Crude Oil Price Forecast - Crude Oil Has Another Strong Showing - FX Empire

Crude Oil Price Forecast - Crude Oil Has Another Strong Showing - FX Empire


Crude Oil Price Forecast - Crude Oil Has Another Strong Showing - FX Empire

Posted: 10 Nov 2020 08:23 AM PST

WTI Crude Oil

The crude oil markets have rallied again during the trading session on Tuesday, as we continue to celebrate the idea of a vaccine. That being said, we are way ahead of ourselves as we are months away from this vaccine being released, and of course we still have the massive headwind of oversupply. By the time this is all said and done, I suspect that the sellers are going to come back in. In fact, it is not until we break above the $43.50 level that I would be convinced of a big move to the upside, and I believe there is plenty of room between here and there to see signs of exhaustion that you can fade.

Crude Oil Video 11.11.20

Brent

Brent markets also rallied as one would expect, reaching towards the top of the range from the previous session. Ultimately, this is a market that continues to see a lot of choppiness and volatility, so I think we are looking at a scenario where we are likely to see a "fade the rally" type of situation. The 200 day EMA above at the $43.33 level should also offer resistance. Signs of exhaustion should be sold into, but I think that the traders out there should be very cautious, because markets do tend to get a little over excited at points in time. I think we are seeing that right now, but ultimately, I believe that the oversupply of crude oil will continue to be a major problem. With this, I am very skeptical of what we are seeing over the last 48 hours.

An Oil Market Recovery Is On The Horizon - OilPrice.com

Posted: 10 Nov 2020 05:00 PM PST

The major participants at ADIPEC 2020's ADNOC Trading Forum expressed a wide range of sentiment, but the general message was one of caution or even outright pessimism when it came to oil price movements. The Virtual Conference, which was held in Abu Dhabi, was dominated by three main topics, the impact of COVID-19, global oil and gas demand destruction, and the U.S. election results. With a wide range of speakers including representatives from Abu Dhabi's national oil company ADNOC, the major storage company VITOL, Japanese company ENEOS, Abu Dhabi Global Markets (ADGM), and OMV amongst others, the forecasts for 2021 were plentiful and varied. The main takeaways for observers were that markets may be growing increasingly optimistic about a COVID recovery, but oil prices are unlikely to see a real recovery before the end of 2021. Oil market fundamentals are very weak at the moment and even if a COVID-19 vaccine is produced, the impact on fundamentals will be slow. Furthermore, any oil market recovery could easily be halted by a change in the strategy of OPEC+ or any other supply increase before demand picks back up. According to Energy Intelligence, Platts and Argus, the overall expectation for oil prices in 2021 is in the high $30s to mid $40s per barrel. In a panel with Martin Fraenkel, Euan Craik, and Alex Schindelar, all three industry leaders agreed that they expected a more optimistic situation in 2022. The three oil analysts emphasized that much will depend on the success of tackling COVID globally and the resilience of the market in the face of a possible supply boost.

Russel Hardy, the CEO of Vitol, argued that 2020 has shown how resilient the hydrocarbon sector still is. Despite the major breakdown of demand due to the COVID-19 pandemic, Hardy claimed that Vitol has been able to ride out the storm and is fully prepared for 2021. While a combination of negative prices, demand destruction, and a storage glut means that a return to normal is still a long way away, an industry recovery is well and truly underway. Kajo Fujiwara, the Executive Officer of Crude Trading and Shipping for Japanese company ENEOS emphasized that "work continued even in COVID time". He said that was particularly difficult as a state of emergency had been put in place in Japan as its refineries were forced to cut, exports decreased and margins were very low. The company's investment plans were also altered as several projects were delayed. In H2, however, ENEOS saw refinery runs increase and signs of demand recovering.  

