Brent Crude Holds Gains Above $65 - OIR 230221

Tuesday, February 23, 2021 /08:10 PM / by Tom Kool ofOilprice.com / Header Image Credit: Reuters

Today, we will takea quick look at some of the critical figures and data in the energy marketsthis 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 in theglobal energy complex over the past few days. We hope you enjoy.

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The Texas blackouts came from asteep drop in generation from gas, coal, wind and nuclear power.
Natural gas typically can supply 40 GW of capacity at peakperiods, but frozen gas lines, wellheads, and other damage to infrastructureled to widespread outages.
The mismatch between supply and demand grew to as much as30 GW on February 15.

MarketMovers

SunPower (NASDAQ: SPWR) was downgraded by CreditSuisse to Underperform. The solar company's stock sank by 9.6% during middaytrading on Monday.
Electric truck maker Xos will go public with ablank-check SPAC, valued at $2 billion.
Mizuho Securities downgraded Sunoco (NYSE:SUN) to Neutral from Buy.

Tuesday,February 23, 2021

Oil prices were off a bit in early trading on Tuesday, but are nonethelesstrading close to more than one-year highs after soaring on Monday. The price hike comes shortlyafter Goldman Sachs forecast that oil prices would climb into the $70s over thenext few months and after it became clear that U.S. oil production andrefineries will take a bit of time to resume their normal level of output afterthe Texas Freeze knocked out oil refineries and oil production.

Texasrefineries restarting. Motiva, the U.S.' largest oilrefinery, began to restart operations inPort Arthur, TX after a weeklong shutdown. A handful of other large refineriesannounced a return of operations. Still, a full recovery could be weeks away,which could push up gasoline prices.

Texascrisis was historic. Gas traders said the volatility washistoric. "I've been through a lot: The '98 and '99 power spikes in theMidwest, the California crisis" of 2000-2001, Cody Moore, head of gas and powertrading at Mercuria Energy America, told Bloomberg. "Nothing wasas broadly shocking as this week." Some traders likened it to a Lehman Brothersmoment.

Texasblackouts leave winners and losers. Some high-profilecompanies, such as Comstock Resources (NYSE: CRK), saw a windfall for theirnatural gas when Texas market prices went haywire last week. But buyers of gaswere slammed. Atmos Energy (NYSE: ATO), a distributor of gas, said itneeds to raise cash after spending $3.5 billion to secure fuel during lastweek's crisis. Canada-based Just Energy Group (NYSE: JE) lost $250 millionand may have trouble continuing as a going concern. Its shares were down bynearly 25%.

Texasoil production restart could take weeks. It could take atleast two weeks to restart the more than 2 mb/d of Texas oil production shut-infrom last week's cold snap. "With three-quarters of fracking crews standingdown, the likelihood of a fast resumption is low," ANZ Research said in a note. "Ithink it will be a while before things get better out in the field," oneexecutive at a Permian producer told Reuters.

Diamondbacksays it lost 4-5 days of production. DiamondbackEnergy (NASDAQ: FANG) said that it lostfour to five days' worth of total production from the Texas blackouts, sendingits shares down 4% in late trading on Monday. Cimarex (NYSE: XEC)said it could lose up to 7% of its first-quarter production.

OPECcuts U.S. shale forecast. OPEC downgraded itsassessment of U.S. shale production for 2021, expecting a contraction of140,000 bpd, a bit deeper than what the EIA foresees. The lack of shale growthgives OPEC+ more room and leverage to unwind production cuts and regain marketshare.

Bullishforecasts start to multiply. Several investment banks cameout with bullish crude oil forecasts. Goldman sees Brent averaging $70 in thesecond quarter and $75 in the third quarter. Morgan Stanley sees $70 by thethird quarter. Socar Trading SA says oil could hit$80 this year.

Saudiand Russia disagree on strategy. OPEC+ will soon decide onthe next steps regarding their massive production cuts, and Riyadh and Moscow disagree on thestrategy. The Saudis want to mostly stay the course and allow prices to rise,while Russia is keen to increase production. At the same time, Saudi Arabiasuggested it would reverse the 1 mb/d of voluntary cuts it announced inJanuary.

Eniaims for net-zero by 2050. Eni (NYSE: E) said it wouldfully decarbonize by 2050, but will still increase oil and gas productionthrough the mid-2020s.

Exxonpressured to announce net-zero goal. Activist investorEngine No. 1 called on ExxonMobil(NYSE: XOM) to revamp its board and announce a net-zero goal."This is not just a climate issue but a fundamental investor issue-no differentthan capital allocation or management compensation-given the immense risk toExxon Mobil's current business model in a rapidly changing world," SanFrancisco-based Engine No. 1 wrote in a letter sent to the company.

Petrobrassinks after Bolsonaro sacks CEO. Brazilian President JairBolsonaro fired the chief executive of state-owned Petrobras (NYSE:PBR), scapegoating him for rising domestic fuel prices.Investors did not like the move - Petrobras' stock was down more than 22% asmarkets opened on Monday. Investors are interpreting the move asan abandonment of the market-based stewardship of Petrobras.

Isanother LNG glut looming? A tight LNG market could prompt anew wave of an investment super-cycle in LNG projects. However, a possible newwave of strong investment in LNG could create a massive glut later thisdecade if most of the planned or proposed projects move forward.

Occidentalposts large loss. Occidental Petroleum (NYSE: OXY) reported a $731million loss for the fourth quarter, compared to a $269 million loss from ayear earlier. Its shares fell 4% in after-hours trading.