Price changes for Thursday, December 31st, 2020

 

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating and stove oil to increase by 2/10ths of a cent a litre.

*Diesel fuel shows no change, and...

*Gasoline shows an increase of 4/10ths of a cent a litre.

 

Market highlights

 

2020-The Year of Energy Transition

 

This year has to be called a year of energy transition. No one thing has stood out this week in the markets as markets traded for just four days over the intervening period.

     It did give me some pause for thought however, on a year where the oil industry was also hard hit by covid-19 as much as the economy was hit, so the following is the first six months of oil events I tracked this year:

 

     The first quarter of the year was a time of oil price recovery as demand factors picked up prices immediately ahead of an OPEC and Russia price war at the start of the pandemic. Both OPEC and Russia would come to a realization-probably too late-that saw oil prices crash early in the pandemic that also saw the advent of powerful alternative energy replacements for oil leaping to the forefront.

     Leading the charge is hydrogen where countries like Germany and Russia are leading change and building hydrogen powered projects and refineries/production facilities well ahead of the curb.

 

     March saw the arrival of a disease that completely shut down an oil-fired economy in North America, Europe and Asia as economies were forced to grind to a halt for months under an economic shutdown the likes this world has never seen. A crunch in demand for all fuels forced the immediate shut-down of at least fourteen refineries worldwide and a huge reduction in refining capacity worldwide that some think came close to 40 percent at one point, and still ranges down by at least 20 percent today.

      Here at home, the shutdown of the economy forced the closure/shudder of the North Atlantic refinery in Come By Chance  March 30^th as inventories of heating and jet fuels remain unsold as the demand crunch continues.

      Jet travel has collapsed almost 90 percent, leaving worldwide stocks of jet fuel unsold and left in holding tanks in refineries, causing further production disruptions.

      April month saw a disaster on the oil markets as oil prices for West Texas Intermediate  went negative for a day as stocks of oil at Cushing, Oklahoma threatened to flood the pricing centre before inventories could be sold.

     May month saw the start of OPEC and non-OPEC cuts to production that came into force on May 1^st that saw the two groups cut production by an unheard of 9.7 million barrels a day while the covid-19 pandemic rages. Oil rig counts south of the border at a historic low of 237 rigs, well down from the over 900 that were operating the year before over the same timeframe.

      June saw Canadian figures on damage to oil production. Canada drops 1.1 million barrels a day from a pre-covid level of 3.9 million barrels a day with the demand crunch biting heavily at Alberta production and production disruptions affected by drops in train shipments.

      The Newfoundland and Labrador government requests that the Public Utilities Board give a one-time rebate back to electrical customers based on lower projected costs for oil-generated electricity. The rebate will be in the form of a tax credit on consumers’ bills for June/July month.

 

     I’ll have the next six months events in the price change notice for next week.

 

Hydrogen: There I said it

Hydrogen continues to ride front and centre when it comes to a world transitioning from oil and to alternative energy sources. The number one story to me this year that records the sum-up of the transition has to be one of ongoing exploration of hydrogen as a source for fuel cells for air travel and the first flight of an airplane using hydrogen as a source of energy.

      That was in September.

       However, ZeroAvia also made a first in the annals of aviation with the first electric-powered flight in June of this year: ZeroAvia completes first UK flight of electric plane | The Engineer The Engineer

 

US EIA inventory data

      The Energy Information Administration is reporting a drop of 600,000 barrels of crude inventories this last week, while gasoline inventories dropped 1.1 million barrels.

      Distillates dropped 2.3 million barrels of inventory.

      Refiner capacity was reported at 78 percent.

      US domestic production was reported at 11 million barrels a day, remaining steady over the past week.

 

That’s it for this week!

 

Regards,

 

George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, December 24th, 2020

 

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating and stove oils to increase by 2.1 cents a litre.

*Diesel fuel to increase by 2.4 cents a litre, and...

*Gasoline shows an increase of three cents a litre.

 

Market highlights

 

Covid vaccine powers up the markets

The announcement of the covid-19 vaccines powered up the markets with oil rising to peak at $52.26 US a barrel earlier this week before starting a correction as word got out of a mutation with the virus that saw a slow retreat to the peak in oil late in the session.

     Brent prices closed below the $50 US mark at $49.96 US as shut-ins were seen to affect the economy worldwide, starting with travel restrictions in Europe from the United Kingdom.

