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Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav

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Lebanon’s Fuel Crisis Could Spark Civil War

By Felicity Bradstock - Oct 12, 2021, 5:00 PM CDT

  • A combination of corruption, incompetence, and underinvestment have led to a major fuel crisis in Lebanon
  • This weekend, the country saw a 24-hour blackout that was only solved when the central bank provided the energy ministry with $100 million of credit to secure fuel
  • If the new government fails to solve the energy crisis in Lebanon, there are very real fears that the country could fall into civil war

https://oilprice.com/Energy/Energy-General/Lebanons-Fuel-Crisis-Could-Spark-Civil-War.html

 

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EU’s Green Bond Debut Comes Out Swinging

By Julianne Geiger - Oct 12, 2021, 4:30 PM CDT

https://oilprice.com/Latest-Energy-News/World-News/EUs-Green-Bond-Debut-Comes-Out-Swinging.html

The European Union’s green bond debut was a great hit, drawing record demand, according to Bloomberg.

The EU received orders worth 135 billion euros on Tuesday, ultimately selling $13.9 billion in securities that will mature in 2037.

It outshone the U.K.’s green bond debut from September.

The green bond was just the first batch of 250-billion-euros in green bond sales set to take place in the next couple of years. But the next batch may not go on sale until sometime next year.

Green bonds are poised to play an increasingly important role in financing assets needed for the low-carbon transition.

Green bonds have already grown in popularity, with green bond issuance hitting a record last year, with total sustainable debt hitting a record high of $732.1 billion. Not even the pandemic could stop the surge in investor appetite....

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https://oilprice.com/Latest-Energy-News/World-News/Russia-Gazprom-Uses-Inventories-To-Stabilize-Europes-Gas-Market.html

Russia: Gazprom Uses Inventories To Stabilize Europe's Gas Market

By Tsvetana Paraskova - Oct 12, 2021, 3:30 PM CDT

Russia's gas giant Gazprom has started withdrawing gas from its storage facilities to stabilize the gas market, Russian Deputy Foreign Minister Sergey Ryabkov told a BBC program on Tuesday, adding that "It's not in our interest to rock the boat further."

Some analysts and Members of the European Parliament have suggested that Russia has been deliberately withholding gas supply to the European market in recent weeks, exacerbating the gas crisis and pushing prices higher, possibly with the ultimate goal of pushing the European Union into admitting that it needs the controversial Nord Stream 2 pipeline to avoid a more severe crisis when the winter comes.

More than 40 members of the European Parliament from all political groups have reportedly urged the European Commission to launch an investigation into Gazprom over alleged market manipulation that could have contributed to the record-high natural gas prices in Europe.

Ryabkov dismissed any such suggestions in an interview with the BBC program Hard Talk on Tuesday.

"We favour energy security of Europe; we want to work collaboratively ... Gazprom has in fact started pumping out from its reserves into the pipelines to stabilise the market," the Russian diplomat said, as carried by Reuters.

"We work deliberately, quietly, soberly towards stabilisation. It's not in our interest to rock the boat further," he added.

Haidach, a storage facility in Austria used by Gazprom, switched from injecting gas to withdrawing gas for one day after gas prices in Europe hit a record last week, Russian news agency Interfax reported on Monday, citing data from Gas Infrastructure Europe.

After reaching another record high last Wednesday, natural gas prices in Europe and the UK reversed some of the gains later in the day after Russian President Vladimir Putin suggested that Gazprom could send more gas to its European customers.

On Thursday, the International Energy Agency's executive director Fatih Birol told the Financial Times that the IEA's assessment points to the fact that Russia could boost its European exports by 15 percent of peak winter supply.

By Tsvetana Paraskova for Oilprice.com

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Pakistan Struggles To Find LNG Amid Gas Crisis

By Charles Kennedy - Oct 12, 2021, 11:30 AM CDT

https://oilprice.com/Latest-Energy-News/World-News/Pakistan-Struggles-To-Find-LNG-Amid-Gas-Crisis.html

Pakistan is looking to buy liquefied natural gas (LNG) for the winter, but it couldn’t find any sellers in a recent tender, which highlights the fact that the natural gas market in Asia is tight.

Pakistan has issued a tender seeking eight LNG cargoes for delivery in December and January, but has not received any bids, according to a document from Pakistan LNG.

