Saturday, May 29, 2021
/06:00 AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice.com
It was a historic week
in the oil industry as three separate oil majors faced pressure from
shareholders and courts to reduce emissions, a development that could result in
a supply crunch.
Friday, May 28th, 2021
It was a historic week for the oil industry, potentially
marking a turning point, at least for the corporate strategies of the oil
majors. More curbs on the supply side do add some bullish sentiment to the
market, although the impacts on the fundamentals are not necessarily going to
unfold in the near term. But in the wake of the huge blows to the oil majors
this week, more than a few analysts spoke about growing odds of a supply crunch
in the years ahead.
loses in court. Royal Dutch Shell (NYSE: RDS.A) lost
a landmark legal case in a Dutch court, which, if it stands, will require 45%
cuts in GHG emissions by 2030. The case is seen as a warning sign for the rest
of the oil industry, signaling legal exposure to Scope 3 emissions (those
burned by end-users). More litigation related to
emissions is likely.
loses board vote. Engine No. 1 won votes for two if its
candidates in a stunning blow to ExxonMobil (NYSE: XOM). The win is
being viewed as a shocking
and powerful statement by shareholders as to their displeasure with the oil
giant for not doing enough to mitigate the effects of its business on the
climate. And For Exxon, it could mean big changes are coming.
ruling could shrink Shell. The court ruling ordering
Shell to speed up its plans to cut greenhouse gas emissions could lead to a 12%
decline in the company's energy output, including a sharp drop in oil and gas
sales, according to Reuters.
must cut production, Engine No. 1 says. Engine No. 1
said that ExxonMobil (NYSE: XOM) must cut oil
production. "They need to position themselves for success," Charlie Penner, of
Engine No. 1, told the FT. "You would certainly believe that would mean less
oil and gas production going forward." The hedge fund's founder, Chris James,
added: "Watching that meeting yesterday was such a perfect example of how they
don't realize the world has changed. It was all on display."
shareholders vote for Scope 3. Chevron (NYSE:
CVX) also lost a notable shareholder vote, with a measure
requiring a target to reduce Scope 3 emissions passed by more than 60% of
shareholders, another major rebuke to the oil industry.
rises after boardroom brawls. Oil prices rose early on Friday
for a sixth consecutive day and were on track for weekly and monthly gains
after the defeats on climate policies that major oil firms suffered at the
hands of shareholders and judges.
to see investor pressure. On the heels of the string
of losses suffered by Exxon, Chevron, and Shell,
France's Total (NYSE: TOT) is facing growing scrutiny from investors
over its corporate strategy.
defends Alaska oil project. President Biden's
administration has backed the Willow oil
project in Alaska in a new filing by the Department of Justice.
boom driven by speculation. A Bloomberg analysis argues that the
spectacular rise in commodity prices in recent months is not the result of
demand outstripping supply, but mainly the result of increased risk appetite - i.e. speculative financial flows into commodities.
signs a 10-year deal with Gunvor. In a major
achievement towards a new LNG project, Tellurian (NASDAQ: TELL) inked a 10-year deal
for 3 mtpa of LNG with Guvnor, linked to JKM and TTF prices. The deal could
bolster a push towards an FID on the Driftwood LNG project on the U.S. Gulf
to test U.S. grid. The risk of grid blackouts to multiple
regions in the U.S. is rising this summer, with 40% of the U.S. population now
living in areas at risk, according to the North American Electric Reliability
Corporation. This is the first time that NERC included parts of New England and
the Midwest in this threat assessment.
Credit risks growing for Big Oil. This week's
climate-related actions in boardrooms and courtrooms involving some of the
largest international oil companies signal a rising threat to the sector,
Moody's Investor Service said in a comment on the industry. "A new court ruling
against Royal Dutch Shell and shareholder votes at ExxonMobil and Chevron
highlights the increasing credit risk for major oil producers over concerns
about climate change," Moody's said.
region to become hydrogen hub? The largest oil
producers in the Arab Gulf have jumped on the hydrogen
bandwagon - especially its so-called green variety produced from water
electrolysis using electricity from solar or wind - as it gains momentum with
governments and the world's largest international oil companies.
bars banks from selling commodity-linked products to retail buyers. China's
banking regulator has asked lenders to stop selling
investment products linked to commodities futures to retail investors,
according to Reuters. The move comes after soaring commodity prices has put the
spotlight on speculative flows.
says sanctions on Nord Stream 2 "counterproductive." The
Biden administration stuck with its new
position on refraining from sanctions on companies working on Nord Stream 2,
citing the risk of fraying ties with European allies.
unveils Pacific offshore wind push. The Biden
administration announced a decision to
open off blocks in offshore California for wind development. Deep waters have
made development more difficult, as well as opposition from the U.S. military.
to propose regulations for pipelines. The U.S. Department
of Homeland Security is preparing regulations on
cybersecurity for oil and gas pipelines, a move that could beef up security in
the wake of the Colonial outage.
The post A Historic Week For Big
Oil first appeared in Oilprice.com on May 28, 2021.
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