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President Biden spent three days in Rome talking to world leaders before and during the G-20. He held a formal press conference before heading to the UN climate summit in Glasgow.

Brendan Smialowski/AFP via Getty Images

President Biden said on Sunday that the world can’t immediately stop using oil and said OPEC and Russia need to pump more of it, even as he pushes the world to pledge to cut climate-changing carbon emissions at the Glasgow climate summit this week.

After three days of meeting with world leaders in Rome, where he attended the G-20 summit, Biden said he is worried that surging energy costs are hurting working class families.

“On the surface it seems like an irony,” Biden said of simultaneously calling on major oil producers to pump more as he heads to the COP26 climate change summit. “But the truth of the matter is … everyone knows that idea that we’re going to be able to move to renewable energy overnight … it’s just not rational,” he said.

Biden said the idea that Russia, Saudi Arabia and other producers are holding back to boost prices “is not right.” With gas prices averaging $3.40 a gallon in the US, according to AAA, Biden said families are feeling it.

“It has profound impact on working class families just to get back and forth to work,” Biden said. He talked about the issue with other major oil-consuming countries at the G-20, but told reporters he was reluctant to reveal any of their plans to spur producers to pump more.

Twin peaks: Whether it’s supply or demand, oil era heads for crunch time

October 31, 2021

Twin peaks: Whether it’s supply or demand, oil era heads for crunch time

A worker collects a crude oil sample at an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS/Carlos Garcia Rawlins

Oct 25 (Reuters) – Energy transition and peak demand predictions have spooked investors in oil, putting the prospect of peak production sooner than anticipated accompanied by wild price spikes.

Key climate talks are set to begin at the end of this month in Glasgow, Scotland to tackle global warming under the 2015 Paris Agreement, with fossil fuel in policy-makers’ crosshairs.

But as it stands now, mobility curbs which hollowed out both spending on upstream oil projects and oil end use may already be set to permanently rein in the growth of both supply and demand.

“On current trends, global oil supply is likely to peak even earlier than demand,” the research department of bank Morgan Stanley said in a note this week.

“The planet puts boundaries on the amount of carbon that can safely be emitted. Therefore, oil consumption needs to peak. However, this is such a well-telegraphed prospect that it has solicited its own counter-response already: low investment.”

Global oil demand and declines in supply by scenario

Still, with most oil producers and watchdogs putting the peak to the world’s thirst for oil at least several years away, demand is already veering back toward pre-pandemic levels. read more

The mismatch between demand for oil and other polluting fossil fuels roaring back to normal and output having lagged has helped contribute to an energy crunch in Europe and Asia, with crude prices soaring to multi-year highs.

…click on the above link to read the rest of the article…

Oil Prices Will Remain High For Years To Come

October 26, 2021

Oil Prices Will Remain High For Years To Come

A growing number of major investment banks are turning bullish on oil in the medium to long term.
A lack of investment is leading to supply deficits as demand rebounds to pre-COVID levels.
Rebounding consumption and tight supply could push oil prices even higher.

Six years after former BP chief executive Bob Dudley said that “the industry needs to prepare for lower for longer,” a growing number of major investment banks now expect “higher for longer” oil prices.

Rebounding global oil consumption amid tight supply—contrary to some forecasts last year that indicate demand may have peaked or was close to its peak—as well as years of underinvestment in new supply following the 2015 crash, have prompted Wall Street banks to raise significantly their projections for oil prices in the short and medium term.

Oil prices have hit multi-year highs in recent days, with WTI Crude at its highest since 2014 and Brent Crude at the highest level since October 2018.

Even after the latest rally, prices still have headroom to rise further, many major investment banks believe.

Goldman Sachs, for example, sees Brent hitting $90 per barrel at the end of this year, up from $80 expected earlier. The key driver of Goldman’s higher forecast is global oil demand recovery amid still a weaker supply response from non-OPEC+ oil producers.

The investment bank also sees sustained higher oil prices in the coming years.

