New base energy news 18 may 2020 issue no. 1339 senior editor eng. khaled al awadi

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NewBase Energy News 18 May 2020 - Issue No. 1339 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: ADNOC CEO sees signs that oil markets have tightened in
recent weeks and will rebalance over time .. WAM/Tariq alfaham
Dr. Sultan Ahmed Al Jaber, UAE Minister of State and Group CEO of the Abu Dhabi National Oil
Company, ADNOC, says there are signs that oil markets have tightened in recent weeks and will
rebalance over time.
Speaking on ADNOC’s "Virtual Majlis" with Helima Croft, Managing Director and Global Head of
Commodity Strategy at RBC Capital Markets, Dr. Al Jaber said the world is in unchartered territory
and right now, no one is in a position to predict exactly what the global economic recovery will look
like. While this outlook remains unpredictable, Dr. Al Jaber highlighted reasons for cautious
optimism in oil markets.
"When it comes to oil, there are signs that the market has tightened in recent weeks. The OPEC-
plus agreement, voluntary cuts outside OPEC-plus plus, and production shut-ins are working
together to start to rebalance the market. This will take time. As economies begin to open up,
demand will follow, but the path to the next normal is not a straight line," Dr. Al Jaber said.
Dr. Al Jaber continued by highlighting how ADNOC is reaping the benefits of its transformation over
the past four years as it navigates this period of uncertainty.
www.linkedin.com/in/khaled-al-awadi-38b995b

"We are seeing the benefits of the steps we have taken on over the last four years. In fact, this crisis
has highlighted just how forward-thinking our leadership’s guidance has been in directing this
transformation. As a result, ADNOC is now far stronger and better positioned to manage the current
market dynamics.
"Through our transformation, we have focused on what we can control and that is our costs. We’ve
been laser-focused on being one of the lowest-cost producers in the world. And this has given us
the flexibility and the resilience that we need at times like these. In this environment, we are
continuing to work even harder to preserve our resources, and maximize our profitability," Dr. Al
Jaber said.
Dr. Al Jaber stressed ADNOC continues to make the health and safety of its employees its top
priority as it proactively responds to the risks presented by the COVID-19 situation. He detailed how
this approach closely aligns with the wise measures put in place by the UAE leadership to ensure
the health and safety of everyone living in the country while driving health diplomacy around the
world.
"The foundation of the UAE’s response has been comprehensive testing. We have so far conducted
well over 1.5 million tests, one of the highest, if not the highest per capita ratios in the world. At the
same time, the UAE believes that international cooperation is key to managing the crisis. So, we
are staying connected to the rest of the world through health diplomacy, delivering aid, and personal
protective equipment to 47 countries when they need it most.
"At ADNOC, we have taken additional precautions to enhance the safety of our employees,
including comprehensive testing, minimizing staff on site, and ensuring all office-based staff can
work effectively from home. On top of that, transparent communication has been critical," Dr. Al
Jaber said.
The pandemic has highlighted the importance of three key leadership qualities – Capability, Crisis
Management, and Connectivity, according to Dr. Al Jaber.

