Judge Denies Pipeline Shutdown Appeal
July 13th, 2020
In the US oil rigs were down four in Friday’s Baker Hughes Rig Count report bringing the total number of oil rigs in the US to 181 compared to last year at this time when there were 784 rigs in operation. As the price of WTI crude has hovered around the $40 dollar per barrel level for the last couple weeks of trading you are hearing about the potential for more production to come online.
OPEC + does have a meeting this week of their monitoring committee which take stock of current production and the current market and makes recommendation for the OPEC+ group. Their current production cut agreement will ease production limits starting in August and it appears that is the how the market perceives things going currently. They may also continue to put pressure on those countries, like Iran, that have not complied well with the current agreement and have said they will cut more now to make up for those actions. OPEC+ has a very delicate job to do here, wanting to increase production but they do not want to see the market move lower on the announcement of their plan. The headlines have been a factor for the markets as there is a lot of uncertainty out there and any new headlines can drive prices.
The appeal by Energy Transfers for a stay not to shut their pipeline down pending an appeal for the Dakota Access Pipeline was denied by US District Judge James Boasberg last week. The judge called for the pipeline to shut by August 5th, 2020. Energy Transfers (ETP) says it is impossible to close the pipeline in month as it is a complicated procedure to make sure it is done safely. It appears they’re continuing to charge ahead as more appeals are likely on the way. ETP said: It would take three months to close and preserve the pipe for future use. To preserve the pipe, it must be filled with an inert gas, like nitrogen, which is costly. ETP estimates it will cost $24 million to empty the pipe and take the steps to preserve it. ETP said it would spend an additional $67.5 million each year it remains inoperable.
Saudi Arabia reported that they had intercepted four missiles and six drones that were launched by Houthi forces in Yemen. The Houthi forces claimed that they targeted and hit an oil facility in Jizan. The market is still trading lower in spite of this news but there have been no confirmations.
The news continues to be filled with COVID-19 news which continues to present the idea of demand being impacted as more restrictions could be imposed. The delicate balance between production, virus related demand destruction, and current high inventories is trying to be sorted out by the market. A lot of moving parts and a lot of uncertainty likely leads to more rangebound trading.