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Oil Market Hopeful As Vaccinations Begin

Gasoline demand hit a 20 year low over the Thanksgiving holiday, down 8.4% from the week before and the decline is showing no sign of shopping

Chart of the Week


 
-        -    The volume of natural gas vented or flared in the U.S. in 2019 was 1.48 billion cubic feet per day (Bcf/d), a record high. That amounted to 1.3% of total gross gas withdrawals.  

-    North Dakota and Texas accounted for 85% of the total gas vented or flared.

-    The environmental impact is causing reputational damage to the industry. Some European buyers are backing away from purchasing U.S. LNG because of the enormous volume of vented and flared gas upstream. 

Market Movers

-    Antero Resources (NYSE: AR) received a double upgrade from JP Morgan from Underweight to Overweight with a $6 price target. The upgrade was “largely driven by our constructive macro call on NGLs,” the bank said.

-    Enbridge (NYSE: ENB) raised its dividend by 3% this week.

-    Chevron (NYSE: CVX) was downgraded to Hold from Buy by Tudor Pickering Holt, as the firm said that there were better risk-reward opportunities elsewhere.

Tuesday, December 8, 2020

Oil prices declined on Tuesday due to a weak short-term demand outlook but steadied during midday trading. The macro backdrop has a bullish tinge as coronavirus vaccinations officially began in the UK on Tuesday.

U.S. gasoline demand falls 8%. U.S. gasoline demand over the Thanksgiving holiday fell to its lowest level in 20 years, and it was down 8.4% from the week before. “We’re heading toward a 90-day period where gasoline demand gets further crimped by winter weather and post-holiday cocooning,” Tom Kloza, executive director, IHS Markit, told Reuters. “By January, we may regularly see demand numbers not witnessed since the last century.”

Saudi Arabia hikes prices. Saudi Arabia hiked its oil pricing for cargoes heading to Asia, the largest price increase in five months. “Aramco views the demand picture in Asia as recovering to pre-pandemic levels, led mainly by China,” said Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai.

Tesla to issues shares to raise $5 billion. Tesla (NASDAQ: TSLA) decided to take advantage of its soaring share price by issuing new equity. The third share sale in 10 months could raise as much as $5 billion. 

UAE’s jockeying at OPEC meeting hints at ambitions. Some tough negotiation and arm-twisting at the OPEC meeting by the UAE was a bit of a departure from the past. The UAE typically follows Saudi Arabia’s lead at OPEC. The UAE also said that it plans on spending $122 billion on increasing production capacity. Bloomberg looks at the UAE’s rising ambition.  
Judge cancels Arctic offshore project. A federal judge canceled the approval of what would have been the country’s first offshore project in the Arctic, citing botched environmental analyses by the Department of Interior. 

Chevron vows higher returns and lower carbon. Chevron (NYSE: CVX) CEO Mike Wirth told Bloomberg that his company would deliver “higher returns, lower carbon.” But Chevron’s CAPEX towards cleaner energy will only be $300 million, or 2% of its total $14 billion budget.  Related: The Oilfield Service Industry Will Never Truly Recover

ExxonMobil under pressure from activist fund. ExxonMobil (NYSE: XOM) is facing a proxy fight from activist investor Engine No. 1 LLC, which is pressuring the company to shift investments towards clean energy. The outcome will depend on whether larger shareholders, such as BlackRock and State Street, join the effort.

Iran prepares to increase oil exports. Iran has instructed its oil ministry to prepare for full oil production and exports within three months as it eyes a potential easing of U.S. sanctions, according to Reuters.

Clean trucks key to electrification. Commercial trucks are emerging as a fast-growing segment of the electric vehicle market. Fifteen U.S. states and Washington DC have announced plans to require new trucks to be electric by 2050. But corporations are moving regardless of state mandates, with new commercial EV trucks rolling off assembly lines.

Lithium Americas gets U.S. permit. After more than a decade of review, Lithium Americas Corp. (NYSE: LAC) received an environmental impact statement from the U.S. government for a lithium mining project in Nevada. The company expects to receive the final greenlight in early 2021.

Iraq budgets for $42 oil. Iraq will draft its budget based on an average oil price of $42 per barrel for next year, oil minister Ihsan Abdul Jabbar Ismail said this weekend at an event in Baghdad, as quoted by Argus Media.

Private equity fleeing from U.S. shale. Private equity is losing interest in U.S. shale, with capital invested declining by 45% between 2017 and 2019. PE fueled the last shale boom following the 2014-2016 downturn. Warburg Pincus recently told investors it is pulling back from oil and gas, part of a broader trend, according to Argus Media. Roughly 90% of the debt involved in bankruptcy this year came from private equity-backed oil and gas companies.  Related: The Death Of U.S. Shale Has Been Greatly Exaggerated

China’s buying spree is slowing. China’s record-high imports from earlier this year continued to slow down last month along with other commodity imports, as demand growth slackens.

Exxon slows a key carbon capture project. ExxonMobil (NYSE: XOM) has tapped the breaks on a significant carbon capture project in Wyoming due to the pandemic, even as it presses ahead with traditional oil and gas projects, according to Bloomberg Green.

Tellurian withdraws application for Permian gas pipeline. Tellurian (NASDAQ: TELL)withdrew its application to build the Permian Global Access natural gas pipeline, which would transport Permian natural gas to southwest Louisiana near Tellurian’s proposed Driftwood LNG project. The company said “current market conditions do not support” the pipeline.

BP to invest in Middle East oil production. BP (NYSE: BP) has said it will invest heavily in Middle Eastern oil and natural-gas fields going into 2021. Despite pledging its transition to renewable energy, the company has highlighted its interest in Middle East oil and gas.

By Tom Kool for Oilprice.com

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