Fundamentals warrant higher oil prices, and the bank’s forecast for the next several years is $85 a barrel, Damien Courvalin, Head of Energy Research & Senior Commodity Strategist at Goldman Sachs, told CNBC earlier this month.

Oil demand will set record highs next year and the year after that, and we need to see a ramp-up in investment, he said.

“We’re facing potential multi-year deficits and the risk of significantly higher prices,” Courvalin told CNBC.

…click on the above link to read the rest of the article…

Forget $100, Options Traders Now Betting On Oil Prices Hitting $200

October 24, 2021

Forget $100, Options Traders Now Betting On Oil Prices Hitting $200

$100 Oil is no longer an ‘outrageous’ bet in the call-options market
Some speculative traders are now betting on $200 oil in December 2022
For those betting on $100 oil, the leader of the OPEC+ alliance, Saudi Arabia, has a message: look beyond the end of this year; an oversupply is coming next year

As oil prices hit multi-year highs, some speculative traders are betting on the options market that oil could exceed $100 a barrel by the end of this year and even reach a record $200 per barrel by the end of 2022.

Call options give traders the right—but not the obligation—to buy assets at a certain price, the so-called strike price, by a certain date.

The amounts of call options at triple-digit strikes have soared in recent weeks, suggesting that more speculative traders are attracted by potential quick profits from options trades, which are relatively low-cost ways to speculate on the direction of an asset.

Some “wild” bets such as call options at a $100 per barrel WTI Crude strike by December 2021 or $200 per barrel Brent Crude by December 2022 have been placed in recent weeks, The Wall Street Journal reports, citing data from provider QuikStrike.

For example, at the end of September, call options at Brent at $200 a barrel for December 2022 traded 1,300 times in one day, amid a worsening energy crunch in Europe and Asia ahead of the winter heating season in the northern hemisphere.

In WTI, the number of outstanding call options with $100 per barrel strike price with different expiry dates has surged five times since early February 2021 to more than 141,000 contracts as of the middle of October, according to data from CME quoted by the Journal.

Other popular call options for WTI included strikes at $95 or $180, QuikStrike data reported by the Journal showed.

…click on the above link to read the rest of the article…

Peak Oil Demand Forecasts Turn Sour As Demand Keeps Growing

October 24, 2021

Peak Oil Demand Forecasts Turn Sour As Demand Keeps Growing

Predicting oil—or, apparently, gas—prices is a notoriously uncertain business
Over the longer term, predicting oil prices becomes even more challenging
But besides crazy bets on high oil prices in the near future, there are other signs that the demise of fossil fuels has been greatly exaggerated

In the mind of many a news consumer, oil is on its way out. So is coal. So is gas, although that one might stick around for a little longer. We are, after all, moving into a new era of clean energy, and while it will take us some time to get there, it’s our only option for a future. And fossil fuels have no place in that future.

The latest oil, gas, and coal price rally, therefore, must have come as a shock to that hypothetical news consumer. It turns out, this rally said, that news does not always reflect reality. Neither do oil and gas price forecasts. Remember when there was a gas glut, as recently as last year? Everyone said it would persist, keeping prices low. But it didn’t. The glut ended quite suddenly this year.

Predicting oil—or, apparently, gas—prices is a notoriously uncertain business. This, however, is not stopping hundreds if not thousands of people from doing it on a daily basis, with varying degrees of success. Right now, most forecasters seem to expect prices to continue rising because there are simply too many factors working to support them.

Over the longer term, predicting oil prices becomes even more challenging. Right now, it is especially challenging because few forecasters appear to have anticipated the current rally, and now a flurry of revisions are being made, according to a New York Times report…

…click on the above link to read the rest of the article…

One Bank Crunches The Numbers On Oil Supply/Demand Dynamics, Reaches A Shocking Conclusion

October 20, 2021

One Bank Crunches The Numbers On Oil Supply/Demand Dynamics, Reaches A Shocking Conclusion

With oil prices surging amid a broader global energy crisis, many are hoping that this particular price spike is truly transitory as incremental supply – whether from OPEC+ or shale – kicks in and resets the market lower.

