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“Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova

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Jason Burack of "Wall Street for Main Street" is someone I like to listen to when driving.  I have long been following him.  He has years of experience as a financial analyst for the oil industry and the mining sector.   You will see sources cited in the show notes of the video.

(12 minutes - January 6th)

In his show notes, Jason Burack says...

Track the oil price and read great free research here: https://oilprice.com/

Please visit the Wall St for Main St website here: http://www.wallstformainst.com/

Follow Jason Burack on Twitter @JasonEBurack

Follow Wall St for Main St on Twitter @WallStforMainSt

You can also checkout the Wall St for Main St Facebook Fanpage at http://www.facebook.com/WallStforMainSt or the Wall St for Main St Facebook Group where you can learn and join in on the conversation!

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The following article might have some debatable aspects...

Russia Turns Attention To US After Winning Oil War With Saudi Arabia

Saturday, Jan 09, 2021 - 13:05

https://www.zerohedge.com/geopolitical/russia-turns-attention-us-after-winning-oil-war-saudi-arabia

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

If you missed the big story of this week I wouldn’t blame you. It’s a big story, bigger than riots in D.C. Russia became the de facto controller of the marginal barrel of oil.

prince-mohammed-bin-salman-of-saudi-arab

This is a bigger story than what happened on Capitol Hill on Wednesday because that was a continuation of a story whose end was already written.

Joe Biden will be President. 

The Era of Trump is over.

Now that has far-reaching effects on a number of markets, including oil. But, again, we’ve known Biden was taking office, if we’re being honest with ourselves, since election night when the civil war in the U.S. officially began.

So, we’ve known that Trump’s push to become the controller of oil markets was coming to an end. We’ve also known since the Coronapocalypse that U.S. oil production had peaked and could only go down from there.

image%20(50).png?itok=IlmCTIFh

Yes Russia’s production dropped by a similar amount, around 2 million barrels per day, averaging 10.27 millions of barrels per day in 2020. But the difference here is not in how much is produced but in what it costs to produce those barrels.

And not just any barrel, but the marginal barrel… the last barrel.

Because he who has the lowest marginal cost of production ultimately can and will be the price setter for any commodity. Russia has, by far, the lowest cost of production of the major producers when adjusted for currency effects.

The 2020 EIA report on breakeven oil prices — the price needed to balance the country’s current account — for major producers sheds some light on the subject, but everything is normalized to dollars in terms of cost. Under that analysis Russia comes in at around $42 per barrel and Saudi Arabia at around $64 per barrel.

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But that doesn’t reflect the economic reality of each producer unless they are dependent on dollars to source their expenses. Russia is most definitely not in that position. The oil industry there is homegrown.

Expenses are paid in rubles, parts are manufactured locally, and this is where the big advantage lies. I’ve been banging the drum for three years now that Russia’s currency is its ultimate weapon in the oil price wars.

Because Russia with its homegrown oil industry is far less exposed to a dollar drop in the price of oil to maintain internal production costs. The ruble rises when oil prices fall and the income is buffered by this while expenses stay relatively constant.

On the other hand the Saudi riyal is still pegged to the U.S. dollar and is trapped by it. The same goes for U.S. domestic producers, who have had it even worse now that the debt-fueled mania of the Trump years is over.

Access to cheap capital is over. Rates will rise in the U.S. over the next two years. There was just a major technical breakout on the 10 year Treasury note.

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These things combined, along with Russia’s flexible taxing regime on oil profits, give them a sincere advantage over their rivals.

So, what happened this week that was so important? The Saudis unilaterally offered to cut production by 1 million barrels per day. While, at the same time, OPEC+ accepted that both Russia and Kazakhstan would increase their production at their January meeting. It doesn’t matter that it was a paltry 75,000 barrels per day.

What matters is the message.

Saudi Arabia is no longer the price setter through massive market share in oil. Period. They surrendered to the Russians.

Oil markets rallied on the news and Brent Crude is setting up today to close the week on a technical breakout above $50 per barrel.

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With the Obama restoration completed in the U.S. it also means that the U.S. won’t be running interference for the Saudis through idiotic foreign policy boondoggles like endless sanctions on Iran and Venezuela.

Nor will U.S. domestic policy be supportive of the oil and gas industry under an Obama restoration. The opposite will occur. Texas will become a pariah state targeted for retribution for backing Trump and forcing the Supreme Court to openly abdicate its responsibilities under the Constitution.

The era of Iran and Venezuela being complete pariahs is over. Iran’s oil is already returning to the market as China turns to them as a major supplier.

The $400 billion investment deal they signed with Iran implies a massive return on investment through oil sales.

That leaves the Saudis in no position to do anything other than try to desperately keep the price of oil from returning to the $30’s.

Now, once the money printing and conversion of the U.S. to full-blown MMT insanity is complete under the Democrats, nominal oil prices will likely soar in dollar terms.