"Fundamentally, the capability of every organisation in keeping their people safe, and their
operations running smoothly is being tested. At the same time, leaders are being measured against
how well they manage a crisis, ensuring their organizations can run under stress. And then
connectivity, how clearly leaders communicate to their people what they need to do to stay safe,"
Dr. Al Jaber said.
Concluding the majlis, Dr. Al Jaber underscored the importance of business leaders conveying a
positive, optimistic, and credible way forward, with humility and honesty. "It is essential to
communicate a message of unity, that we are in this together and will find our way through together,"
Dr. Al Jaber added.
ADNOC’s virtual majlis is part of several initiatives the company embarked on last month as part of
its participation in the "UAE Volunteers" initiative. Broadcasted on ADNOC’s social media platforms,
the virtual majlis is bringing together UAE government leaders and global experts to engage on the
key issues facing the world today and provide actionable insights to topics ranging from how to
rebuild the global and domestic economy, to what the post-COVID-19 workplace should look like.
Oil prices jump as demand shows signs of picking up
Reuters + NewBase
U.S. crude prices jumped 7% on Friday to their highest since March, on strengthening fuel demand
as countries around the world eased travel restrictions they had imposed to curb the spread of the
coronavirus.
U.S. crude gained 19.7% in the week and Brent crude rose 5.2% after a week of bullish news. WTI
oil settled up at $29.43 a barrel, Brent crude settled at $32.50.
The second-month contract for U.S. crude traded at a discount to the first month for the first time
since late February, implying market tightness, said Bob Yawger, director of energy futures at
Mizuho in New York.
“It is no accident the spread switched after EIA crude oil storage, and storage at the NYMEX
delivery site at Cushing, both posted up their first storage draws in weeks in Wednesday’s storage
report,” he said.
The Organization of the Petroleum Exporting Countries and other major producers have cut supplies
to reduce a glut, and now there also are signs of improving demand. Data showed China’s daily
crude oil use rebounded in April as refineries ramped up operations.
Still, the market remained cautious with the coronavirus pandemic far from over and new clusters
of infection emerging in some countries where lockdowns have eased. “Oil prices have been up
significantly since yesterday thanks to a better assessment of the situation by the International
Energy Agency (IEA),” Commerzbank said in a note.
The IEA expects global crude inventories to fall by about 5.5 million barrels per day (bpd) in the
second half. It also expects oil demand this year to fall by 8.6 million bpd, smaller by 690,000 bpd
than the decline it forecast last month. It expects non-OPEC supply to fall by 3.2 million bpd.
Barclays raised its forecasts for Brent and WTI by $5-$6 a barrel for 2020 and by $16 a barrel for
2021. It now sees Brent prices averaging $37 a barrel and WTI at $33 this year. For 2021, the bank
expects Brent to average $53 a barrel while WTI averages $50.
“The sheer size and speed of the disruption and associated inventory overhang will take time to get
fully absorbed, in our view,” Barclays analyst Amarpreet Singh said in a note.

On Wednesday, the U.S. Energy Information Administration said the country’s crude inventories fell
unexpectedly. This reduced the risk that prices will plummet ahead of the front-month contract
expiring next week.
“With the drawdown, it shouldn’t be as perilous as it was last time,” said John Kilduff, a partner at
Again Capital Management in New York. Ahead of last month’s contract expiration, fear of storage
shortages pushed the contract into negative territory for the first time on record. Still, market
participants remain skittish about the upcoming expiration date, Kilduff said.
Record production cuts of nearly 10 million bpd by OPEC and associated producers - collectively
known as OPEC+ - have kicked in for May and June, with Saudi Arabia, Kuwait, and the UAE
pledging to cut beyond their commitments. Oman said on Friday that it is considering cutting output
further in June as well.

Oman: PDO pledges to press ahead with renewables after
GlassPoint Solar liquidation…. Oman Obbserver - Conrad Prabhu
Petroleum Development Oman (PDO), the Sultanate’s leading oil and gas producer, has vowed to
stay the course in the pursuit of its ambitious renewable energy objectives, notwithstanding the
announcement by key technology partner GlassPoint Solar to go into liquidation – a casualty of the
COVID-19 pandemic.
A statement by the majority state-owned energy firm acknowledged that the US-based technology
startup – billed as a pioneer in the use of solar energy for steam generation in heavy oil production
– was facing liquidation.
California-headquartered GlassPoint Solar is a technology partner in the development of PDO’s
Miraah project — a giant 1,021 MW solar farm currently in an advanced stage of implementation at
the Amal field in the south of the Sultanate. Construction on the landmark project began in October
2015 with part of the vast scheme already in operation. At full capacity, it will feature a total of 36
glasshouse modules, covering an area of more than 360 football pitches.
“We regret that GlassPoint Solar Inc has gone into liquidation at a time of considerable global
business distress and uncertainty resulting from the COVID-19 pandemic,” said PDO in a statement.
“PDO is proud of the flagship Miraah project delivered using GlassPoint technology in our Amal
solar steam operations. PDO is fully equipped to operate the solar facilities to its full potential and
remains firmly committed to renewable energy and its ongoing transition to a fully-fledged energy
company,” it noted.

