Friday December 13, 2019
1. OPEC+ cuts deeper
– OPEC+ agreed to cut output by an additional 500,000 bpd last week. Overall, the group has agreed to hold 2.1 mb/d off of the market for the first quarter.
– OPEC production is now 2.69 mb/d lower than it was a year ago. Iran and Venezuela have lost a combined 1.4 mb/d compared to last year.
– Those disruptions were entirely offset by a 1.5 mb/d increase in supply from the U.S. this year.
– But the task for OPEC+ is not over. The IEA still sees a supply surplus of 0.7 mb/d in the first quarter.
2. Tullow’s 70% stock meltdown
– Tullow Oil (LON: TLW) saw its share price fall off a cliff this week, falling by 70 percent in a single day. It was one of the worst performances from a London-listed company in a decade, as the FT put it.
– The meltdown was the result of a revelation by the company of its dismal performance in Ghana. The company’s flagship operation has a list of technical issues – in particular, more water than expected has entered its oil field.
– Tullow slashed its production guidance to just 70,000 bpd in 2020, down from 100,000 previously.
– Cash flow is expected to fall to just $150 million as a result, down from a previous forecast of $500 million.
3. Shale base declines increase
– The IEA sees U.S. shale growing by 1.1 mb/d in 2020, down from 1.6 mb/d in 2019, but still a substantial growth rate.