But maybe not so fast: as Morgan Stanley’s chief commodity strategist Martijn Rats writes, on current trends, global oil supply is likely to peak even earlier than demand. And as prices search for the level at which demand erosion kicks in, he is increasing his Q1 2022 Brent forecast to $95/bbl, while also lifting his long-term forecast from $60 to $70/bbl.

As hinted by the bold text above, the note from the Morgan Stanley commodity strategist (available to pro zero hedge subs in the usual place) focuses on arguably the two key drivers in the oil market: peak demand and peak supply. As Rats explains, while tThe planet puts boundaries on the amount of carbon that can safely be emitted – and therefore, oil consumption needs to peak – this is such a well-telegraphed prospect that it has solicited its own counter-response already: low investment (especially in conjunction with ESG pressures to curb fossil fuels). The question has therefore become: which will actually peak first? Supply? Or demand?

According to MS, the second scenario would materialize if demand were to decline very sharply, say along the trajectory of the IEA’s ‘Net Zero by 2050’ study.

This assumes that oil demand falls by ~29% between 2019 and 2030, driven by technological improvements, a change in end-user behaviour and other factors (recent event have shown just how much of a pipe dream this is). The sum of all oil future oil demand in this scenario amounts to ~700-900 bn barrels, roughly half the estimate of proved oil reserves in the BP Statistical Review of World Energy of 1.7 trillion barrels.

…click on the above link to read the rest of the article…

Crude oil prices will go the way of ‘whale oil’ as demand has peaked, says ARK’s Cathie Wood

October 12, 2021

Crude oil prices will go the way of ‘whale oil’ as demand has peaked, says ARK’s Cathie Wood

Rising crude oil prices are a factor of supply rather than demand, she says

An old building of a British shipping base, which was consumed by a mudslide sparked by a volcano, crumbles at Whalers Bay in Deception Island, in the western Antarctica peninsula on March 06, 2016. In 1912 the Hektor Whaling Company was issued with a license to establish a shore-based whaling station. Approximately 150 people worked at the station during the austral summer, producing over 140,000 barrels of whale oil.

AFP VIA GETTY IMAGES

Much like the whale oil trade at its peak in the mid 1800s, crude oil prices have probably topped.

That’s according to Cathie Wood, founder and CEO of Ark Investment Management, who spoke of a coming peak in crude oil prices due to the arrival of electric vehicles (EV), in a series of tweets late Thursday.

Citing U.S. Energy Information Administration data, the investment manager said global oil demand peaked at 101 million barrels per day (mbd) in 2019, dropped to 92 mbd during the coronavirus in 2020, and has since rebounded to 97 mbd in 2021. “Based on our forecast for EV sales, @ARKInvest believes that oil demand has peaked,” Wood said.

ARK has predicted that EV sales will rise roughly 20-fold from around 2.2 million in 2020 to 40 million units in 2025, and industry heavyweight Tesla TSLA, 1.54% is the biggest holding in the flagship ARK Innovation exchange-traded fund ARKK, 1.04%. She also pointed to pension funds who are demanding oil companies reduce capital spending while Wall Street banks are denying them money for fracking, as OPEC is “holding the line on supply”.

…click on the above link to read the rest of the article…

Oil settles up 1.5%; hits multi-year highs on surging demand

October 12, 2021

Oil settles up 1.5%; hits multi-year highs on surging demand

Oil prices surge, adding to global energy crunch

BENGALURU, Oct 11 (Reuters) – Oil prices jumped on Monday to the highest levels in years, fuelled by rebounding global demand that has contributed to power and gas shortages in key economies like China.

Brent crude rose $1.26, or 1.5%, to settle at $83.65 a barrel. The session high was $84.60, its highest since October 2018.

U.S. West Texas Intermediate (WTI) crude gained $1.17, or 1.5%, to settle at $80.52, after touching its highest since late 2014 at $82.18.

