Saturday, December 12, 2020 /06:00 AM / by Tom Kool of
Oilprice.com / Header Image Credit: Oilprice.com
Oil prices fell back
on Friday morning following a strong rally on the back of an OPEC+ agreement
and new COVID-19 vaccine rollouts around the globe.
Friday, December 11th, 2020
Brent
hit $50 per barrel on Thursday for the first time since March, edging higher on
optimism surrounding vaccinations, the OPEC+ deal, plus strong demand in Asia.
However, prices eased a bit on Friday as demand in Europe and the U.S. remains
subdued and Covid-19 cases continue to spread. The EIA also reported a surge in
crude inventories for last week, up 15.2 million barrels.
Signs
of demand rebound in Europe. Many European countries
went back into lockdown in November, but are loosening restrictions
again. Bloomberg says that road
usage is on the rise, hitting a two-month high.
Pemex
suspends work with Vitol. Pemex suspended business with
Vitol after the oil trader paid $160 million to settle bribery charges. Vitol
settled charges for paying bribes in Brazil, Mexico and Ecuador.
Exxon
makes Suriname discovery. ExxonMobil
(NYSE: XOM) and its partner Petronas announced a discovery in
offshore Suriname, the first in the country for the partnership. The discovery
adds to Exxon's already large footprint in neighboring Guyana.
SEC
to vote on disclosures. The Securities and Exchange
Commission will vote on December 16
on whether or not to approve new disclosure rules for oil, gas and mining
companies related to payments to foreign governments. It is the third iteration
of the rule and stems from the 2010 Dodd-Frank law.
BLM
fast-tracks Uinta Basin land sale. The Trump
administration is fast-tracking a proposed 2,100
lease sale in Utah for tar sands developers.
Germany
hopes to insulate Nord Stream 2. Germany is looking
for ways to insulate the Nord Stream
2 project from U.S. sanctions. The pipeline is more than 90% finished but has
been held up by sanctions.
EU
clinches deal on tougher CO2 targets. The European
Union has agreed to tighten
climate targets to 55% reduction in CO2 by 2030 (from a 1990 baseline), ramping
up ambition from the current 40% reduction. Carbon prices in Europe rose to 31
euros per tonne, an all-time high.
Texas
regulator banned from waiving environmental rules. The
Texas Railroad Commission has been banned from enforcing a
string of environmental rule waivers after a judge ruled the agency had failed
to provide the public with adequate advance notice of such moves, first
proposed in the spring.
Top
shale gas basin continues to bleed cash. Frackers in
the top shale gas basin, the Appalachia, continue to bleed cash, despite the deep
cuts in capital expenditures this year as a result of the plunge in gas prices
in the first half of 2020 due to mild winter early in the year and depressed
demand later on with the pandemic.
Investors
turn to SPACs. Burned by shale, investors are
increasingly turning to clean energy SPACs, according to the Wall Street
Journal. Private equity has done more deals in clean energy than oil
and gas in 2020. Special-purpose acquisition companies (SPACs) are a new
popular vehicle - SPACs raise money, go public, and only then do they merge
with a startup company. The number of SPACs has skyrocketed this year.
Some
companies could benefit from a pipeline shortage. Some
pipeline operators with pipes already in the ground will see the value of their
existing pipelines rise amid a looming scarcity of
infrastructure, analysts say.
Shell
executives resign over the pace of transition. Some
top executives at Royal Dutch Shell (NYSE: RDS.A) resigned over a
disagreement over how quickly the company would pursue its clean energy
transition.
Consolidation
in Canada's oil industry. Whitecap
Resources (TSE: WCP) said it would buy rival TORC Oil &
Gas Ltd (TSE: TOG) in an all-stock deal worth C$552
million. It's the latest sign that the downturn is forcing consolidation in the
industry.
Oil
majors take advantage of tax havens. Reuters published an
investigation detailing how the oil majors shift billions of dollars in profits
to tax havens, often in island nations in the Caribbean. From Reuters: "In 2018
and 2019, Shell earned more than $2.7 billion - about 7% of its total income in
those years - tax-free by reporting profits in companies located in Bermuda and
the Bahamas that employed just 39 people and generated the bulk of their
revenue from other Shell entities."
UAE
awards contract to Occidental. Occidental
Petroleum (NYSE: OXY) won a contract for exploration
in the UAE.
New
York to divest from fossil fuels. The New York State
Common Retirement Fund said it would divest
itself from the riskiest oil and gas stocks by 2025. The $226 billion pension
fund is the largest yet to divest from fossil fuels.
Oilfield
services lost more than 91,000 jobs. The U.S. oilfield
services sector lost 91,680 jobs
since the market downturn started last March.
D.E.
Shaw pushes Exxon to cut CAPEX deeper. D.E. Shaw &
Co., which owns a sizable portion of ExxonMobil (NYSE: XOM),
is pressuring the oil major to
cut its spending in order to protect the dividend. The shareholder argues that
Exxon is overspending and posting poor returns, resulting in its position
slipping below that of Chevron (NYSE: CVX). D.E. Shaw says
Exxon should slash CAPEX to $13 billion, down from a planned $23 billion this
year.
WoodMac:
77% of LNG projects at risk. A new report from Wood
Mackenzie says that 77% of new LNG projects are at risk in a 2-degree climate
scenario. In other words, climate policy will result in renewables outcompeting
LNG.
LNG
gaining traction in shipping. Recently enacted IMO
rules are forcing the shipping industry to use alternative fuels to slash
emissions. LNG is gaining traction as a fuel source, the Wall Street
Journal reports.
Tesla's
shares "dramatically overvalued." JPMorgan
said that Tesla (NASDAQ: TSLA) was "dramatically overvalued."
The company's shares have climbed 800% in the past two years.
Credit:
The post Oil Takes a Breather After Big Rally first appeared in Oilprice.com on December 11, 2020.
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