OPEC+ Extends Production Cuts to End of July
June 8, 2020
OPEC+ agreed to extend the current production cuts of 9.6 million bpd until the end of July over the weekend. They also plan to crack down on those countries that have been the cheaters on their quotas, Nigeria and Iraq. Nigeria and Iraq will have additional quotas for July thru September to make up for their lack of compliance. Mexico pulled out of their 100,000 bpd cuts.
Libya announced over the weekend that two of their large oil fields, (EL-Feel and Sharara) have reopened after months of a blockade. The civil unrest here keeps Libyan production a moving target, but both these field together can produce about 400,000 bpd.
The Baker Hughes Rig Count report out on Friday called oil rigs down 16 to a total of 206 a new record low.
BP made an announcement that they plan to cut 10,000 jobs out of is 70,100 worldwide workforce.
Crude oil back near $40 dollars has some producers are starting up some wells. Parsley Energy and WPX Energy both said they are turning on well but do not plan on starting any drilling activity just yet.
Goldman Sachs has estimated that less than half of US 2020 crude oil production was hedged in January of this year but die to the price action in March may companies rushed to protect cash flows and currently some 66% of US oil production is hedged, the highest rate in five years.
The non-farm payrolls number on Friday was a big surprise. Most estimates were calling for big declines, but the number came in up 2.5 million. This was the biggest increase ever and it made the unemployment rate go down. It was down 1.4% to 13.3% down from 14.7%. This news helped fuel stock indices higher and energy along with it.
New jobs and states opening back up after lockdowns is still being seen in a very positive light and the outlooks are strong and helping to continuing to push energy price higher. As long as the news is good and positive economic data continues then energy price will stay on this uptrend. The real test will be once we get some bad news or poor data thrown into the picture.