-Another US energy company bites the dust
-Brent prices avoided a milestone, but just barely
Crude oil prices were supported, but just barely, in early Friday trading on expectations that global policymakers would keep their foot on the stimulus pedal, despite worrying signs of new COVID-19 cases and waning demand in Asia. Brent crude oil was on pace for one of its longest consecutive streaks of decline since late March on troubling signs of waning demand, though false hope carried the day on Thursday. Trading volumes in the August contract for Brent, meanwhile, were thin as investors moved into the forward month, and volumes could be influenced by the draw of new US benchmarks based on Gulf Coast deliveries.
The last time Brent posted a loss over three consecutive sessions was during a period ending March 31. Brent went from bust to boom in the previous session to recapture the $40 mark, but just barely. The global benchmark was trading up some 0.2% as of 8 a.m. ET to trade at $41.13 per barrel, but falling fast. Trading in the August contract was thin, with volumes in September nearly twice as high.
Europeans are working to keep the bloc up and running after the World Health Organization warned it faces a “very significant resurgence” of new COVID-19 cases. On Friday, the EU extended health support to countries such as Ukraine.
“The virus knows no borders, but neither does European solidarity,” Janez Lenarčič, commissioner for crisis management, said in a statement Friday.
US lawmakers, meanwhile, are busy debating what another round of federal stimulus would look like. A report from Moody’s Investors Service found another trillion-dollar package was likely overblown, though doing nothing “could shave as much as 3 full percentage points for real GDP and erase about 4 million jobs.” US taxpayers this year received federal stimulus worth $1,200 and biweekly unemployment checks were boosted by an additional $600 in federal support. While in normal circumstances, that would be a disincentive to find new work, the vast closure of many segments of the economy mean some unemployed could be without a check for years. State lawmakers, however, seem divided, and the growing US political and social divisions are creating a nightmare for effective policy. A survey from the Federal Reserve Bank of Dallas finds business conditions in the energy sector at their worst in the four-year history of the reading, indicating a significant contraction is imminent. One respondent to Fed questions said the shale patch is its own worst enemy.
“Instead of adapting and responding to market signals, we are constantly managing unmanageable levels of debt,” the respondent said. “This drives irrational decisions that over the long haul are detrimental to the economic health of the oil and gas industry.”
The dip into negativity for West Texas Intermediate in April caused deep collateral damage. Occidental Petroleum, spinning its wheels after purchasing rival Anadarko Petroleum last year, is seeking to write down as much as $9 billion in debt to avoid default. Houston-based shale producer Sable Permian Resources filed for Chapter 11 bankruptcy protection on Thursday. The company was the brainchild of the late Aubrey McLendon, who was ousted by troubled-Chesapeake Energy in 2014.
Elsewhere, demand signals from Asia are showing a contraction. Cargo tracking from data firm Kpler show 82.5 million barrels of crude oil and related products sitting in floating storage off Singapore, up 12.7 million barrels from May. Chinese demand, meanwhile, may be slowing after its recent buying binge, according to S&P Global Platts.
Economic, social and political distractions, meanwhile, continue to overshadow other risks. We’ve already seen some adventurism from North Korea, and Iran and Venezuela continue to taunt the United States with gasoline shipments. With Washington leaving the global management to others, Libya is one again emerging as the world’s chessboard. The Libyan National Oil Corporation said on its Facebook page it was deeply concerned by Russian meddling in the giant Sharara oil field. NOC Chairman Mustafa Sanalla suggested Russia, one of the architects of oil’s rebound, was trying to keep Libya off the playing field to support the market.
“We do not need Russian and other foreign mercenaries in Libyan oilfields, whose goal is to prevent oil production,” he said in part. “We need patriotic, professional, and independent security forces who will facilitate the resumption of oil production for the benefit of all the Libyan people.”