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Posted: 08/06/2020

Heating Oil Market Price Information May 2020

Heating Oil Market Price Information May 2020

Goff Heating Oil Market Price Information

Oil Market, Exchange Rate and Heating Oil Price Information May 2020.

Brent Crude Dated ($ per Barrel)

Price at Start of Month: $18.85                Price at End of Month: $35.48

Highest Price in Month: $35.48                Lowest Price in Month: $18.85

Pound £ to US Dollar Rate $ Exchange Rate FT:

Start of Month: 1.2614                              End of Month: 1.2363

Kerosene (Heating Oil) Cargo Price $ per tonne       

Start of Month: $121.75                                           End of Month: $253.25

Highest Price in Month: $271.50                            Lowest Price in Month: $121.75

Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 9.00 ppl

 

Market Commentary:

Goldman Sachs: Jet Fuel Demand Recovery Could Take Years

By Tsvetana Paraskova - May 11, 2020, 11:00 AM CDT

While global oil demand is set to rebound with a V-shaped recovery, demand for jet fuel will continue to languish for at least another two years, cut by significantly reduced business travel, Goldman Sachs says, as carried by Business Insider.

"We believe oil will exhibit a V-shaped recovery, but supply will exhibit an L shaped recovery," Goldman Sachs' head of global commodities research, Jeff Currie, said at a virtual briefing attended by Business Insider.

However, jet fuel demand will not return to the pre-virus levels until Q3 2022, according to Currie. 

"You are going to lose a big chunk of the jet demand that would have been associated with business travel," he said.

Boeing CEO Dave Calhoun said on Boeing's Q1 earnings call at the end of April:

"We believe this industry will recover, but it will take two to three years for travel to return to 2019 levels, and it will be a few years beyond that for the industry to return to long-term growth trends."

So far into the pandemic, jet fuel was the oil product with the largest decline in demand relative to 2019, the International Energy Agency (IEA) said in its Global Energy Review 2020 report earlier this month. 

Rystad Energy also sees jet fuel demand being hit the hardest, assuming as a base case that "the common summer air travel peak will not occur at all this year."

Jet fuel demand globally is set to plunge by 33.6 percent on the year in 2020, or by at least 2.4 million bpd from last year's demand for jet fuel of about 7.2 million bpd, Rystad said in its latest assessment on oil and fuels demand last week.

Oil demand could rebound enough to exceed supply by the end of May, Goldman's Currie said last week, noting that this would be in no small part because of the production cuts implemented by all major producers.

However, there are some 1.2 billion barrels in storage, Currie added, that would need to be drawn down before oil prices materially improve.

By Tsvetana Paraskova for Oilprice.com

When Will The Next Oil Price Cycle Begin? By Salman Ghouri - May 11, 2020

The world will soon bounce back from this pandemic, but the recovery will be rough and painful. The current low oil price environment will also come to an end, with prices possibly spiking as demand recovers.

The extent of oil and gas exploration and production is largely driven by current oil prices, future expectations of oil prices, and availability of resources. Higher oil prices generally lead to large investments in upstream operations, while lower oil prices can lead to a drastic drop in investment. Persistently lower oil prices from 2014 to 2016 led to underinvestment in upstream and fewer Final Investment Decisions for oil projects. Investments in upstream, for example, plunged from $1079 billion in 2014 to $900 billion in 2015 and then further down to $583 billion in 2016. This is because lower oil prices severely affect the revenues, cashflows, and profitability of oil and gas companies. That leads to fewer resources being available for future investment in exploration and production activities. The question now, is what will happen to the oil and gas industry post-COVID-19? Should we expect the regime of lower oil prices to linger or will oil prices bounce back?

COVID-19 has devastated the global economy and it may take years to recover from the economic and social damage it has caused. The months-long lockdown has not only severely impacted businesses but has also resulted in high unemployment and all the social issues that come with it. The U.S Labor Department reported that total nonfarm payroll employment fell by 20.5 million in April, causing the unemployment rate to hit 14.7 percent. This is the highest rate of unemployment and the largest monthly increase since January 1948.

