Wednesday, January 27, 2020 / 08:14 AM / by Tom Kool of
Oilprice.com / Header Image Credit: DW
Today, we will take a quick look at some of the critical figures and
data in the energy markets this week.
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.
Chart of the Week
- The EIA expects global oil demand
to be larger than supply in 2021, particularly in the first quarter, leading to
sharp inventory drawdowns.
- EIA projects Brent to
average $56 per barrel in the first quarter.
- However, the agency expects
Brent to remain stuck between $51 and $54 on a quarterly basis through 2022.
- Hess (NYSE: HES) said
it would spend $1.9 billion in
2021, 80% of which would be concentrated in Guyana and the Bakken.
- Russian vessel Fortuna started working on the last
section of the Nord Stream 2 pipeline in Danish waters, despite U.S.
- ExxonMobil (NYSE: XOM) lifted force majeure on
Qua Iboe crude exports in Nigeria for the first time in six weeks.
Tuesday, January 26, 2021
Oil prices fell at the
start of the week on growing concerns related to demand. China is encouraging its population not to travel over the Lunar New Year period due to
new Covid-19 cases, a time when millions of people travel.
BP cuts exploration team. BP's (NYSE: BP) exploration
team is down to less than 100 people, from over 700 a few years ago. "The winds
have turned very chilly in the exploration team since Looney's arrival. This is
happening incredibly fast," a senior member of the team told Reuters.
Oil majors slow exploration. It isn't
just BP. In 2020, the five largest western oil majors dramatically reduced the number of drilling licenses they acquired. Analysts say as a
result of the cutbacks in acquired licenses, production in the second half of
the decade will be significantly impacted.
Oil industry alarmed at drilling restrictions. The Biden
administration may suspend new leases on federal lands â€“ the administration
already issued a 60-day moratorium â€“ sending the stock prices of oil drillers
tumbling. New Mexico may have a lot to lose. However, the industry has already stockpiled permits that could take
years to work through, so the practical impact may be limited.
Drilling restrictions bullish for oil. "[P]olicies to
support energy demand but restrict hydrocarbon production (or increase costs of
drilling and financing) will prove inflationary in coming years given the still
negligible share of transportation demand coming from EVs (and renewables)," Goldman Sachs wrote in a report.
Keystone XL cancellation bolsters TMX. The Trans
Mountain expansion project has just become the most important oil pipeline project in Canada after U.S. President Joe Biden stopped the U.S.-Canada
cross-border link Keystone XL. The project is "really the only practical option
left for increasing pipeline takeaway capacity and there should be a clear
statement from the federal government that they're committed to its
completion," said Dennis McConaghy, a former executive vice-president of
Keystone developer TC Energy.
Morgan Stanley: LNG shortfall by 2023. Morgan
Stanley said that the global market for LNG is tightening. Recent price spikes
are temporary, but the bank said that there could be a supply shortfall by
2023. The report said that the Covid-related knocked off 15% of expected global
supply through 2025, but demand only fell by 3%. "While the recent price spike
has left summer '21 prices over-extended, creating some near-term price risk to
the downside, a new multiyear up-cycle has likely begun," the report said. As a
result LNG prices could double between 2020 and 2023.
$50 billion worth of gas projects at risk. Volatile LNG
prices are putting $50 billion worth of gas-fired power plants in Asia at risk.
IEA: Global gas demand up 2.8% in 2021. In its
first-ever quarterly gas report, the IEA said that global gas demand would
bounce back this year, erasing losses from 2020. "Global gas demand is expected
to recover in 2021 from an unprecedented drop in 2020," the IEA said.
WoodMac: Solar least-cost option by 2030. The costs of solar
will fall by another 15-25% over the next decade, making solar the least cost
form of power generation in all 50 states by 2030, according to a new study by
Equinor divests from Canada's oil sands. Equinor
(NYSE: EQNR) sold its 18.8% stake in Athabasca Oil, completing its total exit from
Indonesia seizes Iran oil tanker. Indonesia seized
an Iranian-flagged oil tanker over a suspected illegal oil transfer.
