Oil Prices Rangebound As Long Term Problems Emerge

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Chart of the Week

- U.S. CO2 emissions declined by 11% last year.

- Within the power sector, coal emissions dropped by 19%, and natural gas emissions declined by 3%.

- Power generation from wind and solar increased by 17%.

Market Movers

- Jeffries upgraded ExxonMobil (NYSE: XOM) to hold from underperform and upgraded Eni (NYSE: E) to buy from hold, both due to an improving oil price environment.

- BP (NYSE: BP) discovered oil near its Mad Dog deepwater field in the Gulf of Mexico.

- Continental Resources (NYSE: CLR) said its first-quarter production was roughly 6,000 boe/d lower than expected due to the Texas grid crisis.

Tuesday Aril 13, 2021

Oil prices are still bouncing around depending on the news cycle, but with little definitive direction. In the words of Rystad Energy, “Prices are still locked in a sideways limbo, as bearish Covid-19 developments in some countries compete against bullish economic data and spending projections going forward in US and China,”.

Related: Many Drilled U.S. Wells Will Never Be Completed

300 corporations call for 50% GHG cut. In a letter to President Biden, more than 300 companies called on the U.S. to double its greenhouse gas reduction target to 50% by 2030. “I think this signals a major shift in the corporate community’s understanding of the urgency of climate change as a systemic financial risk,” Anne Kelly of Ceres told the NYT. The Biden administration is expected to announce an emissions target before a climate summit next week.

Permian pipeline glut. Nearly half of the Permian pipeline capacity could be unused by the end of the year, the result of a building spree from several years ago that assumed pre-pandemic levels of oil production. Wood Mackenzie sees utilization rates falling to 57% - the prior low point during the 2016 bust was 70%.

Falling oil reserves a big IOC problem. In the coming years, the power structure of global oil markets is set for a major shakeup if the reserve life of International Oil Companies (IOCs) continues to decline.

Morgan Stanley: Oil prices stuck at $60. Oil prices will likely be stuck in the $65-$70 range this summer, Morgan Stanley says in a new note, tempering its previous forecast for $70 oil with temporary overshoots because of rising U.S. drilling activity and the potential return of Iranian exports.

LG Chem and SKI reach an 11th-hour deal. LG Chem had sued SK Innovation for theft of trade secrets, and the suit endangered a $2.6 billion battery plant in the state of Georgia from moving forward. But the two South Korean companies reached a last-minute deal that paves the way for more battery production in the U.S.

Iran Natanz facility attacked. Iran accused Israel of sabotaging its uranium enrichment plant in Natanz over the weekend.

Dakota Access decision delayed by 10 days. The Army Corps of Engineers – now under President Biden – declined to take a stance on the Dakota Access pipeline in federal court on Friday, despite the pipeline operating without a federal permit. The judge gave Dakota Access 10 days to come up with new information, after which the court may take action.

Exxon considers shutting Norway refinery. ExxonMobil (NYSE: XOM) is considering closing its 116,000-bpd Slagen refinery in Norway, converting the site into an import terminal.

Total signs Uganda deal for $3.5 billion. Total (NYSE: TOT) and CNOOC signed deals with Uganda and Tanzania for the construction of a $3.5 billion oil pipeline to ship crude from Uganda to the coast in Tanzania.

California considers setback distances, fracking ban. The California legislature is considering a bill that would eliminate fracking statewide and implement mandatory 2,500-foot setback distances for drilling.

New York pension fund divests from oil sands. New York state’s pensions fund is restricting investment in six Canadian oil sands companies over their lack of an energy transition plan. The companies include Imperial Oil (TSE: IMO), Canadian Natural Resources (TSE: CNQ), MEG Energy Corp. (TSE: MEG), Athabasca Oil Corp. (TSE: ATH), Japan Petroleum Exploration (TYO: 1662), and Cenovus Energy (TSE: CVE), along with Husky Energy, which was recently acquired by Cenovus.

DUCs may never be completed. The big backlog of drilled but uncompleted wells might be overstated. The United States’ true DUC count could be much lower, given that many of the wells included in the EIA’s DUC count are dead in the water and many years old, likely never to be completed.

Investors see growing risks from Big Oil’s bet on plastics. A new report finds that the oil industry’s big foray into petrochemicals carries financial risks. “Investors are likely to find that companies’ reliance on plastics to recoup lost demand for fossil-based energy is problematic,” the report said.

Will shale trigger another price crash? A year after the pandemic and the disagreement within OPEC+ over supply management crushed oil prices, the industry finds itself at an all-too-familiar crossroads: Will OPEC’s bet that U.S. shale’s “drill, baby, drill” is gone forever be right this time?

Related: Saudi Oil Minister: OPEC+ Strategy Is Not Set In Stone

TC Energy eyes wind for its pipelines. TC Energy (NYSE: TRP) said it may invest as much as $1 billion in wind power to help decarbonize its oil pipeline system in the U.S.

Oil buyers look to Asia. Brent’s premium to Dubai is at its highest level in 16 months. “There’s much cheaper crude, and a lot of it coming from the Middle East,” Grayson Lim, a senior oil analyst at FGE told Bloomberg. “Those Brent-linked cargoes will need to be offered at a huge discount for buyers in the region to snap up the barrels.”

India’s oil demand in question with quiet streets. Visuals of empty streets in normally teeming Indian cities has raised doubts about the country’s oil demand.

By Tom Kool for Oilprice.com

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