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Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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OPEC+ is moving quickly to try to halt the meltdown in oil prices as the demand hit from the coronavirus continues to grow.

The Joint Technical Committee (JTC) meets Tuesday and Wednesday to assess the damage and to recommend a course of action. Press reports suggest OPEC+ is considering deeper cuts on the order of 500,000 bpd to 1 million barrels per day (mb/d). The rumor was enough to halt the slide in oil prices on Tuesday, after WTI briefly dipped below $50 per barrel during intraday trading on Monday.

BP’s CFO Brian Gilvary said that the coronavirus could shave off 300,000 to 500,000 bpd from demand growth this year. “We will see how it plays out, but that will soften (demand). If OPEC roll their cuts through the end of year, that should sweep up any excess of supply and re-balance the market,” he told Reuters.

Oil prices have declined by 20 percent decline over the past month. The oil market was “already slightly oversupplied in January,” before the outbreak of the coronavirus really began to hit, Commerzbank said in a note on Tuesday. Whether OPEC+ can balance the market will “depend chiefly on Saudi Arabia,” the bank said. “After all, the restrictions to crude oil processing that have been announced in China will total nearer to 1 million than 500,000 barrels per day.”

Meanwhile, Goldman Sachs is out with a note that digs a little deeper into the demand side of the equation. The $11-per-barrel decline in oil prices over the past few weeks is “effectively pricing in a large oil demand shock,” Goldman analysts said. “Illustrating this dynamic, the recent move of front-month Brent timespreads into contango – for the first time since last July – would be consistent with the physical market suddenly shifting into a large surplus.” Related: New Tech Could Unlock An Alaskan Oil Boom

Of course, estimating the specific hit to demand is still guesswork – much depends on the duration and severity of the crisis. Still, Goldman Sachs said that its model, which incorporates shifts in the structure of the oil futures curve as well as inventory levels, results in an estimated loss of 500,000 bpd in demand growth.

But then, the bank also factors in a 50 percent chance of a 500,000-bpd cut from OPEC+, and it also assumes the 1 million-barrel-per-day (mb/d) outage in Libya lasts through early March. That brings the demand destruction total up to 750,000 bpd relative to the bank’s original forecast.

The coronavirus also cuts into GDP growth by 0.44 percent. “Such a global GDP hit would be even larger than the worst case scenario that our economists laid out in their latest assessment of a two quarter hit, suggesting that the oil market is already pricing in a significant demand shock relative to other assets,” the bank concluded. Related: Why Europe’s Gas Glut Is Worsening

However, because so much of this is already baked into the price, Goldman analysts say there is “only modest further downside potential.”

In another study, investment bank Standard Chartered said that much depends on Libya, which is garnering surprisingly little press attention given the severity of that country’s crisis. The civil war rages on, and the LNA has effectively blockaded much of the country’s oil exports.

If the 1-mb/d outage in Libya persists, the surplus in the market for the first half of the year because of the coronavirus would be offset by the deficit in the second half of 2020, “even under our most severe demand scenario,” Standard Chartered said in a note to clients. “However, while the Libyan outage might delay or reduce the reaction, pressure on prices is likely to force an additional OPEC cut despite potential H2 tightness.”

There are so many variables that any pricing forecast goes out the window if one factor plays out differently than expected. But OPEC+ is not taking any chances. The Joint Technical Committee (JTC) meets on Tuesday and Wednesday, and a full ministerial meeting is expected late next week.

By Nick Cunningham of Oilprice.com

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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