Royal Dutch Shell Looks to Cut Oil Production Costs
September 21, 2020
Crude oil and refined fuels products prices closed mixed on Friday, both WTI and Brent crude oil rose by 10% to 11% for the week and the largest weekly rise in the past 3 months.
Baker Hughes reported that crude oi rigs fell by 1 to a total of 179 rigs. Last year at this time the US had 719 crude oil rigs online. The US has dropped 504 crude oil rigs since March 20, 2020 when the pandemic started to hit the US severely with shutdowns of schools and businesses.
Bloomberg estimates that more 40% of Americans are still working from home. The daily commute to work is a big factor in gasoline demand so this fact is still a negative for gasoline consumption. Gasoline demand has recovered very nicely but still missing a complete recovery because of things like working at home.
Royal Dutch Shell is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus on renewable energy and power markets , sources have told Reuters.
Chinese and US relations are still tense and an area of concern for many. Reuters reported that China’s air force released a video showing nuclear-capable H-6 bombers carrying out a simulated attack on what appears to be Andersen Air Force Base on the US Pacific island of Guan.
Goldman Sachs expects global oil inventories to draw in September and predicted the market would be in a deficit of 3 million bpd by the fourth quarter. It expects a further 2 million bpd increase in demand from September to December, compared with previous estimates of 2.4 million bpd. It reiterated its target for Brent to reach $49 per barrel by the end of the year and $65 by the third quarter of 2021. It sees Brent prices averaging $44.10 per barrel in 2020 and $59.40 per barrel in 2021. Goldman Sachs said it sees WTI prices averaging $40.20 per barrel in 2020 and $55.90 per barrel in mid-2021.
The market it is trading down to start this week as fears of COVID-19 rises cases and possible shutdowns weighs on the market. The UK contemplates another lock down as cases rise there.
The news on Libya that is it getting back to work on oil exports is also causing some profit taking here today. Libya is a very fluid situation and is a wild card if they can really pull off more oil to the market but for now the prospect of more oil out of Libya has near term pressure on prices.