Is $80 The New Normal for Oil? - OIR 121021


Tuesday, October 12, 2021 / 08:18 PM / by Tom Kool of / Header Image Credit: Oilprice


we will take a quick look at some of the critical figures and data in the energy markets. 

We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.

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Chart of the Week

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  • Private producers with acreage in West Texas and southeast New Mexico are spearheading oil production growth in the US on the back of high oil prices and increased financing access, Bloomberg writes.
  • According to Rystad forecasts, private companies will make up more than half of US supply increments next year as their rig fleet is already on par with that of established US majors.
  • Total Permian Basin production is expected to reach its pre-pandemic high of 4.9 million b/d over the upcoming weeks, only to continue its upward movement over 2022.
  • Publicly traded companies, ranging from ExxonMobil to Pioneer and Diamondback, have opted to pay back debts they incurred and pass profits back to shareholders rather than to invest in new wells. 


Market Movers

  • South Korean tech firms LG Chem and LG Electronics will pay $1.2 billion for General Motors' (NYSE:GM) Bolt EV recall, the majority of costs associated with recalling more than 140,000 cars worldwide.
  • Global trading major Trafigura is planning to invest heavily in ammonia production as it sees the low-carbon gas as the shipping fuel of the future, already developing ammonia-fueled engines with Germany's MAN Energy.
  • Russian gas giant Gazprom (MCX:GAZP) mulls the expansion of its upcoming Ust-Luga LNG plant that is currently expected to have two 6.5mtpa trains coming online in 2024-2025, though it did not provide any details on the assumed capacity of the presumed third train. 

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Tuesday, October 12, 2021

Crude prices seem to have settled quite comfortably above the $80 per barrel mark, despite growing calls from US officials on OPEC+ to increase production so as to ease the ongoing appreciation of transportation fuels. The supply restraint of the oil group has been largely offset by the Chinese power crunch and production mandates for refiners across the country. It takes several weeks for demand disruptions to be visible in crude flows, yet one can be certain Chinese buying for December-loading barrels will be even weaker than the already-meager levels of Q3. With this, Brent prices have been hovering around the $84 per barrel mark, whilst WTI is trading around $81 per barrel. 

China Set to Liberalize Power Prices Amid Ongoing Crunch. Chinese authorities have 
decided to further liberalize power pricing for coal-fired electricity plants and force industrial consumers to buy from the market in a bid to ramp up production and render its pricing transparent. 

La Nina Event Increasingly Likely This Winter. Japan's meteorological agency JMA has increased its probability forecast for a La Nina weather event from 30% to 60%, indicating that spells of cold weather in Northeast Asia are increasingly more likely in December 2021-February 2022 which spells trouble for electricity demand in the Asia Pacific. 

Reliance Backs Up Commitment towards Solar. India's largest private refiner Reliance Industries (NSE:RELIANCE) 
paid $771 million to acquire Norway-based REC Solar, a solar-grade polysilicon producer, and separately agreed to buy a 40% stake in Sterling and Wilson, an Indian solar-focused engineering company, on the back of its $10 billion photovoltaic commitment as it seeks to diversify away from oil. 

Aluminum Prices Soar on China's Power Crunch. Aluminum prices 
rose to a 13-year high this week as global supply continues to be severely hit by mandated cuts in China, power outages in India, and exorbitant energy costs in Europe, pushing the benchmark LME contract above $3,070 per metric ton.

There Is No Stopping for Coal Prices. Coal prices have been increasing for 23 straight weeks already, with Australia's benchmark Newcastle thermal coal prices traded around $230 per metric ton recently, gaining 400% year-on-year and some 12% week-on-week as high LNG prices incentivize coal switching.

Oxy Signs Up for Four Offshore Blocks in Colombia. Colombia's national hydrocarbon agency stated that US firm Anadarko, a subsidiary of Occidental Petroleum (NYSE:OXY)
signed four exploration and production deals with expected investment commitments of $1.4 billion, less than a year after the parent company sold its onshore assets to the Carlyle Group. 

Chinese Firm Signs 13-Year LNG Supply Deal with Cheniere. China's natural gas distributor ENN (SHA:600803) 
signed a 13-year supply deal with US firm Cheniere Energy (NYSE:LNG) for 0.9 million tons of LNG per year on a FOB basis, with prices pegged to Henry Hub prices plus a fixed liquefaction fee.

Angola Fails to Attract Majors' Interest in Farm-Out Round. Just as Angolan oil exports have dropped to a 30-year low this month, the African nation's national oil company Sonangol 
disclosed the names of companies that bid in its upcoming farm-out bid round, with no Western majors being present. 

Chevron Commits to 2050 Net-Zero Goal. Wary of following in ExxonMobil's (NYSE:XOM) footsteps, US major Chevron (NYSE:CVX) 
pledged to cut its operational emissions, coming predominantly from the upstream and power generation segments to a net-zero by 2050. 

Freeport Starts Construction of Giant Indonesia Smelter. US mining firm Freeport McMoran (NYSE:FCX) 
launched the construction of a $3 billion copper smelting facility in Gresik, East Java, with an assumed capacity of 1.7 million tons of copper concentrate. The plant will be designed by Chiyoda and should be commissioned in late 2023-early 2024. 

Mexican President Accuses Trading Firms of Smuggling Fuel. Mexico's President Andres Manuel Lopez Obrador has 
accused trading major Trafigura of transporting contraband fuel into the Latin American country, adding that the import permit of the Swiss-based firm had already been suspended. 

Norwegian Indigenous Group Turns Against Wind Energy. In a landmark ruling for European law practice, Norway's Supreme Court 
ruled that two wind farms, owned by a consortium led by Statkraft and built on territories inhabited by Sami people – whose grazing animals are frightened by the sight and sound of wind turbines - should see their licenses revoked. 

Qatar Petroleum Rebrands as It Seeks to Expand Competence. Qatar Petroleum 
changed its name to Qatar Energy to reflect a broader strategy scope as the Qatari NOC intends to move beyond hydrocarbon extraction and to expand its international presence in energy efficiency and CCS technologies.


The post Is $80 The New Normal For Oil? first appeared in on October 12, 2021.  

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Related News - Previous Oilprice Intelligence Report 

1.       Prepare for a Prolonged Period of High Energy Prices - OIR 081021

2.      Oil Prices Charge Higher as Bullish Sentiment Builds - OIR 051021

3.      Oil Markets On Edge As OPEC plus Meeting Looms - OIR 011021

4.      Brent Temporarily Breaks the $80 Mark - OIR 280921

5.      Oil Prices Continue to Climb on Supply Disruptions - OIR 240921

6.      Oil Prices Under Pressure from China's Evergrande Crisis - OIR 210921

7.      Oil Ends Week on Bullish Note as Outages Persist - OIR 170921

8.     Oil Prices Climb as Another Storm Hits the Gulf Coast- OIR 140921

9.      Oil Prices Bounce Back as Bullish Sentiment Returns - OIR 100921

10.  Oil Prices Slide Despite Supply Disruption - OIR 070921

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