The State General Reserve Fund (SGRF), the largest sovereign wealth fund in Oman, is a key
shareholder in GlassPoint Solar. So is Royal Dutch Shell.
In recent years, the Sultanate had emerged as a key focal point for GlassPoint Solar’s Middle East
operations. In addition to its important partnership with PDO, GlassPoint Solar had also signed a
Memorandum of Understanding (MoU) with Occidental Oman in November 2018 for the
development of a world-scale solar thermal energy, exceeding 2 gigawatts in capacity, at the
Mukhaizna heavy oil field in the Sultanate.
As the lead developer of the proposed project, GlassPoint had pledged to deploy solar technology
to produce up to 100,000 barrels of solar steam per day. The solar steam would be purchased by
Occidental and used to facilitate production of heavy oil.
Miraah: A Gigawatt Solar Plant for Oil Production
On an oilfield in South Oman, the solar thermal project, called Miraah, will concentrate sunlight to
produce steam. The steam will be used to extract heavy and viscous oil in a process called thermal
enhanced oil recovery (EOR).
Miraah will provide a sustainable solution for EOR steam, which is currently produced by burning
natural gas. Once complete, Miraah will save 5.6 trillion British Thermal Units (Btus) of natural gas
each year, the amount of gas that could be used to provide residential electricity to 209,000 people
in Oman.
The project will generate an average of 6,000 tons of solar steam daily, dwarfing all other solar EOR
installations. The system will deliver steam to existing thermal EOR operations at PDO’s Amal field,
meeting a sizable portion of its steam demand.
The full-scale project will comprise 36 glasshouse modules, built and commissioned in groups of
four. Miraah will break ground this year with steam generation from the first glasshouse module in
2017. The project is expected to reduce CO emissions by over 300,000 tons annually, the equivalent
of taking 63,000 cars off the road.

Somalia launches first offshore licensing round
Source: Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia
The Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia has
announced the launching of Somalia’s first offshore licensing round.
Due to the spread of the global pandemic, COVID – 19, and resulting restrictions, the Ministry
decided to launch the licensing round virtually.
The 2020 Somali licensing round features up to 7 blocks that are up for the bidding process which
are estimated to be among the most prospective areas for hydrocarbon explorations and production
in Somalia. This licensing round will open on 4th of August this year and will be closing on 12th
March 2021.
This roadshow highlights as landmark moment in the development of Somalia’s natural resources,
which will be transformational for the country’s development.

According to the Minister, Somalia has achieved significant milestones that will provide
predictability, reliability and transparency to the oil and gas companies and investors who are willing
to do business with the Somali Government.
Among such milestones are; the ground breaking Petroleum Law which completed its legislative
process earlier this year. The Revenue Sharing Agreement enshrined in The Petroleum Law which
indicates how future revenues from the development of the industry will be shared between The
Federal Government, the Federal Members States and their local communities.
And this agreement has now been ‘road-tested’ with the first revenues, which were recently
generated from rental payments from Shell and Exonn. Moreover, Production Sharing Contract
model is investor friendly, flexible and top quartile fiscal framework.
The Minister assured that the process would be fair and transparent for everyone taking part in the
licensing round, adding that the revenues generated from oil gas explorations will be used as the
catalyst for a new dynamic, renewable and self-sustainable economy
His Excellency Abdirashid Mohamed Ahmed, The Minister of Petroleum & Mineral Resources said:
'The opportunities for the international exploration and development majors are enormous. Somalia
is committed to attracting investment and promoting partnership and business in all segments of the
oil and gas industry value chain. This event is the starting point to allow the Somali Government to
better showcase the vision that our country has for our petroleum and gas industry to potential
foreign investors.'
RSA road tested
Earlier last year, Somalia reached an accord with Shell and ExxonMobil over rental and other fees
owed to the government relating to offshore blocks placed under force majeure during the civil war.
The amounts are small—c.£1.7mn covering the period 1991-2018—but Somalia’s minister of
petroleum & mineral resources Abdirashid Mohamed Ahmed has been eager to highlight the
distribution of the first instalment as evidence that the revenue sharing agreement (RSA) with the
states was being implemented successfully.
“[The RSA] has now been ‘road-tested’ with our first,
albeit small, revenues represented by rental payments
from Exxon and Shell, which are in the process of
being shared between the federal government, six
member states and their local communities,” he said
in a speech in Cape Town in October.
Ahmed said the RSA would deliver a higher
percentage of future oil revenues to non-federal
institutions than any comparable agreement
elsewhere in the world, adding that it provided “an
equitable and stable basis on which to develop the
industry, commanding the broadest possible support
across the country”.
Meanwhile, a maritime border dispute between Somalia and Kenya is due to be ruled on by the
International Court of Justice in November. The Somali government said in September it would
accept the court’s ruling. The row had intensified when Somalia’s initial licensing round map
included Somali blocks in the disputed area. All acreage in the disputed area has been removed
from the round.

