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Energy Mixed Messages Flood On:

The mixed messages on many levels including energy flood by on a daily basis. Western Pennsylvania continues to endure increasing public lockdown, social distancing transitioning to shelter in place, and COVID-19 now in every county. This invisible microbe has devastated the local and national economy, disrupted everyday activity, and has literally taken our breath away. As we in concert seek respirator help, global forces continually act to dynamically impact home issues, energy no exception. Mr. Doyle’s letter of last week has become a bit of old news as the “powers that be” orchestrate a new oil pricing and production agreement. Back on Main Street we can speculate from six feet apart that there is an underlying impact to this all. The snowfall of Thursday supports the forecast of colder weather for the next six to ten days, along with a rumor China will soon be accepting US Liquid Natural Gas (LNG) shipments help bolster natural gas prices However gas storage exceeds last year amount and is above the five year average, so no bump up in price at the well head or in the royalty check if there is one. Reuters reports US rig count continues to fall, Analysts at Raymond James, an investment bank, projected total U.S. oil and natural gas rigs would fall from about 800 at close of 2019 to a record low of 400 by the mid-2020 and under 400 by year end. All this likely means no major new Marcellus/Utica drilling activity in the area for the foreseeable future. For those interested in new Natural Gas exploration related developments, According to Hart Energy, U.S. Well Services Inc. executed a contract on April 8 to provide electric hydraulic fracturing services for EQT Corp. using its Clean Fleet technology. Per the agreement, U.S. Well Services will provide a dedicated electric hydraulic fracturing fleet to support EQT’s completions for up to three years. “EQT is the largest producer of natural gas in the United States and is a best-in-class E&P operator. The decision to contract an electric fracturing fleet from USWS is a testament to EQT’s focus on decreasing completion costs and improving efficiencies while minimizing its environmental impact.” Joel Broussard, U.S. Well Services’ president and CEO, said. Toby Z. Rice, EQT president and CEO, added. “This partnership will allow EQT operational efficiencies to deliver on our well cost targets, while decreasing our carbon footprint and opening the door for future innovation. Back to oil each day added new scenes to the oil play drama. According to Reuters The U.S. Energy Department said on April 7th, U.S. oil companies were expected to reduce oil output temporarily by nearly 2 million barrels per day as lower crude prices force companies to cut back operations. “The private sector and the free market are driving those cuts,” the department said regarding projections in a U.S. Energy Information Administration, or EIA, report. The United States, the world’s top oil and natural gas producer, pumped a record of more than 12 MMbbl/d in 2019, according to the EIA. Oil demand has plummeted roughly 30%, or about 30 MMbbl/d, as the coronavirus pandemic slams economies, and Saudi Arabia and Russia flooded markets with extra supply. Saudi Arabia, Russia and allied oil producers discussed stabilizing global oil markets on April 9, but see deep cuts to their output only if the United States joins with curbs to help prop up prices, hammered by the coronavirus crisis. Note, U.S. President Donald Trump said on April 6 that OPEC had not pressed him to ask U.S. oil producers to reduce their output. Trump said he thought U.S. cuts were “happening automatically” by private companies.  On Thursday, during the OPEC+ meeting, Mexico – part of the non-OPEC group of producers in the pact since 2017 – disagreed with proposals that it should reduce its production by 400,000 bpd from its October 2018 baseline.  Mexico walked out of the OPEC+ talks yesterday. On Friday morning Mexico’s President Andres Manuel Lopez Obrador said. The United States is ready to help Mexico reach its production cut quota as part of the tentative OPEC+ deal. Lopez Obrador spoke with President Trump yesterday and the US agreed to cut 250,000 bpd for Mexico to help it reach the 400,000-bpd cut OPEC+ is asking. The U.S. has argued that its oil production decline is happening naturally as a result of the free market (and very low oil prices), but the major players in the OPEC+ group, especially Russia, want only voluntary production cuts as this contribution to the deal.   As we go to press U.S. Energy Secretary Dan Brouillette is participating in a virtual G20 ministerial meeting on restoring calm to global energy markets with his counterparts around the world, said Shaylyn Hynes, a department spokeswoman. So where is the free market: crudely put is an economic system based on supply and demand with little or no government control? Seemingly Saudi Arabia and Russia play the market up and down. Does the US then dance in between, not determining market, but balancing so everyone plays nice in the neighborhood. The hope is we the people continue to think it is all free, this interplay. and never see or understand the heavy underlying cost.

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