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From the Energy Sector - Mixed Messages

By Drew Orient

From the Energy Sector Mixed Messages

By Drew Orient

With the constant information barrage that penetrates our sensory world many contend that we often suffer from media fatigue and overload. The most strident voices seem to drown out many important messages that are dynamically impacting our world. From the energy sector the debate continues regarding the future direction of policy, investment, resource management, and economic stability. As noted in previous articles this debate though essential has often been reduced to over simplification, exaggerated sound bites, and self-satisfying rhetoric. Behind the constant media whirlwind multiple messages on energy development have been advanced by a broad spectrum of sources. There have been major news releases, by corporate and government leaders, international events that impact the US energy world, would be presidential candidate’s pontifications, and pundit’s predictions. The messages are “mixed” some controversial, some disputed to be factual, others polarizing as well as those advance from totally opposite positions with such fervor so as to guarantee truth.

Today one needs to begin with the dominant news that overshadows all in the current news cycle no matter the subject energy or otherwise, the impact of the Coronavirus on the energy world. Its big news, China’s economic engine slowdown due to its efforts to contain the virus has disrupted worldwide energy markets. Paraphrasing Nick Cunningham at Oil “The market meltdown continues oil futures have plunged to below $47 per barrel”. So what we might say in the Allegheny River Valley means cheaper gasoline prices at the pump. But it also means that Texas, Oklahoma, and North Dakota oil producers from shale formations could face bankruptcy if the decline continues. It is reported oil prices need to be at $55 dollars a barrel for sustained profitability. According to Mr. Cunningham these events puts pressure on OPEC and Saudi Arabia to act at their upcoming March meeting in Vienna  to curtail production of oil to stabilize price. In all this the Saudi’s need to convince Russia to also cut back production. “With Brent crude price back down into the low-$50s, it seems hard to imagine OPEC+ leaves Vienna without an agreement to cut production deeper.  Although, given the fact that the coronavirus is spreading across Europe, it’s not even clear that OPEC plus Coalition will be able to meet in person in Vienna.”

Closer to home the spread of the virus has disrupted present and future shipments of Liquid Natural Gas to China. Marcellus and Utica gas producers in our region were counting on the demand to keep well head gas prices above two dollars ($2.00). Coupled with the mild winter April future price for the western Pennsylvania region is $1.36. On Thursday, Pittsburgh-based EQT, the largest natural gas producer in the country, reported a larger fourth quarter loss than anticipated.  OTHER MIXED MESSAGES THAT SHOULD NOT BE OVERLOOKED NEXT WEEK.

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