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IEA: The Oil Glut Is Going Nowhere

IEA: The Oil Glut Is Going Nowhere

Barrels

Global oil markets will remain well supplied this year, with a possible overhang of some 1 million bpd, the head of the International Energy Agency, Fatih Bitol, told Reuters.close [x]ReplayUnmuteLoaded: 0%Progress: 0%Remaining Time -0:00CaptionsFullscreen

“Non-OPEC production is very strong. We still expect production coming from, not just United States, but also Norway, Canada, Guyana, among other countries,” Birol said, adding “Therefore, I can tell you that the markets are, in my view, very well supplied with oil, and as a result of that, we see prices remain at $65 a barrel.”

Norway is about to experience a sharp jump in oil production in the next four years, a new forecast from its Petroleum Directorate has shown. After a steady decline over several years, production is set for a 43-percent increase between 2019 and 2024, the NPD said, reaching 2.02 million bpd in 2024. This will be thanks to the start of production at the Johan Sverdrup offshore field along with several smaller fields.

In Guyana, Exxon has just begun production from the Liza-1 well. Daily output from the deepwater field should reach 120,000 bpd before the end of 2020. Exxon is also building a second production vessel that should raise the total to 220,000 bpd.

In Canada, meanwhile, oil production is also set to grow despite a government-imposed curtailment aimed at supporting prices. The curtailment was relaxed twice in 2019 and it only concerns large producers, allowing smaller ones to pump as much as they can sell. Based on this, the Canadian Conference Board recently forecast oil production in the country will be growing at 4.2 percent annually between this year and 2024.

Demand growth, however, will be slow, according to Birol.

“We are expecting a demand growth of slightly higher than 1 million barrels per day,” the top IEA man told Reuters.

This means that except sudden spikes in prices due to geopolitical factors or possible production outages in a major producer, oil prices this year will remain largely range-bound.

By Irina Slav for Oilprice.com

Poland: Zero Emissions Is A Trillion-Dollar Fantasy

Poland: Zero Emissions Is A Trillion-Dollar Fantasy

Coal plant

Reducing emissions in Poland to zero will cost the country between $760 and $980 billion (700-900 billion euro), said Energy Minister Krzysztof Tchorzewski, as quoted by Reuters.

“Of course, these costs would obviously be spread over years. But I treat it as a fantasy when someone says that Poland is able to reach the zero-emission goal by 2050,” Tchorzewski said, according to a report in Polish state news agency PAP.

Poland, along with Hungary and the Czech Republic, became the reason an ambitious emissions plan proposed by other EU members was dropped as a piece of binding legislation.

Later in the year, France’s President, Emmanuel Macron, criticized Poland specifically for still using a lot of fossil fuels—particularly coal—despite the EU’s climate change goals.

Ahead of the UN climate talks last month, Macron slammed Poland for not toeing the line: “Marching every Friday to say that the planet is burning, that’s nice, but that is not the problem,” the French president told media before going on to lash out at climate protesters in France, telling them that they should “go protest in Poland! Help me move those I cannot push forward.”

At the time, Poland’s Deputy Foreign Minister tried to soften the blow, and Macron himself added remarks to that effect.

“I’m not stigmatising anyone. But I want to convince our Polish friends that it’s good for them to move on this,” Macron said.

Poland is in fact not opposed to zero emissions. However, as Prime Minister Mateusz Morawiecki said in June, it will need a solid compensation package for its industry in exchange for a firm commitment to the EU’s ambitious climate change goals.

“Poland wants to catch up with Europe, not to perish. Each percent means huge costs,” Energy Minister Krzysztof Tchorzewski said, referring to the percentage of renewable energy in Poland.

Canadian Oil Driller Abruptly Shuts Down, Abandons 4,700 Wells

Canadian Oil Driller Abruptly Shuts Down, Abandons 4,700 Wells

Orphan wells Alberta

A junior Canadian gas E&P company has shut down abruptly, leaving as many as 4,700 wells behind, CBC reports, quoting the Alberta Energy Regulator, which said it had sent Trident Exploration Corp. an order to manage its wells, to which the company did not respond.

Trident closed two days ago and announced it would not be returning any money to shareholders or holders of unsecured bonds, adding it had well abandonment and reclamation liabilities of US$244.78 million (C$329 million) to deal with.