But that will not be based on a demand-pull scenario but rather a cost-push one of the type we’re already seeing in industrial metals, grains and timber as supply shocks continue to buffet the global economy and the so-called first world is locked in their homes.

Lastly, this capitulation by the Saudis is acknowledgment that 2021 oil demand will not recover from the worst of the 2020 version of the Coronapocalypse.

All of these factors together put Russia in the driver’s seat o be the price-maker in the oil space and everyone else a price-taker.

It’s a subtle transfer of power based on its ability to operate a reasonably independent economy and political system now mostly decoupled from not only the U.S. dollar but also the U.S. dominated global institutions like the IMF, SWIFT and the World Bank.

Because of this expect an Obama 3rd term to be even more belligerent towards Russia than we saw under Trump, if that is at all possible.

The Russians beat the Saudis this week. Now their attention will turn to the U.S.

*  *  *

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So tell me. If we killed 4 mbpd of oil imports from Canada would that help oil producers in the US get higher oil prices. Why is this a bad thing. Can’t they build their own infrastructure in their own country? 
 

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55 minutes ago, Boat said:

So tell me. If we killed 4 mbpd of oil imports from Canada would that help oil producers in the US get higher oil prices. Why is this a bad thing. Can’t they build their own infrastructure in their own country? 
 

You tell me. 

Trade between nations is nutty...there are all kinds of weird trade-offs and lobby networks and underhanded things that go on which us average folks are not aware of.  The world does not have a true general free market exchange.

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Russia's victory over Saudi Arabia.

Russia has turned out to be the strongest player in the oil market this year.

Let's compare, for example, Russia's budget revenues: oil and gas and other than oil and gas We can very clearly see an upward trend in the diversification of non-oil and gas revenues.

Oil and gas revenues accounted for 40% of the 2011 budget.

They currently account for 25% of the budget

The oil and gas sector (not only drilling) currently accounts for 16% of GDP.

Agricultural development is clearly one of the sources of rapid growth in non-oil and gas revenues.

Retail sales growth is another source of non-oil revenue

There are also reports on the net about the rapid growth of the light industry due to the devaluation of the RUB, which I suspect is another important factor affecting tax revenues.

In addition, under Mishustin, who was promoted for this success to the position of new prime minister, there was a massive reform in tax collection.

You can find information that without increasing the tax rate itself, there was an increase of about 20% solely for the purpose of better tax collection

And also a higher VAT rate from 18 to 20% starting from 2019

Russia is a country poorer than most Arab OPEC members, but at the same time much less dependent on oil prices

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21 hours ago, Boat said:

So tell me. If we killed 4 mbpd of oil imports from Canada would that help oil producers in the US get higher oil prices. Why is this a bad thing. Can’t they build their own infrastructure in their own country? 
 

From what I've found out NO. You import heavy to mix refine and use/sell. You have too much light and too little heavy. So you export light and refined products. Apparently it would mess everything up youd have to export more light + make less product .so youd have less refined to sell and more light and the heavy would still be on the market but not in competition for reasons above. So outside of this crazy year youd just destroy your refiners . This is my understanding I could be wrong. 

RUSSIA: So if their currency gains the USD drops (i don't know the ratio) putting up Oil price. Their currency also gets moved with Nat Gas sales volume and price thats a reason they "lost" the price war and changed their mind on opec agreement. EU gas storage looks much better than last year and Asian sales will probably grow in volume for Russia. 

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How U.S. Shale Upended Global Crude Flows

By Tsvetana Paraskova - Jan 10, 2021, 7:00 PM CST

https://oilprice.com/Energy/Crude-Oil/How-US-Shale-Upended-Global-Crude-Flows.html

The U.S. removed the ban on American crude oil exports to countries other than Canada in 2015, unleashing a new force on the global oil market to be reckoned with.  Soaring shale production over the past half-decade has not only helped America to reduce its reliance on foreign oil imports, but it has also created a new global player on the market, taking market share from the top exporters, Saudi Arabia and Russia.  

The shale boom—especially in the years 2017-2019 when U.S. exports were no longer restricted—frustrated the efforts of the OPEC+ coalition led by the Saudis and Russia to tighten the market and prop up oil prices. Every time the OPEC+ group succeeded in taking oil prices above $55-60 per barrel, U.S. producers ramped up drilling activity, taking advantage of the higher prices—and ultimately capping gains because of the rising supply out of America. 

OPEC and its key ally in the OPEC+ alliance, Russia, began to consider (albeit not publicly) the U.S. shale response to higher prices when setting production policies. The group has signaled with its policies over the past few years that despite the temptation to rake in more oil revenues with oil above $60, it is unwilling to sacrifice too much market share to U.S. shale by tightening supply too much and lifting oil prices to above the break-evens of the major U.S. shale basins. 