The International Labor Organization (ILO) reported that some 1.6 billion workers in the informal economy, representing nearly half of the global labor force, are in immediate danger of losing their livelihoods due to the COVID pandemic. Within the formal economy, things aren’t much better, with industries such as the aviation industry suffering through record-breaking losses. The oil industry is another front-line sector that has been hit hard. Low oil and gas prices over the past few months have not only resulted in high unemployment within the industry (the U.S. Labor Department reported that unemployment in mining, quarrying, and oil and gas extraction rose from 1.9 percent in January to 10.2 percent in April 2020.) but have also hit revenues, profit, and cash flows hard. As such, most of the major oil companies have already incurred huge losses. For example, Occidental Petroleum Corp. reported a net loss of $2.2 billion, BP  reported $4.4-billion net loss in the 1st quarter, ExxonMobil reported an estimated first-quarter loss of $610 million and also announced 30 percent cut in its capex for 2020 to $23 billion, compared to the $33 billion earlier announced. Italian oil and gas company Eni SpA (E) reported its first-quarter net loss was 2.93 billion euros, compared to a net profit of 1.09 billion euros a year ago. Many companies within the oil and gas industry will go out of business as the losses mount and prices remain low.

Rystad Energy estimated that E&P companies will see revenues plunge by around $1 trillion in 2020, falling to $1.47 trillion from $2.47 trillion last year. They were also of the view that 2020 will see the lowest project sanctioning activity since the 1950s in terms of total sanctioned investments, which stands at $110 billion – only 33 percent of the investments in 2019. Many companies have already abandoned or deferred their major projects.

So what does this all mean? It simply means that fewer resources will be made available for future investments in exploration and production - hindering the ability of companies to invest in future projects. A decrease in exploration and production investment will lead to a supply squeeze in the future once demand comes back online.

The coming recovery will require enormous financial and energy resources to rectify the damages caused by COVID-19. During this recovery process, global oil demand will slowly move towards normalcy and may even surpass global supply. Even if the oil industry were to increase investment, there is always a lag involved in bringing production online. It takes a number of years to discover, acquire, and develop a project. Even shale oil wells may struggle to come back online as it is difficult to return a well that has been shut-in to its previous production levels. Then there are the disruptions at manufacturing sites (where plants & equipment for future delivery are under construction) to consider. These delays may impact a project’s completion date. The list of variables that could impact the supply side of the oil market in the near future is a very long one.

The world has witnessed various cycles in the past, but there has never been anything as complete and intensive as this. The time-scale of the oil price recovery will depend upon how quickly the global economy is revived and how fast the surplus oil is consumed by increasing demand. The ability of OPEC to comply with its production cut deal will also play a role in the oil market recovery.

While the timescale remains unclear, a new oil price cycle is in the making, and the serious lack of investment in exploration and production as well as other supply-side issues could send oil prices significantly higher.

By Salman Ghouri for Oilprice.com

 

Has Demand For Oil Already Peaked?

By Nick Cunningham - May 12, 2020, 7:00 PM CDT

Oil prices continue to rise on the prospect of a rebound in fuel demand as economies begin to reopen.  But there is a large difference between oil demand rising from recent lows and actually growing relative to pre-COVID-19 trends. In other words, demand destruction on the order of nearly 30 million barrels per day (mb/d) may have been brief, but we are a long way from a 100-mb/d oil market.

In fact, some are wondering whether the world will ever get back to 100 mb/d of oil demand. Even oil executives have their doubts. Royal Dutch Shell’s CEO Ben van Beurden recently suggested that a rebound is unlikely, even looking out beyond 2020. “We do not expect a recovery of oil prices or demand for our products in the medium term,” he said.

“We basically have a crisis of uncertainty. Uncertainty about demand, about prices,” van Beurden said in a video address when presenting first quarter results at the end of April. “Maybe even uncertainty about the viability of some of our assets given all of the logistical issues we have.”

