Oil prices fell on Tuesday as the Suez Canal was cleared and concerns about global bottlenecks eased. Traders are now focused on the upcoming OPEC+ meeting, which most observers believe will result in an extension of cuts, and the impact of Covid-19 on oil demand in Europe.
Chart of the Week
- Annual spending by U.S. utilities on transmission has increased from $9.1 billion in 2000 to $40 billion in 2019.
- The increase includes both new investment and an increase in opex costs.
- One example: In 2020, Minnesota Power connected a 224-mile, 500-kV transmission line to bring Canadian hydropower to the U.S.
- Another example: PG&E and SCE spent more than $1 billion in 2019 on new transmission infrastructure, mostly related to wildfire mitigation.
Market Movers
- Chevron (NYSE: CVX) is the leading contender to purchase the 145,000-bpd Puget Sound refinery in Washington State from Royal Dutch Shell (NYSE: RDS.A).
- Devon Energy (NYSE: DVN) said its first-quarter production would decline by 8% due to the Texas freeze.
- Vine Energy (NYSE: VEI) announced a bond sale to raise $950 million in senior unsecured notes due in 2029. Vine Energy recently launched an IPO and raised less money than it had hoped.
Tuesday, March 30, 2021
OPEC+ poised to extend cuts. Saudi Arabia wants OPEC+ cuts extended through June. Russia, the leader of the non-OPEC group in OPEC+, favors a rollover of the alliance's oil production cuts while seeking a slight increase for itself to meet higher seasonal demand.
Total evacuates staff from Mozambique. Total (NYSE: TOT) and other international contractors evacuated some staff from Mozambique over the weekend as insurgents advanced to the coastal town of Palma, a hub for the country’s nascent LNG industry. Total’s $20 billion project is the largest foreign investment on the African continent but now appears to be at grave risk.
Iran and China sign an economic and security agreement. Iran and China signed a wide-ranging economic and security agreement, billed as a “strategic partnership” that will last 25 years. Details remain sparse, but the move likely paves the way for more Chinese investment in Iran’s oil sector and also open up more room for exports. The WSJ also says that the two countries could set up a joint bank that would help Iran evade U.S. sanctions. Reuters reports that Iranian oil exports are expected to continue to rise in March.
Sinopec to ramp up hydrogen investment. Sinopec, the largest oil refiner in Asia, announced plans to shift towards carbon neutrality by 2050, a plan that leans heavily on hydrogen.
Abu Dhabi debuts Murban contract. Abu Dhabi allowed trading in its futures contract, Murban, on the Intercontinental Exchange (ICE). The move is aimed at bolstering the emirate as an international oil trading hub.
Biden invites China and Russia to climate summit. President Joe Biden is including rivals Vladimir Putin of Russia and Xi Jinping of China among the invitees to the first big climate talks of his administration, according to the AP. The event will be held virtually April 22 and 23. Related: Is Natural Gas Still A Safe Bet For Oil Majors?
Exxon and Chevron cautious on shale drilling. ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) have dramatically scaled back drilling in the Permian compared to a year ago. According to Rystad, the two majors accounted for 28% of Permian drilling activity in the spring of 2020, a share that is now down to less than 5%. “We essentially hit a pause button,” said Chevron Chief Financial Officer Pierre Breber, according to Reuters.
Will U.S. shale exploration surge? Cheap financing and higher crude oil prices could kick off another round of drilling in U.S. shale, despite promises to exercise restraint.
Questions on Shell’s bet on LNG. The Wall Street Journal reports that massive billion-dollar bets on LNG appear riskier as the energy transition gains momentum. Royal Dutch Shell (NYSE: RDS.A) spent over $50 billion to purchase BG Group in 2015, a large wager on the future of LNG. But the gas era could be short-lived as countries leap frog to renewables. Shell has written down gas assets and lowered its forecast for demand growth.
Shell links executive pay to climate. Royal Dutch Shell (NYSE: RDS.A) has proposed linking director’s pay more closely to its climate performance, while also severing the link between LNG production.
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Vanguard and BlackRock make net-zero emissions plans. BlackRock (NYSE: BLK) and Vanguard Group are among 43 investment firms managing more than $22 trillion in assets that are joining Net Zero Asset Managers initiative.
Natural gas prices are stuck. The U.S. natural gas benchmark is set for several months of below $3 MMBtu price analysts and EIA forecasters say. The agency cited declining demand for heating in the spring along with rising American dry natural gas production.
New Mexico adopts flaring regulations. New Mexico regulators adopted new regulations that end routine flaring from Permian drillers. They can still flare in the event of an emergency, but no longer simply as a fact of doing business. Related: Oil Markets Already Priced In An OPEC+ Output Cut Extension
Biden announces offshore wind push. The White House announced Monday an ambitious plan to expand wind farms along the East Coast and jumpstart the country’s nascent offshore wind industry. The Biden administration is targeting 30 GW of offshore wind by 2030.
Biden infrastructure plan to include orphan wells. One aspect of President Biden’s forthcoming $3-$4 trillion infrastructure proposal (to be unveiled Wednesday) is a big push to clean up abandoned oil and gas wells.
EIA: Battery boom on U.S. grid. The EIA laid out a long-term forecast for energy storage in the U.S., and in its reference case, the U.S. sees 59 GW of battery storage by 2050, a figure that could be much higher if renewables accelerate.
Aramco resists dividend cut. Despite a 44 percent drop in its 2020 profits, the Saudi Arabian government has instructed majority-state-owned Saudi Aramco to stick to the US$75 billion per year dividend payout for shareholders that it pledged at the time of its IPO.
By Tom Kool for Oilprice.com
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