Some of the U.S. shale companies did “drill themselves into oblivion,” as Harold Hamm warned in 2017, after taking on too much debt to pump more and more crude. With prices crashing in 2020, bankruptcies soared, but the United States has already established itself as a key producer on the global oil market. 

It actually had become the world’s biggest crude oil producer in 2018, surpassing both Saudi Arabia and Russia, and has kept that status since then, even with the production decline due to the pandemic. On the other hand, Saudi Arabia and Russia—bound by their OPEC+ cut pact—have been withholding production from the market for more than four years now. 

The U.S. shale boom and the lifting of the export ban resulted in growing U.S. crude oil exports, which averaged nearly 3 million barrels per day (bpd) in 2019, EIA data shows. Since late 2019, average monthly U.S. crude oil exports have exceeded 3 million bpd in every month except May and June 2020. 

Rising exports helped to reduce the U.S. dependence on foreign crude oil from the peak in 2005, and it also mitigated oil price surges when events in the Middle East spooked the global market. 

In a decade and a half, U.S. crude oil imports sank to 6.8 million bpd by 2019, about one-third less than 2005 volumes of more than 10.1 million bpd. 

The U.S. shale boom was one of the reasons why oil prices didn’t soar to triple digits when more than half of the oil production of the world’s top oil exporter Saudi Arabia was knocked offline by attacks in September 2019. Rising U.S. oil exports have also kept oil from soaring for prolonged periods when the Trump Administration slapped sanctions on the oil exports of Iran in 2018 and Venezuela in 2019. 

“The flow of U.S. oil since the ban’s end has kept global oil supply in balance even at times when politics have caused the loss of supply from Iran, Venezuela and Libya,” Sandy Fielden, director of oil research at Morningstar, told Bloomberg

Going forward, U.S. crude oil exports have the chance to take additional market share from heavyweights Saudi Arabia and Russia in the world’s top oil importing market, China. But the Biden Administration could cap new drilling activity on federal lands and waters, limiting the sources of U.S. crude oil going to foreign markets.  

In November 2020, U.S. exports to China jumped thirteen-fold annually, to the third-largest on record, as Beijing stepped up crude purchases under the first phase of the U.S.-China trade deal. 

Yet, Biden’s pledge to ban federal leasing on natural gas and oil development on public lands and waters could reverse the declining trend of U.S. crude oil imports, the American Petroleum Institute (API) says, warning that nearly 1 million jobs could be lost by 2022, while U.S. crude oil imports from foreign sources could increase by 2 million bpd by 2030. 

By Tsvetana Paraskova for Oilprice.com 

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India Oil Demand Falls For First Time In 20 Years Due To COVID

By Charles Kennedy - Jan 11, 2021, 9:00 AM CST

https://oilprice.com/Energy/Crude-Oil/India-Oil-Demand-Falls-For-First-Time-In-20-Years-Due-To-COVID.html

India's crude oil demand last year fell for the first time in more than 20 years because of the Covid-19 pandemic, Bloomberg has reported, noting that Asia's second-biggest oil importer was expected to report its biggest GDP contraction since records began in the early 1950s.

Like most of the world, India implemented strict lockdowns in response to the first wave of infections last spring, which resulted in a 70-percent drop in crude demand. Refineries cut processing rates, and imports declined sharply.

Even so, the Asian powerhouse remains one of the main global drivers of future oil demand, together with neighbor China. In fact, BP last year said in its Energy Outlook 2020 that India will be the source of the biggest energy demand growth until 2050. However, consumption of crude oil may peak as soon as 2025, the supermajor also said in its outlook.

Right now, things are looking up for oil sellers: after the end of the lockdowns in India, businesses began reopening, the economy started to pick up, and oil demand rose, driven, among other things, by stronger car sales as people opted to travel by personal transport rather than the transit network amid the continuing pandemic.

"Gasoline has already crossed the pre-COVID-19 levels, and diesel too is edging towards pre-COVID-19 levels. The festive season would give a further boost to the demand," Shrikant Madhav Vaidya, chairman of India Oil Corp., said at the India Energy Forum in late October.

By November, India had once again become one of the fastest-growing markets for fuels. Refineries operated by Indian Oil Corp. cranked up processing rates to 100 percent in response to this development, as did other refiners.

Last month, gasoline consumption in India went up by 9.3 percent on the year, Bloomberg reported, even though diesel fuel demand was lower than a year earlier. Total fuel consumption for the month was 1.8 percent lower than in December 2019 but the highest since February, the report also noted.

