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Oil Rises Ahead of Weekly Inventory Data

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Red Sea Crisis and OPEC+ Cuts Support Oil Prices

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US Administration Cancels Gulf Of Mexico March Oil & Gas Lease Sale

The Bureau of Ocean Energy Management (BOEM) has rescinded the Record of Decision for the oil and gas lease Gulf of Mexico planned for March, effectively canceling this auction as part of the Biden Administration’s review of new drilling activities on federal land and in offshore waters.

The lease sale would have offered 78.2 million acres for a region-wide Gulf of Mexico lease in March 2021, or 14,594 unleased blocks – all of the available unleased areas in federal waters of the Gulf of Mexico.

However, President Joe Biden directed in an executive order last month the Secretary of the Interior to pause new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.

“Cancelling this huge offshore Gulf oil auction helps protect our climate and life on Earth. President Biden understands the urgent need to keep this oil in the ground,” Kristen Monsell, oceans legal director with the Center for Biological Diversity, said in a statement.

The American Petroleum Institute (API) has said in a report last year that a ban on new federal oil and gas development would result in job losses, weaker energy security, and increased reliance on oil imports. According to API, U.S. offshore oil production would drop by 44 percent by 2030, while offshore natural gas production would fall by 68 percent.  

“A ban on new leasing, if permanent, would mean that by 2035 US offshore oil and gas production would be about 30% lower than if lease sales had continued,” Wood Mackenzie said in a snapshot overview of the Biden Administration effect on the U.S. energy sector.

Referring to the suspension of permitting for new drilling on federal land and waters, Chevron’s CEO Michael Wirth said on the Q4 earnings call last month that “the risks are probably greater in the Gulf of Mexico.”

“If conditions in the U.S. become so onerous that it really disincentivizes investment, we've got other places where we can take those dollars,” Wirth noted. 

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By Charles Kennedy for Oilprice.com

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