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Oil Optimism Returns On Fresh Vaccine News

Oil prices reacted positively to the news of a Pfizer vaccine that is reportedly 90% effective for the coronavirus.

Chart of the Week

-        Energy-related CO2 emissions in the U.S. declined by 3% in 2019, after rising by 3% the year before. The decline was largely due to the evolving mix of electricity generation 

-    Emissions from coal plunged by 15% as more coal plants were taken offline. Emissions from natural gas increased by 7%.

-    U.S. electricity emissions are now down by 33% from their peak in 2007.

-    Renewables and nuclear power combined account for 38% of the electricity mix. The carbon intensity of electricity has fallen sharply to 408 metric tons per kilowatt-hour in 2019, down from 619 mt/kWh in 2005.

Market Movers

-    First Solar (NASDAQ: FSLR) suffered a double downgrade by Raymond James from Outperform to Underperform on the prospect that the Biden administration repeals solar tariffs. First Solar benefits from them as it sells thin-film panels that are not subjected to the tariffs. First Solar’s stock was down nearly 4% in early trading on Tuesday.

-    Continental Resources (NYSE: CLR) is set to offer a series of senior notes due in 2031, with proceeds used to pay other expiring notes. Continental’s stock was up 4% in premarket trading.

-    Occidental Petroleum (NYSE: OXY) reported its fourth straight quarterly loss, with a net loss of $3.8 billion. The company said it would add four rigs back to the Permian and keep CAPEX at $2.4-$2.6 billion. 

Tuesday, November 10, 2020

Oil prices skyrocketed on Monday after Pfizer announced that its vaccine would be more than 90% effective for the coronavirus. The announcement rippled across financial markets, with the share prices for Zoom crashing, but the stocks for cruise lines, airlines, and automakers, among other sectors, all shooting up. With markets contemplating the possible end of the pandemic sometime next year, optimism returned in a big way. Needless to say, crude oil had its best day in months, soaring more than 10%. The uplift also led to huge gains for the share prices of many oil companies.  Related: Oil Prices Jump On Large Crude Inventory Draw

Covid cases surging. Vaccine optimism will be tempered by the negative short-term outlook, with Covid-19 cases out of control in the U.S. and in Western Europe. “The market has now priced in an effective vaccine in the near future,” Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. “There’s still the problem of the second wave and that’s going to affect demand in the near-term.”

Citibank cuts 2021 forecast to $49 WTI. Citi revised down on Monday its outlook for the WTI Crude price for next year by $5 to $49 a barrel, citing the global spike in coronavirus cases that is set to impact oil demand. Vitol CEO Russell Hardy said he sees Brent going to $50 in the next few months.

Mountain Valley Pipeline sees construction blocked. A circuit court temporarily blocked the construction of the Mountain Valley Pipeline over concerns about its impact on waterways. The court issued a stay while an appeal of permits makes its way through the legal process. The MVP project would carry Appalachian shale gas to the U.S. southeast. 

BP and Orsted team up on green hydrogen. BP (NYSE: BP) and Orsted A/S (CPH: ORSTED) said they would work together on developing an industrial-scale electrolyzer to make green hydrogen at an oil refinery in Germany. If successful, 50 megawatts of North Sea wind would help produce enough hydrogen to power 20% of the refinery’s needs. 

Peabody warns of Chapter 22. Peabody Energy (NYSE: BTU) warned that it faces the possibility of its second chapter 11 bankruptcy in five years.

Energy lobbyists line up at Biden admin. While election drama continues, energy lobbyists are wasting no time switching over from the Trump administration to the Biden administration. The Washington Post reports that lobbyists from multiple sectors – coal, oil, gas, renewables, trucking – are flipping their scripts from deregulation to something that could work under the Biden administration, such as big stimulus on infrastructure and reduced trade tensions with China. 

Russian energy minister to become Deputy PM. Russian energy minister Alexander Novak was promoted to Deputy Prime Minister.  Related: Four OPEC+ Members Favor Extended Cuts

Texas RRC tightens flaring rules. The Texas Railroad Commission said it would shorten times that companies are allowed to flare and it also said companies would be required to disclose more detail on why they need to flare. The tweak is relatively minor, and the RRC is under pressure from big oil companies themselves to tighten the rules. 

NextEra Energy bids $15 billion for Evergy. NextEra Energy (NYSE: NEE), the world’s largest solar and wind developer, is hoping to purchase Evergy Inc. (NYSE: EVRG) in an all-stock deal worth $15 billion. Evergy rejected the offer. 

U.S. Midwest utilities shift to renewables. Six Midwest utilities said they would spend a combined $15 billion on renewables over the next several years with the aim of building more than 4 GW of solar, 3.6 GW of wind, and 1 GW of energy storage. They also said they plan on continuing to shutter coal plants.

IEA: Renewables growing faster than expected. The IEA published its Renewables 2020 report, in which the agency predicted that wind and solar capacity will double over the next five years globally. By 2023, solar and wind capacity will overtake natural gas capacity, and renewables will surpass coal by 2024. The agency also said that while much of the energy sector was hit hard due to the pandemic, renewables proved “more resilient than previously thought.” The IEA revised up its 2020 forecast for renewables by 18%.

Libya’s oil production hits 1 mb/d. Libya's oil production has surged past 1 mb/d, national petroleum officials said on Saturday.

Wall Street flocking to EVs. At least nine EV startups have gone public, or will soon, according to Axios. Companies span the sector, including EV cars, heavy-duty trucks, parts manufacturers, infrastructure, etc., and capital is pouring in

U.S. LNG to China to grow substantially. After a year of non-existent liquefied natural gas (LNG) exports from one of the fastest-growing global suppliers, the United States, to the fastest-growing world importer, China, American LNG cargoes started to travel again to China in March this year. Cheniere Energy (NYSE: LNG) has recently signed a framework agreement with China’s Foran Energy Group to sell 26 LNG cargoes to the Chinese company over the next five years.

Pirate Attacks On Oil Tankers Off West Africa Intensify. Several oil tankers were attacked or approached with attempted attacks in the Gulf of Guinea off West Africa over the past few days, maritime security companies warn.

By Josh Owens for Oilprice.com

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