Saudi Oil Rush Threatens to Disrupt Stabilizing U.S. Market
Bloomberg - Sheela Tobben
An armada of tankers filled with Saudi Arabian crude steaming toward the U.S. threatens to prevent
America’s oil glut from draining, which is only just beginning.
Over 30 ships are set to arrive on the U.S. Gulf Coast and West Coast during May and June,
according to ship tracking data compiled by Bloomberg. The more-than 50 million barrels of Saudi
crude on the water threaten to upend a positive supply development: U.S. crude stockpiles declined
for the first time since January and inventories at the Cushing, Oklahoma storage hub contracted
by the most in months.
The U.S. is facing a tsunami of Saudi oil -- the lingering effect of a price war between Riyadh and
Russia back in March -- that led the Middle East nation to slash pricing of its grades to multi-year
lows and flood the market. The wave of supply occurred even as the Covid-19 pandemic was
beginning to rapidly weigh on petroleum demand. A fifth of global consumption is still
seen disappearing this quarter alone.
“The expected Saudi deliveries could push U.S. inventories back to builds depending on their
timing,” said Sandy Fielden, director of oil and products research at Morningstar Inc. “If the
shipments land at a rate that isn’t balanced by falling production or an uptick in exports, then we’ll
see a domestic build.”

Tankers with Saudi oil waiting to discharge
The oil industry has been on edge for months with onshore and offshore storage capacity levels
tested worldwide due to ballooning oil inventories spurred by the demand slowdown. On the U.S.
West Coast, crude stockpiles are less than 5 million barrels short of reaching the region’s
storage capacity.
While data from the Energy Information Administration this week showed U.S. crude production
dropped to the lowest in nearly a year, there are still volumes being produced that may have to
jostle with new Saudi deliveries for storage space.
“If all the Saudi tankers unload, the crude they carry will offset during May almost all of the production
reductions from March levels, effectively maintaining the current high storage filling rates,” Paola
Rodriguez-Masiu, a senior oil market analyst at Rystad Energy, said in a note.
Very Large Crude Carries, or VLCCs, heading for the U.S. Gulf include Shaybah, Hong Kong Spirit
and Dalma, ship tracking data show. Tankers en route to the Pacific Coast include Sea Jade and
Sikinos I. The vessels, mainly supertankers, will deliver over 45 million barrels of Arabian crude to
Gulf buyers and at least 7 million to Pacific users. The volume of oil arriving in May and June is
equal to nearly a third of all Saudi crude delivered to the U.S. last year.
As a result of the surge in shipments, delays in discharging Saudi oil have become common. For
some ships, it has taken about two weeks to unload cargoes, about twice the usual time to finish
the job as small ships that are needed to unload have become increasingly scarce.
So far this year, weekly Saudi crude imports peaked at over 600,000 barrels a day in March.
Shipments had been on a steady downtrend since late 2018 in response to curtailment agreements
with OPEC and its allies.
While West Coast crude stockpiles are currently at 58.2 million barrels, nearing full capacity, the
inventory picture is brighter on the U.S. Gulf Coast, America’s refining belt. Crude inventories there
are 88 million barrels shy of reaching total storage capacity. Oil imports from Saudi Arabia are not
set to slow down anytime soon even though the kingdom deepened its production cuts and raised
prices for June supply, with demand still coming from refiners that process the heavier crude.

