Mid-Week Review

Can Shale Survive Low Oil Prices?

Lower oil prices could drag down U.S. shale drillers at a time when their finances are already looking shaky. But the impact on oil production growth is still murky.  Complicating matters further for Texas shale drillers is the increasing shift of the oil slate to lighter forms of crude. Oil coming out of the ground in West Texas was light to begin with, but as drillers begin to shift increasingly from the Midland to the Delaware basin, oil is becoming lighter and lighter.  The refineries along the Gulf Coast are not equipped to handle oil that light. It is typically mixed in with other streams to create WTI, but rising volumes of ultra-light oil are forcing changes.  Click here to read more from OilPrice.com.

Hedge funds sell oil as economic fears intensify

Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018 amid increasing fears about the health of the global economy.  Hedge funds and other money managers were net sellers of 104 million barrels of futures and options linked to the six most important petroleum contracts in the week to June 4.  Fund managers have sold a total of 290 million barrels of petroleum in the last six weeks, after buying 609 million in the previous 15 weeks since Jan. 8.  Mounting fears about a possible recession in the United States and around the rest of the world have outweighed continued output restraint by Saudi Arabia and disruptions to exports from Russia, Iran and Venezuela.  Click here to read more from Reuters.

Oil Refiner Margins Tank in Europe in Latest Sign of Weak Demand

Oil refining margins in northwest Europe are collapsing, the latest sign of weak demand for crude that’s driven prices into bear-market territory this month.  Three out of seven refining configurations in the region are losing money while the remaining processes are the least profitable in years, according to Oil Analytics data compiled by Bloomberg.  The slump reflects a physical oil market that’s been strengthening in the North Sea — forcing regional refiners to pay more for crude — despite a collapse in headline prices. Margins drop when the plants can’t pass on the cost of purchasing barrels, something that’s been particularly acute for so-called lighter fuels like gasoline and naphtha this year.  Click here to read more from Bloomberg.

Oil steadies as OPEC supply cuts counter growth concerns

Oil prices were little changed on Tuesday as firmer equities and expectations that OPEC and its allies will keep withholding supply countered concern about slowing economies and demand.  Russia said on Monday it might support an extension of OPEC-led supply cuts that have been in place since January, while equities rose after China eased financing rules to stem an economic downturn, giving oil a lift. While the talk of prolonged supply restraint is supporting prices, concern about slowing demand and economic growth has had a bigger impact on sentiment.  Click here to read more from CNBC.