Oil prices have fallen below $ 60, but have remained at levels not seen since January 2020.
This week Global Energy Alert, our investment team describes the best way to trade the Texas freeze. Sign up today for the latest news, expert reviews and trading tips.
Friday, February 19, 2021
Texas’ electricity crisis is easing, but human disruptions, damages and losses have been historic. On Friday morning, Texas network operator ERCOT said that would come out of “emergency conditions” at the end of the day. After a crazy week, WTI fell slightly, but maintained gains close to $ 60, a price not seen since January 2020.
Texas shutdown eases. As of Tuesday, about 45 gigawatts of electricity generation from renewable sources, coal and natural gas were offline. More than 4 million people lost energy. On Friday, most of these people saw their energy restored. The crisis has once again focused attention on several network policy issues – the lack of climate control in Texas’ power generation assets, the lack of a capacity market and the isolation of the state grid from the rest of the country.
US oil production was impacted. About 4 mb / d of United States oil production has been neglected due to power outages, freezing wellheads and other equipment failures. Most of the interruptions occurred in the Permian Basin. Restarting frozen or closed wells is not necessarily simple and some restarts can take weeks.
Related: Is this Oil Rally the beginning of something much bigger?
Texas prohibits the sending of natural gas outside the state. Texas Governor Greg Abbott took the drastic step to ban the state’s export of natural gas to conserve supplies. The move is highly controversial and potentially illegal, although most analysts note that any legal challenges would be debatable because the order will have expired by the time a judge reviews them. The governor also personally sent orders to several LNG exporters to stop operations.
LNG cargo canceled. At least 10 LNG shipments have been canceled because of the network crisis, according to Bloomberg.
Restarting the refinery can take weeks. Four of Texas’ largest oil refineries have seen widespread damage from the cold wave and could take weeks to repair, according to Bloomberg. The interruptions may reduce the demand for oil, but cut the supply of refined products. The four refineries include ExxonMobil’s (NYSE: XOM) Baytown and Beaumont plants, Marathon Petroleum (NYSE: MPC) Galveston Bay refinery, andTotal (NYSE: TOT) Port Arthur facility. The result could be $ 3 per gallon of gas in May.
The United States wants to reopen negotiations with Iran. The US government said it would accept an EU invitation to hold talks with Iran. Iran did not exactly jump on the news, saying it would “immediately reverse” recent actions in its nuclear program, but only after the US suspended its sanctions.
Gas companies hit the jackpot in Texas’s deep freeze. While Texans struggle to keep lights and heating on, gas producers in Lone Star State, or at least those whose wellheads have not frozen, are having an explosion.
Saudi Arabia to increase production. Saudi Arabia is expected to reverse its voluntary 1 mb / d production cut in the coming weeks, according to the Wall Street Journal, with the returned barrels hitting the market in April. “A Saudi increase in production … makes perfect sense given the tightening that is beginning to appear in the market,” Ole Hansen, head of commodity strategy at Saxo Bank, based in London, told WSJ. “The market is likely to accept that very well.”
Shell will sell Alberta assets for $ 900 million. Royal Dutch Shell (NYSE: RDS.A) will sell its Duvernay shale assets in Alberta for $ 900 million to Crescent Point Energy Corp. (TSE: CPG). Related: Oil prices rise as U.S. oil production falls 30%
Maersk plans carbon-neutral shipping containers. Maritime giant AP Moller Maersk A / S is accelerating plans to transition to carbon neutral operations, including plans to add the first biofuel-powered container ship.
US shale remains in moderation for the time being. With WTI rising to $ 60 a barrel, the United States shale industry could be in a better financial position than previously expected. Recent comments from shale executives suggest that drillers will not return to aggressive spending plans, instead they will focus on cash generation.
Canadian gas drilling on the rise. Canadian shale gas drilling has increased rapidly this year, and Canadian gas exports to the US are also growing. Canadian drillers hope to gain more market share, as U.S. drillers are slowing.
The Texas freeze raises the cost of carrying a Tesla to $ 900. The shortage of electricity in Texas in the midst of the cold wave has caused electricity prices to rise so much that the increase in energy prices is equivalent to a cost of $ 900 to charge a Tesla.
$ 100 oil possible in the commodity super cycle. Several investment bank analysts say oil could reach $ 100 a barrel because we may be at the start of a new commodity super cycle.
Egypt will restart a second LNG plant. Egypt is close to restarting a second LNG facility, after being closed for eight years. The restart raises Egypt’s hopes of developing an important natural gas hub and LNG export industry.
Shell’s Nigerian accounts frozen in a legal dispute. A restricted Nigerian court Royal Dutch Shell (NYSE: RDS.A) access to their bank accounts in the country over a legal dispute for years.
By Tom Kool for Oilprice.com
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