Saturday, June 19, 2021
/06:00 AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
After a momentous rally this year, it looks like oil prices
are finally coming under pressure - with the threat of inflation dampening oil
Friday, June 18th, 2021
The months-long oil price rally hit the pause
button this week, following a shift in outlook from the U.S. Federal Reserve.
"Inflation is your friend until it isn't," Louise Dickson of Rystad Energy said
in a statement. "The oil market is re-learning this lesson in the past two
trading days after the US central bank hinted at potential interest rate hikes
in 2023, which would make oil more expensive in non-dollar denominated
economies and could damper demand."
oil looking more likely. Many oil traders see
oil remaining above $70 per barrel for the foreseeable future, with $100 oil no
longer an impossibility.
shoots down Biden's public lands freeze. A federal
court said that the Biden administration's pause on new leases for drilling on
public lands was illegal. But the administration still has leverage to slow walk or delay leasing.
to ramp up EV spending by 30%. GM (NYSE:
GM) will increase EV
spending to $35 billion through 2025, a 30% increase over its previous
guidance. It will also build two new battery plants in the U.S., although the
locations are to be determined. The decision comes a few weeks after Ford
(NYSE: F) said it would spend $30 billion on EVs through
too late to avoid supply crisis. The level of drilling
and by extension capital investment is insufficient and has been for a number
of years to sustain oil production at current levels. The lack of new drilling
will start to show in a decline in production as early as next year.
boom has barely impacted fossil fuels. Oil, gas, and
coal still represent over
80 percent of final energy consumption, not much different from a decade ago,
despite the rising share of renewable energy in the world's total energy
oil demand rebounds. India's oil demand rebounded in
the first half of June, offering bullish momentum to the oil market.
services prices are on the rise. The steady and
substantial climb in oil prices has led to more business for
oilfield service providers and higher prices. "We are already beginning to see
a positive increase in activity and an upturn in service pricing will hopefully
be reflected in the coming months," Packers Plus Energy Services' chief executive
Stuart Wilson told Reuters.
urges members to continue oil investments. The energy
transition should not crowd out any source of energy as all energy sources of today
will be required for the foreseeable future, OPEC Secretary-General Mohammad
to boost West Qurna 1 by 40%. Iraq plans to boost the production
capacity of West Qurna 1 by 40% to more than 700,000 b/d over the next five
sees little shale growth this year, more in 2022. OPEC
officials heard from industry experts that U.S. oil output growth will likely
remain limited in 2021 despite rising prices, OPEC sources told Reuters. "The general
sentiment regarding shale was it will come back as prices go up but not super
fast," said a source. "It looks like the shale oil genie is going to stay in
the bottle for now," said the source, adding: "OPEC and Saudi Arabia have a lot
of power at this time."
Permian exit a "litmus test." The potential sale
of Royal Dutch Shell's (NYSE: RDS.A) Permian assets
will offer a "litmus test" for how the industry values the prospects of U.S.
shale. Shell is hoping to raise $7 to $10 billion, which would value its
acreage at $40,000 per acre. Most Permian deals this year have closed between
$7,000 and $12,000 per acre, according to Reuters.
to release metals from reserve. China announced plans
on Wednesday to release industrial metals from its national reserves to curb
first quarter for solar and wind. The U.S. added 3.3 GW of new wind in
the first quarter, and 5 GW of solar. For wind, it was a 75% year-on-year
increase in new capacity.
overwhelmed by wind demand. Siemens (ETR: SIE) is
being overwhelmed with requests to build turbines in countries tapping wind
resources. "The challenge we have is how many countries are saying, â€˜Hey, you
need to build a factory here," Chief Executive Officer Christian Bruch told reporters.
traders transition to both oil and renewables. Vitol said that it aims to
have 50% of its investments in renewables, gas and power, and the other 50% in
oil within five years. Other traders are viewing a similar transition. "We will
keep oil trading activities as we see strong demand for oil in the next 10
years," said Torbjorn Tornqvist, CEO at Gunvor. "We are also increasing our
power trading, investing in technologies to decarbonize, and looking at
existing solar and wind assets."
withdraws from new oil development. Sumitomo Corp.
(TYO: 8053) has decided to no longer
develop new oil reserves and transition its fossil fuel business to renewables
LNG industry pivots in support of carbon price. Australia's
liquefied natural gas (LNG) sector is changing from
an industry that was vociferously opposed to any form of carbon taxes or
trading to one that views a price on emissions as vital to its future.
may crackdown on private refiners. In April, officials
from China's economic planning agency began probing teapots for suspected
violations of tax and environmental rules. "Recent moves by the Chinese
government indicate a change in the wind against the smaller independents," an
analyst told Bloomberg.
"This is likely to hand power back to the majors."
The post Is The Oil Rally Nearing Its End? first appeared in Oilprice.com on June 18, 2021.
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