Page 12 - AsiaElec Week 12

AsiaElec
OIL PRICE COMMENTARY
AsiaElec
three months. National oil firm Rosneft is pre- dicted to play a key role in providing the extra supply. It recently launched trial operations at a mid-sized West Siberian field it operates with Gazprom Neft. The company is also moving ahead with full-scale development of one of Eastern Siberia’s largest oilfields.
Not all Russian producers are on board with the supply war. Lukoil, which lacks the capacity to increase production in Russia, has urged the government to renew negotiations with OPEC.
Russia will be able to maximise its exports, as many of its refineries are due to wind down operations over the coming months for routine maintenance.
Oil price outlook
As producers prepare to flood the market, the outlook for oil demand continues to weaken. Fitch Ratings is predicting a y/y decline in con- sumption of 7-10mn bpd in the second quarter. Goldman Sachs expects Brent to average just $20 per barrel in the three-month period.
The effect of the coronavirus on demand will peak in late March, at 8mn bpd, the bank said last week, forecasting a supply surplus of 3.9mn bpd and 5.7mn bpd in the first and second quar- ters respectively.
Uncertainty over the pandemic’s severity and duration, as well as what actions producers will
take, makes it difficult to predict oil prices mov- ing forward. But if they remain low, the impact on supply will be profound.
Wood Mackenzie estimates that at a Brent price of $35 per barrel, revenues from 4mn bpd, or 4% of global oil production, do not cover costs and the government share. This rises to 10mn bpd if prices remain at $25 per barrel.
“In the short term, companies, governments and other stakeholders are likely to continue pro- ducing assets at a loss, as they have in the past, in the hope the price will rebound quickly,” Wood Mackenzie said in a research note on March 20. “But the current trifecta of oversupply, demand evaporation and global behemoths fighting for market share may require immediate and dra- matic action.”
“If prices don’t rebound, the taps will inevi- tably be turned off. Shut-ins will be more sub- stantial than 2015/2016,” the Edinburgh-based consultancy said. “Given the difficulties and costs associated with restarting mature pro- duction, a proportion of this supply may never return.”
Output over the longer term will also be affected, as producers have cut all or most of their discretionary spending to protect their balance sheets. This means that projects that had been due to come on stream in 2021, 2022, 2023 and further ahead will be delayed.™
COVID-10
ADB president offers
support for Vietnam’s
COVID-19 response
The Asian Development Bank (ADB) is ready to provide Viet Nam with timely and flexible support for the government’s response to the novel coronavirus (COVID-19) pandemic.
“The Asian Development Bank stands ready to provide financial assistance and policy advice to help the Government of Viet Nam contain the spread of COVID-19,” said ADB President Masatsugu Asakawa.
“We will consider all options, including quick-disbursing budget support, policy- based lending, and expedited disbursement of existing loans, to ensure any support package can be approved quickly and disbursed in a
NEWS IN BRIEF
timely manner.”
Asakawa discussed options for ADB
support in detail with Viet Nam’s Minister of Finance Dinh Tien Dung on March 20 and Governor of the State Bank of Viet Nam Le Minh Hung on March 24.
Asakawa commended the government on its timely and effective actions to combat the pandemic.
He welcomed the government’s focus on maintaining economic stability and growth in the medium and long-term, including through expanding public investment expenditure and strengthening social safety nets for poor and vulnerable households.
On March 18, ADB announced a $6.5bn initial package to address the immediate needs of its developing member countries as they respond to the COVID-19 pandemic. Asakawa said ADB will provide additional support as needed.
ADB
COAL
Coal mines emit more
methane than oil-and-gas
sector, study finds
Methane emissions from coal mines could be more than double previous estimates, according to a new study, Carbon Brief reported.
The fossil-fuel industry is understood to be one of the biggest sources of atmospheric methane, primarily due to leaks from the production of oil and gas.
However, a new paper published in the Journal of Cleaner Production suggests
that coal mining may actually be a bigger contributor to levels of the greenhouse gas, with emissions set to grow considerably in the coming years.
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Week 12 25•March•2020