Investors in futures have been unwinding long, or bullish positions in May as stockpiles in the United
States have surged by record amounts and storage limits will be tested this summer. U.S. storage
at the Cushing, Oklahoma delivery hub for WTI is now 69% full, up from 49% four weeks ago,
according to U.S. Energy Department figures.
This has made prices for oil for delivery in nearby months much cheaper than those for future
delivery - sending the market deeper into a structure known as contango, which reflects
expectations for oversupply.
“This morning’s major disconnect between May WTI and the rest of the energy complex could
become even more pronounced during the next three sessions before the May contract goes off the
board,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Inflows into the U.S. oil fund (USO) has surged as investors seek exposure to cheap oil, dealers
said. The fund said in a filing late on Thursday it would adjust its positioning by diversifying from
100% investments in front-month WTI contract to 80% front month and 20% in the second month.
The change is already prompting some traders to sell June futures and buy July’s contract, dealers
said, sending the spread between the two contracts CLM0-N0 to as much as $4.78, the widest on
record.

Money managers raised their combined futures and options net long position in New York and
London by 24,323 contracts to 199,543 in the week to April 14, the U.S. Commodity Futures Trading
Commission (CFTC) said.
U.S. oil rigs see biggest decline in a week since February 2015: Baker Hughes
Oil rigs in the United States saw their steepest cuts since February 2015 as crude prices more than
halved since the start of the year despite fresh global efforts by producers to cut output to counter
a glut triggered by demand destruction from the coronavirus pandemic.

Drillers cut 66 oil rigs in the week to April 17, bringing the total count down to 438, the lowest since
October 2016, energy services firm Baker Hughes Co BRK.N said in its closely followed report on
Friday. RIG-OL-USA-BHI
The oil rig count, an early indicator of future output, is down 47% from the same week a year ago
when 825 oil rigs were active.
More than half of the total U.S. oil rigs are in the Permian basin in West Texas and eastern New
Mexico, where active units dropped by 33 this week to 283, the lowest since January 2017.
Analysts at Raymond James projected total U.S. oil and natural gas rigs would collapse from around
800 at the end of 2019 to a record low of around 400 by the middle of the year and around 200 at
the end of 2020. The investment bank forecast the rig count would average a mere 225 rigs in 2021.
That compares with the current all-time low of 404 rigs during the week ended May 20, 2016,
according to Baker Hughes data going back to 1940.
In Canada, meanwhile, the total oil and gas rig count fell to 30, the lowest since at least 2000,
according to Baker Hughes data going back that far. The prior all-time low was 29 rigs during the
week ended April 24, 1992.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, last
weekend agreed to reduce crude output to stop oil prices from falling as governments around the
world attempt to slow the pandemic with lockdowns that are also crimping economic growth and
energy demand.
U.S. crude futures CLc1 traded around $18 per barrel on Friday, ahead of its April 21 expiration as
investors rapidly switched out of that contract into June futures.
Also, weak Chinese economic figures and rapidly filling U.S. crude storage offset bullishness built
on U.S. President Donald Trump’s outlines for the U.S. economy to emerge from the coronavirus
shutdown.

NewBase Special Coverage
The Energy world - Special 02- April-2020
IEA's Global oil demand unique analysis- April 2020
The IEA Oil Market Report (OMR) is one of the world's most authoritative and timely sources of
data, forecasts and analysis on the global oil market – including detailed statistics and commentary
on oil supply, demand, inventories, prices and refining
activity, as well as oil trade for IEA and selected non-
IEA countries.
Global oil demand is expected to fall by a record 9.3
mb/d year-on-year in 2020. The impact of containment
measures in 187 countries and territories has been to
bring mobility almost to a halt.
Demand in April is estimated to be 29 mb/d lower than
a year ago, down to a level last seen in 1995. For
2Q20, demand is expected to be 23.1 mb/d below
year-ago levels. The recovery in 2H20 will be gradual;
in December demand will still be down 2.7 mb/d y-o-y.
Global oil supply is set to plunge by a record 12 mb/d in May, after OPEC+ forged a historic output
deal to cut production by 9.7 mb/d from an agreed baseline level.
As April production was high, the effective cut is 10.7 mb/d. Additional reductions are set to come
from other countries with the US and Canada seeing the largest declines. Total non-OPEC output
falls could reach 5.2 mb/d in 4Q20, and for the year as a whole output may be 2.3 mb/d lower than
last year.
Refining throughput in 2020 is forecast to fall 7.6 mb/d y-o-y to 74.3 mb/d on sharply reduced
demand for fuels. Global refinery intake is expected to plummet by 16 mb/d y-o-y in 2Q20, with

