Despite growing demand fears due to new outbreaks of covid across Asia, oil prices have remained resilient this week.
Friday, August 13th, 2021
Crude prices have pulled off a noteworthy performance this week, with Brent remaining above the $70 per barrel mark despite mounting COVID fears in China and the U.S. While President Biden called on OPEC+ to drill more in order to counter rising gasoline prices, the IEA downgraded its demand forecast for the remaining months of 2021, wary that Asia’s Covid recovery might not be as swift as previously thought.
Goldman Sachs Still Sees $80 per Barrel Crude. The ever-bullish U.S. investment bank Goldman Sachs (NYSE:GS) forecasts crude prices to average $80 per barrel in Q4 2021, arguing that demand weakness brought about by the Delta variant will be short-lived, keeping the global balances tight.
BP Quits The Gambia Without Drilling a Well. The UK major BP (NYSE:BP) agreed to pay an outstanding fee of $29 million to cancel its drilling commitments in the Gambia, leaving the country without having drilled a single well. BP reportedly argues that offshore Gambia was incompatible with its low-carbon strategies.
U.S. Majors Want Renewables without Costly Upgrades. U.S. oil majors ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are looking into ways to utilize their current production facilities for renewable fuel production. Chevron has already set an end-2021 deadline for co-processing bio feedstocks in its fluid catalytic crackers (FCC).
Total Clinches Offshore Angola Deal. French oil major TotalEnergies (NYSE:TTE) signed a production sharing contract with Angola’s oil regulator ANPG for offshore block 29 in the yet-untapped frontier Namibe Basin, to the south of the prolific Kwanza Basin. Italian major ENI (NYSE:E) signed up for adjacent blocks 27 and 28 last month.
Chesapeake Buys into Haynesville Shale. In a first major move since its bankruptcy earlier this year, U.S. oil firm Chesapeake Energy (NASDAQ:CHK) agreed to acquire shale gas-focused Vine Energy through a $2.2 billion cash and stock transaction, boosting Chesapeake’s Haynesville shale acreage by additional 123,00 acres.
Foxconn Takes On US EV Market. Chinese tech firm Foxconn (TPE:2354) seeks to build electric vehicles in the U.S. and Thailand, potentially also eyeing the European market. Mass production is expected to start in 2023 in both countries, with Foxconn teaming up with Thai oil major PTT and US EV-manufacturer Fisker (NASDAQ:FSR) for the task.
Rosneft Quintuples Y-o-Y Profit. Russian state oil company Rosneft (MCX:ROSN)reported a fivefold increase in Q2 net profits, cashing in $3.1 billion on the back of higher outright oil prices. Rosneft’s crude production averaged 3.9mbpd, up 4% quarter-on-quarter.
Scottish Government Turns Back on New Projects. Scotland’s first minister Nicola Sturgeon penned a letter to the UK Prime Minister Boris Johnson, asking to “reconsider” all new offshore projects given their environmental impact. Cambo, the largest one in the project pipeline, is set to be commissioned in 2025.
Related: Biden Administration Takes Aim At ‘Soaring’ Gasoline Prices
Wind Turbine Maker Vestas Worsens 2021 Outlook. The world’s largest wind turbine maker Vestas (CPH:VWS) cut its 2021 outlook, citing higher feedstock costs and surging transportation expenses as the main reason for doing so. The Danish firm’s operating profit margins dropped to 5-7%, a far cry from its long-term target of 10%, Reuters writes.
Coal Prices Continue Soaring. Front-year 2022 ICE coal futures have surged past the $100 per metric ton threshold, marking the first time since 2012 that the market saw such higher futures prices. Exorbitantly high LNG prices keep on heating up coal demand in Europe.
ADVERTISEMENT
Nickel Surges Amid Supply Concerns. Shanghai nickel prices gained 5% on Thursday, rising to almost $22,800 per metric tonne, as latest data from China show domestic nickel output falling by 15.7% year-on-year and global nickel inventories dropping to their lowest since early 2020 just as EV demand for the metal keeps on increasing.
Strike Averted at Escondida Mine. The BHP (NYSE:BHP) operated Escondida copper mine in Chile (the largest in the world) has seen a long-standing corporate row come to an end after the 2,300-strong labor union accepted a new contract. A failure to do so would have sent copper prices spiraling.
Norway Sticks to Oil Production. Despite increasing pressure on oil-producing nations, Norway remains committed to oil and gas production according to the country’s Energy Ministry. Against prospects of seeing its output fall to a mere 500kbpd by 2040, Norway still entertains hopes of replenishing reserves with prospective Arctic discoveries.
Shell to Pay $111 Million to Nigeria. The Anglo-Dutch major Shell (NYSE:RDS) agreed to pay 111 million to Nigeria’s Ejama-Ebubu community in a bid to settle a long-standing case over an oil spill that took place during the 1967-70 Biafran War. Shell has been seeking to divest its onshore Nigerian assets, partially due to the array of lawsuits it faces.
USDA Lowers Global Wheat Supply. The U.S. Department of Agriculture lowered its global wheat supply forecast for the 2021-22 season, with Russia, Canada, and the United States all seeing lower production, dropping by more than 20 million tons compared to the previous forecast. Wheat prices have been on the rise since mid-July, getting increasingly closer to multi-year highs.
By Josh Owens for Oilprice.com
More Top Reads From Oilprice.com:
- Europe Could Face A Natural Gas Crisis This Winter
- Why An Oil Deal Between Kurdistan And Baghdad Is Unlikely
- Venezuela’s Oil Reserves Doomed To Become The World’s Largest Stranded Asset
The reason is that the fundamentals of the global oil market are robust. They won't be distracted from their surge by concerns about resurgent COVID cases in Asia particularly with the availability of billions of vaccines around the world.
Dr Mamdouh G Salameh
International Oil Economnist
Visiting Professor of Energy Economics at ESCP Europe Business School, London