NewBase May 18-2020 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices rise more than $1 ahead of WTI June contract expiry
Reuters + NewBase
Oil prices jumped by more than $1 a barrel on Monday to their highest in more than a month,
supported by ongoing output cuts and signs of gradual recovery in fuel demand as more countries
ease curbs imposed to stop the coronavirus pandemic spreading.
Brent crude climbed $1.14, or 3.51%, to $33.64 a barrel by 04.33 GMT, after touching a high since
April 13. U.S. West Texas Intermediate crude was up $1.29, or 4.38%, at $30.72 a barrel, the
highest in nine weeks or since March 16.
Oil price special
coverage

The June WTI contract expires on Tuesday, but there was little sign of WTI repeating the historic
plunge below zero seen last month on the eve of the May contract’s expiry amid signs that demand
for crude and derived fuels is recovering from its nadir.
Production is also falling as U.S. energy firms cut the number of oil and natural gas rigs operating
to an all-time low for a second consecutive week.
That partly helped ease concerns about the WTI contract’s delivery point in Cushing, Oklahoma,
running out of space.
The Chicago Mercantile Exchange, which hosts trading in WTI futures, brokerages and the United
States Oil Fund LP, the largest oil-focused exchange-traded product in the country, have all taken
steps that reduce open positions ahead of the WTI contract’s expiry.
The positive mood was reinforced as U.S. Federal Reserve Chairman Jerome Powell issued an
optimistic outlook for economic recovery later this year.
“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover
steadily through the second half of this year,” Powell said Sunday night in broadcast remarks.
Also supporting oil prices are production cuts by the Organization of the Petroleum Exporting
Countries (OPEC) and its allies, including Russia, a grouping known as OPEC+.
The world’s top exporter Saudi Arabia announced last week that it would cut an additional 1 million
barrels per day in June, while OPEC+ wants to maintain existing oil cuts beyond June when the
group is next due to meet.
Kuwait and Saudi Arabia have agreed to halt oil production from the joint Al-Khafji field for one
month, starting from June 1, Kuwait’s Al Rai newspaper reported on Saturday.

U.S. oil & gas rig count plunges to record low for second week
U.S. energy firms cut number of U.S. oil and natural gas rigs operating to an all-time low for a second
week in a row as producers slash spending on new drilling after oil prices collapsed due to a slump
in demand caused by global lockdowns to stop the coronavirus pandemic.
The rig count, an early indicator of future output, fell by 35 to a record low of 339 in the week to May
15, according to data from energy services firm Baker Hughes Co going back to 1940.
The prior all-time low was 374 rigs in the week ended May 8.
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 23 this week to 175, the lowest since July 2016.
Global fuel demand is expected to drop roughly 10% in 2020 from 2019, prompting companies to
make drastic cuts to spending, lay off thousands of workers and close production to offset the
worldwide supply glut.
“The number of rigs running in the United States has fallen 52% since the start of the year. Over
400 rigs have gone offline, which is more than ... are still running,” analysts at Enverus DrillingInfo
said.
Drillers have cut an average of 50 rigs per week since mid March after crude prices started to plunge
due to the coronavirus and a brief oil price war between Saudi Arabia and Russia.
Analysts expect energy firms to keep chopping rigs for the rest of the year and noted drillers will be
hesitant to activate new units in 2021 and 2022.
Simmons Energy, energy specialists at U.S. investment bank Piper Sandler, forecast the U.S. rig
count would fall from an annual average of 943 in 2019 to 528 in 2020, 215 in 2021 and 221 in
2022.
In Canada, drillers cut the rig count by three to a record low of 23 this week, according to Baker
Hughes. U.S. oil rigs fell 34 to 258 this week, their lowest since July 2009, while gas rigs fell by
one to 79, a record low according to data going back to 1987.

The U.S. Energy Information Administration (EIA) projected a fall in domestic crude output to 11.7
million barrels per day (bpd) this year from a record 12.2 million bpd in 2019, while global petroleum
and other liquid fuels consumption will drop to 92.6 million bpd in 2020 from a record 100.7 million
bpd in 2019.
U.S. crude futures were trading around $29 a barrel on Friday, up about 68% over the past three
weeks but still down over 50% since the start of the year.
Chesapeake Energy Corp, which helped revolutionize the use of hydraulic fracturing, or fracking, to
extract oil and gas from shale formations, is considering a bankruptcy restructuring.
Energy consultant Rystad Energy forecast U.S. fracking activity will hit “rock bottom” in May before
starting to recover in the third quarter.
Global refining activity slump extends into May as glut builds -IEA
The agency now sees global crude refining throughput at 66.2mln barrels-per-day
The sharp decline in global refining activity has continued in May, the International Energy Agency
said in its monthly oil market report on Thursday, as refiners face the double whammy of rising crude
prices and falling diesel profits.

