While climbing Omicron cases have sparked fear of demand destruction, supply issues in Libya and falling U.S. oil inventories pushed prices higher.
Chart of the Week
- India needs to add 40 GW per year of renewable capacity to reach the 2030 objective it agreed to at the COP26 summit in Glasgow, but the country seems increasingly unlikelyto do so.
- Renewables currently account for only 11% of India’s aggregate generation capacity, with coal - the country’s main source of energy - still having ample spare capacity.
- With thermal coal prices sliding down below the $100/mt threshold recently and coal plants still using only 55% of their nameplate capacity, the widely anticipated GDP surge over 2022-2023 will trigger further increases in coal utilization.
- With feedstock prices for both wind turbines and solar panels increasing over 2021, it is unlikely that India will be able to add more than its usual 10GW per year in the upcoming years.
- UK-based oil major BP (NYSE:BP) will buy out the remaining stake in its US pipeline venture BP Midstream Partners (NYSE:BPMP) for a total price of $723 million, a structure simplification triggered by authorities no longer providing income tax allowances to master limited partnerships.
- Energy firm Shell (NYSE:RDS.A) signed up to develop Oman’s onshore Block 10 with an operator’s stake of 53%, aiming to produce 500 MCf per day of gas from the Saih Rawl field by 2023.
- Privately owned Presidio Petroleum is reportedly in advanced talks to buy some 5,000 shale gas wells from US oil major ExxonMobil (NYSE:XOM) in the Fayetteville Shale patch in Arkansas, initially assessed around $500 million.
Tuesday, December 21, 2021
The rapidly multiplying count of Omicron cases around the world has sparked fears in the oil market of another period of weak demand, with the new strain already becoming the dominant COVID variant in the United States. Despite early indications of Omicron being less lethal, the market will still have to wait out this period of bearish news before it can regain its bullish sentiment. Acting as temporary support for oil prices, skirmishes in Libya that led to a force majeure on oil exports have provided some upward pressure on prices, as did news of US crude oil inventories apparently falling for the fourth week in a row. These bullish factors helped push oil prices higher on Tuesday morning.
OPEC+ Underproduces Output Target in November. OPEC+ compliance with oil production cuts moved a bit higher month-on-month in November to 117%, primarily triggered by Angola and Nigeria struggling to bounce back from declining production rates and never-ending maintenance issues.
Manchin Veto Blocks Biden $1.7 Billion Package. The Biden administration will be forced to revamp its $1.75 trillion Build Back Better infrastructure bill following Senator Joe Manchin’s veto, making it increasingly likely that some bits such as methane fees will be left out of the final bill.
Libya Declares Force Majeure on Several Export Terminals. Libya’s NOC declared force majeure on crude exports from the country’s western ports of Zawia and Mellitah after the Petroleum Facilities Guard took over and shut down production at most of the African country’s fields in the west.
Aker BP-Lundin Megadeal Creates NCS Giant. Norway-focused producer Aker BP will buy North Sea peer firm Lundin Energy (STO:LUNE) in a $14 billion deal, joining forces to become the second-largest firm in Norway’s Continental Shelf.
European Gas Prices Spike Further. With Russian pipeline gas deliveries to Germany remaining at relatively low levels and the odds of seeing Nord Stream 2 launched this year fading away, the day-ahead European TTF benchmark rose to €149 per MWh this week (equivalent to $52 per mmBtu).
An Investor's Guide To Private Placements. While nearly every retail investor has at least a basic understanding of stock markets, the private market is largely misunderstood. Luckily, Oilprice readers can now get a FREE report on Private Placements and access to deals that have traditionally been reserved for insiders.
EPA Toughens US Vehicle Emission Requirements. Reversing the Trump-era rollback of car pollution cuts, the US Environmental Protection Agency toughened new vehicle emissions requirements through 2026, expecting a real-world average consumption of 40 miles per gallon by that point (up 8mpg compared to previous rules).
UK Government Wants to Assess New Projects’ Climate Policy Alignment. Only weeks after the future of Cambo was jeopardized, the UK government launched a national consultation on the future design of its oil & gas licensing, seeking to ensure that any new licenses will be fully aligned with UK climate change commitments.
Chevron Farms Out Suriname Stake to Shell. US oil major Chevron (NYSE:CVX) sold one-third of its 60% equity interest in the Block 5 offshore license in Suriname, just two months after it landed the 30-year production sharing contract at the country’s most recent shallow offshore bid round.
Chile Miners Brace for Leftist President. Chile-focused stocks such as Albemarle (NYSE:ALB) or SQM (NYSE:SQM) took a beating early this week as Chile’s president-elect Gabriel Boric promised to create a state lithium firm and to stop the $2.5 billion Dominga iron-copper mine on environmental grounds.
Toyota Plans Hindered by Supply Chain Disruptions. Japanese carmaker Toyota Motor Corp (TYO:7203) stated it would suspend production at five of its factories in January 2022 due to chip shortages and other supply chain disruptions, having already slowed down US output.
Qatar Sponsors UK Small Nuclear Plant Drive. The Qatar Investment Authority invested $110 million into Rolls Royce’s project to develop small nuclear power plants that could be operating by the early 2030s, allowing the nascent business unit to raise the required capital.
US Fishing Industry Teams Up with Big Oil. United in their drive against offshore wind installations, the US’ fishing and oil industries have teamed up to derail the 800MW Vineyard Wind power plant in offshore Massachusetts, the first large-scale plant in the Americas, arguing the wind farm would interfere with vessel navigation and hurt fishing stocks.
Rosneft Vows to Go Net-Zero by 2050. Russian state-owned oil company Rosneft (MCX:ROSN) approved a new 2030 strategy that sets a net-zero target by 2050 (Scope 1 and 2 emissions), the first time a Russian major has given itself a stringent carbon-cutting deadline.
By Tom Kool for Oilprice.com
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