Industry sources told Reuters that the main driver behind the lack of offers was the long validity period of the offers, 15 days, considering the volatile prices of spot LNG cargoes in Asia right now.

It was not immediately clear if Pakistan will re-issue the tender at a later stage.

Pakistan is one of the price-sensitive buyers of spot LNG cargoes in Asia, but it still needs spot supply on top of its contractual term LNG deliveries to meet gas demand and avert a power crisis.

Pakistan is likely to slash spot LNG purchases this winter to avoid the record-high prices, which could result in a gas crisis in the country, Pakistani outlet The Express Tribune reported earlier this month.

High import prices of LNG will impact Pakistan’s finances, if the country manages to attract offers for cargoes, analysts say....

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China Backpedals On Climate Commitments

By Irina Slav - Oct 12, 2021, 9:30 AM CDT

China has taken a step back from emission reduction commitments amid the energy crunch that caused factory closures and power rationing.

In a statement, Premier Li Keqiang said that the stable supply of energy must be the foundation of any transition to a less emission-intensive future.

“Energy security should be the premise on which a modern energy system is built, and the capacity for energy self-supply should be enhanced,” Li said as quoted by Bloomberg.

Based on this, Beijing now plans to make sure that its goal to reach peak emissions by 2030 and a net zero emission status by 2060 will be pursued in a “sound and well-paced” manner.

Last month, the International Energy Agency estimated that China was on track to achieve its peak emission target before its own deadline in 2030 thanks to its latest efforts in this respect. The IEA also said, as quoted by Argus, that China could become a net-zero economy before 2060.

This, however, was before the energy crunch caused a shortage that immediately boosted China’s demand for fossil fuels, like Europe’s. The Financial Times reported earlier this week that factory owners in China were buying diesel generators to keep their businesses going as the government imposed power rationing because of the shortage.

The demand for oil, coal, and gas is likely to remain strong, based on the Chinese Premier’s statement. In it, Li also said that economic development took priority because it “holds the key to solving all its problems.” To that end, China will continue building its production capacity in all three fossil fuels, the Premier also said.

Li also spoke against power rationing, saying the government was working to “keep homes in the north warm and safe this winter, and ensure the stability of industrial and supply chains and sustained, steady economic development.”

By Irina Slav for Oilprice.com

https://oilprice.com/Latest-Energy-News/World-News/China-Backpedals-On-Climate-Commitments.html

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(edited)

The 'sky is the limit' for heating oil prices if we get slammed this winter: strategist

Yahoo [VIDEO interview] https://finance.yahoo.com/news/the-sky-is-the-limit-for-heating-oil-prices-if-we-get-slammed-this-winter-strategist-170745954.html

Get those blankets and sweaters ready for the winter as one bad storm may send oil and natural gas prices soaring to new heights from already worrisome levels. 

"The sky is the limit," Natasha Kaneva, JPMorgan's head of global commodities strategy, told Yahoo Finance Live, referring to the outlook for heating oil prices, if the U.S. gets hit with a bad winter. "We are dealing with theoretical prices at this point because everything is already at record high levels. We just don't see the release valve. The only option is for demand destruction to start taking place. That's exactly the link with oil prices. Natural gas prices are so high that consumers are switching to other sources."

Kaneva added that natural gas prices could "double" from current levels if this winter is as bad as the one that impacted the flow of energy in Texas last year.

"We cannot even put a price on the European natural gas prices at this point," Kaneva noted after a very volatile week for energy prices overseas.

With winter not even here yet, energy prices across the board have shot higher amid tight supplies during the global recovery from the pandemic. 

Oil prices are at seven-year highs. On Monday, Brent crude oil pushed higher to $84 a barrel — nearing the recent upwardly revised targets by some on the Street. 

Meanwhile, natural gas prices have more than doubled since June. 

The supply/demand imbalances in the energy markets has Kaneva's peers issuing similar worrisome comments.

"When you head into winter with critically low inventories, it has the potential to be a crisis," said Damien Courvalin, Goldman Sachs head of energy research, on Yahoo Finance Live. "It would take a cold winter to really face the risk of gas shortages."

