Oil prices are expected to rebound in 2021 as optimism grows over a COVID vaccine and OPEC seeks to extend its production cuts.
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Friday 20 November 2020
Oil prices have slashed recent gains as investors nervously monitor the spread of Covid-19, which has tempered the uptrend following positive vaccine news. “This is not good news,” Bill O’Grady, executive vice president of Confluence Investment Management in St. Louis, told Bloomberg. “It will likely be a disappointing travel vacation ahead, and that’s going to weigh on demand.” Still, there are signs of life in global oil demand visible beyond the coronavirus wave in the near term.
The demand for oil in Asia appears strong. As demand for oil in Europe and the United States continues to disappoint, refiners in Asia are rushing to source crude from around the world, giving the oil market hope that at least in one region, demand strengthened in the fourth quarter.
China’s oil frenzy will last until 2021. China stockpiled oil this year when prices were cheap, providing a little more demand in the market. Reuters reports that Chinese private refiners will store an additional 100 million barrels in 2021.
The demand for oil is poised to recover. Demand for crude oil is expected to rebound next year following the promising announcement of a vaccine against the novel coronavirus, according to Fitch Ratings.
Goldman Sachs: Structural bull market on the way. Goldman Sachs said in a new report that not only will oil prices rise next year, but we may soon see a “structural bull market comparable to that of the 2000s.” The bank says underinvestment in new supplies of basic commodities, the fiscal stimulus to rebound from the pandemic, and the risk of higher inflation all point to a bull market in the 2020s.
GM is increasing the bet on electric vehicles. GM (NYSE: GM) told investors it plans to spend $ 27 billion on electric vehicles through 2025, a 35% increase from previous plans. The automaker intends to showcase 30 different models over the next four years, some of which will have sticker prices below $ 35,000. “We have everything in place to accelerate the mass adoption of electric vehicles,” said Mary Barra, CEO of GM, at a Barclays automotive conference. “We want to be number 1 in electric vehicles.” The company aims to reduce the cost of manufacturing battery packs by 60%, which would mean achieving cost parity with gasoline-powered vehicles by 2025.
Iberdrola aims to dominate hydrogen. Spanish utility Iberdrola (BME: IBE) is building a 200 megawatt electrolyser and has plans for an additional 600 MW over the next few years.
The EU wants 300 GW of offshore wind power by 2050. The EU’s new ‘offshore renewable energy strategy’ calls for increasing offshore wind power from 12 to 300 GW by 2050. In the meantime, the plan calls for 60 GW by 2030. Achieve the 2050 target will require $ 940 billion in investment. Related: Why Iraq Isn’t Producing 10 Million Barrels A Day Yet
Libyan oil will reach 1.25 mb / d. Libya’s oil production has reached 1.25 mb / d, according to the National Oil Corp. The country’s production could reach 1.3 mb / d within a month.
Natural gas prices drop in mild weather. Natural gas prices fell below $ 2.70 / MMBtu this week as the United States experienced warmer weather. By the end of October, prices had jumped nearly $ 3.50 / MMBtu. “The mild weather in November turned the tide,” analysts at Gelber & Associates said in a recent note.
California is considering a 90% EV target for Uber and Lyft. California regulators are considering a rule that will require ride-sharing fleets to switch to 90 percent electricity by 2030.
California wants Imperial Valley to become “Lithium Valley”. California’s Imperial Valley has vast reserves of lithium. A report released earlier this year found that the Salton Sea could produce 600,000 tonnes of lithium per year, nearly 8 times the size of total global production in 2019. A growing number of mining companies and investors are investigating the lithium potential of the region.
The solar group wants Biden to end solar tariffs. The solar industry wants the Biden administration to use an executive order to repeal the Trump administration’s 2018 order that imposed tariffs on imported panels.
Middle Eastern oil producers are drowning in debt. Arab Gulf oil producers are losing billions of US dollars in oil revenue this year due to the pandemic which has crippled demand and prices for oil. Due to government revenues largely dependent on oil, fiscal deficits in the region are soaring. Related: Oil Prices Under Pressure As Oil And Gasoline Inventories Rise
UAE clarifies its position within OPEC. Anonymous officials from the UAE said earlier in the week that the country is considering seceding from OPEC, citing the difficulties it faces due to the strict production cuts it must adhere to. Now, the UAE’s Minister of Energy has officially responded to the allegations.
Enbridge buys Spectra Energy for $ 3.3 billion. Enbridge (NYSE: ENB) will buy the rest of Spectra Energy Partners for $ 3.3 billion in inventory. Enbridge already owns 83% of Spectra.
Investors are shifting capital from fossil fuels to renewables. According to Morningstar, investors invested € 1.9 billion in European investments in renewable energy between July and September, 11 times more than a year earlier. By comparison, conventional energy funds have seen an inflow of less than 115 million euros.
By Tom Kool for OilUSD
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