Why Oil Bulls Won't Back Down - OIR 260221

Saturday, February 27,2021 /06:40 AM / by Tom Kool of Oilprice.com / Header ImageCredit: Oilprice.com

While there is still plenty of potential new oil supply onthe market, particularly from OPEC+, analysts remain very bullish and banks arebeginning to talk about $100 oil.

Proshare Nigeria Pvt. Ltd.

Friday, February 26th, 2021

Oil prices took a breather on Friday after Brent traded justabove $67 on Thursday. While downside risks remain, banks are now openly talking about thepossibility of $100 oil at some point. OPEC+ still has the power to send oilprices down, but very few analysts are staking out overly bearishoutlooks.

Texasscrutinizes blackouts. 5 members of ERCOT, the gridmanager in Texas blamed for the historic outages last week, resigned onWednesday. A sixth withdrew his application. Executives from CalpineCorp., Vistra Corp. (NYSE: VST), and NRG Energy (NYSE:NRG) blamed naturalgas-supply shortages

Texasgas production fell by half. Natural gas production inTexas collapsed by half during the freeze.

Tradersbetting on $100 oil. The open interest on$100 strike Dec 2022 calls has exploded higher since the turmoil in the Texasenergy markets. $100 oil is still a gamble, but there is more interest intriple-digit oil prices than there has been in years.

Shell'sDeer Park refinery could take until April. Royal DutchShell's (NYSE: RDS.A) Deer Park refinery in Texas could take until Aprilto restart, following damage from the freeze across Texas.

China'sshale boom over before it began. Despite China'snatural resources and best efforts, the country has not been able to get itsown shale boom off the ground, anda recent analysis by Reuters shows that what progress Beijing has made towardits own shale revolution could already be obsolete by the middle of thisdecade. "Complex geology and failure to draw in more investors" areprojected to make the industry's expansion economically untenable.

KeystoneXL death means more oil by rail. CenovusEnergy (TSE: CVE) and Imperial Oil (TSE: IMO) aremoving more oil by rail, and Canada's oil-by-rail shipments have tripled sinceJuly. Analysts say without Keystone XL, more oil will hit therails over the course of the 2020s to get heavy Canadian crude to Gulf Coastrefiners.

ContinentalResources sues BLM over delay in leases. ContinentalResources (NYSE: CLR) is suing the Bureau ofLand Management over what it says is an illegally long wait for 50 applicationsfor drilling on federal lands.

Venezuelaand Iran swap jet fuel for gasoline. Venezuela andIran, both sanctioned by the United States, are helping each other out.Venezuela is shipping jetfuel to Iran in the same tankers in which Iran delivers gasoline and spareparts for the refineries in Venezuela.

China'soil imports to slow. China's oil imports in the secondquarter are expected to slow in the face ofhigher prices and refinery maintenance.

Occidentalto lose $750 million on midstream. OccidentalPetroleum (NYSE: OXY) has seen its Permian productiondecline and now it has surplus unused midstream capacity, which could result ina midstream loss of around $750million this year. Occidental has 800,000 bpd of contracted pipeline capacity,but only 485,000 bpd in Permian production, forcing the company to buy supplyelsewhere.

Exxon'sreserves plunge by one-third. In an SEC filing, ExxonMobil(NYSE: XOM) said its total oil and gas reserves fell byone-third to 15.2 billion barrels of oil. Most of the downgrade wasconcentrated in Canada's oil sands.

Exxonto sell North Sea assets. ExxonMobil(NYSE: XOM) said it would sellupstream assets in the North Sea for $1 billion, although the company hadoriginally hoped to obtain $2 billion.

OPEC+considers modest production boost. OPEC+ will discussa modest increase in oil production at next month's meeting, sources told Reuters. The most likelynumber is an increase of 500,000 bpd beginning in April. At the same time,Saudi Arabia's voluntary 1 mb/d cuts are set to expire.

Pioneer:U.S. shale no longer threat to OPEC. OPEC won't haveto worry about U.S. shale growth anymore, according to Pioneer NaturalResources. "I'm confident that we can assume the Iranian barrels into themarketplace over time and then U.S. shale is no longer going to be a threat toOPEC and OPEC+," Scott Sheffield said.

Frackingbanned in Delaware River basin. A regulatory agencygoverning water supplies in the Delaware River basin implemented apermanent ban on fracking in the region. The basin, which supplies drinkingwater to 13 million people in New Jersey, New York, Delaware and Pennsylvania,encompasses the northeastern tip of the Marcellus shale. A moratorium had beenin place since 2010.

SECto step up climate scrutiny. The acting chair of theSecurities and Exchange Commission Allison Herren Lee said on Wednesday thatthe SEC would focus on climate disclosure in corporate filings. "Now more thanever, investors are considering climate-related issues when making theirinvestment decisions," Lee said in the statement. "Itis our responsibility to ensure that they have access to material informationwhen planning for their financial future."

Shell:Global LNG demand to double by 2040. Royal DutchShell (NYSE: RDS.A) said that global LNGdemand could double by 2040, with 75% of the growth concentrated in Asia.

EOGhikes dividend 10%. EOG Resources (NYSE: EOG) boosted its annualdividend on Thursday by 10% after posting better-than-expected fourth-quarterresults. However, the company's share price fell 3% after the announcement, andanalysts cited the fact that EOG plans a capex increase this year, even asproduction is expected to remain flat.

Pembinatakes big write-down. Canada-based Pembina said thatit can "sadly" no longer predict when it might beable to build Jordan Cove LNG, the only LNG project on the U.S. Pacific Coaststill alive. Jordan Cove has suffered too many regulatory defeats. Pembina tooka C$350 million write-down on the project.