Oil prices have fallen back below $60 but remain at levels
not seen since January 2020.
Friday, February 19th, 2021
The Texas electricity crisis is easing, but the outages, damage, and human toll
were historic. As of Friday morning, Texas grid operator ERCOT said that it would be emerging from "emergency conditions"
later in the day. After a crazy week, WTI fell just a bit but
held onto gains close to $60, a price not seen since January 2020.
Texas
outage eases. As of Tuesday, around 45 gigawatts of
electricity generation from renewables, coal, and natural gas were offline.
More than 4 million people lost power. By Friday, most of those people saw
power restored. The crisis has once again focused attention on several grid
policy questions - the lack of weatherization at Texas power generation assets,
the lack of a capacity market, and the state grid’s isolation from the rest of
the country.
U.S.
oil production impacted. Around 4 mb/d of U.S. oil
production was sidelined due to power outages, wellhead freeze overs, and other
equipment failures. Most of the outages were in the Permian Basin. Restarting
frozen or shuttered wells is not necessarily straightforward, and some restarts could take weeks.
Texas
bans shipment of natural gas out of state. Texas Governor
Greg Abbott took the drastic move of banning the export of
natural gas from the state in order to conserve supply. The move is highly
controversial and potentially illegal, although most analysts note that any
legal challenges would be moot because the order will have expired by the time
a judge reviews them. The Governor also personally sent requests to several LNG
exporters to halt operations.
LNG
cargoes canceled. At least 10 LNG cargoes were canceled because of the
grid crisis, according to Bloomberg.
Refinery
restarts could take weeks. Four of Texas’ largest oil
refineries saw widespread damage from the cold snap and could take weeks to
repair, according to Bloomberg. The
outages could reduce demand for crude, but cut the supply of refined products.
The four refineries include ExxonMobil’s (NYSE: XOM) Baytown
and Beaumont plants, Marathon Petroleum’s (NYSE: MPC) Galveston
Bay refinery, and Total’s (NYSE: TOT) Port
Arthur facility. The result could be $3-per-gallon gasoline by May.
The
U.S. wants to reopen talks with Iran. The U.S.
government said it would accept
an invitation from the EU to hold talks with Iran. Iran did not exactly jump at
the news, saying it would
"immediately reverse" recent actions on its nuclear program, but only after the
U.S. lifted sanctions.
Gas
companies hit "jackpot" on Texas deep freeze. While Texans
are struggling to keep the lights and the heating on, gas producers in the Lone
Star state, or at least those whose wellheads did not freeze, are having a blast.
Saudi
Arabia to increase output. Saudi Arabia is poised to
reverse its 1-mb/d voluntary production cut in the coming weeks, according
to the Wall Street Journal, with the returned barrels hitting the market in April. "A
Saudi increase in production…makes perfect sense given the tightness that is
starting to emerge in the market," Ole Hansen, head of commodity strategy at
London-based Saxo Bank, told the WSJ. "The market will probably take it quite
well."
Shell
to sell Alberta assets for $900 million. Royal Dutch
Shell (NYSE: RDS.A) will sell its Duvernay
shale assets in Alberta for $900 million to Crescent Point
Energy Corp. (TSE: CPG).
Maersk
plans carbon-neutral shipping containers. Shipping giant
A.P. Moller Maersk A/S is accelerating plans
to transition to carbon-neutral operations, including plans to add the first
container ship running on biofuels.
U.S.
shale sticks with restraint, for now. With WTI surging to
$60 per barrel, the U.S. shale industry could be in a better financial position
than previously expected. Recent comments from
shale executives suggest that drillers won’t return to aggressive spending
plans, instead focusing on cash generation.
Canadian
gas drilling on the rise. Canadian shale gas drilling
has increased rapidly
this year, and Canadian gas exports to the U.S. is also on the rise. Canada’s
drillers are hoping to capture more market share as U.S. drillers have cut
back.
Texas
freeze raises the cost of charging a Tesla to $900. The
electricity shortage in Texas amid the cold snap has sent spot electricity
prices soaring so much that the surge in power prices equals a cost of $900 for
charging a Tesla.
$100
oil possible on commodity supercycle. Several investment
bank analysts say that oil could spike to $100 per barrel because we could be at the beginning of a new commodity
supercycle.
Egypt
to restart a second LNG plant. Egypt is close to restarting a
second LNG facility after being closed for eight years. The restart boosts
Egypt’s hopes of developing a major natural gas hub and LNG export industry.
Shell’s
Nigerian accounts frozen in a court dispute. A Nigerian
court restricted Royal Dutch
Shell’s (NYSE: RDS.A) access to its bank accounts in the country
over a years-long legal dispute.
Credit:
The post Oil Prices Fall Back Below $60 first appeared in Oilprice.com on February 19, 2021.
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