Goldman recommends shares of ConocoPhillips and ExxonMobil as plays on rising energy prices. 

https://finance.yahoo.com/news/the-sky-is-the-limit-for-heating-oil-prices-if-we-get-slammed-this-winter-strategist-170745954.html

Edited by Tom Nolan
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9 hours ago, Tom Nolan said:

New UK Law To Mandate Home EV Chargers To Switch Off During Peak Hours

By ZeroHedge - Oct 12, 2021, 10:30 AM CDT

https://oilprice.com/Latest-Energy-News/World-News/New-UK-Law-To-Mandate-Home-EV-Chargers-To-Switch-Off-During-Peak-Hours.html

Seems logical to me Tom.

Most people with EV's either charge during working hours (so with this scheme they will get 3-4 hours worth of charging) and then when they get home they plug their car in and it kicks in as soon as off peak starts so they will fully charge their car at off peak times at the cheapest cost.

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Will The U.S. Be Spared From The Global Energy Crisis?

By Tsvetana Paraskova - Oct 12, 2021, 7:00 PM CDT

  • U.S. natural gas prices do have more room to rise, but they are unlikely to follow the skyrocketing rallies of the European and UK gas prices.
  • The United States has a fairly adequate natural gas supply in storage ahead of the winter. 
  • The United States simply has not had to rely on the rest of the world to provide its energy supply, and that’s really what Europe’s problem has been.

https://oilprice.com/Energy/Energy-General/Will-The-US-Be-Spared-From-The-Global-Energy-Crisis.html

U.S. natural gas prices hit a 13-year high last week as the energy crunch in Europe and Asia pushed the prices in these two regions to the highest on record. And depending on winter weather, U.S. natural gas prices do have more room to rise. But they are unlikely to follow the skyrocketing rallies of the European and UK gas prices and the price of spot liquefied natural gas (LNG) in Asia, analysts say.   

Although the regional natural gas markets are now interconnected more than ever thanks to the LNG trade, U.S. gas prices will largely be spared the extreme volatility and record-high European and Asian prices.

The United States has a fairly adequate natural gas supply in storage ahead of the winter. This is unlike Europe, where depleted inventories and rebounding demand have created a rush to stock up for the coldest months of the year, which in turn has caused a supply crunch and record-high gas and power prices.

Moreover, U.S. natural gas production is rising slightly, while weekly injections into storage over the past month have been higher than usual for September.

Despite the record LNG prices in Asia and the handsome netbacks that U.S. exporters are getting for their LNG cargoes, the United States has a certain capacity to feed gas to its LNG export terminals. All cargoes available will be scooped up, mostly by Asia, but the infrastructure will not allow too much incremental LNG supply out of America that would have severely tightened the domestic U.S. market.

Record Global Gas Prices

Last week, natural gas prices in Europe hit a fresh record high to the equivalent of $205 a barrel of oil based on the relative value of the same quantity of energy from each source. The worsening global energy crisis sent Asia’s spot LNG prices soaring by 40 percent last Wednesday, as cargo for delivery into North Asia in November was priced at as much as $56 per million British thermal units (mmBtu)—a record high that beat the previous record from the week prior of $34.52/mmBtu.  

In the turbulent global markets, U.S. natural gas prices also reacted to these mind-blowing record highs, and the benchmark Henry Hub price settled at $6.312/mmBtu on October 5—the highest level since 2008. 

Since the beginning of 2021, U.S. natural gas prices have more than doubled as demand is bouncing back from the pandemic slump, and American producers are not rushing to add too much supply.

U.S. ‘Insulated’ From Global Gas Crunch, Price Spikes

However, U.S. prices—despite being now more influenced by global gas prices—primarily reflect domestic supply-demand factors and the booming global LNG demand. So, American natural gas prices are more insulated from the global spikes in gas prices, even if they have further room to rise in case of a colder winter in the United States.

“The U.S. is much more insulated from this global energy trend than the rest of the world,” Francisco Blanch, head of Global Commodities, Equity Derivatives and Cross-Asset Quantitative Investment Strategies at Bank of America Merrill Lynch, told CNBC’s “The Exchange” recently.

Sure, analysts now expect U.S. natural gas prices to be higher than earlier forecasts because of the ripple effect of the global energy crunch and natural gas price rally. JP Morgan and Credit Suisse have recently raised their Q4 average price outlooks to $5.50/mmBtu and $5.75/mmBtu, respectively.

