The surprise cuts by Saudi Arabia following the OPEC+ meeting have provided oil bulls with a major boost, sending Brent above $55.
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Friday, January 8th, 2021
Brent topped $55 per barrel at the end of the week, as the pledge from Saudi Arabia to cut deeper has built a solid rally. Other forces are at play as well, including monetary stimulus, the prospects of deeper fiscal stimulus in the U.S., and vaccine optimism. “The past 10 weeks of trading have seen only one weekly decline, which was comparatively small,” said Carsten Fritsch, an analyst at Commerzbank AG. “This is testimony to the strength of the oil market in the last 2 1/2 months.”
Cold winter rallies coal and gas. Thermal coal prices in China are shooting up, and JKM prices for LNG are skyrocketing. Spot prices for liquefied natural gas (LNG) delivery in Asia jumped to a six-year high. A cold winter across the northern hemisphere is contributing to price gains. Javier Blas of Bloomberg notes that at least one LNG spot cargo was sold for $33-$36/MMBtu, which would be a historically high price.
3 reasons to go all-in on lithium. Shares of major lithium producers and explorers, including Sociedad Quimica y Minera de Chile (NYSE:SQM), Albemarle Corp. (NYSE:ALB), and Orocobre Ltd (ASX:ORE) received a major hammering after Morgan Stanley forecast that Chilean low-cost brine producers could add as much as 200kt per year by 2025, while the expansion of China's and Australia's hard-rock mines could pump in another half a million metric tonnes over the timeframe. But there are three main reasons to go all in on lithium.
U.S. LNG exports hit record high in December. U.S. LNG exports set a new record in December after a record-breaking November 2020, averaging 9.8 billion cubic feet per day (Bcf/d).
Pioneer paints gloomy outlook for shale. The immediate future of U.S. shale remains bleak despite Saudi Arabia’s pledge to cut an additional 1 million bpd in production to prop up prices. “I really don’t see much increase in the Permian Basin or the U.S. shale over the next several years,” Scott Sheffield of Pioneer Natural Resources (NYSE: PXD) said this week. I never anticipate growing above 5% under any conditions…Even if oil went to $100 a barrel and the world was short of supply.”
Shale pledges restraint. Devon Energy (NYSE: DVN) said that it won’t start drilling aggressively even with higher oil prices. “I have a hard time seeing the need for U.S. producers over the next several years to get back to double-digit growth,” new CEO Rick Muncrief told Bloomberg. “For this management team, if we really think about 2021, let’s keep it flat.”
2020 tied for warmest year on record, disaster costs double. 2020 was tied with 2016 for the warmest year on record, according to new data. The costs from natural disasters in the U.S. topped $95 billion last year, double the costs from the year before.
Musk becomes world’s richest person. Elon Musk overtook Jeff Bezos to become the richest person in the world, driven by the wild surge in the stock price of Tesla (NASDAQ: TSLA). Musk’s net worth is estimated at $195 billion.
Saudi Arabia looks to build bridges with Biden. Saudi Crown Prince Mohammed bin Salman called off a multi-year blockade of Qatar this week, and it also said it would voluntarily cut 1 mb/d of oil production. The new tone, some analysts say, is at least in part aimed at currying good will with the incoming Biden administration.
Exxon releases GHG data for first time. ExxonMobil (NYSE: XOM) has disclosed emissions data for its Scope 3 emissions – those burned by end-users – for the first time. Exxon’s sales in 2019 were equivalent to 730 million metric tons of carbon dioxide, roughly the same amount as the entire country of Canada. It is also the highest of all the western oil majors.
ANWR sale an “epic failure.” The highly-anticipated first lease sale in the Arctic National Wildlife Refuge (ANWR) was a major bust. Only 50% of the acreage on offer received bids, and the sale only generated $14 million in sales, a fraction forecasted in recent years. To make matters worse, the state of Alaska was the main player in the successful bids, and only two small private companies – Knik Arm Services LLC and Regenerate Alaska Inc. – obtained tracts. Environmental groups called the sale an “epic failure.”
Banks criticize rule forcing lending. Wall Street banks blasted a proposed rule by the Trump administration that would force them to lend to energy and firearms firms.
Rivian near $25 billion valuation. Rivian Automotive Inc., the electric-truck startup backed by Amazon.com Inc. and Ford Motor Co., is close to raising a new round of funding valuing it at about $25 billion.
Biden aims to build international coalition to counter China. In a departure from the Trump administration’s go-it-alone approach, the Biden administration will aim to build an international coalition to confront China on multiple fronts, including trade, according to the WSJ.
Canada’s oil sands grows. Canada’s oil sands production hit a record high in November at 3.16 mb/d.
Norway’s EV sales reach 54% of market share. EV sales in Norway achieved a 54% market share in 2020, overtaking gasoline and diesel vehicles for the first time.
Georgia Senate races open up more aggressive Biden plans. The twin wins in Georgia by two Democrats flipped control of the Senate. That opens up a lot more possibilities for the Biden administration on a range of energy and climate initiatives. S&P Global Platts gives a rundown.
Army Corps finalizes pipeline permitting program. The Army Corps of Engineers finalized its Nationwide Permit Program (NWP), a technically complex program that allows for quick permitting for pipelines. However, the Biden administration could suspend the program.
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