Analysts are divided over whether oil prices can continue to climb, with WTI nearing $60 and profit-taking having begun.
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Friday, February 12th, 2021
Brent held above $61 per barrel in early trading on Friday, despite some headwinds from a slight strengthening of the dollar. Analysts are now split on whether or not the rally has gone too far or has more room to run.
OPEC cuts oil demand forecast. OPEC expects oil demand to rise by 5.8 million barrels per day (bpd) this year, down by around 100,000 bpd from last month’s projection due to lockdowns in major developed economies in the first half of this year, the cartel said on Thursday.
EIA: U.S. shale to grow. The EIA said that with WTI over $50, U.S. shale will return to growth later this year. The agency increased its 2022 supply forecast to 11.53 mb/d, up from 11.49 mb/d last month.
S&P cuts credit rating for ExxonMobil. S&P cut ExxonMobil’s (NYSE: XOM) credit rating by one notch to AA- with a negative outlook. The ratings agency cited heavy levels of debt and energy transition risk.
Exxon to close its Australian refinery. ExxonMobil (NYSE: XOM) said it would close its 72-year-old Altona refinery in Australia, the nation’s smallest. Once closed, Australia will only have two remaining refineries.
Goldman: Upside risk to $65 oil. A broad commodity supercycle is getting underway, creating upside risk to $65 oil, according to Goldman Sachs. “I want to be long oil and hang on for the ride,” Goldman’s Jeff Currie said in an interview with S&P Global Platts on Feb. 5, warning “there is a lot of upside here.” He added: “Is it back to $150/b? I don't know... as it is a macro repricing we are talking about and everything needs to reprice.”
Equinor sells of Bakken assets. Equinor (NYSE: EQNR) announced the sale of its Bakken assets for $900 million, after purchasing them for $4.4 billion nearly a decade ago. “We should not have made these investments,” Equinor Chief Executive Officer Anders Opedal said. “The Bakken does not compete.” Related: Oil Prices Continue To Rise As Bullish News Mounts
Appalachian fracking boom didn’t lead to prosperity. A new report from the Ohio River Valley Institute finds that despite a natural gas boom over the past decade, the counties in Appalachia that saw the most drilling actually saw worse job growth than elsewhere. The conclusions undercut the notion that the shale gas industry is a job engine.
Oil majors trim shale dreams. ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and BP (NYSE: BP) have collectively shelved as much as 2.4 mb/d in future oil production plans from U.S. shale, according to an analysis from Energy Intelligence. The strategy overhaul means the majors will focus on cash generation rather than production growth. Excess cash flow will go to paying down debt or otherwise be returned to shareholders.
Shell says its production already peaked. Royal Dutch Shell (NYSE: RDS.A) said it would start reducing oil production at a rate of 1 to 2% per year, which would include asset sales. The company said from now on it would allocate 25% of its capex to renewables and marketing, or $5 to $6 billion. Marketing includes retail gasoline stations and lubricants.
Morgan Stanley: Gasoline could become worthless. Morgan Stanley says the market may be ascribing zero or even negative value for ICE-derived revenues at GM and Ford and has listed a variety of factors that are likely to transform the companies' once-profitable assets into potentially cash-burning and loss-making businesses.
Texas RRC delays flaring decision. The Texas Railroad Commission again delayed a decision on flaring permits, evidence that the regulator is starting to scrutinize flaring plans to a greater degree.
Marathon cuts 5% of workforce. Marathon Oil (NYSE: MRO) cut its workforce by 5%, and also cut executive pay.
China’s grid firms to buy 40% renewables by 2030. China will require its grid companies to purchase 40% renewable energy by 2030.
Rivian aims for IPO this year. EV-startup Rivian is planning to go public this year at a valuation of around $50 billion, which would make it one of the largest IPO’s of the year. Meanwhile, Xos Trucks Inc., another EV builder, is planning to go public with a SPAC with a $2 billion valuation.
Macquarie opens $2 billion renewables fund. Macquarie, the world’s largest infrastructure investor, announced that it would open a $2 billion global renewables fund, its second such fund, after strong interest from institutional investors. It will target wind and solar projects in Western Europe, the United States, Canada, Mexico, Japan, Taiwan, Australia, and New Zealand.
Libya’s oil port reopens. Libya’s Hariga oil port reopened after a month-long strike, which had cut output by more than half from 320,000 to 120,000 bpd.
LG Chem battery dispute could disrupt EV manufacturing. LG Chem filed a trade dispute against SK Innovation for stealing trade secrets. If LG Chem wins, the U.S. may see disrupted imports of battery cells needed for EV manufacturing.
Biden admin launches $100 million clean energy funding. The U.S. Department of Energy’s Advanced Research Projects Agency-Energy, or ARPA-E, announced $100 million in funding for low-carbon technologies. ARPA-E funds high-risk high-reward early-stage technologies.
By Tom Kool for Oilprice.com
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This means according to my research that Brent crude could be projected to hit $70-$80 a barrel by the third quarter of 2021 and average $60-$65 this year. Furthermore, global oil demand will return to pre-pandemic level of 101 million barrels a day (mbd) by the middle of the year.
There you have it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
The US economy is not impacted much by huge energy spikes as was true say back in 2008 given how much the entire World is dependent upon US energy production to include obviously all of "the rest of North America"(Canada, Mexico, the Caribbean and Panama) but of course all of Asia and the entire Eurasian Land mass at the moment.
Once some type of spring thaw hits though I would expect US energy pricing to dramatically stabilize at these very high prices given how slight the US recovery in US Airline travel has been.
Obviously the sudden appearance of an all electric Ford F150 will truly be a "game changer" in the US logistics market given all the current ahem "features" ahem already built into such a product.
Great time to be investing in Ford Motor Company as such imo and indeed excludes the already extant Ford hybrid F150 and Toyota Rav 4 Prime.
In short gasoline and ethanol demand still no where near equal the demand for the current crop of "moving the metal" steel on wheels.
US Steel appears very compelling as dirt cheap equity as a consequence as well and therefore.
Just my opinion on that as well should be noted.