The Suez Canal traffic jam, caused by a cargo ship that ran aground on Tuesday, has driven oil prices higher as supply fears grow.
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Friday, March 26th, 2021
Oil has bounced around with significant volatility this week, dragged down by slow vaccinations, lockdowns, and speculative outflows, but pushed back up on Suez Canal bottlenecks. Analyst sentiment is also all over the place.
Goldman remains bullish. In a Friday note, Goldman Sachs noted bearish fears, but struck an upbeat tone: “We continue to view the decline in prices as overshooting the shifts in oil fundamentals,” the bank said. “In particular, we expect a slower ramp-up in OPEC+ production this spring to help offset both slower EM and EU demand recovery and higher Iranian exports, with global demand still set to increase sharply through the summer.”
Bank lending to fossil fuels down 9%. Bank lending to fossil fuels declined by 9% in 2020 due to the pandemic and the ensuing downturn. The 60 largest banks lent more than $750 billion to 2,300 fossil fuel companies in 2020, down from $824 billion in 2019, according to a report by Rainforest Action Network, Reclaim Finance, Oil Change International, and other non-governmental organizations
$3 gasoline nears. Average retail gasoline prices rose to about $2.88 per gallon in the U.S. last week. Analysts say $3 is likely by summer.
Moody’s cuts ExxonMobil. Moody’s cut ExxonMobil (NYSE: XOM) to Aa2 from Aa1, with a stable outlook. “ExxonMobil's large increase in debt in 2020 and accompanying deterioration in financial leverage metrics following the onset of the coronavirus pandemic looks unlikely to be fully reversed in the next few years,” said Pete Speer, Moody's Senior Vice President.
World’s largest coal miner bets on solar. Coal India Ltd., the largest coal miner in the world, said that it might shift into solar panel manufacturing. “Coal as you know, we’re going to lose business in the next two, three decades. Solar will take over (from) coal slowly as a major energy provider in the coming years,” the company’s chief executive said.
Equinor makes North Sea discovery. Equinor (NYSE: EQNR) made a “significant” new oil discovery near the Fram and Troll complex in the North Sea.
Federal Reserve to scrutinize climate risk. The U.S. Federal Reserve said that its new Financial Stability Climate Committee (FSCC) will focus on the potential threats climate change can pose to the broader financial world.
Fossil fuels talking loudly about ESG. Fossil fuel companies have gone from barely talking about ESG issues, to mentioning it hundreds of times in the first quarter of 2021, according to a Bloomberg analysis.
Glencore trader charged with manipulation. A former oil trader at mining company Glencore PLC (LON: GLEN) was charged with manipulating fuel oil prices
Clean energy bubble? Bloomberg Green explores the prospect of a financial bubble in the cleantech sector.
Dallas Fed: Shale resumes growth. The new Dallas Fed survey offered glimmers of optimism. From a reading of just 18.5 for the fourth quarter of 2020, the business activity index of the survey soared as high as 53.6 over the first quarter of this year.
Shale costs creep up. The average cost to drill a new well in U.S. shale rose to $52 per barrel according to the Dallas Fed survey, up 6% from last year. Cost inflation due to fewer service providers has contributed to higher costs. Related: Pandemic Puts Saudi-Kuwaiti Oil Plans On Ice
Ovintiv sells shale assets for a third of original cost. Ovintiv (NYSE: OVV) soldEagle Ford assets to Validus Energy for $880 million, after paying $3.1 billion for those assets in 2014.
Asian market soft, pressuring prices. Chinese refinery maintenance and renewed lockdowns in Europe put pressure on crude, forcing traders to mark down prices. “Barrels are struggling to find homes in the export market as Asia still isn’t buying and Europe is struggling as well,” said Scott Shelton, energy specialist at United ICAP.
Goldman: EVs grapple with higher costs. Rising demand for battery metals and minerals will lead to an increase in EV battery costs, Goldman Sachs analysts said in a note, pointing out that this could lead to an increase in EV prices.
World’s most controversial pipeline shift to hydrogen? Moscow is silently investing in the production of hydrogen, potentially aiming to make it flow through its new NordStream 2 pipeline.
Suez bottleneck causes trade problems. Automakers have been forced to scale back production due to global supply chain problems related to semiconductors. The supply chain problems are about to get worse due to the blockage of the Suez Canal. The blockage could also delay the delivery of at least 10 LNG cargoes to Europe. At the end of the week, it appeared that global shipping began rerouting around Africa as the outage continued.
Permian methane emission back to pre-pandemic levels. Permian methane emissions are back to pre-pandemic levels according to EDF.
API endorses a carbon price. The most powerful oil lobby in the U.S., the American Petroleum Institute (API), came out in favor of a carbon price, although it did not endorse a particular tax or price level. The move is a substantial change of position, and the head of the group said that it came from internal pressure, particularly from the European oil majors.
Canada’s Supreme Court upholds carbon tax. In a 6-3 decision, Canada’s Supreme Court ruled that a carbon tax is constitutional.
China boosts oil and gas spending. PetroChina is planning to spend $36.6 billion in capex this year, making it the world’s top spender, just above Saudi Aramco’s (TADAWUL: 2222) $35 billion. The top spender from the western oil majors is Royal Dutch Shell (NYSE: RDS.A) at $20.5 billion.
By Tom Kool for Oilprice.com
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