The pace of economic recovery from the pandemic has supercharged energy demand at a time when oil output has slowed due to cutbacks from producing nations during the pandemic, focus on dividends by oil companies and pressure on governments to transition to cleaner energy.

A U.S. administration official on Monday said the White House stands by its calls for oil-producing countries to “do more” and they are closely monitoring the cost of oil and gasoline. read more

The Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, have held back from boosting supply even as prices have risen. In July, the group agreed to boost output by 400,000 bpd to restore the 5.8 million bpd in supply curbs left from its 2020 deal to cut production in the wake of the coronavirus outbreak. read more

Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford — Pipelines run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford

Power prices have surged to record highs in recent weeks, driven by widespread energy shortages in Asia, Europe and the United States. Soaring natural gas prices have encouraged power generators to switch to oil. read more

“Everything is very much focused on the lack of supply returning at a time when demand appears to be roaring back,” said Matt Smith, lead oil analyst at Kpler.

…click on the above link to read the rest of the article…

IEA, OPEC Slash Oil Demand Outlook Amid “Headwinds” From Spreading Delta Variant

August 12, 2021

IEA, OPEC Slash Oil Demand Outlook Amid “Headwinds” From Spreading Delta Variant

The International Energy Agency and Goldman Sachs are both warning that global oil demand is facing headwinds due to the spread of the COVID-19 Delta variant: “Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said in its monthly report.

“We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia, and other parts of Asia,” the IEA said.

Since July, NYMEX West Texas Intermediate (WTI) futures have fallen at least 10% as the Delta variant spreads worldwide. Traders are worried renewed lockdowns and or stricter social distancing measures in China, Europe, and the US may continue to weigh on oil demand and result in lower prices.

The “recent rally has lost steam on concerns that a surge in Covid-19 cases from the Delta variant could derail the recovery just as more barrels hit the market,” the IEA said.

The agency said global oil demand “abruptly reversed course” last month, after surging by 3.8 million barrels a day in June, adding that it lowered consumption estimates for the second half of this year by 550,000 barrels a day.

However, the IEA projects in the last quarter of this year, the global economic recovery should regain steam as world fuel should reach an average of 98.9 million barrels a day.

Similar to IEA’s forecast is a report from Goldman Sachs’ Damien Courvalin, who told clients that “transient demand headwinds” have developed and there is “growing evidence of structural supply tailwinds.”

Courvalin already lowered his emerging market demand expectations last month due to the Delta spread but at the time “omitted” China from the downgrade.

…click on the above link to read the rest of the article…

Brace For Shock At The Pump: WTI Surges Above $75 As OPEC+ Raises Output Less Than Expected

July 1, 2021

Brace For Shock At The Pump: WTI Surges Above $75 As OPEC+ Raises Output Less Than Expected

Brace for shock at the pump. WTI crude prices surged by over $2, rising more than 3% to $75.8/bbl…

… the highest since 2018…

… amid reports that ahead of the conclusion of today’s OPEC, JMMC and OPEC+ meetings, Saudi Arabia and Russia have agreed on a preliminary deal regarding raising oil output, one which will include a monthly oil output increase of less than 500k bpd to OPEC’s current holdback of 5.8 million barrels until December-2021, which is less than the market consensus of 500kbp/d. Reuters adds that OPEC+ is also likely to ease oil output cuts by 2 million bpd between August and December, which suggest that OPEC+ is weighing inflation risks in the short-term, however by year-end the market is expected to be in a deficit of over 3mmb/d, which is why most banks have projected oil to rise above $85 toward the end of the second half.

Additionally, local sources add that OPEC+ is currently debating extending the production deal to the end of 2022 (from the original April 2022), according to a delegate, which will lead to the further supply constraints and even higher prices.

While OPEC+ intentions should hardly be a surprise to the market, the fact that oil prices are only now spiking shows how far behind the curve algos and CTAs have been. Or as energy expert Art Berman puts it, “So much commentary about how OPEC doesn’t matter any more yet today so many tweets expressing frustration with OPEC for not increasing supply.”

