WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. (REUTERS)
Updated 14 July 2019

WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

  • It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020

OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
After holding stable below $65 and $60 for nearly two months respectively, Brent crude’s price jumped to $66.72 and WTI’s to $60.21 per barrel. Oil prices are higher over sharpening US crude inventories and concerns over US Gulf of Mexico production ahead of Tropical Storm Barry, as well as tensions in the Arabian Gulf after Iran’s alleged attempt to block a British-owned tanker in the Strait of Hormuz.
The Atlantic hurricane season threatened offshore oil production and began soaking Louisiana with heavy rains, leading to 15 production platforms and four rigs being evacuated in the Gulf of Mexico. So far, oil companies operating in the area have halted about 1 million barrels per day (bpd) of offshore oil output, or 53 percent of the region’s total production.
The Gulf of Mexico and the Texas coast produce about 5 percent of US natural gas and 17 percent of crude oil. Onshore facilities account for about 45 percent of US refining capacity and 51 percent of its gas processing. The Louisiana Offshore Oil Port will be closely monitoring Atlantic storm activity.
The weather has added to the headaches caused by the increasing demand for refined products while US inventories continued to recede more than expected for the fourth consecutive week. As US oil producers in the gulf cut more than half their output, commercial crude stocks fell 9.5 million barrels to 459 million barrels, a 12-week low.
Meanwhile, the Organization of the Petroleum Exporting Countries’ (OPEC) monthly oil market report MOMR concluded that OPEC+ output cuts will not change the fundamental outlook of an already oversupplied market. OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
The International Energy Agency’s (IEA) also suggested an oversupply forecast for 2020, with a 2.1 million bpd expansion from non-OPEC supply led by US shale producers. The IEA still sees weak oil demand growth and surging US shale oil output, estimating 2019 oil demand growth at 1.2 million bpd and 1.4 million bpd for 2020.
The EIA, in its short-term energy outlook, sees crude oil demand growing more slowly than previously expected. It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020.

Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


Google Cloud prepares for Black Friday ‘peak on top of peak’

Updated 04 August 2020

Google Cloud prepares for Black Friday ‘peak on top of peak’

  • Cloud technology, used to host websites and store data, is a key part of many retailers’ e-commerce operations

OAKLAND, California: Alphabet’s Google Cloud unit is poised for a surge in fourth-quarter sales from US retailers, as they brace for record online shopping during the holidays because of COVID-19 lockdowns.
Cloud technology, used to host websites and store data, is a key part of many retailers’ e-commerce operations. As fees are often pegged to site traffic, a jump in activity will drive up revenue for the unit.
Carrie Tharp, vice president of retail and consumer at Google Cloud, said that her team had this year tossed out its linear growth model to predict how many servers it will need to process web orders for retailers around Black Friday.
“We’re planning for peak on top of peak,” she said on Monday. That could be a boon for Google Cloud, which has generated about 30 percent of its revenue during the fourth quarter the last two years.
Stores such as Kohls Corp. and Wayfair Inc. lean on Google months in advance to ensure it has enough servers to withstand increased shopping during holiday discount days such as Black Friday and Cyber Monday in November and December.
This year, Black Friday-style demand has flooded shops since March, when the United States began lockdowns, Tharp said.
Holiday shopping is expected to boost demand further, as retailers including Target Corp. and Walmart Inc. have said they will reduce in-store hours because of coronavirus concerns.
Tharp said the pandemic has already benefitted Google Cloud, with some retailers adopting its predictive algorithms years ahead of plan to help them work out the most efficient way of fulfilling orders.
Electronics retailer Best Buy Co., for instance, announced on Tuesday a multi-year deal to centralize customer and product data with Google Cloud to improve its loyalty program and online ad campaigns.
The companies declined to elaborate on the deal, but Tharp said she hopes it leads to Google eventually powering Best Buy’s web ordering system.