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IEA Drops Bombshell Report On Oil And Gas

·5 min read

The IEA made headlines today when it suggested that there should be no new oil and gas investments after 2021... If that were to happen - with a supply crunch already looming - the oil traders at OPC Markets would have a great time.

Chart of the Week

- U.S. residential energy consumption declined by 4% in 2020, despite people spending more time at home during the pandemic.

- Relatively warmer weather reduced heating needs during winter months, offsetting the 2 percent increase in electricity sales.

- Space-heating and water-heating are usually the most energy-intensive uses in the average U.S. home.

Market Movers

- BP (NYSE: BP) is in advanced talks to sell its 28% stake in a North Sea oil field.

- Natural gas stocks rose in concert with prices following new weather forecasts showing hotter-than-average temperatures later this month. Nymex natural gas was up more than 5% on Monday. Coal stocks also rose on the news.

- Gran Tierra Energy (TSX: GTE) announced that it was shutting some of its oil wells in Colombia due to unrest.

Tuesday, May 18, 2021

Oil prices took a breather Tuesday morning, but Brent is once again testing $70 per barrel, with expectations of improved demand on the heels of widespread vaccinations in the U.S.

IEA: No new fossil fuel exploration. The IEA is out with a landmark report on a pathway to net-zero emissions by 2050. Among the many important points in the 200-plus-page report is the call to end fossil fuel exploration. “[N]o exploration for new resources is required,” the agency said. It also listed a series of restrictive policies that are necessary, including phasing out sales of the internal combustion engine and bans on new natural gas hookups in buildings. The conclusion is a dramatic shift in tone.

Supply crisis coming? The steep cuts to capex and the increasingly stringent climate policy have forced the oil majors to lower their growth plans. Some analysts warn that this could set the market up for a supply crunch in the coming years.

India demand takes 500,000-bpd hit in May. India’s oil demand could be off by as much as 500,000 bpd for the month of May, according to Reuters. The negative effects from the Covid-19 spike are expected to extend into June.

Gas industry faces an existential threat from renewables. The Wall Street Journal details the gas industry’s looming decline from renewables. “I’m hellbent on not becoming the next Blockbuster Video,” said Vistra (NYSE: VST) Chief Executive Curt Morgan. “I’m not going to sit back and watch this legacy business dwindle and not participate.” Vistra owns 36 gas-fired power plants but said it will not build anymore, instead it will invest $1 billion in solar and batteries.

Central banks step up climate scrutiny. A coalition of 90 central banks from around the world – the Central Banks and Supervisors Network for Greening the Financial System – is scheduled to meet next month at a major conference to address risks from climate change.

Gasoline shortages ease. Over 1,000 retail gasoline stations were resupplied over the weekend, easing the shortages from the Colonial Pipeline outage.

Iran planning oil export boost. Iran is preparing to boost production and exports of crude oil as talks on the nuclear deal with the United States continue to progress, government officials said.

OPEC+ production rising by 1 mb/d. OPEC’s oil exports have jumped by 1 million barrels per day (bpd) so far in May, while the OPEC+ group started easing the production cuts by 350,000 bpd this month.

Spain to end fossil fuel production. Spain’s parliament voted in favor of a new climate law that commits the country to cut emissions 23% by 2030, compared with 1990 levels. The law also bands coal, natural gas, and oil production by 2042, and outlaws new permits immediately.

Shell says Nigerian assets not compatible with energy transition. Royal Dutch Shell (NYSE: RDS.A) acknowledged that its operations in Nigeria are incompatible with its green transition. “The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” CEO Ben van Beurden told investors. “We cannot solve community problems in the Niger Delta.” Shell has been selling off assets in Nigeria incrementally in the past decade, so a “full retreat would be an obvious end point,” Bloomberg said.

Related Video: Iraq Eyes Exxon Stake and New OPEC Status

Offshore wind turbines require 63,000 pounds of copper. Renewables—and especially offshore wind—are set to drive a surge in copper demand that will push prices even higher, as the amount of copper required per wind turbine is staggering, at 63,000 pounds.

Activist investors get another boost against ExxonMobil. Glass Lewis & Co. agreed with investor activist Engine No. 1 in its quest to revamp the board of ExxonMobil (NYSE: XOM), another boost for the effort.

Washington State’s most aggressive climate policy. Washington State just enacted the most aggressive climate policy in the nation, a cap-and-trade system that would take emissions down close to zero by 2050. Utilities need to be carbon neutral by 2030. The law covers more of the economy (70% of overall emissions) than most other state policies.

UK seeks G-7 deal to end fossil fuel subsidies. The UK is helping the G-7 move close to an agreement to phase out fossil fuel subsidies.

Oil industry gets a partial win at Supreme Court. The U.S. Supreme Court gave the oil industry a partial win in a highly-anticipated court case. The City of Baltimore has sued 20 international oil companies seeking damages related to climate change, and the Supreme Court decided that the case should be heard in federal court, which the oil industry views as more favorable terrain. The case now goes back to federal court.

Shell wins backing from shareholders. Royal Dutch Shell (NYSE: RDS.A) won backing from shareholders in a non-binding vote on its green transition plans, with 88% of shareholders voting in favor.

Shale comeback would be disastrous for oil. Experts are now warning that OPEC+ could see its efforts thwarted by a chief rival: U.S. shale. According to the Oxford Institute for Energy Studies, rising oil prices could allow for a significant return of U.S. shale to the market in 2022, potentially upsetting the delicate rebalancing of the global oil market.

By Josh Owens for Oilprice.com

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