The OPEC+ meeting is happening against a backdrop of tightening supply. Crude inventories in the U.S. are falling at the fastest rate in decades, while shale producers are remaining disciplined with their spending and won’t overwhelm OPEC, ConocoPhillips Chief Executive Officer Ryan Lance said on Wednesday…

…click on the above link to read the rest of the article…

Oil Prices Set To Head Even Higher As Market Tightens

June 24, 2021

Oil Prices Set To Head Even Higher As Market Tightens

Solid oil demand is driving up the spot crude prices in every part of the world. This is a clear indication that the physical oil market is finally catching up with the recent rally in the paper market.

The strengthening appetite for crude in Asia and tightening regional markets due to changed differentials between regional benchmarks are, in turn, supportive of the oil futures rally, analysts and traders tell Reuters.

The surging premium of Brent over the Middle Eastern benchmark Dubai now makes shipping crude grades from the Atlantic Basin to Asia uneconomic because they are priced off the Brent benchmark. So Asian demand for Middle Eastern and Russian grades priced off the Dubai benchmark is high, driving the spot premiums for Omani crude and Russia’s ESPO and Sokol grades close to a one-year high.

At the same time, the narrowing discount of WTI Crude to Brent Crude is effectively shutting the arbitrage for U.S. crude to go to Europe and Asia as the less-than-$2 a barrel spread makes shipping American oil to the major import markets uneconomical.

As a result of these dynamics in spreads between regional benchmarks, physical crude supply in each of the regions is tightening. First, because it’s uneconomical to import crude from other regions. Second, because oil demand is rebounding as the summer driving season begins and economies reopen from restrictions in mobility.

In the paper market, Brent Crude prices already hit $75 a barrel this week, for the first time in over two years. WTI Crude was above $73 early on Wednesday as demand strengthened and as U.S. crude oil inventories were estimated by the American Petroleum Institute (API) to have shrunk by 7.199 million barrels for the week ending June 18.

Backwardation in the WTI futures continues to tighten—a sign of a tighter market.

…click on the above link to read the rest of the article…

Decade Of Chaos Could Send Oil To $130 Per Barrel

June 23, 2021

Decade Of Chaos Could Send Oil To $130 Per Barrel

From $35 per barrel to $130 per barrel—this is the range for oil prices in the next few years that we could see, according to a commodity trading group. And it will all depend on what peaks first: demand or investment in new production. “You could see spikes to even higher than $100 a barrel, even $130, and you could also see it go down to $35 a barrel for periods of time going forward,” William Reed II, chief executive of Castleton Commodities International, said at the FT Global Commodities Summit this week, as quoted by Reuters. “The question is what happens first. Peak demand or peak investment?”

This is a fascinating question that will likely remain open for quite some time; it seems as if forecasts are even more unreliable than usual in the post-pandemic world. For instance, last year, energy authorities and the industry itself predicted oil demand growth was over thanks to the pandemic that encouraged a doubling down on an energy shift away from fossil fuels. Now, these same forecasters, including the International Energy Agency and BP (0.78%), are talking about growing oil demand.

One thing that can hardly be disputed is that lower spending on exploration would inevitably lead to lower production. This is what we have seen: the pandemic forced virtually everyone in the oil industry to slash their spending plans. This is what normally happens during the trough phase of an industry cycle.

What doesn’t normally happen in a usual cycle is long-term planning for smaller output. Yet this is the response of Big Oil to the push to go green. Most supermajors are planning changes that would effectively reduce their production of oil and gas. In Shell’s (1.31%) case, it has been literally ordered by a Dutch court to shrink its production of oil and gas.