A double-digit Henry Hub price is in the cards if the winter is very cold, but a crunch similar to Europe and Asia’s is unlikely for the United States, Robert Thummel, managing director at TortoiseEcofin, told CNBC last week.

“[The U.S.] hasn’t had to rely on the rest of the world to provide its supply, and that’s really what Europe’s problem has been,” Thummel said.

In addition, U.S. LNG export capacity is not infinite, despite the nice netbacks exporters would get because of the large premium of LNG prices in Asia to the U.S. Henry Hub prices.

“You’re not going to see the U.S. to the rescue here, because there’s just not enough infrastructure on either side — on the U.S. side or the European side and most importantly on the Asian side — to solve this,” Thummel told CNBC.

Regardless of how much Asian LNG prices surge, the current capacity in the United States allows 10.5 billion cubic feet per day (Bcf/d) of gas to be turned into LNG. Natural gas deliveries to U.S. LNG export facilities typically average 10.0 Bcf/d - 10.5 Bcf/d, out of total U.S. dry natural gas production of around 92.3 Bcf/d.

U.S. Gas Supply More Adequate Compared To Europe, Asia Crunch

The U.S. has an adequate natural gas supply, and although the injection season between April and October has seen lower-than-average net injections into gas storage, recent weekly stock builds have exceeded the average for this time of the year.

The net injections into storage totaled 118 Bcf for the week ending October 1, compared with the five-year average net injections of 81 Bcf and last year’s net injections of 75 Bcf during the same week, EIA data showed.

This week’s weekly build is again expected to be a bit larger than the five-year average and potentially again over 100 Bcf, according to NatGasWeather.com, which also forecasts low to very low demand for this week.

U.S. natural gas prices are not entirely detached from the global energy turmoil, but America will likely be spared the skyrocketing prices elsewhere.  

By Tsvetana Paraskova for Oilprice.com 

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Energy Stocks To Watch Amid Supply Chain Chaos

By Alex Kimani - Oct 12, 2021, 6:00 PM CDT

  • Solar and hydrogen stocks have been on the rise over the past few days as investors pile into renewables. 
  • Wall Street is betting that global supply chain constraints and oil and gas shortages will be a boon for renewable energy. 
  • As some analysts predict even higher oil prices, investors are betting that demand for fossil fuels will face growing pressure and force consumers into greener - and cheaper - alternatives. 

https://oilprice.com/Energy/Energy-General/Energy-Stocks-To-Watch-Amid-Supply-Chain-Chaos.html

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Latest articles from Irina Slav

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Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

Latest articles from Tsvetana

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IEA Says Clean Energy Spending Must Triple

By Irina Slav - Oct 13, 2021, 10:00 AM CDT

https://oilprice.com/Energy/Energy-General/IEA-Says-Clean-Energy-Spending-Must-Triple.html

Investments in low-carbon energy need to triple if the world is to meet its Paris Agreement targets, the head of the International Energy Agency told the Financial Times.

“There is a gross mismatch, and the longer this mismatch persists the greater the risk of further sharp price swings and increased volatility in the future,” Fatih Birol said, noting that current levels of investment in clean energy were just a third of what was needed.

However, Birol also said that projected investments in oil and gas production were now in line with Paris Agreement climate targets. That’s a rare piece of good news for an industry that has become the target of constant accusations of being the sole party responsible for adverse climate changes.

The IEA expects gas demand to peak soon after 2025, Birol also said, adding that oil demand was also about to peak in a little more than five years, even if world governments make no new commitments about climate change. Oil demand, according to the IEA, would peak at 97 million bpd, although in an earlier forecast for the short term, the IEA estimated that oil demand would reach 100.6 million bpd next year. This is well above its latest peak level.

Global investments in energy this year, according to the IEA, will rise to $1.9 trillion, of which $370 billion are investments in low-carbon power generation.

In his interview with the FT, Birol also once again said that renewable power was not to blame for the energy supply crunch in Europe, adding that the crisis must not divert European leaders off their energy transition course.

“There is an inaccurate campaign that’s saying we’re seeing the first crisis caused by clean energy and that this can become a barrier for further policy action to address climate change. But this is definitely not true,” Birol said.

According to him, the crisis was the result of a variety of factors, including an uneven recovery from the pandemic, gas supply outages, and the weather.

