The whirlwind of events that has transpired in the past couple of months — namely the coronavirus pandemic and the collapse of the OPEC+ coalition — has not only shaken up the energy markets, but quite literally sent it reeling in the opposite direction than where it was headed just a few months ago. The oil price decline has reverberated through the energy complex, and key indicators that drive industry decisions are veering far off from their recent course, and in many cases, also from historical norms. The world is continuing to change at a rapid pace as the industry navigates the uncertainty. Just yesterday, in an emergency meeting, OPEC announced it had reached a 23-nation agreement to cut a combined 9.7 MMb/d of crude oil production starting May 1, 2020. Today, we highlight some of the biggest moves happening in prices and price relationships in recent days and weeks as the realities of crude oil demand constraints, supply glut and low prices set in.
The double-whammy of the coronavirus pandemic and Saudi/Russia price war have ripped to shreds many, if not all, the previous working assumptions the industry had about the oil and gas markets just a couple months ago. The resulting collapse in oil prices has sent tremors across the energy complex in the form of capital expenditure cuts, infrastructure project cancellations, a collapse in gasoline prices, refinery run cuts — and now also brimming crude storage. In We Ain’t Seen Nothin’ Yet, we laid out the before-and-after dichotomy that’s emerged since the OPEC+ failure on March 6, our demarcation point for the abrupt shift in market realities. In the crude market, for instance, production has gone from a growth trajectory long term, to expectations of volumes stalling and eventually declining; transportation capacity that was once in short supply, has in some cases become redundant; refineries that were utilized at high rates before are now seeing declines; and storage capacity that was underutilized just a few months ago is now highly valuable for helping absorb surplus supply.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
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About the song
"Figure It Out" was written by Mike Kerr and Ben Thatcher, and appears as the third cut on Royal Blood's debut album, Royal Blood. It was released as a single in August 2014, and went to #3 on the Billboard Mainstream Rock chart and #18 on the Billboard Hot 100 Singles chart. The song appears on the soundtrack for the video game, Pro Evolution Soccer 2016, and also appears in the trailer for the second series of the BBC drama, Doctor Foster. Personnel on the record were: Mike Kerr (lead vocal, bass guitar) and Ben Thatcher (drums).
Royal Blood was recorded in 2013-14 at Rockfield Studios in Monmouth, Wales, with Tom Dalgety, Mike Kerr and Ben Thatcher producing. Released in August 2014, the album went to #1 on the Billboard Top Hard Rock Albums chart and #17 on the Billboard Top 200 Albums chart.
Royal Blood is an English rock duo formed by Mike Kerr and Ben Thatcher in Brighton, UK, in 2011. Kerr uses effects to make his bass sound like an electric guitar, which makes their music as a duo sonically unique. Royal Blood has released two studio albums, two EPs and eight singles to date. They still record and tour, and are currently at work on their third studio album. They are scheduled to play the Y Not Festival in July, and the Victorious Festival in August in the UK, though that’s subject to change due to COVID-19.