Related: This Just Became The World's Largest Gas Hub

When asked about ADNOC Trading, Khaled Salmeen, the Executive Director, stated that the company "has  not stopped doing what we wanted to do….we wanted to go strong on trading and we are as ADNOC Global Trading is going to go live in the coming weeks". When asked about the impact of COVID on trading, Salmeen stated that for his company it had been an opportunity, as working on risk management and pricing has allowed the company to become more resilient. ADNOC Trading is developing well, with the crude book having gone live in September and the products book via Global Trading set to go live in the coming weeks. ADNOC is now starting to train and support the next generation of traders in the UAE. An ADNOC Trading official added that ADNOC Trading plans to set up representation internationally, including in the U.S. As well as trading, Salmeen confirmed that ADNOC Trading is also looking at entering the shipping space. ADNOC has always been an FOB seller. Shipping is now going to be a major part of the company. The cost of both second hand and new vessels in the current climate is extremely attractive for those with capital.

Overall it was a mixed takeaway from the event. COVID is once again hovering over markets with a second round of lockdowns in the EU, and price volatility has increased. For some, such as Hardy, real optimism could return to markets in H1 2021. There doesn't seem to be any significant demand increase set to take place in winter and even if a COVID vaccine is produced, the real impact won't be felt in the market before end H2 2021. At the same time, all participants agreed that the OPEC+ strategy is one of the major factors to watch. Vitol expects normal stock levels by Summer 2021, but even that will depend on OPEC+ strategies. New additional production, such as from Libya or Iran, could set markets back. A return to normal stock levels would see prices rising at the end of 2021. Hardy is cautiously optimistic but admits that it all depends on a continuous flow of "good news".  The Vitol official expects oil prices to recover to the high 40s or even the 50s in H1 2021, although any demand reduction would hurt that prediction.

When asked about Biden, Hardy said that any U.S. supply response would be price related. He stated that if Biden rejoins JCPOA and Iranian oil flows again, prices will be hit hard. He doesn't expect the Biden Administration to have much of an impact on U.S. shale production though. While new regulations would impact production by increasing overall costs, the sector itself is largely non-political.

Even the oil and gas situation in Asia remains unclear. According to ENEOS' Kajo, the COVID impact is still very much being felt. While the economies have suffered less than their western country parts, the impact on demand is still tangible. She said that China's demand is healthy, but other countries such as Japan and India are still suffering. In Japan, refining margins are still suffering as JET demand is very low, and export markets are yet to recover. When asked about a possible Peak Oil demand scenario in Japan, the ENEOS official said that COVID has moved it forward dramatically.

By Cyril Widdershoven for Oilprice.com

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This Could Become The World's Most Expensive Crude Oil - OilPrice.com

Posted: 08 Nov 2020 02:00 PM PST

This year has been turbulent for global energy markets. The COVID-19 pandemic and March 2020 price crash sent markets into a tailspin, which saw the North American oil price benchmark West Texas Intermediate plunge into negative territory for the first time in history. Those events, along with the emergence of stricter sulfur contents for fuels, have precipitated a shake out of the global oil industry and transformed traditional pricing assumptions. The popularity of sweet crude oil among Asian refiners is ratcheting upward at a solid clip. This is an important trend to understand because it creates a situation where many heavy and extra-heavy sour crudes, like those found in Canada's oil sands and Venezuela, could become stranded assets sooner than expected. It has also seen the price differentials between sweet crude oils and the international Brent benchmark reach all-time highs, with the Asian demand for sweet crude soaring higher.