The agency now sees global crude refining throughput at 66.2 million barrels-per-day, unchanged
from April, and more than 14 million bpd lower from a year ago. Gradual recovery could start
appearing in June, it added.
"If crude supply adjusts more quickly to the oversupply than forecast, this will support crude prices
and depress refinery margins, resulting in lower refining throughput than anticipated," the IEA said
in its monthly oil market report.
"On the other hand, a quicker demand recovery could boost margins and accelerate a recovery in
refining activity," it added.

Oil demand in April slumped by around 25%, or more than 25 million bpd, IEA figures showed, in
reaction to global lockdowns to stem the spread of the new coronavirus.
While the easing of some lockdown restrictions in places like the United States, China and Europe
this month is expected to boost demand for oil products, refiners are still facing big headwinds and
more are shutting down until margins improve.
Refiners across the globe have been curbing output in recent months in the face of falling demand
and filling storage tanks, but until recently they had some incentive to continue running.
As the price war between key producers like Saudi Arabia and Russia hit its peak in April, physical
crude grades were trading at historic lows, a boon for refiners, which coupled with healthy diesel
margins, allowed many to keep running.
But in recent weeks the physical crude market has bounced back, adding pressure on refiners.
"Crude market strength is exerting more and more pressure on refining economics, with our
assessed global weighted average margin having fallen solidly into negative territory for the first
time since Q2-2014," JBC Energy said.
While diesel margins in Europe traded in double digits throughout April, in the past week they have
slumped to their lowest since mid-2009 below $5 a barrel.
Refiners in Europe are already feeling the pain.
Spain's Petronor is the latest to announce economic run cuts, saying it had shut one of its crude
units from May 9 at its 220,000 bpd Bilbao oil refinery due to slow demand and storage saturation.
A middle distillate trader said they already see tightening high-sulphur gasoil in the Mediterranean
region, and offers of jet fuel were falling. "These are signs of run cuts," he said.

NewBase Special Coverage
The Energy world - Special 01- May-2020
Oil Watchers Applaud Swift Delivery of OPEC+ Supply Cuts
Bloomberg - Grant Smith
OPEC+ is responding to the oil market’s collapse with an urgency never seen before. The alliance’s
program of production cutbacks this month is well on the way to trimming 9.7 million barrels of daily
crude output -- roughly 10% of global supplies, according to tanker-tracking data, interviews with
physical crude traders and refiners, and assessments by consultants. And that’s just in the first two
weeks of the agreement.
“The actual production cuts are deeper and more spectacular than any reasonable person would
have thought a week ago,” said Ed Morse, head of commodities research at Citigroup Inc.
Despite skepticism over the efficacy of the measures unveiled in mid-April by Saudi Arabia, Russia
and their partners, compared to the immense hit to demand, the impact has been substantial. Oil
prices have recovered by 60% in the past three weeks, as a pick-up in fuel use is complemented
by the supply cuts.
Swift Action
OPEC+ has responded promptly to coronavirus impact with substantial cuts
Source: Bloomberg, International Energy Agency, OPEC
Little Option
Much of the prodigious effort undertaken by the Organization of Petroleum Exporting Countries and
its allies has been unavoidable.