By Charles Kennedy for Oilprice.com

 

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Why The Last Leg Of The Oil Demand Recovery Is The Hardest

By Tsvetana Paraskova - Jan 11, 2021, 5:00 PM CST

Over the past six months, excess U.S. crude oil and product inventories have declined from their surplus at the start of the summer of 2020. Petroleum inventories have been slowly falling and are now at just single-digit-percent surpluses over five-year averages, compared to 20-30 percent excess over five-year seasonal averages last summer.   Demand for gasoline and other petroleum products in the United States has recovered from multi-year lows in April and May, but the last leg of the recovery to pre-pandemic levels proves to be the most difficult and seems to have stalled at the end of 2020.   

Sure, consumption has recovered from the spring of 2020, and the excess of inventories has been shrinking. This has come, however, at the expense of significantly reduced refinery utilization and crude oil processing since oil prices and demand crashed in March. Refiners are still processing crude at levels below normal, with refinery utilization across the United States at just 80.7 percent in the week ending on January 1, compared to 93-percent utilization for the same week in the previous year, EIA’s weekly petroleum report showed last week. 

This latest report showed a major crude oil draw of 8 million barrels, but substantial inventory builds in gasoline and middle distillates. 

Still, excess stocks of all types have been trending down in recent months, and middle distillate consumption such as diesel are back to pre-crisis level, Reuters market analyst John Kemp writes.

Over the past four weeks, distillate fuel product supplied—the proxy for demand—averaged 3.7 million barrels per day (bpd), down by just 0.3 percent from the same period last year, EIA’s report showed. 

However, the largest component of U.S. oil demand—gasoline consumption—was still down by a double-digit percentage. Over the past four weeks, motor gasoline product supplied averaged 7.9 million bpd, down by 11.8 percent from the same period last year, EIA said. 

This suggests that the last part of the oil demand recovery will be the hardest, with the most recent data pointing to a stall again due to reduced travel amid measures to fight soaring COVID-19 cases. 

In the week to January 1, implied U.S. gasoline demand fell to levels last seen in May 2020, according to Bloomberg estimates of EIA data on motor gasoline product supplied. 

There’s no evidence of a substantial pick-up in gasoline demand in the immediate term, and the still raging pandemic will continue to weigh on travel in coming weeks, analysts told Bloomberg last week. 

In 2020, vehicle travel in the U.S. dropped to multi-year lows, with April vehicle travel the lowest on record dating back to 2000, according to the EIA. Average gasoline prices were also down last year to the lowest annual average since 2016. 

End-December saw the highest U.S. gasoline price in nine months, but not because of high demand. 

“Despite low demand, pump prices are more expensive because crude oil has seen steady gains,” AAA spokesperson Jeanette Casselano McGee said. 

U.S. gasoline demand was at the lowest level for the last week of December in 23 years (since 1998)—at 8.1 million bpd, with holiday travel down by at least 25 percent, AAA said last week. As of January 4, AAA expected gasoline demand to dwindle in coming weeks as the holiday season ended. 

This year, U.S. gasoline prices will rise compared to 2020, to an average of $2.44 per gallon, with a low point in January and a possible high point in July, according to GasBuddy’s Fuel Price Outlook. However, due to the pandemic, the margin for error is 19.8 percent, the highest level of uncertainty in predictions since GasBuddy started its forecasts in 2012. 

“With the coronavirus in the driver’s seat, 2021 looks to be a very uncertain year for gas prices with a wide range of possibilities. Add in President-elect Biden and the potential for new policy adding into the equation, we could see gas prices coming into 2020 like a lamb and leaving like a lion,” said Patrick De Haan, Head of Petroleum Analysis at GasBuddy. 

The biggest unknowns for U.S. gasoline and total oil demand, of course, will be the pandemic, how fast vaccines are being rolled out, and how fast they would allow a return to normality, analysts including GasBuddy say.

At least in the early months of 2021, U.S. gasoline demand will struggle to reach pre-crisis levels.  

By Tsvetana Paraskova for Oilprice.com

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Energy Stocks Jump After Goldman Hikes Oil Price Target To $65; MS Overweights Exxon

https://www.zerohedge.com/commodities/energy-stocks-jump-after-goldman-hikes-oil-price-target-65-ms-overweights-exxon

EXCERPTS

... which in turn is up on the back of a report published by Goldman's chief commodity strategist Jeffrey Currie who writes that "the events of last week substantially reduced the downside risks to our bullish commodity narrative — a fact reflected in the rise in oil and copper alongside the sharp decline in gold." ...

... In addition to being bullish on commodity stocks, Goldman has also hiked its oil forecast, and on the back of the abovementioned market "tightness" Goldman now expects Brent prices to reach $65/bbl this summer as opposed to year-end, here's why:

With vaccines being rolled out across the world, the likelihood of a fast tightening market from 2Q21 is rising as the rebound in demand stresses the ability of producers to restart production. While higher prices pose the risk of a shale response - as WTI spot prices are now at $50/bbl allowing for higher activity and positive free cash flows — we see this response remaining muted in the first instance, as higher capital costs and producer discipline curtail the US E&P’s reaction function. Moreover, OPEC+ March production level will still be near the recent lows just as global demand starts rebounding sharply driven by warmer weather and rising vaccinations.