By Irina Slav for Oilprice.com

These Technocrats have no sense.--Tom Nolan

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https://oilprice.com/Energy/Oil-Prices/Putin-100-Oil-Is-Quite-Possible.html

Putin: $100 Oil Is “Quite Possible”

By Tsvetana Paraskova - Oct 13, 2021, 11:00 AM CDT

  • It is “quite possible” that the WTI Crude oil prices reach $100 per barrel in light of growing global demand for energy commodities, Russian President Vladimir Putin said on Wednesday
  • Putin: Russia and its allies in the OPEC+ oil producer group want a stable oil market without any shock spikes in prices

It is “quite possible” that the WTI Crude oil prices reach $100 per barrel in light of growing global demand for energy commodities, Russian President Vladimir Putin said on a CNBC panel at the Russian Energy Week on Wednesday.

Asked by CNBC’s Hadley Gamble whether the U.S. benchmark could hit $100 a barrel, Putin replied “That is quite possible.”

However, Russia and its allies in the OPEC+ oil producer group want a stable oil market without any shock spikes in prices, Putin said.

“Russia and our partners and OPEC + group, I would say we are doing everything possible to make sure the oil market stabilizes,” Putin said, according to a translation.

“We are trying not to allow any shock peaks in prices. We certainly do not want to have that — it is not in our interests,” the Russian president added.

The OPEC+ group decided last week to stick to their planned 400,000 barrels per day (bpd) increase in collective production in November, despite calls from oil importing nations to add more supply and despite an expected additional demand from a gas-to-oil switch due to record high natural gas prices in Europe and Asia.

Oil prices could hit $100 in case of a colder winter, some analysts and investment banks have said in recent weeks. Record-high natural gas prices are forcing some utilities to switch to oil derivatives instead, boosting demand for crude.

Surging natural gas prices, a cold winter, and reopening of international airline travel could push oil prices to $100 per barrel and trigger the next economic crisis, Bank of America said in early October.

Recovering global oil demand could send oil prices to $100 a barrel at some point at the end of 2022, despite COVID challenges to demand this coming winter, according to one of the world’s largest independent oil traders, Trafigura.

By Tsvetana Paraskova for Oilprice.com

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Reuters

EIA expects U.S. power use to rise in 2021 as economy recovers

https://finance.yahoo.com/news/eia-expects-u-power-rise-173536201.html

Oct 13 (Reuters) - U.S. power usage will rise about 3% in 2021 as the economy grows following last year's coronavirus hit to demand, the U.S. Energy Information Administration (EIA) said on Wednesday.

In its Short-Term Energy Outlook (STEO), EIA projected power demand will climb to 3,915 billion kilowatt hours (kWh) in 2021 and 3,929 billion kWh in 2022.

That compares with a coronavirus-depressed 11-year low of 3,802 billion kWh in 2020 and an all-time high of 4,003 billion kWh reached in 2018.

 

EIA projected 2021 power sales would rise to a record high 1,488 billion kWh for residential consumers, as ongoing COVID concerns keep more people working from home, 1,308 billion kWh for commercial customers and 977 billion kWh for industrials.

That compares with a previous high of 1,469 billion kWh in 2018 for residential consumers and all-time highs of 1,382 billion kWh in 2018 for commercial customers and 1,064 billion kWh in 2000 for industrials.

EIA said natural gas' share of power generation will slide from 39% in 2020 to 36% in 2021 and 35% in 2022 as gas prices rise. Coal's share will rise to 24% in 2021, from 20% in 2020, and contribute 23% in 2022.

The percentage of nuclear generation will ease from 21% in 2020 to 20% in 2021 and 2022, while renewables will hold at 20% in 2021, the same as 2020, before rising to 22% in 2022.

The EIA projected 2021 natural gas sales would rise to 13.37 billion cubic feet per day (bcfd) for residential consumers, 9.32 bcfd for commercial customers and 22.81 bcfd for industrials, but fall to 29.83 bcfd for power generation.

That compares with all-time highs of 14.36 bcfd in 1996 for residential consumers, 9.63 bcfd in 2018 for commercial customers, 23.80 bcfd in 1973 for industrials and 31.74 bcfd in 2020 for power generation.