     In the meantime, while I did not expect this time around to be the anticipated reason for the market correction, data seems to indicate, at least so far, that inventory levels have not been showing to be increasing in the face of possible rising demand with the covid-19 treatments slowly making the rounds.

     Predictions of another growth in pandemic cases as a result of Christmas travel is also predicted for January also helped to mute the market.

 

Canada proposes to end fossil fuel vehicle sales

Canada is proposing to the US that both countries seek to end new fossil fueled vehicle sales as early as 2035 to combat carbon emissions.

      Vehicle emissions account for over 25 percent of all carbon emissions in this country.

      California and Quebec have already announced that they will end fossil fuel vehicle sales by 2035, joining the call from such countries as France, the United Kingdom, Ireland and Norway.

      Canada is in agreement with the US that electric vehicles needed to get out on the markets faster than they have been, and that more needs to be done to fight carbon emissions.

 

Apple getting into the EV business?

Apple has announced that it is hoping to get into the electric car business as early as 2024, this coming just weeks after their breakthrough announcement of new technology that allows for extended life in batteries for their products that they’re hoping can be adapted to electric vehicle use, helping car batteries with longer range and at a cheaper cost.

     Project Titan is an ongoing program developed by Apple in 2013 where the company set plans to develop it’s own EV entry into the markets.

     While no details have been released on the EV itself, it will be Apple’s first venture outside of the cellular market.

 

US inventories

The Energy Information Administration released inventory data again last week showing crude oil inventories down by 3.1 million barrels.

      Gasoline stocks increased by a million barrels, while distillates increased by just 200,000 barrels.

      US refiner capacity was recorded at 79.1 percent, while US domestic production dropped 100,000 barrels to sit at 11 million barrels a day.

      7.9 million barrels of refined gasoline were supplied to the markets every day last week, down 1.4 million barrels a day from the same timeframe last year.

 

That’s it for this week!

 

Safe and happy Christmas to all!

 

Regards,

 

George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, December 17th, 2020

 

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating, stove oil and Diesel to increase by 1.2 cents a litre.

*Gasoline shows an increase of 1.3 cents a litre.

 

Market highlights

 

Oil hits $50 US

Brent oil prices hit $50 US for the first time since March 4^th as speculators bet on economic recovery and vaccines to prevent Covid-19 hit the world.

     While things still remain shut in and demand stymied almost everywhere except in Asia, and the hopeful end to the Coronavirus now months away, speculators bet on rising anticipated demand as more vaccines met approval, or are close to hitting the markets.

      But is oil oversold?

      While shutdowns are still ongoing, demand remains weak for all fuels, with most demand still down a rough 20 to 30% from pre-Covid levels. Spot prices for heating and stove oils are two cents lower than pre-covid levels in early March, while gasoline spots are roughly 6 to 7 cents lower as demand hasn’t picked up there.

       So, while demand is weak, and inventories keep building, at what point does the market realize it has been oversold and thus, correct itself?

       It could be soon, or even determined by how fast the world can get a vaccine out to everyone.

 

Refineries close, but production drops in those still open

While we have seen several refineries close during Covid, others have remained open-at least for now-with reduced capacity.

     Latest numbers seem to indicate that fact as in the US, a drop of 1.7 million barrels of refinery capacity has been noted.

     All the same, while refineries closed, overall US refinery runs have dropped almost 2.2 million barrels a day from the same timeframe last year.

     And inventories are still building.

     The data seems to indicate a lot of weakness in demand being reflected that has a long time yet to recover.

 

OPEC oil demand to fall again

OPEC is predicting that world oil demand will drop by another 400,000 barrels a day in 2021 as predictions initially had demand averaging 96.3 million barrels a day as the world recovers from Covid-19.  

      OPEC is now predicting world oil demand to average just over 95.8 million barrels a day.

      In the meantime, OPEC produced over 700,000 barrels a day more than their self-imposed quotas, mainly as a result of growing Libyan output, for which Libya wasn’t subject to quota restrictions as the country recovers from unrest.

 

That’s it for this week!

 

Regards,

 

George Murphy

Twitter @GeorgeMurphyOil

Price changes for Thursday, December 10, 2020

 

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating, stove oil and Diesel to increase by 2/10ths of a cent a litre, and...

*Gasoline shows a drop of one cent a litre.

 

Market highlights

 

OPEC+ agrees to an increase

OPEC+ has finally agreed to an increase in production after a three day session that saw some major differences come to the fore.