As Goldman concludes, this suggests that the traditional bogeyman of higher oil prices - shale production - won't be a factor immediately as it "struggles to ramp-up output quickly enough, with our balance currently reflecting a 1.3 mb/d deficit in April-July despite OPEC+ increasing production by 4 mb/d, a historically tall order."

In summary, Goldman recommends a long Dec-21 Brent trade (currently trading at $53/bbl vs. our $65/bbl forecast) and expect sustained backwardation and lower implied volatility.

Finally, it is also worth noting that Exxon is also surging on the back of an upgrade from Morgan Stanley (which follows a similar upgrade from Goldman) to Overweight, making it the bank's top pick over Chevron:

 

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Tom Nolan here - In the following article by the Editors of OILPRICE.COM, it mentions a long list of potential company investments.  It is a long article.

One investment mentioned in the article is FNV -  EXCERPT follows

Franco-Nevada Corporation (TSX:FNV) specializes in securing precious-metal streams, but the company also works in the oil and gas industry. With key assets in some of North America’s most desirable oil and gas plays, including Texas, Oklahoma and Alberta, it is clear that the company has amazing potential in the coming years.

I own some stock in this Royalty and Streaming company, not only for the gold/silver royalty factor, but also because it owns mineral rights for oil/gas properties.  Franco-Nevada has perhaps 40 employees, and so its market cap per employee is about 400 million.  Think about that kind of viability.  As long as a miner or oil/gas producer is pulling stuff out of the ground, the corporation makes a profit. 

