Chart of the Week
– New Mexico’s oil production hit a record high in March 2021, averaging 1.16 mb/d, and natural gas output hit 6.19 Bcf/d.
– The March increases were the largest monthly increases on record (although some of the gains came from restarted wells that shuttered during the February blackouts).
– In 2020, New Mexico’s oil production rose by 133,000 bpd, or 15%.
• BP BP is aiming to enter offshore wind in Norway.
• Earthstone Energy ESTE announced that it has acquired working interests in Eagle Ford assets for $48 million in cash.
• Six oil majors are vying to partner with Qatar to develop the country’s natural gas fields and LNG projects. The list includes ExxonMobil XOM, Royal Dutch Shell RDS.A, Total Energies SE TOT, ConocoPhillips COP, Eni E, and Chevron CVX
Tuesday, June 15, 2021
Oil prices are up at the start of the week on growing demand optimism. “Oil prices really are in a positive June upswing as demand and supply are recovering in an unequal speed,” Rystad’s Louise Dickson said in a statement.
Oil prices hit 32-month high. Oil prices rose early on Monday, with the U.S. benchmark hitting a 32-month high and Brent rising above $73 per barrel as the market is growing increasingly bullish on-demand while the return of Iranian oil looks more distant than initially thought.
Shell considers selling Permian assets. Royal Dutch Shell RDS.A is considering a sale of its Permian assets, hoping to rase $10 billion. Shell’s Permian operations produced 193,000 barrels of oil equivalent per day in 2020, or about 6% of the company’s total output.
Shipping costs driving up prices. The skyrocketing costs of shipping are driving up prices for commodities across the globe. Shipping costs are up 547% relative to the seasonal average for the last five years.
Investors see green push leaving oil market short on supply. Bets from hedge funds and money managers are becoming more bullish, and analysts say that a growing number of investors see a supply shortage coming as a global push for energy transition leaves the world short on oil supply in the years ahead. “This is the basis for the next oil crisis,” Leigh Goehring, managing partner at commodities-focused investment firm Goehring & Rozencwajg Associates, told the WSJ. “We’re in uncharted territory.”
RBC: U.S. shale might be needed. RBC argues that OPEC+ may not have enough spare capacity to satiate the market next year, and more U.S. shale supply might be needed. “In the event that the U.S. remains status quo and does not grow next year, global stocks could be nearly 400 million barrels lower, from entry to exit in 2022,” wrote Michael Tran, commodity strategist at RBC Capital Markets. “Put another way, market balances only begin to reach a state of equilibrium if U.S. production grows by 1.2 million bpd next year. Anything short of that and balances will remain tight. And this comes after virtually all of OPEC+ spare capacity has returned to the market.”
G-7 call for end of coal finance. G-7 countries did not agree on a full phaseout of coal, but agreed to cut off government-backed financing for new coal projects that lack carbon capture. G-7 countries also agreed on a goal to cut emissions in half by 2030.
G-7 backs away from EV target. The G7 nations failed to set targets for EV sales in their push towards the electrification of transport at their latest meeting, pledging only to “intensify efforts in enhancing the offer of more sustainable transport modes”, the group said in its final communiqué today.
Nevada lithium project delayed. Lithium Americas Corp LAC delayed a highly-anticipated lithium mining project in Nevada while a court reviews whether the project was hastily approved during the Trump administration.
Commodity traders bet on Russian oil. Two commodity trading giants are betting big on a Russian oil project in a rare move that could make or break the oil traders’ fates – and oil market observers should be paying close attention.
Equinor ups renewables investment. Equinor EQNR outlined a strategy to ramp up renewables, setting a goal of having 50% of capex go to renewables by 2030, compared to 4% last year. It aims to have 12-16GW of renewables installed by that date. But the company declined to set declining targets for oil and gas production.
Natural gas prices shoot up. A heatwave in multiple parts of the U.S. has pushed up natural gas futures, with July Nymex contracts rising to $3.35/MMBtu.
Europe turns to coal as gas grows scarce. Coal use in Europe is up 10-15% this year due to cold weather and low natural gas inventories.
Lumber prices falling. Lumber prices staged a historic rally in recent months, but prices are now crashing, down by 42% since early May. “The rapid decline suggests a bubble that has burst and the question now is how low lumber prices will fall,” the Wall Street Journal wrote.
BofA: Exxon probably will raise its dividend. Bank of America believes shareholders who voted in favor of the board shake-up were likely focused on one thing: the dividend.
Japan bets on hydrogen. Japan is making a long-term bet on hydrogen, which critics view as unrealistic, but if it succeeds, could help build out a global supply chain.
Saudi Aramco borrows to fund its dividend. Saudi Aramco returned to the global debt market to raise cash despite higher oil prices, raising $6 billion in Islamic bonds. Aramco generated $18.3 billion in free cash flow in the first quarter, just short of the $18.75 billion in dividends it shelled out.
Biden administration looks to auction offshore wind tracts in NJ. The Biden administration on Friday announced that it would begin the formal process of selling leases to develop offshore wind farms in shallow waters between Long Island and New Jersey as part of its push to transition the nation to renewable energy.
Oil demand could surge by 8 mb/d. S&P Global Platts Analytics expects global oil demand to surge by 8.2 million b/d from May to August as major economies continue to recover from the pandemic.
Renewable energy’s employment problem. As the world reopens and the global and national economies begin to return to normal, the clean energy industry has run into the same problem as so many other economic sectors–there just aren’t enough workers.
The biggest threat to Europe’s battery boom. Weak carbon dioxide (CO2) emission rules for car sales across the European Union and the UK in the near term risk undermining what is shaping up to be a booming battery manufacturing industry in Europe, a clean transport campaign group has warned.
By Josh Owens for Oilprice.com
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