widespread run cuts and shutdowns in all regions. Although refinery runs are falling, product stocks
are still expected to build by 6 mb/d. In 2H20, refining activity will slowly recover as the global market
moves into deficit.
Early data show China’s implied stock build in 1Q20 at 2.1 mb/d, and US stocks increased by 0.5
mb/d. OECD data show that industry stocks in February fell by 35.4 mb to 2 878 mb as a draw for
products more than offset a build in crude. Total OECD oil stocks stood 42.4 mb below the five-year
average and, due to the weak outlook, now provide 79.2 days of forward demand coverage. In
March, floating storage of crude oil increased by 22.9 mb (0.7 mb/d) to 103.1 mb.
Twin demand and supply shocks caused oil futures prices to fall by 40% in March. Brent has
recovered modestly from an 18-year low as producers reached agreement to curtail output and is
trading at $31/bbl. Weak demand pushed prices for crude grades such as WTI Midland and West
Canadian Select below $10/bbl. Cracks for gasoline and jet fuel continued to suffer as containment
measures were introduced.

Highlights
Around the world billions of people are affected by one of the worst health crises of the past century.
The global economy is under pressure in ways not seen since the Great Depression in the 1930s;
businesses are failing and unemployment is surging.
Confinement measures are in place in 187 countries and territories, and although they vary in scope,
activity in the transportation sector has fallen dramatically almost everywhere. Even assuming that
travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020
will fall by 9.3 million barrels a day (mb/d) versus 2019, erasing almost a decade of growth.
Against this bleak background, policy makers are responding with radical steps. Governments have
introduced massive emergency fiscal plans to support workers and businesses. Central banks have
embarked on huge monetary stimulus programmes. We are also seeing measures being taken to
tackle the oil market crisis, with two major events taking place over the past week.
On Sunday, oil producers in the OPEC+ group agreed to cut output by an initial 9.7 mb/d versus
their agreed baseline, effective 1 May.
In light of the unprecedented depth of the crisis, the IEA has urged major consumers and producers
to work together through the forum of the G20 to mitigate the impact on market stability, and an
extraordinary meeting of energy ministers from G20 and other countries took place on Friday 10
April.

