Oil Demand Is Finally Bouncing Back

Oil Demand Is Finally Bouncing Back

Oil prices moved higher this week after the demand outlook improved. While Covid cases are up significantly from a few weeks ago, and travel restrictions have proliferated, demand still looks strong and on the rise. 

IEA raises oil demand forecast. The IEA raised its oil demand forecast for 2021 by 230,000 bpd, citing improving vaccination efforts and U.S. stimulus.

Exxon spends huge sums to defeat proxy moves. ExxonMobil (NYSE: XOM) is spending above $35 million to block proxy votes by activist shareholder Engine No. 1, and could spend as much as $100 million, according to Reuters, although Exxon disputes that figure. Analysts say it could become one of the biggest proxy fights in history. 

New Zealand becomes first country to require climate disclosure. New Zealand became the first country to require banks, insurers and investment managers to report the impacts of climate change on their businesses. The law affects banks and insurers with assets over NZ$1 billion, and all equity and debt issuers listed on the country’s stock exchange.

Oil majors’ struggle to sell $110 billion in assets. Large oil and gas companies are looking to sell off a combined $110 billion in assets to raise cash and pay down debt. But they may struggle to find buyers, according to Reuters. “This is not a very good time to sell assets,” Total (NYSE: TOT) CEO Patrick Pouyanne said.

California fracking ban dies in state legislature. A proposal to ban fracking statewide in California fell short in the state legislature this week. 

Bitcoin power consumption jumped 66-fold since 2015. Energy consumption for Bitcoin mining is up 66 times and the associated emissions are destined to receive greater scrutiny, Citigroup warned. Bitcoin uses more energy than the entire country of Argentina. The New York Times also did a deep dive on the issue.

Chevron invests in offshore wind for first time. Chevron’s (NYSE: CVX) venture capital unit invested in Ocergy Inc.’s floating offshore wind turbines. “To my knowledge, this is the first investment by a U.S. oil major in offshore wind,” said Anthony Logan, a senior analyst at Wood Mackenzie Ltd.

Exxon cuts Guyana production due to compressor problem. ExxonMobil (NYSE: XOM) cut its Guyana oil production by 75% down to 30,000 bpd due to a problem with a compressor on its offshore platform.

BP halts production at Shetlands oil field. BP (NYSE: BP) suspended production indefinitely at its Foinaven crude oil field west of Shetland. 

Pioneer warns of price war if shale moves too fast. Pioneer Natural Resources (NYSE: PXD) CEO Scott Sheffield warned that OPEC+ would engage in a price war if U.S. shale grew production too quickly. “If we grow another million barrels a day next year, we’re going to have another price war in my opinion going into ‘23,” he said.

Exxon may exit Iraq’s West Qurna 1. Iraq’s oil ministry said that ExxonMobil (NYSE: XOM) may exit the West Qurna 1 oil field. The ministry said it is looking for buyers. Exxon operates the massive 500,000-bpd field. 

Investors around the globe looking for ESG. More than 80% of affluent investors in Hong Kong, China, Singapore and the UK say that environmental and ethical issues matter, and only a third have their investments tied to ESG factors, according to HSBC Asset Management. The data suggests there is an appetite for ESG investments.

WoodMac: Global energy transition to result in $10 Brent by 2050. Stricter climate policy could accelerate the energy transition, and a steep drop in demand could begin by 2023, according to Wood Mackenzie. Demand could fall to 35 mb/d by 2050, with Brent averaging between $10 and $18.

Goldman Sachs: Oil demand to peak by 2026. Goldman has been bullish on oil demand in the short run, but expects “anemic” demand after 2025 and a peak by 2026.

Biden expected to propose 50% cut in GHG. The U.S. is hosting a virtual climate summit next week, and ahead of that meeting, the Biden administration is expected to announce a 2030 greenhouse gas reduction target of 50%. 

Report: 2035 100% EVs is possible. A new report shows that, with the right policy, it is technically and economically feasible for all new car and truck sales to be electric by 2035.

Shell opposes climate proxy vote. Royal Dutch Shell (NYSE: RDS.A) is pushing shareholders to oppose a climate resolution filed by activist investor Follow This. 

Shell warns of stranded assets. Royal Dutch Shell (NYSE: RDS.A) says that it will have produced 75% of its proved oil and gas reserves by 2030, and will produce only 5% after 2040.

North American oil bankruptcies hit 5-year high. Oil and gas bankruptcies in North America hit their highest first-quarter level since 2016, according to Haynes and Boone. There were eight bankruptcies in the first quarter. 

The largest U.S. gas driller wants methane regulations. EQT (NYSE: EQT), the largest natural gas driller in the U.S., called for stricter limits on methane. The Pittsburgh-based company supports Congressional efforts to repeal the Trump-era rollback on methane limits. 

Permian pipeline crisis. A few years ago, Permian drillers suffered price discounts due to inadequate pipeline capacity. Now they have the opposite problem: too many pipelines and not enough oil.

Oil Price, by Tom Kool, April 20, 2021