Malaysia's Tapis grade crude oil, produced in the South China sea near the Malaysian peninsula, has long been recognized as the world's most expensive. Its lightness with an API gravity of 42.7 degrees and sweetness, which sees Tapis possessing extremely low sulfur content of 0.04%, makes it highly desirable for refining into high quality gasoline, diesel and other fuels.  Tapis' popularity appears to be waning with it now trading at a 7% discount to Brent, rather than a premium. That can be explained by the growing demand among Asian refiners for other high-quality crude oil grades. Earlier this year some unexpected contenders challenged Tapis' mantle as the world's most expensive. By September 2020 Australian heavy sweet crudes Vincent and Van Gogh were trading at premiums to Tapis despite heavier API gravities of 18.5 and 17 degrees and higher sulfur content of 0.55% and 0.37% respectively. This, as Oilprice.com's Viktor Katona explained, was because of their blending utility and extremely low pour points of minus 17 degrees and minus 15 degrees Celsius, respectively. The pour point is an important but often ignored characteristic of crude oil. It is the lowest temperature at which a crude oil will flow under gravity when cooled, beyond that point it becomes plastic and will not flow, making it impossible to store or transport through a pipeline. The pour point is indicative of a crude oil blend's paraffin content because greater volumes of paraffin create a higher pour point. High paraffin content is an undesirable characteristic for refiners because it increases the difficulty and cost of processing crude oil. The extremely low pour points of Vincent and Van Gogh crude oil grades, and hence low paraffin content, further explains the surge in their popularity. There are signs that two Brazilian crude oil grades could take the crown as the world's most expensive crude oils. Demand for Brazil's Lula and Buzios crude oil grades, which are produced from the country's offshore pre-salt oil fields, has soared since the implementation of IMO2020 which caps the sulfur content of maritime fuels at 0.5% mass by mass. Both are medium grade sweet crude oils with API gravity of 29 degrees and 28.4 degrees respectively and low sulfur content of 0.27% and 0.31%. Lula and Buzios also possess low pour points of around 9 degrees Celsius, indicating low volumes of paraffin, which when combined with low metals content makes them cheaper and easier to refine into high quality gasoline, diesel and other fuels compared to many other crude oil blends.

Related: Is This The Key To Cheaper Solar Power?

This explains soaring demand for Lula and Buzios among Asian refiners which by the end of September 2020 saw Brazil became the third largest supplier of crude oil to China compared to sixth place in 2018. For September 2020, Brazil's national oil company Petrobras reported record crude oil exports of just over 1 million barrels daily, with most of those cargoes destined for China. It is not only the world's second largest economy which is snapping up Brazilian crude oil, there has been a surge in demand from other countries including the U.S., Spain, Portugal and the Netherlands. Refiners in other Asian countries, notably India, have flagged that they wish to increase imports of Brazilian medium sweet crude oil grades. Solid and growing demand for Brazilian medium sweet crude oil will drive its price higher. The differential between Lula and Brent has closed significantly over the last year. According to Oilprice.com data, Lula is trading at a 4% premium to Brent or almost $2 per barrel more expensive. Lula is selling at an 8.5% premium price to Tapis, which is equal to around $3 per barrel higher. For the reasons discussed, it is likely that the price differential between Lula and Brent will widen further, especially if demand from Asia remains strong. Pricing for Buzios is more difficult to find, but according to Petrobras like Lula it trades at a premium to Brent in China.

While the U.S. has the greatest refining capacity globally of any single country, with a significant portion configured for cheaper heavy sour crude oil grades, the combined processing capability of China, India and other Asian countries significantly exceeds that North America. Most of those refineries are designed to process lighter sweeter crude oils, meaning demand for Brazil's sweet crude oil grades will not only remain strong but keep expanding. This explains why Brazil's pre-salt production continues to expand despite overall crude oil output falling because of uneconomic non-pre-salt, shallow water and onshore wells being shuttered because of the difficult pricing environment. During September 2020, Brazil's pre-salt oil production reached an average of 2,586,626 barrels daily which was 13% greater than for the same month a year earlier. This saw pre-salt crude oil output responsible for 70% of Brazil's total hydrocarbon production compared to 61% a year earlier. The Tupi and Buzios fields, which pump Lula and Buzios crude oil, when combined are responsible for 72% of Brazil's pre-salt oil output. 

Petrobras is the driving force behind growing pre-salt oil production from its pre-salt operations pumping on average1.65 million barrels daily for the third quarter 2020. This was almost 21% greater year over year and made 62% of Brazil's total pre-salt production. Brazil's national oil company is investing heavily in ramping-up activity in the Buzios field to grow production of what is becoming a highly popular, low sulfur content medium crude oil grade. Strong demand for Lula and Buzios oil grades, coupled with their premium to Brent and an anticipated oil price recovery during 2021, will boost Brazil's oil revenue as well as Petrobras' profits.

Editor's Note: Find Brazilian Crude And 150 other global crude blends on the Oilprice.com Oil Price Data page.

