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OPEC Predicts A Rebound In U.S. Shale

Oil prices fell back on Friday morning as demand fears grow, but OPEC has predicted an increase in U.S. shale production at current price levels.

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Friday, January 15th, 2021

Oil prices fell back on Friday over demand concerns. News that China has reported its highest Covid-19 case count in months weighed on market sentiment. 

OPEC sees shale rebounding. OPEC admitted that an improved outlook for crude oil prices could result in higher U.S. shale production. OPEC upgraded its forecast for U.S. oil production, expecting an increase of 370,000 bpd, up from a previous forecast of 71,000 bpd.

LNG spike causing havoc worldwide. Bitter cold and skyrocketing prices for LNG are now being felt in more places than just Asia. The ripple effects are affecting gas markets everywhere, straining supplies and forcing consumers to cut back. Another potential side effect could be the undermining of the spot market, potentially leading to more emphasis on oil-linked contracts, which would provide more stability. 

Total quits API. Total (NYSE: TOT) announced its decision to withdraw from the American Petroleum Institute, the industry’s most powerful lobby. The French oil giant cited API’s opposition to methane regulations, EV subsidies, and carbon pricing. Total also disagreed with API’s political contributions to U.S. politicians that oppose the Paris Climate Agreement. 

Gas projects in Mozambique at risk. A chronic insurgency puts Total’s (NYSE: TOT)$23 billion gas production and LNG export project at risk. The same is true of ExxonMobil’s (NYSE: XOM) planned $33 billion facility. Total has halted work at its site due to nearby attacks.

JPMorgan touts commodities, pro-risk posture. JPMorgan told investors to boost commodity positions, go underweight on bonds and take a pro-risk exposure to equities. “We increase our overweight in commodities, in particular energy, both as an inflation hedge and to position for a continued cyclical recovery,” analysts wrote.

Exxon target of new SEC probe. ExxonMobil (NYSE: XOM) is under investigation by the Securities and Exchange Commission (SEC) after an employee filed a whistleblower complaint last fall, alleging that the company has overvalued its Permian assets.

Shale boosts hedging. U.S. shale drillers increased hedging with WTI surging above $50 per barrel.

Is the rally in renewables sustainable? Solar and wind power companies have soared in value. The New York Times explores the potential bubble in clean tech stocks.

Biden’s $1.9 trillion stimulus could preview energy package. President-elect Biden proposed a $1.9 trillion covid rescue package, which included vaccination efforts, $1,400 checks to Americans, and other stimulus measures. He has indicated that a sequel package in the spring, which could be even larger, would target major investments in clean energy. 

Halliburton turns to grid instead of diesel. Halliburton (NYSE: HAL) is swapping out diesel engines for the electric grid for its Permian basin operations.  Related: Saudi Arabia Starts New Bull Run In Middle East Oil

Shell declares force majeure on Forcados. Royal Dutch Shell (RDS.A, RDS.B) says loadings of Nigeria's key export grade Forcados are on force majeure due to the shutdown of the Trans Forcados pipeline.

Summit Midstream Partners soars on greenlight. Summit Midstream Partners, LP (NYSE: SMLP) saw its share price shoot up after its Double E Pipeline received agreenlight from FERC.

ExxonMobil upgraded by JPMorgan. JPMorgan upgraded ExxonMobil (NYSE: XOM) to Overweight for the first time in seven years. 

Siemens to produce hydrogen from wind. Siemens Gamesa (BME: SGRE) and Siemens Energy (ETR: ENR) are developing a commercial offshore wind turbine that produces hydrogen via electrolysis, the companies said.

EIA: Oil production to rise to 11.49 mb/d in 2022. The EIA unveiled its first forecast for 2022, projecting that U.S. oil production rises to 11.49 mb/d, a 3% increase over this year’s levels. 

Proterra to go public. Electric bus producer Proterra will launch an IPO, with preliminary estimates valuing the company at $1.8 billion.

Saudi cuts exports to Asia. Saudi Arabia has reduced sales of oil to at least 11 refiners in Asia, evidence that it is following through to some degree on its pledge to cut production by 1 mb/d.

Gasoline profit margins increase. The profit margin for refining gasoline has widened to its largest extent since July, as markets anticipate demand recovery by mid-year.

U.S. warns European companies on Nord Stream 2. The Trump administration warned European companies that they risk U.S. sanctions over their involvement in the Nord Stream 2 pipeline. 

Equinor wins offshore wind contract in New York. Equinor (NYSE: EQNR) was selected for a major offshore wind project off the coast of Long Island. The combined 3.3 GW Empire Wind and Beacon Wind projects will be the largest offshore wind installation in the U.S. to date.

Chesapeake Energy to emerge from bankruptcy. Chesapeake Energy will emerge from bankruptcy valued at over $5 billion.  Related: Biden's Boom: The $30 Trillion ESG Sector Is Set To Explode In 2021

Occidental to use direct air capture for oil production. Occidental Petroleum (NYSE: OXY) plans to build a direct air capture (DAC) facility, which will remove carbon dioxide from the atmosphere, and then use the CO2 to produce more oil. The project could be the world’s first large-scale DAC facility and it could cost hundreds of millions of dollars. 

Forest Service gives go-ahead to Marcellus pipeline. The U.S. Forest Service approved the construction of the Mountain Valley Pipeline through a sensitive part of the Jefferson National Forest, a big win for a project that would carry Marcellus shale gas to the U.S. southeast.

Ireland drops another LNG terminal over methane concerns. The Port of Cork in Ireland allowed an agreement with NextDecade Corp. (NASDAQ: NEXT) for an LNG import terminal to expire. It’s the latest setback for the LNG company in Europe over concerns about methane emissions. NextDecade is planning an LNG export terminal in Texas.

By Tom Kool for Oilprice.com 

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