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Oil Prices Could Rise to $65 - OIR 010920

Sep 01, 2020   •   by   •   Source: Proshare   •   eye-icon 1021 views

Tuesday, September 01, 2020 /  8:15PM / by Josh Owens of Oilprice.com / Header ImageCredit: Oilprice

 

Today,we will take a quick look at some of the critical figures and data in theenergy markets this week. 

We will then look at some of the key market movers early this week beforeproviding you with the latest analysis of the top news events taking place inthe global energy complex over the past few days.

We hope you enjoy.

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Chart of the Week

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  • From 2011 to mid-2020, roughly 95 GW of coal-fired capacity hasgone offline, with another 25 GW slated to shut down by 2025.
  • The U.S. coal fleet will soon drop below 200 GW, downfrom 314 GW at its peak in 2011.
  • The remaining plants are underutilized because of coal's decliningcompetitiveness. 


Market Movers

  • Total's (NYSE: TOT) Port Arthurrefinery is awaiting the restoration ofelectricity in order to restart operations following Hurricane Laura. Citgo andPhillips66 (NYSE: PXD) said that assessments of damage at theirfacilities in Lake Charles could take days.
  • Chesapeake Energy (NYSE: CHK)hoped to cancel a $300 millioncontract with Energy Transfer (NYSE: ET), but a court ruled inEnergy Transfer's favor.
  • Enbridge (NYSE: ENB) said that anoffshore natural gas pipeline that services four offshore platforms in the Gulfof Mexico remained out of commissiondue to the hurricane.


Tuesday, September 1, 2020

Oil prices rose onTuesday on new manufacturing data fromboth the U.S. and China, which surprised on the upside. The dollar alsoweakened, adding some support to crude. Nevertheless, crude is showing fewsigns of being able to break out from its current range. 


Distressed shale assets from the last boom. Many of the M&A deals in U.S.shale following the 2014-2016 oil market downturn are now "unworkable," according to Reuters.Of the 50 largest acreage purchases between 2016 and 2019, 31 of them only addvalue if Brent trades above $50 per barrel. For instance, DiamondbackEnergy (NASDAQ: FANG) paidroughly $54,977 per acre when it purchased Energen in 2018, a deal that wouldnow breakeven if Brent averaged $77 per barrel.

Gulf of Mexico output remains down. As of Monday, about 53 percent ofoil production in the Gulf of Mexico was stillshut-in, following the devastation from HurricaneLaura. About 41 percent of natural gas production is shut-in. Personnel remainevacuated from 117 production platforms or 18 percent of the total. 

EVs still costly to produce. EVs will remain more costlyto manufacture than traditional gasoline and diesel-fueled vehicles for therest of the decade, according to newresearch. EV manufacturing costs could average 16,000euros by 2030, or 9 percent higher than conventional cars.

Goldman: Oil prices to jump to $65. Goldman Sachs expects Brentcrude to reach $65 a barrel in the third quarter of 2021, although it could endthe year lower, at $58 a barrel, according to Goldman Sachs analysts. "There isa growing likelihood that vaccines will become widely available starting nextspring, helping support global growth and oil demand, especially jet," theGoldman analysts said.

U.S. seizes websites involved in illegal oil trade. The United States announced todaythat it has seized three websites used by sanctions-violators to trade in crudeoil, according to an official press release. The websites were, according tothe U.S. government, used by Iran to trade oil with Venezuela-two sanctionedcountries that are not allowed to trade oil at all, let alone with each other.

Natural gas prices sink on cooler weather. Natural gas prices sank earlyon Monday on expectations of lower demand due to cooler weather and lowerliquefied natural gas (LNG) feed in the aftermath of Hurricane Laura passingthrough the U.S. Gulf Coast.

Biden: "I am not banning fracking": In a speech on Monday inPittsburgh, Biden dismissed accusations that he would target oil and gasdrillers. "I am not banning fracking. Let me say that again. I am not banningfracking. No matter how many times Donald Trump lies about me," Biden said.

UAE overproduces in August. The UAE breached itsOPEC+ quota in August, pumping 2.693 million b/d, according to S&P GlobalPlatts.

U.S. SPR damaged from the hurricane. The U.S. Energy Department said onMonday that the West Hackberry site of the Strategic Petroleum Reserve "sustained considerable damage" from Hurricane Laura.

Shipping companies profit amid downturn. Cost-cutting and removingexcess capacity have kept shipping margins in positiveterritory this year. 

Trump Administration Proposes Easing Oil and Gas Permittingin National Forests. The Trump administration on Aug. 31 issued aproposal that would make it easier to permit oil and gas drilling operations innational forests, aligning permitting processes between the Forest Service andthe Bureau of Land Management. Environmental groups say the move will sidestepenvironmental reviews. 

U.S. gasoline demand fizzling. U.S. demand for gasoline surgedafter bottoming out in April, but has flattened out in the past two monthsbelow pre-pandemic levels. Stagnating demand raises concerns about the healthof the economic recovery. "The easy work has been done," Noah Barrett, anenergy analyst for Janus Henderson Investors, told theWSJ. "That last 10% to 15% of lost demand is goingto be really hard to get back." 

Trump admin prepares more sanctions on Venezuela. "We think our sanctions have beenextremely effective in reducing income to the regime but we think we can makethem more effective. So we are going to be doing some things to tighten up inthe near future," Elliott Abrams, U.S. Special Representative for Venezuelasaid in a Reuters interview.He did not specify but hinted that the new sanctions would include eliminatingexemptions offered to third parties buying Venezuelan oil. 

Tesla to sell $5 billion in shares. Tesla (NASDAQ: TSLA) said it would sell asmuch as $5 billion in shares "from time to time" in order to fund growth. Thecompany has plans to build new factories in Germany and in Austin, Texas,following the recent completion of a plant in Shanghai. 

Exxon considers job cuts. According to a memo sent toemployees Monday and obtained by BusinessInsiderExxonMobil (NYSE: XOM) is considering job cuts. The company islooking at its upstream unit for "organizational efficiencies and loweractivity levels," according to the memo, including job cuts.

Total and Macquarie pursue 2 GW offshore wind in South Korea. Total (NYSE: TOT) will partner withMacquarie Group's green bank to develop more than 2 gigawatts of floating windfarms off South Korea, the latest push by the French oil and gas giant todiversify into clean energy.


Credit:

The post Oil Prices Could Rise to $65 first appeared in Oilprice.com on September 01, 2020.

 

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Related News - PreviousOilprice Intelligence Report

  1. Oil Prices Fall As Hurricane Fears Subside - OIR 280820
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  3. Oil Tumbles On Shaky Recovery Prospects - OIR 210820
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  6. Oil Prices Rally On New COVID Optimism - OIR 110820
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  9. Economic Turmoil Leaves Oil Trapped At $43 - OIR 310720
  10. OPEC Prepares For Long-Term Demand Risks - OIR 280720
  11. Oil Prices Stuck At $42 - OIR 240720
  12. Oil Jumps on the Prospect of Two Trillion-Dollar Stimulus Packages - OIR 210720
  13. OPEC-Plus News Is Holding Oil Prices Back - OIR 140720
  14. Oil Returns to $42 After COVID Correction - OIR 100720
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  11. NBCC Forum: Experts Call For Increased Investments In Oil and Gas Mid-Stream Production
  12. Mining: Resuscitation of Ajaokuta Steel Company - An End in Sight?
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