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Bloomberg

U.S. Consumers Are Set to Pay Far More for Energy This Winter

https://finance.yahoo.com/news/u-consumers-set-pay-far-164908090.html

...Spending on energy for those households primarily using heating oil will rise 43% compared with last winter, the agency said in a base-case forecast published as part of its Winter Fuels Outlook on Wednesday.

Expenditure on energy by households reliant on propane will increase 54% in the base case, it said. The comparable gains for households mostly using natural gas and electricity are seen at 30% and 6%, respectively.

U.S. prices for natural gas and oil are trading close to multi-year highs amid a global squeeze on supplies.

For households using gas, heating oil or electricity, this winter will be the costliest since at least 2014-2015, according to the data. Fuel costs will rise even if the coming months are 10% warmer than normal. If the winter is colder than average, propane expenditures will almost double, while heating oil costs will jump 59% and gas bills will rise by half.

“The main reason wholesale prices of natural gas, crude oil, and petroleum products have risen is that fuel demand has increased from recent lows faster than supply, in part, because of economic recovery after the first year of the Covid-19 pandemic,” the EIA said. “To varying degrees, these increases in wholesale prices are being passed through to consumers.”

Meanwhile, supply limitations at U.S. coal mines are making it difficult for power producers to boost electricity output from the fuel. Utilities are set to consume 521 million tons this year, lower than the forecast a month ago, when utilities were expected to burn through 537 million tons of the dirtiest fossil fuel....

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Putin Dismisses Accusations That Russia Is Weaponizing Natural Gas

By City A.M - Oct 13, 2021, 1:00 PM CDT

  • Vladimir Putin has dismissed claims that Russia is weaponizing its supplies of natural gas to speed up Germany’s approval of the completed Nord Stream 2 pipeline
  • Putin: The accusations are “politically motivated blather with nothing to support it”

https://oilprice.com/Energy/Energy-General/Putin-Dismisses-Accusations-That-Russia-Is-Weaponizing-Natural-Gas.html

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Is The U.S. Still A Swing Producer Of Oil?

By Irina Slav - Oct 13, 2021, 4:00 PM CDT

  • Less than two years ago, the U.S. was the new major swing producer in global oil markets, but the pandemic has upended its status
  • Despite rising costs and the increasing influence of OPEC+ producers,  the United States remains a country with the substantial potential to return to swing-producer status

https://oilprice.com/Energy/Energy-General/Is-The-US-Still-A-Swing-Producer-Of-Oil.html

Less than two years ago, the United States was the world’s largest producer of crude oil. It was the new major swing producer that moved prices up or down with a shrug of the shoulder, challenging OPEC’s long-standing role as price-setter.

And then it all changed as the pandemic struck.

The second pandemic year is drawing to a close, and oil is rising fast thanks to tight supply combined with stronger than expected demand resulting from a set of favorable circumstances that have pushed West Texas Intermediate to the highest in eight years. But the swing producer is not swinging anymore. It is asking OPEC to pump more.

The Biden administration first asked the oil cartel to step up the supply of crude in the summer. OPEC ignored the plea, just as it did t its last two meetings where the members of the extended group OPEC decided to keep adding 400,000 bpd to global supply every month and not more. Washington remains concerned.

“Joe Biden knows that high gasoline prices are not good for incumbents,” Daniel Yergin, oil historian and vice chairman of IHS Markit, told Bloomberg in an interview this week. “We’ll certainly be hearing more from the administration.”

Less than two years ago, it would have been ridiculous to even think the world’s new swing producer, the world’s biggest producer, pumping some 13 million barrels of crude daily three months before the coronavirus spread, would need to ask OPEC to bring more oil to the market. Yet this is exactly what the White House is doing. So, what happened?

One of the things that happened was capital discipline. The U.S. oil industry had only just recovered from the 2014 price crash. It was still lavishing every dollar on production growth when the pandemic hit, reinforcing an already simmering disgruntlement among shareholders. Pressure ensued, which added onto the pressure from banks that were increasingly unwilling to lend so generously to exploration and production companies amid the rise of the green transition agenda.

Yet, it wasn’t only ESG considerations that caused banks to cool towards oil companies. It was also underperformance of oil fields that added to the increasingly negative sentiment, as did consistent failure to amass any considerable amounts of cash for much of the industry. Shareholders were unhappy. Lenders were unhappy.

