U.S. Manufacturing Employment Fell Sharply Last Month
May 4th, 2020
The Baker Hughes Rig Count on Friday showed the oil rigs fell by 53 to a total of 325 rigs. Oil rigs are down 358 (52%) in the last seven weeks. Last year at this time there were 807 oil rigs a difference of 482 rigs. The impact of this decline should begin to show up in the production data more and more as we move forward in time.
US manufacturing employment fell sharply last month, with the ISM employment index down to just 27.5 in March from 43.8 in February, and the lowest reading since June 1949.
Goldman Sachs increased its second quarter and full-year forecast for Brent crude oil, citing signs of improvements in fundamentals. It raised its second quarter Brent crude oil forecast to $25 per barrel estimate from a previous estimate of $20 per barrel. It expects inventory normalization to flatten the Brent forward curve around $30 per barrel in the third quarter. It also lowered its fourth quarter Brent forecast to $37.50 per barrel from a previous estimate of $40 per barrel, while its full year forecast was increased to $35.80 per barrel from a previous forecast of $35.20 per barrel. It sees oil demand continuing to fall by 17.5 million barrels per day in May and by 12.5 million barrels per day in June.
Mercuria Energy Group said global oil markets are showing signs of rebalancing after oil output cuts by OPEC and the United States, with the market structure indicating it might soon be unprofitable to store unwanted oil on expensive tankers. Mercuria’s CEO, Marco Dunand, said the US oil market was “reasonably well balanced” now and estimates that the country’s output will fall by another 1 million bpd in May, taking that total to 2 million bpd. In regard to storage space, he stated that there was plenty of space.
Global demand will start to show a recovery, but it is going to take a long time and continue to have uncertainties. Data suggest that demand will eventually recover from estimates of being down 25.8 million bpd in May, 14.5 million bpd in June, and it is projected to be still be down 2.7 million bpd in December. April did see the largest demand destruction so far, down 30 million barrels per day.
The US Department of Energy said on Thursday that Chevron, ExxonMobil, Energy Transfer and Vitol are among the nine companies that have rented storage space in the US SPR. The Department of Energy said some 23 million barrel of storage space has been secured. The renters will be able to receive their barrels back through March 2021, “minus a small amount of oil” to cover the storage costs.
ExxonMobil Corp reported a first quarter loss compared with a year-ago profit of nearly $3 billion, on an inventory write-down from declining oil prices. It posted a loss of $610 million in the quarter. It reported that is production increased slightly to about 4 million bpd oil equivalent from 3.98 million bpd of oil equivalent. Exxon cut this year’s projected spending by $10 billion and expects to cut it oil and gas output by 400,000 bpd in line with rivals. It said it largest share of its spending cuts will be in the Permian basin, with shut in levels of 100,000 bpd. Its current estimates for full year liquid demand contraction range from 4 to 12 million bpd compared with 2019.