According to the Alberta Energy Regulator, these 4,700 wells add to more than 3,000 abandoned wells in Canada’s oil heartland that are currently awaiting remediation. The regulator also said it had been working with the company to smooth its exit from the industry and had ordered it to decommission the wells or transfer them to another company. Trident failed to comply with the order, the AER said.

“Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4,400 licensed sites, many of them active, without an operator,” the watchdog told CBC.

Data from the Alberta Energy Regulator says there are some 170,000 abandoned wells in the province, most of these sealed and taken out of service or reclaimed. The number represents more than a third of the total well count in Alberta, with the watchdog noting in its overview on the topic that even their abandonment, the wells remain the responsibility of the company that owns them.

Two years ago, think tank C. D. Howe warned Alberta was facing a well cleanup and reclamation bill of US$5.95 billion (C$8 billion) and needed to change the way it made companies take financial charge of the abandonment and reclamation of their wells. Since then, this figure has grown.

The Biggest Threat To Dollar Dominance

The Biggest Threat To Dollar Dominance

Russian oil exporters are pressuring Western commodity traders to pay for Russian crude in euros and not dollars as Washington prepares more sanctions for the 2014 annexation of Crimea by Moscow, Reuters reported last week, citing as many as seven industry sources.

While it may have come as a surprise to the traders, who, Reuters said, were not too happy about it, the Russian companies’ move was to be expected as the Trump administration pursues a foreign policy where sanctions feature prominently. This approach, however, could undermine the dominance of the U.S. dollar as the global oil trade currency.

Early indications of this undermining became evident this spring, when Russia and Iran launched an oil-for-goods exchange program seeking to eliminate bilateral payments in U.S. dollars and plan to keep it going for five years. The sanction buddies discussed this sort of agreement earlier, back in 2014, when Iran was still under Western sanctions. Even after the notorious nuclear deal was reached, the two countries decided to go ahead with their barter deal, and the preliminary agreement was reached last year. According to it, Russia would receive 100,000 bpd of Iranian crude in exchange for US$45 billion worth of Russian goods.

In March, Iran banned purchase orders denominated in U.S. dollars and said that any merchant using dollars in their orders will not be allowed to conduct the import trade. A month later, Tehran announced that it will publish all its official financial reports in euros instead of dollars in a bid to encourage a switch to euros from dollars among state agencies and businesses.

Now, Russia’s biggest oil producers are renegotiating oil delivery contracts with commodity traders, and three of them, Rosneft, Gazprom Neft and Surgutneftegaz, have raised traders’ hackles by insisting they, the traders, commit to paying penalties beginning next year if U.S. sanctions disrupt sales and as a result the buyers fail to make payments.

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Oil Traders, Supermajors Diverge On Demand Forecasts

Oil Traders, Supermajors Diverge On Demand Forecasts

Oil tanker offloading

The world’s oil supermajors and largest oil trading companies are not in agreement on the future trends in oil demand, a recent event has revealed. This, although normal, should serve as a signal to everyone watching the oil industry that any forecasts on supply and demand, regardless how bullish or bearish they are, need to be taken with a pinch of salt. Or two.

It wasn’t always this way. Once, oil demand was something certain to grow consistently, as there were no alternatives to fossil fuels. Now there are a growing number of these and some industry players are beginning to acknowledge their effect on oil’s fundamentals.

BP was the first to do so: in its latest Energy Outlook, the supermajor forecast that oil demand will peak some time in the next decade. The company noted in the report that “the continuing rapid growth of renewables is leading to the most diversified fuel mix ever seen,” adding that “Abundant and diversified energy supplies will make for a challenging marketplace.”

Different companies are responding to this challenge in different ways. Shell, for instance, is pushing into renewables at breakneck speed. BHP Billiton, on the other hand, is exiting shale oil (under pressure from Elliot Management, but an exit is an exit) and looking for quick-return projects. Exxon is still an oil bull, forecasting that oil demand will continue to grow until 2040 driven by the transport sector and the chemicals industry.

But Exxon and other oil bulls may be underestimating the changes that the energy sector is already undergoing. That’s according to the chief executive of Gunvor. At the FT Commodities Global Summit in Switzerland, Torbjorn Tornqvist, said “I think that generally the oil industry has underestimated the challenges ahead. I think that electric vehicles are just the beginning, the advances create momentum which feeds that’s momentum and accelerates it.”

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