With a dearth of buyers and storage, they’ve had little choice but to slash production. Saudi Arabia
has been forced to reverse the massive output increases made in April, when Riyadh was waging
a vicious battle for market share with fellow OPEC members. And the kingdom has come under
immense political pressure from allies in Washington to shield the U.S. oil industry.
Yet at the heart of the swift response is a recognition of the scale of the oversupply, and the threat
posed to economies dependent on crumbling oil revenues.
“Partly it’s because they couldn’t sell the oil anyway,” said Morse. “But this is a moment when they
really do recognize their mutual interdependence and commonly-shared vulnerability.”
For Saudi Arabia’s sovereign wealth fund, which is central to the kingdom’s economic overhaul, the
crisis has even forced it to find new ways to unlock liquidity. It’s planning to borrow about $10
billion by pledging stakes in SoftBank Group Corp.’s technology investment vehicle as collateral,
according to people familiar with the matter.
‘So Far, So Good’
Petro-Logistics SA, which has observed OPEC’s movements for four decades, says exports from
the 23 nations are down 15% so far this month. Kpler SAS and Vortexa Ltd., analytics firms that
also monitor flows, have also detected a sharp pullback.
“All participating countries are rapidly ramping up their level of compliance,” OPEC Secretary-
General Mohammad Barkindo said in a Bloomberg television interview Friday. “So far, so good.”
Saudi Arabia, having made preparatory curbs before the deal took effect, slashed exports by 2.6
million barrels a day -- or about 28% -- to 6.7 million a day during the first two weeks of May, tanker
tracking shows.
State-producer Saudi Aramco will cut June exports to at least a dozen Asian customers, according
to traders notified by the company. Shipments to the U.S. and Europe will be pared even more
sharply. Gulf allies Kuwait, the United Arab Emirates and Oman have taken similar steps.
While it’s typical for the Gulf bloc to be fully compliant, they’ve surpassed those standards this time
by volunteering to make even deeper cuts before the first month of the latest agreement has
elapsed. An additional Saudi reduction of 1 million barrels a day in June will bring its output to the
lowest since 2002.
What’s surprised physical crude traders even more is the commitment shown by Russia.
In previous agreements, Moscow has secured the right to incrementally phase in its allocated
cutbacks, arguing that its more challenging geological conditions require a gradual approach. The
result being it rarely met its compliance target.
This time round, data from the Energy Ministry’s CDU-TEK unit shows crude output may already be
down to 8.75 million barrels a day -- within striking distance of their 8.5 million-barrel target.
“We’re starting to see some discipline come into the producing countries’ programs,” Clay Seigle,
managing director at Vortexa, said in an interview from Houston. “The headline figures from the first
10 days of the month do look like they’re starting to crack down.”
Usual Suspects
There are exceptions to the general good behavior.

Iraq, which regularly flouts its pledges to OPEC+, has trimmed exports only marginally, tanker-
tracking data shows. Shipments are down only 190,000 barrels a day this month, while the accord
calls for the country to cut production by just over 1 million a day.
Although Baghdad has decided how to allocate the million-barrel reduction with international oil
companies like BP Plc and Exxon Mobil Corp., operators are still awaiting a letter detailing their
share of the burden, according to people familiar with the matter.
Yet even OPEC’s most recalcitrant member is showing signs it may reform. Both Saudi Energy
Minister Abdulaziz bin Salman and OPEC Secretary-General Mohammad Iraq have recently
conferred with Baghdad about compliance, which Baghdad has promised to improve, Barkindo said
on Friday.
Iraq’s state oil-marketing department has reduced contractual supplies of Basrah crude due to be
shipped to at least three customers in June, according to traders who received the notification.
Kazakhstan, which like Iraq has disregarded limits agreed with OPEC+ in the past, is also dragging
its feet. Tengizchevroil, the venture led by Chevron Corp. that pumps a third of the nation’s oil, was
still reviewing the government’s instruction to cut back as of May 11.
Despite the laggards, the visible drop in exports and public assurances of adherence have
convinced traders that OPEC+ is more serious than ever. Discussion in the market has flipped from
whether the supply cuts are enough, to how long they can be maintained.
“It’s more than enough to balance the market,” said Morse. But “as prices rebound and they see
inventories are drawing, they’ll be tempted to bring production all the way back.”

Pandemic Punches 1.7-Billion-Barrel Hole in Global Oil Demand
Bloomberg - Julian Lee
A fifth of global demand for oil will disappear this quarter. All three of the major forecasting
agencies now agree that the world faces its biggest-ever slump in oil consumption, after
governments imposed movement restrictions on billions of people to combat the coronavirus. The
scale of the demand hit means that despite producers implementing unprecedented output cuts,
stockpiles will soar this year.
The International Energy Agency, the Organization of Petroleum Exporting Countries and the U.S.
Energy Information Administration have all updated their oil market forecasts in the past week and
they have come into much closer alignment in their views of the depth of demand destruction.
The pessimistic stance adopted last month by the International Energy Agency has now become
the consensus view — the world will use about 1.7 billion barrels less oil this quarter than it did
during the same period last year.
On the Same Page
The three agencies' views on demand destruction have come into line
Sources: IEA, EIA, OPEC