And then, in April, WTI turned negative.

The only path that made sense in that situation was to tighten belts. This is exactly what U.S. oil companies did and what they are still doing. And this, in turn, is why the Biden administration has to ask OPEC to help bring prices at the pump down.

The chief executive of Pioneer told the FT earlier this month that U.S. shale drillers cannot boost supply to curb the price rally even if they wanted to, so price remained “under OPEC control.”

“Everybody’s going to be disciplined, regardless whether it’s $75 Brent, $80 Brent, or $100 Brent,” Scott Sheffield said. “All the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies.”

“I don’t think the world can rely much on US shale,” he also said. “It’s really under Opec control.”

That’s a sad end to a short rise-and-fall story, but the story in no way means U.S. oil is dead as a swing producer. Despite the strict discipline that public shale producers are maintaining, smaller private companies are not bound by the constraint of keeping any shareholders happy. And these producers are drilling.

The FT wrote in September how small private drillers were ramping up production and how some observers forecast that led by these drillers, U.S. production could add 800,000 bpd in output to the U.S. total over 2022. That would make the U.S. the producer with the fastest-growing output outside OPEC+.

Then, earlier this week, Bloomberg reported that production levels in the Permian were close to pre-pandemic ones. The companies responsible for the increase are the smaller, private players, funded by private equity or family money. However,  the ramp-up will not be strong enough to have any meaningful bearish impact on oil prices, according to the report.

“It’s a win for the privates without being a loss for the oil markets,” Raoul LeBlanc, an analyst at IHS Markit, told Bloomberg. “The big takeaway is that private growth won’t ruin the party.”

Meanwhile, the bigger, public players that spearheaded the previous production growth spurts remain reluctant to boost production as they still face hypersensitive shareholders.

How long this hypersensitivity will continue is anyone’s guess and will largely depend on the progress of the energy transition. In Europe, we are seeing the first signs that not all is going well and that mistakes may have been made along the way. It will take a while before we see the same in the United States, if ever. Meanwhile, the United States remains a country with the substantial potential to return to swing-producer status. 

Whether its oil industry will ever again have the necessary motivation remains to be seen.

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Energy-General/Middle-East-Oil-Giants-Face-Off-In-Market-Share-Skirmish.html

Middle East Oil Giants Face-Off In Market Share Skirmish

By Tsvetana Paraskova - Oct 13, 2021, 5:00 PM CDT

  • While Asian crude imports were relatively low in the third quarter due to high prices and COVID outbreaks, Middle Eastern oil producers are still fighting to dominate the region
  • Led by Saudi Arabia, oil producers across the Middle East continue to cut their prices in an attempt to ensure market share in the region
  • Crude from both Russia and the United States is only adding to the competition in Asian markets

The largest Middle Eastern oil exporters are fighting for market share on the most prized oil market, Asia, although Asian crude imports have been relatively low over the past three months.    The spike in the Delta variant of the coronavirus and the higher prices of Middle Eastern oil in the summer shrunk both Asia’s total crude oil intake and imports from Gulf producers amid cheaper alternatives. 

Chinese and overall Asian crude imports were sluggish in the third quarter of the year as higher prices, increased scrutiny over China’s independent refiners, and the summer COVID outbreak put the brakes on purchases. 

However, as the fourth quarter approached, the largest oil producers in the Middle East—led by the world’s top oil exporter Saudi Arabia—started to offer more oil to Asia thanks to the easing of the OPEC+ cuts and reduced the prices for their oil to stay competitive and regain market shares lost since the pandemic started. 

Estimates show that Asian crude oil imports continued to be unimpressive in September as higher benchmarks and higher official selling prices (OSPs) of the Middle East’s major producers had coincided with a flare-up of COVID cases at the time the September cargoes were nominated in June and July.  Related: Is It Time To Invest In Tidal Energy? China’s crude oil imports are estimated to have declined to an average of 9.62 million barrels per day (bpd) in September, down by 8.6 percent from the previous month, data from energy analytics provider OilX showed. Chinese crude imports last month continued to be weighed down by the stricter oversight on imports, refining operations, and market practices of refiners. In addition, Chinese economic activity moderated in September, further depressing crude oil imports, OilX’s oil analysts noted. 

