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Chart of the Week
– The EIA sees U.S. oil production returning to 2019 levels by 2023 and then remaining between 13 and 14 mb/d through 2050.
– The agency sees Brent prices rising from an average of $42 per barrel in 2020 to as high as $73 per barrel by 2030 and $95 per barrel by 2050.
– The Permian remains the dominant source of new production in the years ahead.
Market Movers
– ExxonMobil (NYSE: XOM) cut production in Guyana due to a gas compressor failure.
– A federal court rejected a bid from Indigenous tribes to halt the construction ofEnbridge’s (NYSE: ENB) Line 3 pipeline.
– Cenovus Energy (NYSE: CVE) reported a $153 million fourth-quarter loss.
Tuesday, February 9, 2021
Brent topped $60 per barrel on Monday, hitting a fresh high. OPEC+ cuts combined with enhanced expectations of U.S. economic stimulus pushed crude oil up. The market continues to tighten. “Support seems robust and the narrative sees the oil market swiftly burning through the remaining crisis-surplus, potentially running into tightness later this year,” Norbert Rücker, an analyst at Swiss bank Julius Baer, told Reuters.
Could oil hit $100? Oil prices could go as high as $100 a barrel next year on the back of “very easy monetary policy” and reflation trade, Amrita Sen, chief oil analyst at Energy Aspects, told Bloomberg in an interview.
Oil majors pay up for wind. BP (NYSE: BP) and Total (NYSE: TOT) won a majority of contracts to build offshore wind in the UK in a recent auction, and they paid a premium. “These huge upfront costs will put up barriers to entry for utilities and oil and gas companies without very deep pockets,” Barclays Plc analysts led by Dominic Nash said in a note.
Algeria’s oil exports shrink. Years of mismanagement and lack of investment are undercutting Algeria’s oil industry. A top government official said the country could cease to be an oil exporter within a decade.
Total earns $1.3 billion, ups clean energy spending. Total (NYSE: TOT) posted $1.3 billion in earnings for the fourth quarter, outpacing its rivals who reported large losses. Total also increased its capex on clean energy by 20% to $2.4 billion, out of a total spending plan of $12 billion. Total also said it would rebrand itself as TotalEnergies.
Marathon cuts executive pay and seeks to cut emissions. Marathon Oil (NYSE: MRO) cut CEO pay by 25% and also aims to cut greenhouse gas emissions on a unit-of-production basis by half by 2025.
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Tesla buys $1.5 billion in bitcoin. Tesla (NASDAQ: TSLA) announced that it has purchased $1.5 billion worth of bitcoin. The company also said it would accept bitcoin for its sales.
Commodities swept up in broader reflation trade. Fiscal and monetary stimulus and expectations of rising inflation are pushing prices of commodities up. “It’s hard to resist this reflation trade at the moment,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG. “With policy all one-way and U.S. refunding coming up this week, we may require some more concessions.”
Trading houses shift away from fossil fuels. Japanese trading houses are accelerating a shift away from coal and fossil fuel trading, according to Reuters. For example, Itochusaid on Thursday it will offload its stake in a Colombian coal mine, and Mitsui is withdrawing from a coal mine in Mozambique.
Imperial takes write-down, no big projects in years ahead. Imperial Oil (NYSE: IMO) said that the company would not take on any big projects in the coming years. The company wrote down $1.1 billion related to a decision not to develop shale gas assets in Canada.
ConocoPhillips’ Alaska project halted. A court blocked winter construction at ConocoPhillips’ (NYSE: COP) project on Alaska’s North Slope, ruling that the company failed to consider wildlife and climate change impacts.
Natural gas prices higher on cold weather. Natural gas prices shot higher as cold weather swept over much of North America.
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NOCs have $414 billion at risk from transition. National oil companies are on track to spend $414 billion over the next decade on projects that could become stranded due to the energy transition. Put another way, they only pay off if the world blows past climate targets.
Pipe laying on Nord Stream 2 resumes. Construction on the Nord Stream 2 pipeline resumed in Danish waters, the last leg of the mostly-completed project that has been stalled due to U.S. sanctions.
Trafigura sees more upside to oil. Oil trader Trafigura said that oil prices have more room to run because refiners will begin ramping up processing, further draining inventories. “The refiners will come for the oil,” Ben Luckock, Trafigura’s co-head of oil trading, told Bloomberg. “Come summer, we will be through $60 a barrel for sure, the question is whether we make it to $70.”
IEA: India to be largest energy demand growth in 2040. India will account for the largest share of energy demand growth over the next two decades, representing 25% of all demand growth, according to the IEA.
Oil may not be Chevron’s main business in 2040. While oil and gas will certainly be needed for decades to come, the oil and gas division may not be Chevron’s (NYSE: CVX) top business in 20 years, although it will still be a very big part of the U.S. supermajor’s operations, chief executive Michael Wirth told CNN.
Qatar signs LNG megadeal. Qatar Petroleum, the world’s largest LNG exporter, signed a contract on Monday for a massive expansion, which could result in a 40% increase by 2026. It is the single largest LNG project ever to go ahead.
By Tom Kool for Oilprice.com
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