How Much Higher Can Oil Prices Go? - OIR 120221

Saturday, February 13,2021 /07:30 AM / by Tom Kool of Oilprice.com / Header ImageCredit: Oilprice.com

Analysts are divided over whether oilprices can continue to climb, with WTI nearing $60 and profit-taking havingbegun.

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Friday,February 12th, 2021

Brent held above $61 per barrel in early trading on Friday, despite someheadwinds from a slight strengthening of the dollar. Analysts are now split onwhether or not the rally has gone too far or has more room to run.

OPECcuts oil demand forecast. OPEC expects oil demand to rise by 5.8 million barrelsper day (bpd) this year, down by around 100,000 bpd from last month'sprojection due to lockdowns in major developed economies in the first half ofthis year, the cartel said on Thursday.

EIA:U.S. shale to grow. The EIA said that with WTI over $50, U.S. shalewill return to growth later this year. The agency increased its 2022 supplyforecast to 11.53 mb/d, up from 11.49 mb/d last month.

S&Pcuts credit rating for ExxonMobil. S&P cut ExxonMobil's (NYSE: XOM) creditrating by one notch to AA- with a negative outlook. The ratings agency citedheavy levels of debt and energy transition risk.

Exxonto close its Australian refinery. ExxonMobil(NYSE: XOM) said it would close its 72-year-old Altonarefinery in Australia, the nation's smallest. Once closed, Australia will onlyhave two remaining refineries.

Goldman:Upside risk to $65 oil. A broad commodity supercycle isgetting underway, creating upside risk to $65 oil, according to Goldman Sachs."I want to be long oil and hang on for the ride," Goldman's Jeff Currie said inan interview with S&P Global Platts on Feb. 5, warning "there is a lot ofupside here." He added: "Is it back to $150/b? I don't know... as it is a macrorepricing we are talking about and everything needs to reprice."

Equinorsells of Bakken assets. Equinor (NYSE: EQNR)announced the sale of its Bakken assets for $900 million, after purchasing them for $4.4 billion nearly a decadeago. "We should not have made these investments," Equinor Chief ExecutiveOfficer Anders Opedal said. "The Bakken does not compete."

Appalachianfracking boom didn't lead to prosperity. A new report from the Ohio River Valley Institutefinds that despite a natural gas boom over the past decade, the counties inAppalachia that saw the most drilling actually saw worse job growth thanelsewhere. The conclusions undercut the notion that the shale gas industry is ajob engine.

Oilmajors trim shale dreams. ExxonMobil (NYSE: XOM),Chevron(NYSE: CVX), and BP (NYSE: BP) have collectivelyshelved as much as 2.4 mb/d in future oil production plans from U.S. shale,according to an analysis from Energy Intelligence. The strategy overhaul means themajors will focus on cash generation rather than production growth. Excess cashflow will go to paying down debt or otherwise be returned toshareholders.

Shellsays its production already peaked. Royal DutchShell (NYSE: RDS.A) said it would start reducing oil productionat a rate of 1 to 2% per year, which would include asset sales. The companysaid from now on it would allocate 25% of its capex to renewables andmarketing, or $5 to $6 billion. Marketing includes retail gasoline stations andlubricants.

MorganStanley: Gasoline could become worthless. Morgan Stanley says the market may be ascribing zero or even negative value forICE-derived revenues at GM and Ford and has listed a variety of factors thatare likely to transform the companies' once-profitable assets into potentiallycash-burning and loss-making businesses.

TexasRRC delays flaring decision. The Texas Railroad Commission again delayed a decision on flaring permits,evidence that the regulator is starting to scrutinize flaring plans to agreater degree.

Marathoncuts 5% of workforce. Marathon Oil (NYSE: MRO) cut its workforce by 5%, and also cutexecutive pay.

China'sgrid firms to buy 40% renewables by 2030. China will require its grid companies to purchase 40%renewable energy by 2030.

Rivianaims for IPO this year. EV-startup Rivian is planning to go public this year at a valuationof around $50 billion, which would make it one of the largest IPO's of theyear. Meanwhile, Xos Trucks Inc., another EV builder, is planning to go public with a SPAC with a $2billion valuation.

Macquarieopens $2 billion renewables fund. Macquarie, the world'slargest infrastructure investor, announced that it would open a $2 billion globalrenewables fund, its second such fund, after strong interest from institutionalinvestors. It will target wind and solar projects in Western Europe, the UnitedStates, Canada, Mexico, Japan, Taiwan, Australia and New Zealand.

Libya'soil port reopens. Libya's Hariga oil port reopened after a month-long strike, which hadcut output by more than half from 320,000 to 120,000 bpd.

LGChem battery dispute could disrupt EV manufacturing. LG Chemfiled a trade dispute against SK Innovation for stealing trade secrets. If LGChem wins, the U.S. may see disrupted imports of battery cells needed for EVmanufacturing.

Bidenadmin launches $100 million clean energy funding. The U.S.Department of Energy's Advanced Research Projects Agency-Energy, or ARPA-E, announced $100 million in funding for low-carbontechnologies. ARPA-E funds high-risk high-reward early-stage technologies.