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Oil Prices Rally Stopped By Chinese COVID-19 concerns

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 – the administration already issued a 60-day moratorium – 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 billionworth 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 Wood Mackenzie.

Equinor divests from Canada’s oil sands. Equinor (NYSE: EQNR) sold its 18.8% stake in Athabasca Oil, completing its total exit from onshore Canada.

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 start up.

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 announcedthat 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 date.

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 financial markets.

-OilPrice.com

Dele Fashomi
Dele Fashomi, seasoned journalist and communication teacher, is a holder of Master of Arts degree in Communication and Language Arts from the University of Ibadan in 1992/93.Earlier, he had bagged a Bachelor degree from the same university in 1984, after which he proceeded to the Nigerian Institute of Journalism, Lagos, in 1990, for a postgraduate diploma in Journalism.He had done many courses in communication, including the EU-BBC Editing Course in 2002.Mr. Fashomi combines effectively the practice, research and teaching of communication. And to date, he has published two academic works in communication: Issues in Communication Technology and Policy (2010) and Economic and Social Issues in Advertising and PR (2013).He had his first break in the Nigerian media in Concord Newspapers in 1990 and today, he has over two and half decades experience earned in several newspapers.He has been part of many start-ups, such as The Republic (1987), The Comet (1999), The Anchor 2001 - 2002; Sun Newspapers (2003); Westerner newsmagazine (2005 - 2010) as Editor; National Life (2011) as Sunday Editor, and Newswatch Newspapers (2012- 2016) as Daily Editor.Dele Fashomi is now the Publisher/Editor-in-Chief of Newstide247.com newspaper online, which he started in July 2015. He is also into biography writing, with many books in his trail, some of which he wrote alone and one he co- authored with his mentor, Mr Dare Babarinsa, entitled:  Olabiyi Durojaiye - DARE TO BE DiFFERENT. He also guided and collaborated with Pa Olatunji Odusanya in writing his autobiography - AGAINST ALL ODDS. There are many other books in the works under his pen.
https://newstide247.com

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