Shell to buy largest UK EV recharging network. Royal Dutch Shell (NYSE: RDS.A) said
it would buy the largest network of EV recharging stations in the UK.
Biden to electrify government fleet. President Biden
said that the federal government will be a major purchaser of electric vehicles. The U.S. government has 645,000 vehicles in
2019, which consumed 375 million gallons of gasoline and diesel.
China to struggle with shale gas. China's oil
majors will struggle to ratchet up shale gas production beyond 2025, according
to Reuters. Geological complexity and high costs could lead to slow growth, which
may mean a greater reliance on imported LNG.
Refiners set for rough quarter. With earnings
reports soon to be unveiled, refiners are bracing for another rough quarter. Seven independent U.S. refiners are expected to post an average
earnings-per-share loss of $1.51, worse than the $1.06 loss in the third
quarter, according to IBES data.
Renewables surpass fossil fuels in EU. Renewable
energy overtook fossil fuels as the European Union's largest source of electricity
for the first time in 2020. Renewables accounted for 38%, with coal and gas
combined at 37%.
NextEra posts loss on Mountain Valley
impairment. NextEra Energy (NYSE: NEE) posted
a fourth-quarter loss after writing down $1.2 billion related to the Mountain Valley pipeline, which suffered
a legal setback recently, potentially leading to "substantial delays" in its
Sumitomo ends work on new oil projects. Sumitomo Corporation said that it would not start any new oil projects in an effort to pivot
away from fossil fuels.
Oil supertankers to be sold for scrap. A surplus of oil
supertankers due to overbuilding and because of weak oil demand means that a
growing number will be broken down and sold for scrap.
EVs near "tipping point." Experts say that
EVs are close to a "tipping point" of mass adoption due to falling costs. EV sales increased by 43%
globally last year. Price parity with the internal combustion engine on an
unsubsidized basis is expected between 2023 and 2025.
EU greenlights $3.5 billion battery project. EU
regulators gave the go-ahead to a $3.5 billion battery project spearheaded by a dozen European countries.
New York divests $4 billion from fossil fuels. New York City's
Comptroller announced that the City's pension funds would divest their portfolios from
fossil fuels. The $4 billion divestment is one of the largest in the world to
BlackRock's Larry Fink calls for net-zero
plans. BlackRock's CEO Larry Fink is set to call on the corporate world to "disclose a plan for how their business
model will be compatible with a net-zero economy." Fink's annual letter to
corporate leaders is widely viewed as a barometer for investment trends in
The post Oil Price Rally Paused By Chinese COVID
Concerns first appeared in Oilprice.com on January 26, 2021.
Related News - Previous Oilprice Intelligence Report
- Energy Shares
Plunge as Oil Rally Halts - OIR 220121
- Oil Demand Fears Continue to Weigh on Markets - OIR 190121
- OPEC Predicts a
Rebound in U.S. Shale - OIR 150121
- Oil Prices Jump on Weak Dollar - OIR 120121
- The Oil Bulls Are
Back - OIR 080121
Surges on OPECplus Restraint- OIR 050121
Prices Climb on Stimulus Hopes - OIR 291220
- Oil Rally Unravels On New
COVID-19 Lockdowns - OIR 221220
Stocks Soar and Oil Prices Climb - OIR 181220
Bulls are Back Despite New COVID Lockdowns - OIR 151220
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- PIB Will Ensure
Nigerians Benefit Optimally from Oil and Gas Resources - Ahmed Lawan
- FG Inaugurates
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- Low Level of Supply of Liquefied Petroleum Gas Responsible for
- Average Prices of PMS, AGO, HHK and Cooking Gas - December 2020
- Collapse of Oil Prices in Nigeria Causes Recession
- Impact of the New
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- Oil and Gas: Seeing the Future Clearly
- Oil and Gas: The Future is Gas
- Oil Demand
Recovery to Fall Short
- Petrol: Back to Subsidies