Total Asian oil imports are estimated to have dropped to 22.99 million bpd in September from 23.24 million bpd in August, according to data from Refinitiv Oil Research cited by Reuters columnist Clyde Russell. Imports of crude into Asia in September were only marginally above the July imports of 22.61 million bpd. 

Higher prices were partly responsible for lower purchases in the third quarter, together with weaker fuel demand across Asia amid localized lockdowns to fight the Delta variant. 

The Saudis raised in August their prices for September, but had to compete against cheaper alternative crudes from the United States and Russia at a time when Asia, including China, were fighting the COVID resurgence. 

International benchmarks continued to rise at the start of the fourth quarter, but Saudi Arabia cut its OSPs for Asia for November, in a second consecutive price reduction, to keep its crude competitive in the top oil-importing region.

At the beginning of October, Saudi Arabia cut its OSPs for Asia for November by $0.40 per barrel for its flagship Arab Light grade, to a premium of $1.30 above the Dubai/Oman benchmark—the lowest premium since March. 

This was a second cut for Saudi prices in two consecutive months, after the price rise spurred by the OPEC+ decision to stick to monthly additions of 400,000 bpd rather than boosting output more to cap international prices.

Related: Canada’s Oil Stocks Are Trading At Bargain Basement Prices

Saudi Arabia, which generally sets the OSPs pricing trends for the other major Middle Eastern oil exporters, is now fighting for market share on the prized Asian market by lowering its crude prices. 

Saudi Arabia is also set to ship additional volumes of crude to at least three refiners in Asia in November, some of which had asked for full or incremental supply on top of the contractual volumes because of attractive prices, sources familiar with the matter told Reuters earlier this week. 

The United Arab Emirates (UAE), via its Abu Dhabi National Oil Company (ADNOC), plans to ship full volumes to customers in Asia in December, not making any cuts to contracted term supply for the first time since prices crashed last year, other sources told Reuters last month.

With the gradual easing of the OPEC+ cuts, the top oil producers in the Middle East are now offering more supply at more competitive prices to Asia in a bid to secure a larger share of the most important oil market in the world.      

By Tsvetana Paraskova for Oilprice.com

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https://oilprice.com/Energy/Energy-General/US-Oil-And-Gas-Dealmaking-Slows-Down-In-Q3.html

U.S. Oil And Gas Dealmaking Slows Down In Q3

By Irina Slav - Oct 13, 2021, 12:00 PM CDT

  • Enverus analysts said that the total value of M&A deals during the third quarter was 44 percent lower than the total value of second-quarter deals.
  • Mergers and acquisitions in the oil and gas space in the U.S. declined in the third quarter after hitting a two-year high in the second quarter
  • The biggest deal during the last quarter was Conoco’s purchase of Shell’s Permian assets for $9.5 billion

Mergers and acquisitions in the oil and gas space in the U.S. declined in the third quarter after hitting a two-year high in the second quarter, according to data analytics firm Enverus.

Enverus analysts said that the total value of M&A deals during the third quarter was 44 percent lower than the total value of second-quarter deals. However, it was still higher than the five-year average for the third quarter, at $18.5 billion versus $16 billion, excluding the Occidental/Anadarko tie-up.

“We have seen a red-hot market for upstream M&A since the industry recovered its footing from the initial shock of COVID-19,” said Andrew Dittmar, director at Enverus, in a news release. “It was inevitable that the hungriest buyers and sellers would find their deals and activity would revert back toward the average. We seem to be hitting that inflection point.”

The biggest deal during the last quarter was Conoco’s purchase of Shell’s Permian assets for $9.5 billion, followed by Chesapeake’s takeover of Vine Energy for $2.7 billion. The rest of the deals agreed to during that quarter were all below a billion dollars in value.

Yet more deals may be on the way now that the outlook for the industry is improving fast amid an increasingly global energy crunch. And the shale patch remains a top pick, it seems.

“Private equity still has dry powder for deals,” Dittmar remarked. “They are using this to target assets being tagged as non-core by public companies. Once you step out of the core of the Permian Basin and a few other key areas, competition for deals drops, and these positions are often available at buyer-friendly price points. That said, private equity is still a net seller in the space and likely to remain so for the foreseeable future given the number of investments outstanding and how long that capital has been deployed.”

By Irina Slav for Oilprice.com

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