BP’s CEO Bernard Looney largely admitted the same thing. The COVID-19 pandemic could entrench certain societal changes – more teleworking, less commuting, less flying – that could permanently erode a portion of consumption. “It’s not going to make oil more in demand. It’s gotten more likely [oil will] be less in demand,” Looney said in an interview with the FT.

“I don’t think we know how this is going to play out. I certainly don't know,” Looney said. “Could it be peak oil? Possibly. Possibly. I would not write that off.”

Not everyone agrees. ExxonMobil’s chief executive Darren Woods recently said that the long-term trends “have not changed.” 

A new study from IHS Markit also sees oil demand mostly returning to “normal” by the end of 2021. “It may be hard to comprehend now. But barring a second wave of the pandemic, nearly all pre-COVID demand could return by the second half of 2021,” Roger Diwan, vice president of financial services at IHS Markit, said in a statement. The firm sees oil demand rising to 96-98 percent of pre-coronavirus levels by the second half of next year.

 “If that transpires it could even lead to a market squeeze in the medium-term as supply destruction hinders the ability of supply to keep up with recovering demand,” Diwan added.

A separate report from the Oxford Institute for Energy Studies sees something similar. The report eyes a supply deficit as soon as the third quarter of 1.5 mb/d, on the back of severe supply curtailments and a rebound in demand. The report says the market could be undersupplied in 2021 by as much as 5 mb/d. But the inventory overhang means that Brent trades in the $40 to $50-per-barrel range for most of next year.

The Oxford report also sees demand mostly arriving back at pre-pandemic levels at the end of 2021.

The problem with that notion is that a second wave of coronavirus infections is completely plausible, perhaps even likely (something both the IHS and the Oxford reports admit are big uncertainties). Time will tell.

But the permanent changes in some behaviors, along with the ongoing market share gains for electric vehicles, go beyond oil market cycles. If demand does return, and boom follows bust, the shift to cleaner energy will only accelerate, and that’s before even considering any green stimulus measures now under consideration.

One important issue that the Oxford report raises is how Saudi Arabia responds after the immediate crisis subsides. With the prospect of peak demand looming, there are “advantages” for Saudi Arabia if it pursues a high-volume/lower price strategy, the Oxford study says. That is, Saudi Arabia may want to ramp up production in the years ahead in order to monetize its remaining reserves as demand peaks and begins to decline.

Cutting by too much in an effort to push prices to $50 per barrel or above would clear the way for a return of U.S. shale. Better to keep the market well supplied, capture more market share, and box out a rebound in shale drilling.

Other analysts agree. “Will OPEC+ then hold on to production cuts in order to opt for price rather than volume once the oil price moves back to $50/bl thus once again chase the oil price to $60/bl and $70/bl by holding back supply?” Bjarne Schieldrop of SEB wrote in a report. “If so, this would again give preference to shale oil volume rebound in exchange for a higher oil price to OPEC+.”

By Nick Cunningham of Oilprice.com

 

England tiptoes out of full lockdown as economy plunges

Alistair Smout May 13, 2020 / 8:49 AM

LONDON (Reuters) - England tentatively began easing its coronavirus lockdown on Wednesday, with some people who cannot do their jobs at home urged to return to work, as stark economic data showed the disastrous impact of the pandemic.

The worst-hit country in Europe with more than 40,000 deaths from COVID-19 according to official data, Britain has been in extensive lockdown since March 23. As of Wednesday morning, people in manufacturing and certain other sectors were being asked to return to work if they could.

GDP data released on Wednesday showed the economy shrank by a record 5.8% in March compared with February, and the April data is likely to be even worse as the country was under lockdown for the entire month.

The government is loosening restrictions very gradually, for fear of triggering a second peak of infections. Prime Minister Boris Johnson has described the process as a “supremely difficult” balancing act.

Scotland, Wales and Northern Ireland, which have semi-autonomous governments, are sticking with a “stay at home” message for now, leaving England, the most populous UK nation, to take the lead in sending some people back to work.

