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Oil Prices Jump To 10-Month High On Weak Dollar

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Chart of the Week

-    Roughly 9.1 gigawatts of electricity capacity are slated for retirement in 2021 in the United States.

-    Nuclear power will account for 51% of that total, with coal accounting for 30%.

-    48 GW of coal capacity has shut down in the past five years. Retirements are expected to continue, although the pace could slow this year. 

Market Movers

-    U.S. Well Services (NASDAQ: USWS) surged to its highest level in seven months after securing a contract extension to provide fracking services for Range Resources (NYSE: RRC).

-    Cheniere Energy (NYSE: LNG) was upgraded to Strong Buy by Raymond James.

-    Royal Dutch Shell (NYSE: RDS.A) resumed LNG exports from its Prelude facility in Australia after a lengthy period of maintenance.

Tuesday, January 12, 2021 

Oil prices shot up to a 10-month high, posting further gains in the wake of the OPEC+ cuts, and edged a bit higher by a weaker dollar. Some analysts are starting to argue that the rally is getting a little overdone. WTI is above the 200-week moving average, and “it may soon top out,” according to Commerzbank. 

LNG prices skyrocket. JKM prices for LNG in northeast Asia are shooting through the roof. Cold weather and higher demand in China and Asia have JKM prices for February delivery well above $21/MMBtu, while individual spot cargoes have traded in the high $30s/MMBtu, breaking all-time record highs. The cost to rent LNG tankers is also breaking records. Related: India Oil Demand Falls For First Time In 20 Years Due To COVID

OPEC cuts could help shale. The jump in crude oil prices could finally bring positive cash flow to much of the U.S. shale industry, according to Rystad Energy. The firm says cash flow could increase by 32% this year. 

OPEC+ compliance slips to just 75%. OPEC+ group’s compliance with the oil production cuts fell to 75% in December 2020—one of the lowest levels since the pact was enacted in May 2020, tanker tracking firm Petro-Logistics said on Tuesday.

Kansas City Fed: shale needs $56 WTI. According to the latest survey from the Kansas City Federal Reserve, oil and gas firms reported that oil prices needed to be on average $56 per barrel for a substantial increase in drilling to occur, and natural gas prices needed to be $3.28 per Btu. The industry’s expectations for future activity improved.

Shell to cut 300 jobs in North Sea. Royal Dutch Shell (NYSE: RDS.A) said it will eliminate 300 jobs in the North Sea over the next two years. 

Fitch warns of oil and gas defaults. Fitch Ratings warned about the continued threat of defaults in a recent update, noting the oil and gas industry would this year again be the one with the most defaults.

Renewables to dominate new power installations. Renewable energy, mostly solar and wind, are set to account for more than two-thirds of the new electricity generation capacity that the United States will install this year, according to the EIA. A total of 39.7 GW of new electricity generating capacity is expected to start commercial operation in 2021, with solar accounting for 39% and wind accounting for 31%. 

European freeze rattles energy. A polar vortex is bringing Arctic weather across much of Europe, blanketing Spain in snow and sending temperatures to unusually low levels. That is adding more upward pressure to gas markets.

Wind becomes top power supplier in Texas. “Wind power surged past coal in Texas’ electricity mix for the first time in 2020, the latest sign of renewable energy’s rising prominence in America’s fossil fuel heartland,” the Financial Times wrote

Faraday in SPAC to go public. Faraday & Future Inc., an electric-vehicle startup, is in talks to go public through a merger with Property Solutions Acquisition Corp., a special purpose acquisition company, or SPAC. The entity hopes to raise $400 million, and the combined entity hopes to be worth around $3 billion.

Drillers stockpile permits ahead of Biden admin. Energy companies have amassed a backlog of drilling permits ahead of the incoming Biden administration in case there are new restrictions on federal lands. 

GM changes logo to promote EVs. GM (NYSE: GM) changed its logo for the first time in 56 years, and the new image noticeably looks like a plug, in an effort to promote EVs.

Chinese rival to Tesla. Chinese automaker Nio Inc. unveiled its first all-electric sedan in a bid to compete with Tesla (NASDAQ: TSLA)

Supreme Court to look at biofuels waivers. The Supreme Court will review the ability of oil refineries to win exemptions from federal biofuel-blending quotas, the latest twist in the ongoing battle between the ethanol and oil refining industries. 

HSBC under pressure to cut fossil fuel investments. Shareholders of HSBC have filed a resolution urging the bank to cut its support for oil, gas and coal.  Related: Why Asian LNG Prices Are Going Through The Roof

Total SA to add renewables investments. Total (NYSE: TOT) will add renewable energy investments in 2021, according to CEO Patrick Pouyanne. The company aims to increase holdings to 35 GW by 2025, up from 9 GW today. 

Saudi Arabia launches NEOM. Saudi crown prince Mohammed bin Salman launched plans to build NEOM, a zero-carbon city.

$1 billion inflows to renewable energy after Dem sweep. After Democrats took control of the Senate, $1 billion flowed into renewable energy exchange-traded funds. 

EIA natural gas reserves fell by 2%. Natural gas reserves in the United States fell by 2 percent in 2019 due to low prices, the Energy Information Administration said in an update on the country’s oil and gas reserves.

By Tom Kool for Oilprice.com

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