WEBSITE - https://www.franco-nevada.com/Home/default.aspx

~~~~~~~~~~~~~~~~~~

January 11th

The World’s Next Giant Oil Discovery Could Be Here

https://oilprice.com/Energy/Energy-General/The-Worlds-Next-Giant-Oil-Discovery-Could-Be-Here.html

https://finance.yahoo.com/news/world-next-giant-oil-discovery-000000980.html

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I looked into gold oz to oil ratio and found a 10-30 barrel per oz. So at 1850$ (a fair price for gold) thats 61$-185$ / barrel . I'd think gold stays above 2k. Yr average. So oil should go up to get back to "wide - normal values" id think 90$ oil is gonna be fair price in coming years and a spike up to 180 is possible . 

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Oil Prices Jump To 10-Month High On Weak Dollar

By Tom Kool - Jan 12, 2021, 2:00 PM CST

We hope you enjoy.

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Chart of the Week

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-    Roughly 9.1 gigawatts of electricity capacity are slated for retirement in 2021 in the United States.

-    Nuclear power will account for 51% of that total, with coal accounting for 30%.

-    48 GW of coal capacity has shut down in the past five years. Retirements are expected to continue, although the pace could slow this year. 

Market Movers

-    U.S. Well Services (NASDAQ: USWS) surged to its highest level in seven months after securing a contract extension to provide fracking services for Range Resources (NYSE: RRC).

-    Cheniere Energy (NYSE: LNG) was upgraded to Strong Buy by Raymond James.

-    Royal Dutch Shell (NYSE: RDS.A) resumed LNG exports from its Prelude facility in Australia after a lengthy period of maintenance.

Tuesday, January 12, 2021 

Oil prices shot up to a 10-month high, posting further gains in the wake of the OPEC+ cuts, and edged a bit higher by a weaker dollar. Some analysts are starting to argue that the rally is getting a little overdone. WTI is above the 200-week moving average, and “it may soon top out,” according to Commerzbank. 

LNG prices skyrocket. JKM prices for LNG in northeast Asia are shooting through the roof. Cold weather and higher demand in China and Asia have JKM prices for February delivery well above $21/MMBtu, while individual spot cargoes have traded in the high $30s/MMBtu, breaking all-time record highs. The cost to rent LNG tankers is also breaking records.

OPEC cuts could help shale. The jump in crude oil prices could finally bring positive cash flow to much of the U.S. shale industry, according to Rystad Energy. The firm says cash flow could increase by 32% this year. 

OPEC+ compliance slips to just 75%. OPEC+ group’s compliance with the oil production cuts fell to 75% in December 2020—one of the lowest levels since the pact was enacted in May 2020, tanker tracking firm Petro-Logistics said on Tuesday.

Kansas City Fed: shale needs $56 WTI. According to the latest survey from the Kansas City Federal Reserve, oil and gas firms reported that oil prices needed to be on average $56 per barrel for a substantial increase in drilling to occur, and natural gas prices needed to be $3.28 per Btu. The industry’s expectations for future activity improved.

Shell to cut 300 jobs in North Sea. Royal Dutch Shell (NYSE: RDS.A) said it will eliminate 300 jobs in the North Sea over the next two years. 

Fitch warns of oil and gas defaults. Fitch Ratings warned about the continued threat of defaults in a recent update, noting the oil and gas industry would this year again be the one with the most defaults.

Renewables to dominate new power installations. Renewable energy, mostly solar and wind, are set to account for more than two-thirds of the new electricity generation capacity that the United States will install this year, according to the EIA. A total of 39.7 GW of new electricity generating capacity is expected to start commercial operation in 2021, with solar accounting for 39% and wind accounting for 31%. 

European freeze rattles energy. A polar vortex is bringing Arctic weather across much of Europe, blanketing Spain in snow and sending temperatures to unusually low levels. That is adding more upward pressure to gas markets.

Wind becomes top power supplier in Texas. “Wind power surged past coal in Texas’ electricity mix for the first time in 2020, the latest sign of renewable energy’s rising prominence in America’s fossil fuel heartland,” the Financial Times wrote

Faraday in SPAC to go public. Faraday & Future Inc., an electric-vehicle startup, is in talks to go public through a merger with Property Solutions Acquisition Corp., a special purpose acquisition company, or SPAC. The entity hopes to raise $400 million, and the combined entity hopes to be worth around $3 billion.

Drillers stockpile permits ahead of Biden admin. Energy companies have amassed a backlog of drilling permits ahead of the incoming Biden administration in case there are new restrictions on federal lands. 

GM changes logo to promote EVs. GM (NYSE: GM) changed its logo for the first time in 56 years, and the new image noticeably looks like a plug, in an effort to promote EVs.

Chinese rival to Tesla. Chinese automaker Nio Inc. unveiled its first all-electric sedan in a bid to compete with Tesla (NASDAQ: TSLA)

Supreme Court to look at biofuels waivers. The Supreme Court will review the ability of oil refineries to win exemptions from federal biofuel-blending quotas, the latest twist in the ongoing battle between the ethanol and oil refining industries. 

HSBC under pressure to cut fossil fuel investments. Shareholders of HSBC have filed a resolution urging the bank to cut its support for oil, gas and coal. 

otal SA to add renewables investments. Total (NYSE: TOT) will add renewable energy investments in 2021, according to CEO Patrick Pouyanne. The company aims to increase holdings to 35 GW by 2025, up from 9 GW today. 

Saudi Arabia launches NEOM. Saudi crown prince Mohammed bin Salman launched plans to build NEOM, a zero-carbon city.

$1 billion inflows to renewable energy after Dem sweep. After Democrats took control of the Senate, $1 billion flowed into renewable energy exchange-traded funds. 

EIA natural gas reserves fell by 2%. Natural gas reserves in the United States fell by 2 percent in 2019 due to low prices, the Energy Information Administration said in an update on the country’s oil and gas reserves.

By Tom Kool for Oilprice.com

 