Last Month's View
A month ago the IEA was out of line in forecasting a huge drop in second-quarter demand
In reports published mid-April, the EIA and OPEC both saw demand falling by about 12 million
barrels a day in the second quarter, compared with the same period last year. The IEA
alone forecast a drop in excess of 20 million barrels a day.
It has since become a little more optimistic, as lock-downs are eased and businesses gradually
begin to reopen. But the other two forecasters have moved sharply in the opposite direction, seeing
much more demand destruction than they did a month ago and catching up with the IEA’s more
pessimistic view on oil consumption.
All three still see the situation improving dramatically in the second half of the year. Although
demand is expected to remain below year-earlier levels throughout 2020, the size of the drop is
seen to shrink significantly.
The IEA and the EIA see it around 5 million barrels a day below last year’s levels in the third quarter,
while OPEC is less optimistic, with its forecast still showing a year-on-year loss of more than 8
million barrels a day. The situation is seen improving further in the final three months of the year,
with estimates of the demand loss ranging from 2.26 million barrels a day from the EIA to 4.5 million
from OPEC.
But, as the IEA warns, the biggest uncertainty is “whether governments can ease the lock-down
measures without sparking a resurgence of Covid-19 outbreaks.” At present, the forecasts assume
that they can. If that assumption proves incorrect, then we could be in for another slump in demand
as widespread lock-downs return.

Even as the EIA and OPEC have become more pessimistic about the size of the second-quarter
demand destruction, the overall mood surrounding the oil market has become more optimistic. In
part that’s the result of the first signs that the worst of the demand destruction may have passed,
but it also reflects optimism about the impact of output cuts that are a necessary part of balancing
the market.
The IEA points to “massive cuts” in production from countries outside the OPEC+ agreement, which
itself saw 20 countries agree to cut output by an unprecedented 9.7 million barrels a day in May and
June from baselines that were mostly set at October 2018 levels.
If the OPEC+ countries comply fully with their agreed cuts — which would be a first — the agency
sees global oil production in May some 12 million barrels a day below the April level. A further cut
of 1.2 million barrels a day by Saudi Arabia, Kuwait and the United Arab Emirates has been pledged
for June.
Production Cuts
By the fourth quarter, all three agencies see non-OPEC output losses exceeding OPEC cuts
Note: Non-OPEC figures include output cuts implemented by Russia and other OPEC allies, as well
as market-driven reductions in countries like the U.S. and Canada. Note: OPEC figures assume the
output deal agreed in April is implemented in full, with additional reductions in June from Saudi
Arabia, Kuwait and the U.A.E.

The IEA and OPEC already see declines in non-OPEC output — including the cuts implemented by
Russia and other OPEC allies, as well as the market-driven reductions in countries like the U.S. and
Canada — outstripping the effect of the OPEC cuts.
All told, they see global oil production more than 8.5 million barrels a day lower than it was a year
ago on average in the second quarter, while the EIA sees it down by a little over 8 million barrels.
By the end of the year, the IEA and OPEC see producers everywhere pumping in excess of 10
million barrels a day less than they were a year earlier. The EIA sees the reduction at a little over 9
million barrels.
The output cuts, voluntary or otherwise, aren’t nearly big enough to offset the collapse in demand
during the current quarter. Inventories are expected to build by somewhere between 780 million
barrels (OPEC) and 1.12 billion barrels (IEA) over the course of the second quarter. But they should
start to come down again in the second half of the year, as demand begins to recover and output
cuts get deeper.
Inventory Changes
Stockpiles are set to begin falling in the second half of the year after massive builds in the first
Even if the OPEC+ countries implement their output deal as planned and in full, including
the additional reductions offered by Saudi Arabia and its closest allies for June, the world’s
stockpiles of oil will be much higher at the end of the year than they were at the beginning.
OPEC's latest forecast shows an increase of about 530 million barrels in global stockpiles, while the
EIA's figures show a build of 620 million barrels. The IEA foresees the biggest addition of the three,
with worldwide oil inventories ballooning by more than 725 million barrels, a volume that exceeds
the U.S. government's strategic crude reserves. Even if oil demand returns to pre-virus levels in
2021, which remains an optimistic view, oil producers will remain under pressure while excess
inventories are drawn down.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
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Khaled Malallah Al Awadi,
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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
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