By Matthew Smith for Oilprice.com

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Oil Optimism Returns On Fresh Vaccine News - OilPrice.com

Posted: 10 Nov 2020 12:00 PM PST

Oil prices reacted positively to the news of a Pfizer vaccine that is reportedly 90% effective for the coronavirus.

Chart of the Week

-        Energy-related CO2 emissions in the U.S. declined by 3% in 2019, after rising by 3% the year before. The decline was largely due to the evolving mix of electricity generation 

-    Emissions from coal plunged by 15% as more coal plants were taken offline. Emissions from natural gas increased by 7%.

-    U.S. electricity emissions are now down by 33% from their peak in 2007.

-    Renewables and nuclear power combined account for 38% of the electricity mix. The carbon intensity of electricity has fallen sharply to 408 metric tons per kilowatt-hour in 2019, down from 619 mt/kWh in 2005.

Market Movers

-    First Solar (NASDAQ: FSLR) suffered a double downgrade by Raymond James from Outperform to Underperform on the prospect that the Biden administration repeals solar tariffs. First Solar benefits from them as it sells thin-film panels that are not subjected to the tariffs. First Solar's stock was down nearly 4% in early trading on Tuesday.

-    Continental Resources (NYSE: CLR) is set to offer a series of senior notes due in 2031, with proceeds used to pay other expiring notes. Continental's stock was up 4% in premarket trading.

-    Occidental Petroleum (NYSE: OXY) reported its fourth straight quarterly loss, with a net loss of $3.8 billion. The company said it would add four rigs back to the Permian and keep CAPEX at $2.4-$2.6 billion. 

Tuesday, November 10, 2020

Oil prices skyrocketed on Monday after Pfizer announced that its vaccine would be more than 90% effective for the coronavirus. The announcement rippled across financial markets, with the share prices for Zoom crashing, but the stocks for cruise lines, airlines, and automakers, among other sectors, all shooting up. With markets contemplating the possible end of the pandemic sometime next year, optimism returned in a big way. Needless to say, crude oil had its best day in months, soaring more than 10%. The uplift also led to huge gains for the share prices of many oil companies.  Related: Oil Prices Jump On Large Crude Inventory Draw

Covid cases surging. Vaccine optimism will be tempered by the negative short-term outlook, with Covid-19 cases out of control in the U.S. and in Western Europe. "The market has now priced in an effective vaccine in the near future," Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. "There's still the problem of the second wave and that's going to affect demand in the near-term."

Citibank cuts 2021 forecast to $49 WTI. Citi revised down on Monday its outlook for the WTI Crude price for next year by $5 to $49 a barrel, citing the global spike in coronavirus cases that is set to impact oil demand. Vitol CEO Russell Hardy said he sees Brent going to $50 in the next few months.

Mountain Valley Pipeline sees construction blocked. A circuit court temporarily blocked the construction of the Mountain Valley Pipeline over concerns about its impact on waterways. The court issued a stay while an appeal of permits makes its way through the legal process. The MVP project would carry Appalachian shale gas to the U.S. southeast. 

BP and Orsted team up on green hydrogen. BP (NYSE: BP) and Orsted A/S (CPH: ORSTED) said they would work together on developing an industrial-scale electrolyzer to make green hydrogen at an oil refinery in Germany. If successful, 50 megawatts of North Sea wind would help produce enough hydrogen to power 20% of the refinery's needs. 

Peabody warns of Chapter 22. Peabody Energy (NYSE: BTU) warned that it faces the possibility of its second chapter 11 bankruptcy in five years.

Energy lobbyists line up at Biden admin. While election drama continues, energy lobbyists are wasting no time switching over from the Trump administration to the Biden administration. The Washington Post reports that lobbyists from multiple sectors – coal, oil, gas, renewables, trucking – are flipping their scripts from deregulation to something that could work under the Biden administration, such as big stimulus on infrastructure and reduced trade tensions with China. 

Russian energy minister to become Deputy PM. Russian energy minister Alexander Novak was promoted to Deputy Prime Minister.  Related: Four OPEC+ Members Favor Extended Cuts

Texas RRC tightens flaring rules. The Texas Railroad Commission said it would shorten times that companies are allowed to flare and it also said companies would be required to disclose more detail on why they need to flare. The tweak is relatively minor, and the RRC is under pressure from big oil companies themselves to tighten the rules. 