…click on the above link to read the rest of the article…

It’s Too Late To Avoid A Major Oil Supply Crisis

June 18, 2021

It’s Too Late To Avoid A Major Oil Supply Crisis

There are a number of observable trends in oil supplies and by extension prices, presently. I am going to discuss one of them in this article. A lack of capital investment in finding new supplies of oil and gas. A favorite analogy of mine comes to mind, the ship is nearing the dock. In nautical parlance that means the time for course corrections is at an end. So we shall see if that is the case for oil. The massive “ship” that is world oil demand is on an unalterable collision with supplies that will have profound implications for consumers. This key metric reveals what the future is likely to hold for our energy security as the world continues to recover from the virus to those who will listen. The level of drilling and by extension capital investment is insufficient and has been for a number of years to sustain oil production at current levels. It’s no secret that even with the lower break-even costs for new projects thanks to cost-cutting by the industry the last few years, oil extraction is a capital-intensive business. The chart below from WoodMac, an energy consultancy, shows just how severe the decline in capex has been.

WSJ

The message to oil and gas companies has been pretty clear from the market, investment funds like Blackrock seeking green “purity” in the allocation of financing of new energy sources, and government edicts mandating carbon intensity reduction across the entire swath of society, and a transformation to renewable energy, that new supplies of oil and gas are not wanted.

…click on the above link to read the rest of the article…

Oil Markets Baffled As The IEA Calls For More Production

June 15, 2021

Oil Markets Baffled As The IEA Calls For More Production

In its latest Monthly Oil Report, the IEA called on OPEC+ to increase production in order to counter higher demand in 2022.

The agency claimed that, based on current global economic growth expectations, demand for crude oil and petroleum products will be reaching pre-COVID levels by 2022. The Paris-based energy watchdog, which has come under fire after its shocking Net-Zero by 2050 report called for no more investments in oil and gas, stated that “OPEC+ needs to open the taps to keep the world oil markets adequately supplied”. At the same time, the IEA has also reiterated that market realities are at odds with its proposed strategies to reach net zero-emission levels by 2050. Criticism will likely be harsh for the “former” leading oil and gas agency, as the agency has called upon the world to double down on renewables and commit to the Paris Agreement while admitting that the global economy continues to demand vast amounts of hydrocarbons.

The relevance of some of these reports will have to be reassessed, especially when looking at the high-profile “Golden Age of Gas” report and the “Net Zero by 2050” roadmap. When asked what needs to be done, the IEA indicated that the call on OPEC+ will be very strong, as the international oil and gas producers group will need to increase crude oil supply to the market by 1.4 million bpd in 2022. Which would mean a significant increase over its current July 2021-March 2022 targets.

The demand expectations of the IEA fall in line with some others, as OPEC, the EIA, and independent consultants, have stated before that demand for oil is going to increase substantially. Some even expect volumes in 2022 to be higher than 2019 levels, even as prices are increasing substantially.

…click on the above link to read the rest of the article…

Is The World About To See An Oil Shortage?

March 9, 2021

Is The World About To See An Oil Shortage?

It’s possible we could be headed for a shortfall in global oil supply as soon as next year – pretty remarkable considering where oil demand was last spring, with economies slowing under the weight of the pandemic.

Based on projected rising demand, the natural production decline from existing wells and decreases in drilling activity and industry investment – especially in the U.S. – the world’s oil needs could outpace production in 2022. An undersupply potentially could put upward pressure on costs, impacting consumers, manufacturers and, generally, any process that utilizes oil.

API’s outlook has maintained that global oil markets would improve in tandem with the economy, but uncertainties remain about the timing and extent to which the U.S. could participate in that recovery. As a primary source of U.S. petroleum data and analysis, API is able to shed some light on recent developments. Consider:

U.S. and global oil demand through mid-February 2021 nearly returned to pre-COVID-19 levels, mainly due to strong refining & petrochemical needs as well as seasonal winter heating fuels demand.
By all indications, global oil demand exceeded supply and supported prices since the third quarter of 2020.
Current official global oil demand projections through 2022 call for record, two-year demand growth that could require virtually all of the world’s oil spare production capacity.
Additionally, oil production declines naturally and that production must be replaced. Combine that expected decline with projected demand growth, and the world could require more than 14 mb/d of new production by 2022.
Global oil drilling activity and capital investments have remained historically weak, suggesting a potential supply gap.

…click on the above link to read the rest of the article…

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