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Oil Bulls Drive Prices Higher On Vaccine Success

Oil Bulls

Bullish sentiment has once again taken over oil markets as news of a third highly-effective coronavirus vaccine drives hopes of a global demand recovery in 2021

Chart of the Week

-    In August 2020, U.S. offshore production fell by the most on a monthly basis since September 2008, due to several hurricanes.

-    Offshore output fell by 453,000 bpd, or a decline of 27%.

-    Production fell to 1.2 mb/d for the month, a seven-year low.

-    EIA expects output to recover to nearly 1.92 mb/d by December 2020.

Market Movers

-    Noble Corp. (NYSE: NE) is expected to exit Chapter 11 bankruptcy protection. The offshore driller declared bankruptcy in July.

-    BP (NYSE: BP) agreed to sell its London headquarters for $332 million.

-    The S&P energy sector (XLE) surged by nearly 5% on Tuesday as oil prices rallied. Apache (NYSE: APA) was up 8.8% and Occidental Petroleum (NYSE: OXY) was up 7.9%, but the entire sector posted gains.

Tuesday, November 24, 2020

Oil prices rose to their highest levels since March, with WTI nearing $45 and Brent topping $47. Oil prices surged on the potential for a third highly-effective coronavirus vaccine. Also, the seeming end of the election drama also boosted sentiment, as investors hoped for more stimulus under the Biden administration. “By some time in the middle of next year, the economic environment should really move quite rapidly toward normalization, which ultimately means that demand for petroleum products should start to recover,” Bart Melek, head of global commodity strategy at TD Securities, told Bloomberg.

Bakken struggling at $40. Prices need to get “above $45/bbl for completion of drilled-but-uncompleted (DUC) wells, and we need to see $55/bbl oil, in general, to drill new wells and complete them,” Lynn Helms, director of North Dakota’s Department of Mineral Resources said, according to NGI. Related: Oil Prices Leap Higher On Fresh Vaccine Hopes

UAE eyes 5 mb/d. The UAE said that recent discoveries from state-owned ADNOC could help boost oil production to 5 mb/d by 2030. 

India to double refining capacity. India’s Prime Minister Narendra Modi said that India would double refining capacity within 5 years. 

China seeks to become world’s largest refiner. “China is going to put another million barrels a day or more on the table in the next few years,” Steve Sawyer, director of refining at energy industry consultancy Facts Global Energy, told Bloomberg in an interview. “China will overtake the U.S. probably in the next year or two.”

Biofuels industry calls for clean fuels standard. America’s largest biofuels companies are asking President-elect Biden to implement a nationwide clean fuels standard, as the existing renewable fuels standard nears expiration. 

Venezuela arrests oil workers. Venezuela’s regime has recently arrested oil workers or retired oil workers who have dared to expose the corruption and mismanagement at its state oil firm PDVSA and its dire financial, operational, and working conditions.

IMO to ban fuel oil in Arctic. The International Maritime Organization (IMO) approved on Friday a ban on the use of heavy fuel oil for ships in the Arctic, but environmental organizations slammed the new regulation as “riddled with loopholes.”

EU pushes back on U.S. LNG. A recent U.S. LNG deal with Europe was scuttled over concerns about methane emissions. It may not have been a one-off. Politico reports that U.S. LNG is running into trouble across the European Union. “There's a real sensitivity in the EU about fracked gas,” one industry executive told Politico. The incoming administration “would be well advised to prioritize that. If [customers] can't use U.S. gas, then they're using Russian gas and Mideast gas.” The Biden administration’s attempts to regulate methane may be unwanted by U.S. drillers, but it may help gas exporters access European markets. 

Oil companies commit to methane cuts. BP (NYSE: BP), Royal Dutch Shell (NYSE: RDS.A), Eni (NYSE: E), Equinor (NYSE: EQNR), and Total (NYSE: TOT) have signed the Oil and Gas Methane Partnership (OGMP), a voluntary commitment under the United Nations, the European Union and the Environmental Defense Fund aimed at slashing methane emissions from oil and gas wells. They aim to cut methane emissions by 45% by 2025. The group consists of 62 members, although American oil major Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) are not participating. 

Colorado regulators approve 2,000-foot setbacks. Colorado regulators approved new rules for oil and gas drilling, including expanding setback distances from 500 feet to 2,000 feet for wells near homes and public spaces. The rule takes effect on January 15.


GM does 180 on fuel economy standards. GM (NYSE: GM) switched sides in the fight between California and the Trump administration over fuel economy standards. The automaker backed the Trump administration’s effort to water-down standards, but on Monday switched over to California’s side, better aligning it with the incoming Biden administration. Toyota suggested it may switch as well. 

CFTC released report on April flash crash. The Commodities Futures Trading Commission (CFTC) released a report on the April crash in WTI prices into negative territory. One of the commissioners criticized the report as inadequately addressing the root causes.

Williams restructures contracts with Chesapeake. Williams Companies (NYSE: WMB) said it would take ownership of some of Chesapeake Energy’s (OTCMKTS: CHK) assets in exchange for lower gas gathering fees. 

Total to shut refinery. Total (NYSE: TOT) will shut its Donges refinery due to the market downturn.

Oil lobby says it will fight fracking restrictions. The American Petroleum Institute will use “every tool at its disposal” to combat potential restrictions on federal lands for drilling under the Biden administration.  Related: Growing Crude Inventories Put A Cap On Oil Prices

Survey finds institutional investors switching to renewables. Global institutional investors managing nearly $7 trillion said that they plan on doubling their investments in renewables over the next five years. The share of renewables in their portfolios may rise from 4.2% to 8.3% by 2025.

Canada’s oil and gas sector sees record job losses. A total of 37% of oil and gas companies in Canada resorted to permanent layoffs due to the pandemic-driven oil price and oil demand slump, a recent survey of energy labor market organization PetroLMI showed.

By Josh Owens for Oilprice.com 

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