Oil prices jumped on Tuesday morning as OPEC+ agreed to push back the expected production increase until next month.
Chart of the Week
- Silver was the best-performing commodity in 2020, according to a Commerzbank analysis.
- Brent and WTI fared among the worst, only outpaced by a sharp decline in prices for gasoil.
- But a range of commodities performed strongly, particularly in the second half of the year in the wake of extraordinary fiscal stimulus around the globe as well as a loose monetary policy.
Market Movers
- Suncor Energy (NYSE: SU) says it will record a C$425 million impairment charge for the fourth quarter on its White Rose project.
- Royal Dutch Shell (NYSE: RDS.A) will lay off 700 workers following the shutdown of its Convent refinery.
- Ivanhoe Capital Acquisition Corp., the special purpose acquisition company led by billionaire mining investor Robert Friedland, is raising $200 million to invest in industries key to the global energy transition.
Tuesday, January 5, 2021
Oil prices shot up more than 3% in early trading on Tuesday on news that OPEC+ would push off an expected production increase next month. Risks remain, but investors and traders see more restraint as bullish for oil.
OPEC+ leans towards no change. Oil prices rallied on Tuesday morning, following reports that Russia—the OPEC+ producer that was insisting on a 500,000-bpd production increase in February—has agreed that there would not be another rise in the pact's production next month.
OPEC+ sees downside risk. Oil prices have rallied, but OPEC Secretary-General warned of downside risks ahead of the group’s meeting on Monday. “Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle,” said OPEC Secretary-General Mohammad Barkindo.
U.S. shale could recover. EIA estimates point to U.S. oil production staying at around 11 million bpd for at least another year, as production rates from existing wells in the U.S. shale patch will fall faster than production gains from fewer newly drilled wells. But some analysts say that the market has been too quick to write off U.S. shale again, and will be surprised by the rebound in American oil production in 2021.
South Korea tanker seized by Iran. Iran seized a South Korean vessel in the Persian Gulf. The move comes as Seoul has frozen Iranian funds in Korean banks due to U.S. sanctions. Related: Was Buffett Right About Energy In 2020?
China struggles to keep lights on. China’s rapid recovery has strained power supplies, forcing power cuts to some industrial and commercial users. Electricity demand in November was up 9.4% from a year earlier.
The megatrend in solar. The solar sector’s sole pure-play solar fund, Invesco Solar Portfolio ETF (TAN), is up 234% over the past 52 weeks, with a good chunk of those returns having come after Joe Biden was declared the winner of the U.S. presidential elections a month-and-half ago. That incredible momentum is certainly beginning to look like a big bubble in the making, but Wall Street remains bullish. And one secular trend is looking to completely redefine the solar sector.
EPA finalizes science rule. The U.S. EPA finalized a rule to limit what scientific research can be used in regulations, a move critics say is aimed at crippling the agency’s ability to regulate air and water pollution.
Interior finalizes NPR-A plans. The Trump administration on Monday finalized plans to open more than 80 percent of Alaska’s National Petroleum Reserve (NPR-A) to oil drilling. The NPR-A is adjacent to the Arctic National Wildlife Refuge.
Russia’s oil production falls for the first time. Oil production in Russia declined in 2020 for the first time since 2008.
Iraq struggles to pay debts. The New York Times looked at the brewing financial crisisin Iraq from the steep drop in oil revenues.
Permian showing signs of life. On the ground in the Permian basin, there are visible signs of an uptick in activity. More traffic, higher production, and better-than-expected revenues for the New Mexico state government. New Mexico’s oil production increased by 5.5% in the third quarter.
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Dallas Fed: Shale returning. The quarterly Dallas Fed survey showed a positive reading for its oil and gas index, the first positive reading since the first quarter of 2019. Multiple readings in the survey – capex, drilling activity, employment, oilfield services activity – showed improvement.
CNOOC could be delisted from NYSE. China’s state-owned oil firm CNOOC could beremoved from the New York Stock Exchange after the Pentagon deemed the company as controlled by the Chinese military. PetroChina Co. and China Petroleum and Chemical Corp., also known as Sinopec, may also be under threat.
Biden as $40 billion loan fund to use for clean energy. The Department of Energy has a $40 billion fund for loan guarantees for clean energy that has been largely unused by the Trump administration. Politico reports that the Biden administration will likely tap it to accelerate renewables research and deployment.
China’s EV automakers see a surge in sales. Chinese electric car start-ups Nio, Li Auto, and Xpeng each announced in the last few days that vehicle deliveries surged last year.
Tesla narrowly misses 500,000 sale target. Tesla delivered 499,550 vehicles throughout 2020, falling just short of the company’s goal of shipping 500,000, the company announced on Saturday.
Massachusetts to ban gasoline vehicles by 2035. Massachusetts Governor Charlie Baker released a plan on Monday that calls for mandating electric vehicle sales by 2035. The plan also calls for scaling up offshore wind and retrofitting 1 million homes. Gov. Baker is a Republican.
U.S. increases Nord Stream 2 sanctions. As part of a Pentagon funding bill that the U.S. Congress approved over a presidential veto, the U.S. widened sanctions on the Nord Stream 2 pipeline. The pipeline is more than 90% completed but has been delayed for a year. Russia aims to use its own vessels to complete the project, but new sanctions could pose more delays.
Total remove staff from Mozambique over unrest. Total (NYSE: TOT) removed staff from its Mozambique LNG project due to militant attacks and unrest.
By Tom Kool for Oilprice.com
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