Are hopes fading for the production cuts needed to support oil prices?
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Uncertainty continues to abound in the oil sector ahead of a planned meeting on Thursday between Saudi Arabia, Russia and other oil producing countries regarding potential production cuts.
It is certainly questionable if the meeting will result in any serious cuts, given that Russia has reportedly hinted that it is willing to cut its production by 1 million barrels of oil per day, or just under 10 per cent of its average output, if the US commits to cuts of its own.
This is a paltry figure compared to US President Donald Trump’s hopes that Saudi Arabia and Russia would collectively cut 10 million barrels of oil per day.
Even if other producers such as Brazil, Norway and Azerbaijan are convinced to make additional cuts, it is still unlikely to account for the massive drop in oil demand caused by the COVID-19 pandemic.
So it’s probably no surprise that only companies with the strongest balance sheets are even contemplating major project approvals.
Despite this, oil prices have crept up with the benchmark Brent crude up 1.44 per cent to $US33.75 ($55.22) per barrel while the West Texas Intermediate rose 2.55 per cent to $US26.97 per barrel.
While major companies are battening down the hatches, Global Energy Ventures (ASX:GEV) has completed its compressed natural gas (CNG) commercialisation plan and provided it to the operator of an in-development oil field with associated gas offshore Brazil.
The company noted that first production from the Brazilian oil field is still expected in early 2024 despite the downturn in global energy markets.
Its plan is aimed at allowing the project to commercialise its gas resources by loading gas from the floating production, storage and offloading vessel via a buoy system unto a fleet of CNG Optimum ships to an onshore gas processing facility.
The review process for the plan is expected during the June 2020 quarter.
Meanwhile, 88 Energy (ASX:88E) is having a challenging day after UK partner Premier Oil pulled out of their joint venture because the Charlie-1 appraisal well did not meet its pre-drill expectations despite intersecting a large condensate discovery.
Shares in the company plummeted 55 per cent to 0.9c on the news that the expected oil play was gas condensate bearing instead.
While the cost of the well remained within the expected budget and is covered by Premier, the company said that further analysis was required to determine whether the discovery could be commercialised on Alaska’s North Slope given the likely high gas content.
The North Slope has extensive infrastructure in place but it is focused on transporting and exporting oil.