The government has faced a barrage of criticism that its new guidance - Stay alert, control the virus, save lives - was confusing. Appearing on Sky News TV, transport minister Grant Shapps was asked why estate agents were being allowed to restart house viewings when people could not have their own relatives to visit.

“The truth of the matter is, you have to start somewhere. The lockdown message was very straightforward - it was just stay at home. Now as we start to unlock, of course, there have to be decisions made,” Shapps said.

“There is no perfect way of doing this, and we’d ask people to use their common sense ... Right now, there has to be a cut-off somewhere.”

Workers were being advised to avoid public transport if at all possible, and schools remained closed, prompting questions about how parents and people who could not get to work by other means were supposed to apply the new guidance.

Employers faced the daunting task of creating safe environments for their staff, with detailed guidance on one-way systems at entry and exit points and in stairwells, spacing out workstations and other minutiae.

For those still working from home or unable to work, there was only a very slight change in the regime. People were now allowed out to exercise more than once a day, and two people from separate households were allowed to meet outdoors as long as they kept 2 metres apart.

Martin Hewitt, chairman of the National Police Chiefs’ Council, said officers would still be encouraging people to go home if they were out for reasons other than the authorised exercise, shopping for essentials, health or work.

Fines for transgressions have been increased.

“Everybody will carry on hopefully working in the spirit we’ve had for the last seven weeks,” he told BBC TV.

“It’s not for the police to police people being 2 metres apart, that’s about everyone’s individual responsibility. If there are those people who refuse to abide by the new regulations then we will move to enforcement if that’s what we have to do,” he said, describing that as a last resort.

Are Oil Prices Rising Too High Too Soon?

By Tom Kool - May 18, 2020, 12:00 PM CDT

Oil prices have rallied significantly, rising $10 in two weeks as markets are increasingly convinced that global demand for crude is picking up once again.

Deep output cuts and the reopening of some of the largest economies in the world have brightened the outlook for oil, but many analysts are now beginning to question whether this rally isn’t already overdone. So why are oil prices still rocketing as analysts warn of ballooning inventories and continued weak demand for aviation fuel?

Looking at the data, the first signs of real demand recovery are coming from the Far East, where Chinese refiners have embarked on a buying spree, capitalizing on ultra-low crude prices in heavy hit markets such as Brazil, Oman, and West Africa.

Spurred by Beijing’s call to action, factories and farmers are leading the demand recovery in diesel according to Liu Yuntao, an analyst working with Energy Aspects in London. 

But it’s not just diesel. Gasoline consumption is also on the rise in China, where rush hour traffic in Beijing, Shanghai, and tens of other big cities is approaching normal levels once again as the Chinese are finding out that coronavirus isn’t spread by driving your car.

Demand for jet fuel, however, continues to lag behind as air travel is still a fraction of what it was before the lockdown began. Demand for distillates such as jet fuel could continue to lag for a much longer time as long-haul air travel continues to face restrictions. The International Civil Aviation Organization (ICAO) estimates that international capacity could drop by as much as two-thirds from previous forecasts for the first three quarters of 2020.

Chinese refineries may have ramped up activity too soon. Refining margins are already suffering as Chinese refineries are exporting large amounts of oil products in the region, flooding an already well-supplied market with more gasoline, diesel and bunker fuel. Unlike China, other East-Asian countries such as Japan and South Korea are taking a more prudent approach while planning to ease lockdowns, resulting in lower fuel consumption during what is usually seen as peak driving season.

In the meantime, 117 Very Large Crude Carriers are expected to unload up to 230 million barrels of crude oil to China over the course of the next three months. Most of this crude was bought in April against rock-bottom prices. Market watchers are now keeping a close eye on refinery run rates and margins in China as one of the first main indicators of real recovery in global crude demand.

A real recovery in crude markets will only materialize if Chinese oil imports continue to stabilize during 2020.

For now, early data on fuel consumption in both the Far East and the U.S. will show whether the optimism in oil markets was justified or not.

