Factbox: Crude prices tumble as OPEC+ fails to cut output; coronavirus spreads

Crude prices tumbled Friday, with NYMEX futures approaching lows last seen in August 2016, after OPEC and its coalition partners failed to come to a production cut agreement.

OPEC agreed to slash its production quotas by 1 million b/d, contingent on Russia and nine other non-OPEC allies agreeing to shrink theirs by 500,000 b/d, for the rest of the year, amid weaker global demand caused by the COVID-19 outbreak.

However, with Russia refusing to go along with the deal, the 23-country OPEC+ coalition's current 1.7 million b/d production quotas will expire at the end of the month, potentially unleashing a price-tanking market share battle

While China appears to be on the verge of containing the coronavirus outbreak, cases outside of the country continue to grow. According to Johns Hopkins University, there were 101,598 confirmed cases of the virus Friday, with 80,573 of those in China. However, total global recoveries continued to climb as well, to 55,863 Friday.

NYMEX front-month crude settled at $41.28/b Friday, down $4.62 (10.1%) on the day, and down roughly 30% since January 20, when the coronavirus began to impact commodities markets. With NYMEX crude prices falling to the $41/b level, US shale producers may end up cutting activity more than expected.

"If OPEC doesn't get any agreements for production cuts [before March 31], we're looking at a trading range of $35/b-$45/b," James Williams, president of WTRG Economics, said.

"Certainly by midyear US oil production then starts to decline again, just like we saw after the 2016 price collapse," he said.

Under a worst-case price scenario of $35/b, US crude production would drop up to 2.4 million b/d in 2020 on the year, resulting in the first yearly oil output decrease since 2016, according to S&P Global Platts Analytics.

PRICES

Oil

**West Texas Intermediate crude was assessed by S&P Global Platts at $41.28/b Friday, down roughly 30% from January 20, when commodities markets first began reacting to the virus.

**The Singapore jet crack spread against Brent ended Friday at $6.10/b, down from $11.34/b January 20.

**The Rotterdam jet fuel crack against Brent ended Friday at $7.59/b, down from $14.17/b January 20.

**The New York Harbor jet crack against Brent ended Friday at $8.96/b, down from $14.19/b January 20.

LNG

**Platts JKM, the LNG price benchmark for the Northeast Asia region, ended Friday at $3.388/MMBtu, rising from $3.713/MMBtu February 14, but down from $4.184/MMBtu January 20.

**FOB Gulf Coast LNG prices have also recovered somewhat, ending Friday at $2.438/MMBtu. Still, that was down from $2.677/MMBtu January 20.

Metals

**Front-month rebar futures on the Shanghai Futures Exchange closed at Yuan 3,466/mt Friday, having risen from a recent low of Yuan 3,374/mt February 19, but down 6% from January 20.

**Platts assessed the 62% Fe Iron Ore Index at $89.50/dry mt CFR North China Friday, up from its February 3 nadir of $79.80/dry mt, but still down 7% from January 20.

TRADE FLOW

Oil

**With no OPEC production cut deal agreed, the 23-country OPEC+ coalition's current 1.7 million b/d production quotas will expire at the end of March, potentially unleashing a price-tanking market share battle.

**Not all OPEC+ members were ready to give up, with many still holding the door open for Russia, and some suggesting the Joint Ministerial Monitoring Committee could meet later this month.

**OPEC pumped 27.99 million b/d of crude in February, with Saudi Arabia contributing 9.69 million b/d, according to the latest S&P Global Platts survey of OPEC output. Russia, the primary non-OPEC country in the OPEC+ alliance, produced 11.29 million b/d of crude and condensate.

**OPEC further slashed its 2020 oil demand growth forecast to 480,000 b/d, down from 1.1 million b/d seen in December 2019.

**S&P Global Platts Analytics has cut its 2020 oil demand growth projection by 1.1 million b/d since January to 240,000 b/d. But Claudio Galimberti, head of refining and demand analytics, gives that a "'negative outlook,' which means it's likely we will revise it further down."

**Goldman Sachs expects oil demand to contract by 150,000 b/d in 2020, reversing an original call for 1.1 million b/d of growth before the virus.

**Key international airlines have suspended or reduced flights due to the virus, reducing jet fuel demand.

**UK low-cost carrier Flybe went into administration Thursday, with the company saying the coronavirus was partially to blame.

**Global airlines could rack up losses of up to $113 billion this year if the coronavirus outbreak worsens, which would be on the scale of the financial costs for the aviation industry during the financial crisis of 2008, the International Air Transport Association said.

**According to the IATA, Asia-Pacific global passenger traffic in January climbed 2.5% from January 2019, "which was the slowest outcome since early 2013 and a decline from the 3.9% increase in December."

**State-run Chinese refining giants were quick to react to jet fuel's underperformance in the Asian market, with both Sinopec and PetroChina stating that they will lower production to minimal levels.

**China's bunker fuel suppliers estimate a drop of some 30% month on month in bunker fuel sales in February, as the coronavirus outbreak hit demand hard.

**China is one of the biggest bunker fuel consumers in the world and operator of one of the largest shipping fleets.

**US crude exports climbed nearly 500,000 b/d to 4.15 million b/d the week ending February 28, US Energy Information Administration data showed Wednesday. However, US crude exports are expected to slow as the virus has hit Asian demand.

**The Port of Corpus Christi expects its February crude exports to slip from January's record-high 1.38 million b/d due to ripple effects from coronavirus.

LNG

**US LNG suppliers are reaching out to potential alternate buyers in Asia and Europe to sell cargoes diverted from China following the outbreak.

**China's state-owned CNOOC has declared force majeure on LNG contracts.

**Several US developers have delayed final investment decisions on LNG projects, with one warning it was running out of cash to continue normal operations.

**Tellurian will cut spending and try to extend a loan due in May to give it some breathing room, as it appears unlikely the developer will meet a previous target to build sufficient commercial support by the end of this month to advance its Driftwood LNG project in Louisiana.

**In the past two weeks alone, Cheniere Energy has disclosed a second cancellation of a cargo scheduled to load in April and postponed a final investment decision on a proposed midscale liquefaction expansion in Texas.

**Australia's LNG Limited floated a buyout offer to investors that it said is the best option to save its proposed Magnolia LNG project in Louisiana.

**Investors sharply sold off shares of Rio Grande LNG developer NextDecade, which is expected to file its annual report in the next few days, in favor of more established players.

Metals

**China's copper smelters could start cutting production due to rising sulfuric acid stocks, tight cash flow and slow demand recovery from the coronavirus or COVID-19 outbreak, China Nonferrous Metals News said in a report.

**Smelters are struggling to stockpile sulfuric acid - which is a byproduct of smelting - as their warehouses are full. Hubei province, the region hardest-hit by the coronavirus, is the major sulfuric acid producer and consumer in China.

**Following media reports that China's six provinces and Chongqing municipality have approved key projects over January-February worth Yuan 24.4 trillion ($3,503 billion), the most actively traded May rebar futures contract on the Shanghai Futures rallied this week.

**However, Chinese steel market participants were skeptical as the projects had already been planned before the coronavirus outbreak, and compared with projects approved in the same Chinese regions in 2019, total investment value approved this year was in fact down 3% year on year.

**Chinese steel production has slowed since early February due to weak demand and logistics constraints in receiving raw materials and delivering finished products.