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EIA production forecast is for 11.1 mmb/d average in 2021 despite 79% drop in rig count from 846 in February 2020 to 181 in August 2020.

Doesn’t make sense especially if you consider first year declines for most unconventional production is about 40%.

 

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5 hours ago, Tomasz said:

EIA production forecast is for 11.1 mmb/d average in 2021 despite 79% drop in rig count from 846 in February 2020 to 181 in August 2020.

Doesn’t make sense especially if you consider first year declines for most unconventional production is about 40%.

Makes perfect sense as DUC wells are getting completed at rapid pace. Don't need rigs to complete DUCS. 11.0 mmbd from the all time high of 13.1 mmbd is because when demand dropped like a rock, the proven fields in the West Texas and Dakotas jacks are all on timers, and controlled by need. Slow production per "Jack" in bigger fields to 30 minutes less per day, you just eliminated a couple mmbd. 

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Another headline another fail.  I see red oil and oil rises with oil stock decline headline. Why try and predict the price ? Why not say oil stocks decline and fuel inventory builds. Is the headline not supposed to indicate what the peice is about? ... I don't see the eia report about prices just a factor that effects price. 

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Goldman Discovers An Unexpected Source Of Demand For 1 Million b/d Of Oil

Wednesday, Jan 13, 2021 - 12:00

https://www.zerohedge.com/markets/goldman-discovers-unexpected-source-demand-1-million-bd-oil

Having recently turned even more bullish on the oil market, bringing forward up its year-end $65 Brent price target to the summer on Monday, overnight Goldman's commodity team turned even more bullish on oil, "discovering" an unexpected source of oil demand in the near term, which could lead to even higher oil prices in coming days. Specifically, according to to Goldman's Damien Courvalin, global oil demand will be boosted by at least 1 million b/d in the coming weeks as cold weather spurs the use of diesel for power generation.

As Courvalin explains, frigid temperatures in Asia and Europe in the face of LNG supply issues have led to a surge in local gas prices. Specifically, the record-high JKM prices we discussed yesterday...

gS%20oil.jpg?itok=KG5Z39xl

... have moved well past diesel substitution in power generation although the rally in TTF this week is still short of fuel oil parity. Goldman believes this substitution-induced price surge could lead to at least a 1 mm b/d boost to global oil demand in coming weeks, with an upside potential of 1.5mb/d (especially if TTF prices rally past $10/mmBtu).

Goldman based this estimate on the precedent of the 2017 cold winter, grossing up OECD data to the rest of Asia. As the bank explains, "a simple top-down weather model on Asia and EU winter heating demand confirms that the recent cold wave would boost demand by 1mb/d, even before the impact of additional fuel substitution under such extreme price dislocations (with working-from-home dynamics pointing to a potentially even stronger demand impact)."

low%20temps%20gs.jpg?itok=NWIqWCF0

The steady decline in oil burn power generation capacity in recent years ultimately limits the magnitude of this substitution, likely explaining the magnitude of the JKM gas rally which is now solving for end-demand destruction in the LNG trucking and industrial sectors. This in turn will provide additional support to on-road diesel and LPG demand, according to Courvalin.

To be sure, such demand support will be transient, with higher expected LNG arrivals in coming weeks and milder Asian weather forecasts. That said, assuming even a mere three-week impact, this transitory demand spike "will nonetheless help offset half of the c.1.5 mb/d decline in global transportation demand" that Goldman expects in January due to spreading lockdowns (with the split polar vortex potentially leading to additional cold spells).

gs%20wfh%20oil%20trends.jpg?itok=Qosz2Gm

This power boost to oil demand will further be followed in February and March by the unexpected 1 mb/d cut in Saudi production announced last Tuesday, comforting Goldman in the bank's view that oil prices will continue to rally in coming months to reach$65/bbl by July.

Although Goldman's reco helped boost oil price in early trading, Brent has since fallen, sliding almost $1/bbl a little after 830am ET and turning red on the day after OPEC secretary general Barkindo warned that while the worst is now over for the oil market, and OPEC is positioning for a strong 2021 rebound, high crude inventories remain a "key issue of market imbalance," a comment which hammered oil prices to session lows.

brent%201.13.jpg?itok=UuzCw6Xx

 

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1 minute ago, Tom Nolan said:

To be sure, such demand support will be transient, with higher expected LNG arrivals in coming weeks and milder Asian weather forecasts. That said, assuming even a mere three-week impact, this transitory demand spike "will nonetheless help offset half of the c.1.5 mb/d decline in global transportation demand" that Goldman expects in January due to spreading lockdowns (with the split polar vortex potentially leading to additional cold spells).

See details about the SPLIT POLAR VORTEX here...

https://community.oilprice.com/topic/21940-united-states-lng-exports-reach-third-place/?page=4#comment-142663

 

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Oil Rises On Crude Draw Despite Product Builds

By Irina Slav - Jan 13, 2021, 9:40 AM CST

https://oilprice.com/Energy/Crude-Oil/Oil-Rises-On-Crude-Draw-Despite-Product-Builds.html

Crude oil prices jumped further today after the Energy Information Administration reported a crude oil inventory draw of 3.2 million barrels for the week to January 8.

This compared with an estimated draw of 5.82 million barrels from the American Petroleum Institute and analyst expectations of a draw totaling 2.72 million barrels.

It also adds onto the inventory decline of as much as 8 million barrels reported for the previous week, which helped push oil prices higher.

Brent crude yesterday rose above $57 a barrel for the first time in almost a year thanks to Saudi Arabia’s decision to cut an additional 1 million bpd in production in February and March as the collective OPEC+ effort to control prices appeared to not be effective enough for the Kingdom.