By Tom Kool of Oilprice.com

The Oil Rally Is Running On Fumes

Published May 18, 2020, 7:00 PM CDT

Oil prices have surged to two-month highs on growing signs of a rebound in oil demand, as the easing of lockdowns spread worldwide. At its peak in April, global lockdown measures affected around 3.9 billion people. But an estimated 3.7 billion people are now living in areas that are experiencing some version of a “reopening,” according to an estimate from Raymond James.

Data from China has stoked some bullishness in oil markets, although there are some mixed signals. Traffic is back in many Chinese cities, and there are early signs that China’s oil demand is rising back close to pre-pandemic levels around 13 million barrels per day (mb/d).

At the same time, a new coronavirus cluster in China suddenly sparked another lockdown measure. While Wuhan and other regions may be opening up, roughly 108 million people in Jilin province just went into lockdown. It’s a sign that the fight against COVID-19 will likely be frustrated by repeated flare ups in new cases, which may ultimately lead to renewed lockdowns.

But for now, the markets apparently want to focus on the positive. On the global vaccine front, there appears to be some progress. Moderna said on Monday that its vaccine has shown to be safe in humans and has also demonstrated promising results in stopping COVID-19. Meanwhile, AstraZeneca said it could have 30 million doses of its vaccine ready by September.

Financial equities rejoiced, with the Dow Jones up roughly 3.5 percent during midday trading. WTI surged past $30 per barrel, up at one point on Monday by more than 10 percent. 

Massive supply cuts go even further in explaining the recent jump in prices. Oil traders view the implementation of the OPEC+ cuts favorably, with the 9.7 mb/d cuts phasing in swiftly. Part of the reason is that some oil producers, including Saudi Arabia, began having difficulty finding a home for its oil, so a portion of the cuts arguably became involuntary.

Meanwhile, weeks of catastrophically low oil prices ravaged North American oil producers over the past two months. Shut ins could reach 2 mb/d in the U.S. by June, and Canada could lose 1 mb/d.

But a reality check is in order. WTI at $30 per barrel is suddenly seen as “bullish,” but that price level is financially unsustainable for a vast swathe of global oil supply, including most of the U.S. shale complex.

Moreover, the physical oil market is not “out of the woods” just yet, according to Rystad Energy. “We still see a 13.7 million bpd implied liquids (crude, condensate, NGLs, others) stock builds in May-20,” the firm said in a statement. That is down by half from the peak of the glut (-26.7 mb/d in inventory builds in April), but a significant overhang remains. 

Separately, Commerzbank argued that the oil market optimism may be running a little too far. “Despite all the euphoria, however, we believe that caution is still advisable: it will probably take some years before demand recovers to its pre-crisis level,” Commerzbank wrote on Monday.

U.S. Federal Reserve Chairman Jerome Powell warned that the American economy recovery could take until the end of 2021. “It could stretch through the end of next year. We really don’t know,” Powell said over the weekend. He noted that the economy might not return to normal simply because stay-at-home-orders are in the process of going away. “For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine,” Powell added.

In addition, the price rally may also be the result of speculative positioning – the physical market is trending towards rebalancing, but the rally can also be explained by overly exuberant speculative positioning. “Retail and institutional investors are also likely to have played a key part in the latest price rise. According to the CFTC, the latter expanded their net long positions in WTI on the NYMEX to around 352,000 contracts in the week to 12 May, putting them at their highest level since September 2018,” Commerzbank added. “Thus the positive trends (for the oil price) are largely expected and already priced in.”

The lockdowns are lifting, but there is nothing to suggest that the end of the pandemic is near, or that oil supply will remain shut in. “[T]here is significant downside risk related to two events, the resurgence in COVID-19 outbreaks, and deteriorating compliance to OPEC+ cuts as demand comes back,” Rystad warned.

By Nick Cunningham of Oilprice.com

 

Additional Oil Market commentary & Market Data available from the BBC here: Market Data

The Office for National Statistics record the price of heating oil and publish monthly updates on the average delivered cost of a domestic delivery of 1000 litres of kerosene in the UK . The information held by the ONS is freely available online and can be found here:  ONS Price of heating oil