Positive news counteracts COVID; 2020 found resources near 10 bboe

Steve Sutherlin

Petroleum News

After a slump into the $30s to end October, a modicum of stability has settled over oil prices for more than a week leading into Nov. 19, with major benchmarks steadily traversing the channel between $40 and $45 per barrel.

Alaska North Slope crude found itself on the high end of the range Nov. 19, closing at $43.90, up 44 cents. West Texas Intermediate closed at $41.82, up 39 cents, while Brent closed at $44.34, up 59 cents.

Despite currently rising levels of COVID-19 cases, good news on vaccines for the disease has created optimism for a recovery of oil demand.

Pfizer said Nov. 18 that its vaccine - developed in cooperation with Germany based BioNTech - tested at 95% effectiveness, and that it expects to submit an application for emergency use authorization to the Food and Drug Administration “within days.”

Moderna has also said it aims to submit an application in the coming weeks for its vaccine, which it said has an effectiveness of 94.5%.

The ANS price popped 8.34% Nov. 9, the day Pfizer announced results of its late stage trials. Benchmark prices rose in tandem and have trended generally higher since.

Hopes for jet fuel demand lifted higher Nov. 18 as Boeing’s best selling 737 Max jets were cleared back to service by the Federal Aviation Administration after a 20-month grounding resulting from a pair of deadly crashes overseas.

The refreshing dose of optimism has been kept in check, however, not only by concerns of restricted mobility due to pandemic restrictions, but by American Petroleum Institute data released Nov. 17 revealing a build in crude oil inventories of 4.174 million barrels for the week ending Nov. 13.

Analysts had predicted an inventory build of 1.95 million barrels.

On a more bullish note, API reported a build in gasoline inventories of 256,000 barrels for the week ending Nov.13, below a 450,000 barrel build analysts had anticipated.

The Joint Ministerial Monitoring Committee of the Organization of Petroleum Producing Countries ended its Nov. 17 meeting without establishing firm guidance for extending its current levels of oil production curbs.

The economic picture remains mixed, OPEC Secretary General Mohammad Sanusi Barkindo said in remarks to the group by teleconference.

“China is a bright spot with positive growth of 2% in 2020, and other countries in Asia are also exhibiting some positive signs,” Barkindo said. “However new lockdowns, second and third waves of COVID-19 and high levels of unemployment remain major concerns globally.”

Large fiscal stimulus packages remain supportive and vaccines offer hope, but the benefits of the latter will take time to trickle through to the real economy and to oil demand growth, he said.

OPEC+ will make a decision on production levels at meetings Nov. 30 and Dec. 1.

Exploration resilient in 2020

Some 3.75 billion boe, or 46% of total discovered volumes are gas, while liquid volumes are estimated at 4.31 billion boe, the consultancy said.

The 73 new discoveries announced through October are evenly split - 36 onshore and 37 offshore. Russia leads in terms of discovery volume, with 1.51 billion boe, Suriname saw 1.39 billion boe and the UAE follows with 1.1 billion boe, Rystad said.

“Global oil and gas operators will chase plenty of additional volumes in wildcats planned for the final two months of the 2020, although some may not be completed until early 2021 and will therefore add to next year’s tally,” said Palzor Shenga, Rystad senior upstream analyst.

Exploration plans included prospects with higher chances of success in mature areas, as well as high-risk, high-reward wildcats in frontier regions, resulting in some game-changing offshore discoveries, Rystad said.

“The willingness to invest in high-risk probes proves that E&P companies are not shying away from frontier basins - if prospects are promising enough,” it said. Companies have experienced exploratory success in emerging plays in countries including Suriname, Guyana, South Africa and Turkey, as well as in proven mature regions such as Brazil and Norway.

Rystad expects that only 4.5 billion boe of the 8 billion boe discovered so far this year will be produced by 2040, and that annual discovered volumes are likely to settle at around 10 billion boe per year.

A more stringent selection procedure for drill ready prospects means that only the ones with the highest chance of success will see a spinning drill bit, it said. Companies will be less willing to drill high-risk wells in environmentally sensitive frontier areas, for financial and environmental reasons.

“As a result, the full petroleum potential of areas like the Alaskan Arctic, Foz do Amazonas in Brazil and the Barents Sea may never be unlocked,” it said.

While fewer wells will be drilled, Rystad said, improved data access and digitization will help operators pinpoint successful prospects with more accuracy.

- STEVE SUTHERLIN