This decision spurred talk of tight supply facing the world despite still sluggish demand amid still high new Covid-19 case numbers in some key markets, including the United States and India, even though demand is improving strongly in India as fuel demand booms.

In fuels, the EIA reported a 4.4-million-barrel increase in gasoline inventories and a 4.8-million-barrel rise in distillate fuel inventories. This compared with a 4.5-million-barrel increase in gasoline stocks and an even bigger, 6.4-million-barrel rise in middle distillate inventories a week earlier.

Gasoline production stood at 7.5 million bpd last week, down from 8 million bpd a week earlier. Production of middle distillates averaged 4.7 million bpd last week, compared with 4.8 million bpd a week earlier.

A day before the release of its weekly petroleum report, the EIA had some positive news for the oil world. The authority said in the latest edition of its Short-Term Energy Outlook that it expected oil demand to grow by 5.6 million bpd this year, after it shed 9 million bpd in 2020. However, demand growth will slow down in 2022, when the world will only add 3.3 million bpd to its daily demand.

By Irina Slav for Oilprice.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

WTI LIVE GRAPH - https://tradingeconomics.com/commodity/crude-oil

 

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Saudis Prop Up Oil Prices, Cut Shipments To Asia And Europe

By Irina Slav - Jan 13, 2021, 11:00 AM CST

Saudi Arabia has announced reductions in crude oil volumes to be supplied to at least nine clients in Asia and Europe following its decision to add another 1 million bpd to its OPEC+ production cut quota to prop up prices.

Bloomberg reports that the Kingdom will slash supplies to some refiners by between 20 and 30 percent, according to unnamed sources from the buyer companies. The cuts are made for shipments under long-term contracts and concern Aramco’s heavier grades.

Some smaller European buyers, the sources said, may not get any Saudi cargos next month at all.

Saudi Arabia surprised the world last week when it announced plans to cut its current production rate by another 1 million bpd on top of the amount it agreed to cut under the OPEC+ agreement. Saudi Arabia also hiked crude prices for buyers in Asia and the United States.

The announcement came after OPEC+ agreed to increase its February production by just 75,000 bpd, versus an initially proposed 500,000 bpd. For March, the extended cartel agreed to lift output levels by another 120,000 bpd.

Yet with Saudi Arabia saying it would cut 1 million bpd, the modest addition to other members’ production failed to have any negative impact on oil prices, which have been on a tear since the Saudi announcement. Effectively, thanks to the additional cut, the cartel would be producing less than it did for the second half of 2020: February’s total production cuts will be 8.125 million bpd, and March’s will total 8.05 million bpd. That’s compared with 7.7 million in production cuts for the second half of 2020.

While Saudi Arabia cuts additional production volumes, Russia will ramp up its crude output from 9.119 million bpd in January to 9.184 million bpd in February. For March, the country’s production quota will increase further to 9.249 million bpd.

By Irina Slav for Oilprice.com

 

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World’s Top Oil Trader: Airline Travel Won’t Recover Until Late 2021

By Tsvetana Paraskova - Jan 13, 2021, 12:00 PM CST

https://oilprice.com/Energy/Crude-Oil/Worlds-Top-Oil-Trader-Airline-Travel-Wont-Recover-Until-Late-2021.html

Airline travel will continue to suffer in the first half this year and will only recover, and jet fuel consumption with it, in the back half of 2021, when mass vaccinations are poised to allow traveling to more destinations quarantine-free, according to the world’s largest independent oil trading firm, Vitol.

Vaccination passports could be inevitable for the tourism and airline industries to rebound from the pandemic hit, Mike Muller, the head of Vitol’s operations in Asia, said at the online Gulf Intelligence conference, as carried by Bloomberg.

Until a critical mass of people are vaccinated, and probably ‘vaccination passes’ are introduced, jet fuel demand will continue to be a drag on global oil demand recovery, according to Muller.  

“Until there’s a roll-out and until we introduce the inevitable -- which is, alongside your regular passport, probably a vaccination pass -- this demand is not set to recover,” Muller said, noting that holiday booking activity in all regions, including the Americas, Europe, and Asia is “all flat on its back still.”

Jet fuel demand will not recover to pre-crisis levels by the end of this year, and at the end of 2021, it will still be 1 million barrels per day (bpd) to 2 million bpd lower than what was before the pandemic, Vitol’s chief executive Russell Hardy told Bloomberg in an interview at the Gulf Intelligence conference.

Continued low demand for jet fuel will account for 80 percent of the 3.1-million-bpd gap in oil demand this year compared to pre-pandemic levels, the International Energy Agency (IEA) said last month. The IEA expects global oil demand to rebound in 2021 and rise by 5.7 million bpd compared to 2020 levels. Yet, this is a smaller rebound than earlier expectations because of continued weakness in the aviation sector, the IEA said in its latest monthly report.

Vitol is a bit more optimistic about global oil demand growth this year, with Muller expecting oil consumption to rise by over 6 million bpd in 2021 from 2020.

More production from OPEC will be needed later in 2021, and probably more production out of the United States, Vitol’s CEO Hardy told Bloomberg.

By Tsvetana Paraskova for Oilprice.com

 

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(edited)

9 hours ago, Tom Nolan said:

3 Stocks To Buy As Oil Prices Rise Above $50

By Alex Kimani - Jan 12, 2021, 6:00 PM CST

https://oilprice.com/Energy/Energy-General/3-Stocks-To-Buy-As-Oil-Prices-Rise-Above-50.html

QUICK EXCERPT

#1. Suncor Energy

#2. EOG Resources

#3. Pioneer Natural Resources

PXD or PXT .... if your Canadian! :D ... no dividend all ncib (share buy back ) so no div taxes to worry about for Americans. 

Edit- just noticed #1 is Canadian name .

Edited by Rob Kramer
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