As the U.S. has become the epicentre of the coronavirus pandemic, grid operators have seen not only reduced weekday electricity demand relative to expectations for this time of year and current weather but also changes in daily electricity usage profiles. The morning peak, for example, is now later and with a more gradual ramp.
Debt financiers of U.S. fracking firms are preparing to directly manage distressed energy assets to avoid debt write-offs in the event of bankruptcies. Bank of America, Citigroup, JP Morgan Chase and Wells Bank are understood to set up holding companies for distressed oil and gas producers as the industry owes over $200 billion to lenders.
OPEC producers and Russia, supported by the U.S. and Mexico, have agreed to cut output by about 10%, or 9.7 million barrels per day, after demand slumped due to coronavirus lockdowns. Though oil prices did not jump in early trading in Asia today, Wood Mackenzie says the supply cuts will lift oil and gas prices “significantly” starting from the second quarter.
Though China’s economy and gas demand is picking up, the coronavirus pandemic chocked energy consumption elsewhere. Delivered gas prices into Northeast Asia today fell below $2.40/MMBtu, hence Wood Mackenzie warns spot LNG prices in Asia might soon drop below breakeven costs of U.S. upstream companies, causing production shut-ins.
As markets reel from the coronavirus crisis, prices available to oil and associated gas producers have fallen to single digits in Western Canada and turned negative in parts of North America, according to the International Energy Agency (IEA). Analysts expect some existing production will soon grind to a halt.
Origin Energy, the Australian upstream company and utility, has slashed its capital expenditure in reaction to the global Covid-19 outbreak but maintained guidance for earnings and profits in FY2020. CEO Frank Calabria reassured investors on the utility’s resilient balance sheet, saying there was “significant headroom” in its debt covenants at current oil prices.