While there is still plenty of potential new oil supply on the market, particularly from OPEC+, analysts remain very bullish and banks are beginning to talk about $100 oil.
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Friday, February 26th, 2021
Oil prices took a breather on Friday after Brent traded just above $67 on Thursday. While downside risks remain, banks are now openly talking about the possibility of $100 oil at some point. OPEC+ still has the power to send oil prices down, but very few analysts are staking out overly bearish outlooks.
Texas scrutinizes blackouts. 5 members of ERCOT, the grid manager in Texas blamed for the historic outages last week, resigned on Wednesday. A sixth withdrew his application. Executives from Calpine Corp., Vistra Corp. (NYSE: VST), and NRG Energy (NYSE: NRG) blamed natural gas-supply shortages
Texas gas production fell by half. Natural gas production in Texas collapsed by half during the freeze.
Traders betting on $100 oil. The open interest on $100 strike Dec 2022 calls has exploded higher since the turmoil in the Texas energy markets. $100 oil is still a gamble, but there is more interest in triple-digit oil prices than there has been in years.
Shell’s Deer Park refinery could take until April. Royal Dutch Shell’s (NYSE: RDS.A) Deer Park refinery in Texas could take until April to restart, following damage from the freeze across Texas.
China’s shale boom over before it began. Despite China’s natural resources and best efforts, the country has not been able to get its own shale boom off the ground, and a recent analysis by Reuters shows that what progress Beijing has made toward its own shale revolution could already be obsolete by the middle of this decade. “Complex geology and failure to draw in more investors” are projected to make the industry’s expansion economically untenable.
Keystone XL death means more oil by rail. Cenovus Energy (TSE: CVE) and Imperial Oil (TSE: IMO) are moving more oil by rail, and Canada’s oil-by-rail shipments have tripled since July. Analysts say without Keystone XL, more oil will hit the rails over the course of the 2020s to get heavy Canadian crude to Gulf Coast refiners.
Continental Resources sues BLM over delay in leases. Continental Resources (NYSE: CLR) is suing the Bureau of Land Management over what it says is an illegally long wait for 50 applications for drilling on federal lands.
Venezuela and Iran swap jet fuel for gasoline. Venezuela and Iran, both sanctioned by the United States, are helping each other out. Venezuela is shipping jet fuel to Iran in the same tankers in which Iran delivers gasoline and spare parts for the refineries in Venezuela.
China’s oil imports to slow. China’s oil imports in the second quarter are expected toslow in the face of higher prices and refinery maintenance.
Occidental to lose $750…
Read More: Why Oil Bulls Aren’t Backing Down