NextEra Energy bids $15 billion for Evergy. NextEra Energy (NYSE: NEE), the world's largest solar and wind developer, is hoping to purchase Evergy Inc. (NYSE: EVRG) in an all-stock deal worth $15 billion. Evergy rejected the offer. 

U.S. Midwest utilities shift to renewables. Six Midwest utilities said they would spend a combined $15 billion on renewables over the next several years with the aim of building more than 4 GW of solar, 3.6 GW of wind, and 1 GW of energy storage. They also said they plan on continuing to shutter coal plants.

IEA: Renewables growing faster than expected. The IEA published its Renewables 2020 report, in which the agency predicted that wind and solar capacity will double over the next five years globally. By 2023, solar and wind capacity will overtake natural gas capacity, and renewables will surpass coal by 2024. The agency also said that while much of the energy sector was hit hard due to the pandemic, renewables proved "more resilient than previously thought." The IEA revised up its 2020 forecast for renewables by 18%.

Libya's oil production hits 1 mb/d. Libya's oil production has surged past 1 mb/d, national petroleum officials said on Saturday.

Wall Street flocking to EVs. At least nine EV startups have gone public, or will soon, according to Axios. Companies span the sector, including EV cars, heavy-duty trucks, parts manufacturers, infrastructure, etc., and capital is pouring in

U.S. LNG to China to grow substantially. After a year of non-existent liquefied natural gas (LNG) exports from one of the fastest-growing global suppliers, the United States, to the fastest-growing world importer, China, American LNG cargoes started to travel again to China in March this year. Cheniere Energy (NYSE: LNG) has recently signed a framework agreement with China's Foran Energy Group to sell 26 LNG cargoes to the Chinese company over the next five years.

Pirate Attacks On Oil Tankers Off West Africa Intensify. Several oil tankers were attacked or approached with attempted attacks in the Gulf of Guinea off West Africa over the past few days, maritime security companies warn.

By Josh Owens for Oilprice.com

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Shell's Largest Refinery Reduces Crude Processing Capacity By 50% - OilPrice.com

Posted: 10 Nov 2020 10:00 AM PST

Shell will halve the crude oil processing capacity of its largest wholly owned refinery in the world, Pulau Bukom in Singapore, as part of its ambition to be a net-zero emissions business by 2050 or sooner, the supermajor said on Tuesday.    

Pulau Bukom hosts the largest wholly-owned Shell refinery globally in terms of crude distillation capacity, 500,000 barrels per day (bpd), and it also has an ethylene cracker complex with a capacity of up to a million tons per year and a butadiene extraction unit of 155,000 tons annually.

As Shell is looking to cut carbon dioxide (CO2) emissions and is transforming its refining business for the new future, it will cut the crude processing capacity at Pulau Bukom by about half, the company said. In that new future, the Pulau Bukom Manufacturing Site will be one of Shell's six energy and chemicals parks, and will pivot from a crude-oil, fuels-based product slate towards new, low-carbon value chains.

"Our businesses in Singapore must evolve and transform, and we must act now if we are to achieve our ambition to thrive through the energy transition. Our decisive action today will help Shell in Singapore stay resilient and build a cleaner, more sustainable future for all of us," said Aw Kah Peng, Chairman of Shell Companies in Singapore.

The reduced refinery capacity in Singapore will result in fewer jobs at the site, Shell said, while a Shell spokeswoman told Reuters that the supermajor would cut around 500 jobs by the end of 2023. Currently, Pulau Bukom employs around 1,300 people. 

Shell is implementing a new downstream strategy to reshape its refining business towards a smaller, smarter refining portfolio focused on further integration with Shell Trading hubs, Chemicals, and Marketing.

As part of this strategy, Shell has sold the Martinez Refinery in California to PBF Holding Company for US$1.2 billion.

Shell is also set to shut down its 211,000-bpd refinery in Convent, Louisiana, after failing to find a buyer for the site.

By Tsvetana Paraskova for Oilprice.com

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