Those present offered their support for the efforts of the OPEC+ countries to stabilise the oil market
and, in some cases, discussed output cuts that would take place immediately or over time.
The measures announced by OPEC+ and the G20 countries won’t rebalance the market
immediately. But by lowering the peak of the supply overhang and flattening the curve of the build-
up in stocks, they help a complex system absorb the worst of this crisis, whose consequences for
the oil market remain very uncertain in the short term.
We forecast a drop in demand in April of as much as 29 mb/d year-on-year, followed by another
significant year-onyear fall of 26 mb/d in May. In June, the gradual recovery likely begins to gain
traction, although demand will still be 15 mb/d lower than a year ago.
There is no feasible agreement that could cut supply by enough to offset such near-term demand
losses. However, the past week’s achievements are a solid start and have the potential to start to
reverse the build-up in stocks as we move into the second half of the year.
The OPEC+ and G20 initiatives will impact the oil market in three ways. First, the OPEC+ production
cut in May to reach the baseline will actually be 10.7 mb/d and not 9.7 mb/d, as April production
was high. This will provide some immediate relief from the supply surplus in the coming weeks,
lowering the peak of the build-up of stocks.
Second, four countries (China, India, Korea and the United States) have either offered their strategic
storage capacity to industry to temporarily park unwanted barrels or are considering increasing their
strategic stocks to take advantage of lower prices.
This will create extra headroom for the impending stock build-up, helping the market get past the
hump. Third, other producers, with the United States and Canada likely to be the largest
contributors, could see output fall by around 3.5 mb/d in the coming months due to the impact of
lower prices, according to IEA estimates.
The loss of this supply combined with the OPEC+ cuts will shift the market into a deficit in the second
half of 2020, ensuring an end to the build-up of stocks and a return to more normal market
conditions. At the time of publication, we were still waiting for more details on some planned
production cuts and proposals to use strategic storage.
If the transfers into strategic stocks, which might be as much as 200 mb, were to take place in the
next three months or so, they could represent about 2 mb/d of supply withdrawn from the market.
If production does fall sharply, some oil goes into strategic stocks, and demand begins to recover,
the second half of 2020 will see demand exceed supply. This will enable the market to start reducing
the massive stock overhang that is building up in the first half of the year. Indeed, our current
demand and supply estimates imply a stock draw of 4.7 mb/d in the second half.
The historic decisions taken by OPEC+ and the G20 should help bring the oil industry back from
the brink of an even more serious situation than it currently faces. Even so, the implied stock build-
up of 12 mb/d in the first half of the year still threatens to overwhelm the logistics of the oil industry
– ships, pipelines and storage tanks – in the coming weeks. In this Report, we estimate that available
capacity could be saturated in mid-year, based on our market balances.
However, this is a very broad-brush assumption and the situation varies from place to place. There
are already bottlenecks in other parts of the logistics chain, such as competition to buy space on
pipeline systems that transport oil. There are also quality issues: it is not possible to accommodate
different qualities of crude oil at many sites, and special tanks are required for some products.
Floating storage is becoming more expensive as traders compete for ships. Chartering costs for

Very Large Crude Carriers have more than doubled since February. Never before has the oil
industry come this close to testing its logistics capacity to the limit.
Looking beyond the immediate imbalances in the market, the IEA pointed out to the G20 energy
ministers that although low prices might appear to be attractive to consumers, they are of little
benefit to the approximately 4 billion people living under some form of Covid-19 lockdown.
Also, low prices impact the livelihood of millions of people employed along the oil industry’s
extensive value chain, and they damage the economies of weaker producing countries where social
stability is already fragile.
Low prices threaten the stability of an industry that will remain central to the functioning of the global
economy. Even with demand falling by a record amount this year, oil companies still face the
challenges of investing to offset natural production declines and to meet future growth.
Global capital expenditure by exploration and production companies in 2020 is forecast to drop by
about 32% versus 2019 to $335 billion, the lowest level for 13 years. This reduction of financial
resources also undermines the ability of the oil industry to develop some of the technologies needed
for clean energy transitions around the world.
There is clearly a long way to go before we can put the Covid-19 crisis behind us. However, we are
encouraged by the solidarity shown by policy makers from producing and consuming countries
working together to meet this historic challenge of bringing stability to the oil market.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 28 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE operations
base , Most of the experience were spent as the Gas Operations Manager in
Emarat , responsible for Emarat Gas Pipeline Network Facility & gas
compressor stations . Through the years, he has developed great experiences
in the designing & constructing of gas pipelines, gas metering & regulating
stations and in the engineering of supply routes. Many years were spent
drafting, & compiling gas transportation, operation & maintenance agreements along with many
MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences
held in the UAE and Energy program broadcasted internationally, via GCC leading satellite
Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 2020 K. Al Awadi

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New base energy news 19 april 2020 issue no. 1331 senior editor eng. khaled al awadi

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New base energy news 19 april 2020 issue no. 1331 senior editor eng. khaled al awadi