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Chart of the Week
- Global oil demand fell to 92.2 mb/d in 2020, a 9% decline from the year before, according to a new EIA estimate.
- Demand rebounded rapidly after hitting a low point in April 2020, but demand was stagnant and even contracted slightly in late 2020.
- The EIA expects a sharp rebound in demand this year, although two massive unknowns – the pace of vaccinations and the pace of infections from new covid variants – throw most forecasts into a deep state of uncertainty.
Market Movers
- Imperial Oil (NYSEMKT: IMO) was down 2.9% in early trading after posting a larger loss than expected. The company took a C$1.17 billion impairment on shale gas assets that it believes won’t be developed.
- ConocoPhillips (NYSE: COP) was up in early trading after posting a smaller-than-expected fourth-quarter loss at $800 million.
- Marathon Petroleum (NYSE: MPC) reported a fourth-quarter profit of $192 million, compared to $443 million in the same quarter a year earlier.
Tuesday, February 2, 2021
Oil shot up to a one-year high on Tuesday, with WTI topping $55 per barrel. The oil market is “supported by the combination of tightening fundamentals, as seen through the rising backwardation and the renewed risk appetite in the U.S. stock market,” said Ole Hansen, head of commodities research at Saxo Bank A/S.
ExxonMobil posts first annual loss in decades. ExxonMobil (NYSE: XOM) reported a loss of $20.1 billion in 2020, the first annual loss in at least 40 years, and also the fourth consecutive quarterly loss. The loss included a $19.3 billion write-down. At the same time, Exxon vowed to defend its dividend, stating that it would cut spending rather than the dividend if oil prices drop below $50 per barrel.
ExxonMobil announces carbon capture effort. ExxonMobil (NYSE: XOM) pledged to spend $3 billion on low-emissions technologies through 2025, mostly related to carbon capture. Bloomberg notes that much of the effort is old news and depends on not-yet-enacted government subsidies.
Exxon announces board shakeup. Exxon announced changes to its board amid investor pressure to cut spending. The changes came as D.E. Shaw, which owns a sizable position in Exxon. Reuters reported last week that more than 135 investors managing more than $2 trillion in assets formed a coalition to pressure the oil giant. Engine No. 1, a San Francisco-based investment firm, said Exxon needs independent board members “to ensure a clean break from a strategy and mindset that have led to years of value destruction.”
Exxon discussed Chevron merger last year. Exxon and Chevron, were in talks to merge amid the pandemic crisis last year, the Wall Street Journal has reported, citing unnamed sources in the know. Such a tie-up would be one of the biggest corporate mergers ever and create a company that could be worth more than $350 billion based on Exxon’s and Chevron’s current valuations. Related: Global Natural Gas Demand Set To Rebound After Pandemic Shock
BP lost $5.7 billion. BP (NYSE: BP) lost $5.7 billion in 2020, the first loss in a decade. The company said it would ramp up renewable energy capacity to 50 gigawatts by 2030, up from 3.3 GW currently.
Glimmers of hope for crude oil prices. Oil was off to a reasonably good start this year thanks to the start of a vaccination push and a Saudi commitment to cut more production. The continued surge in Covid-19 infections and a new flare-up in China shook optimism and weighed on prices, but now things appear to be looking up based on the latest supply and demand data and forecasts.
Goldman Sachs: Oil market tightening. The oil market rebalancing “continues to beat our above-consensus expectations,” Goldman Sachs said in a January 31 note to clients. “Our base-case remains for a demand-led rebalancing of the oil market,” the bank said.
Total outperforms peers in 2020. French oil company Total (NYSE: TOT) outperformed other oil majors last year. According to Rystad Energy, Total reduced costs on a per-barrel basis by the most compared to its peers. It also discovered 1 billion boe in 2020, allowing it to be the only major able to replace more than 100% of what it produced.
Biden admin revokes drilling permits. Biden’s Interior Department approved drilling permits in the first few days in office, despite an executive order putting a freeze on them. On Friday, Interior said 70 permits were improperly issued, and they rescinded them.
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Iran won’t return to nuclear deal unless sanctions lifted. Iran said it would not simply return to the terms of the 2015 nuclear deal until American sanctions – implemented after the U.S. pulled out of the deal in 2018 – are removed.
Shell ordered to pay compensation for Nigeria oil spills. Royal Dutch Shell (NYSE: RDS.A) was ordered by a Dutch court to pay compensation to two Nigerian villages in a case that stretches back more than a decade. Importantly, the case establishes a precedent of parent company’s being held responsible for pollution abroad.
Shell bets on power trading and hydrogen. Royal Dutch Shell (NYSE: RDS.A) is making big bets on expanding its power trading and hydrogen units as part of its energy transition plans.
Offshore wind turbine market heating up. Competition is heating up in the market for offshore wind turbine manufacturing, with incumbent Siemens Gamesa Renewable Energy (BME: SGRE) seeing a rising challenge from GE (NYSE: GE) and Vestas Wind Systems (CPH: VWS). Meanwhile, Siemens said it would eliminate 7,800 jobs by the end of 2025, mainly from its gas and power division.
Natural gas prices rise on winter weather. On Monday, natural gas prices shot up by more than 11% as colder weather swept over the northeast.
Goldman: Gas markets tight in summer. Goldman reiterated its view that natural gas markets look increasingly tight heading into next winter. The bank sees U.S. natural gas prices averaging $3.25/MMBtu in the summer.
Automakers abandon Trump's effort to stop California fuel economy rules. A group of automakers abandoned their support for the Trump administration’s efforts to bar California from setting tighter fuel economy standards. The companies include Toyota, Fiat Chrysler, Hyundai Motor, Kia Motors, Mitsubishi Motors, and Subaru Corp. An auto industry trade group also proposed opening talks with the Biden administration on tightening federal standards.
By Tom Kool for Oilprice.com
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Gasoline demand in the USA is at or near nil going on more than a Year now with growth in gasoline demand having peaked in the USA well over a decade ago.