     Production will be increased by 500,000 barrels a day from present levels and strict monitoring of production levels will be enforced.

     Russia will pick up an extra 125,000 barrels a day in production as part of the addition.

     The United Arab Emirates was in disagreement with the rest of OPEC. They wanted a return to normal production as agreed to back in April, but OPEC members only conceded some growth and an agreement to revisit the additions to production every month as the world economy recovers.

 

Sticky problems for refiners as oil rises

While any increase in oil prices may be good for oil producers revenues, refiners are left struggling with higher acquisition costs for oil, and a weak demand for refined products.

     The problem arose over the last couple of weeks where prices have risen as a result of speculators betting on a returning economy and demand, and the actualities of the markets where demand has not returned.

      Refined product prices are a good example, where demand remains weak, but speculation over economic recovery has prices increasing to consumers and on the markets. The product is not selling to the same degree, but the acquisition costs rise, causing further complicated refining issues.

 

Green hydrogen project announced

The United Kingdom and Scotland have announced a hydrogen pilot program to further investigate the potential for hydrogen energy as a replacement for fossil fuels.

     Known as the H100 Fife project, the $33 million US pilot project will heat 300 homes and will generate hydrogen through the use of offshore wind and convert that power to manufacture hydrogen through electrolysis.

     100 percent green...

     With every step, fossil fuels are facing worldwide challenges as alternatives take centre stage.

 

That’s it for this week!

 

Regards,

 

George Murphy

Twitter @GeorgeMurphyOil

Special post: Help coming for the offshore

There are challenges in the oil and gas industry that are not easily explained to those who don't watch industry events, but I've made it a habit of it to the point it is almost recreation for me. So, needless to say, I spent the last hour listening to the announcement this morning, so here's my take...

 

It's positive... 

But there are considerations here that people have to remember. We essentially have an industry that others, like OPEC, are struggling with to see what the next day brings.

  

Literally...Keep reading...

 

Today, for example, I'm reading news that OPEC is struggling with a worldwide crude oil over-supply of 900 million barrels, and an over-supply of an estimated 540 million barrels of refined products out there...

 

So, everything you see out there these days has all been caused by either OPEC and their price wars or are related to a Covid-19 shutdown. Simple supply and demand issues have literally collapsed an industry worldwide, and not just here. The needs of a people in search for a "cleaner, low carbon producing oil" are real, so we have an advantage in keeping ours going to market, while other dirtier, heavier crudes are left in the ground.

 

We have something to sell, but... 

Far be it for me to dictate the direction of an oil company. God knows they won't listen to me, but the province and the oil industry simply have no choice but to wait it out... 

So, today's announcement brings with it some hope for the future as the project known as "West White Rose" has not been completely abandoned...but remains in mothballs...as companies, including Huskey, grapple with the uncertainties of an oil future that is no clearer the closer to the end of the pandemic that we get... 

But, we need to grasp the realities too, that this is a changing world...rapidly changing...where our youth promote protection of the environment and look toward a future where alternative energies are used. All depends on a company's abilities to "respond" to the needs of the consumer out there, and we see changes with companies who are also changing their focus from oil and gas, to alternatives like solar and wind, hydrogen and the list goes on...If our youth are our future, and if we are to progress, then we and the oil industry itself have to conform to this change or we will be left behind.... 

That's why I place a lot of hope in the development of the technology industry/sector and projects like the Ocean supercluster...

 

This may very well be the last gravity-based structure that we will ever see in our lifetimes go into the deep, dark waters of the North Atlantic for the purpose of drilling for oil. There may be cheaper FPSO structures from now on before we see the change from using oil to something completely different. 

We may have to change the way we think about work locations like Argentia or Bull Arm...We may have to switch from the gravity-based structure for hauling oil out of the ground to construction of gravity-based structures for offshore wind projects instead. 

The world is changing, and it's all our responsibility to imagine it...to change with it...not against it...and welcome that change and the challenges that go along with it for all our collective futures. 

 

Regards, 

George Murphy 

Price changes for Thursday, December 3rd, 2020

 

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating and stove oil to increase by 2.7 cents a litre.

*Diesel to increase by 2.9 cents a litre, and...

*Gasoline to increase by 2.9 cents a litre.

 

Market highlights

 

OPEC+ fails to meet in agreement on production cuts

OPEC and non-OPEC members met this week to try and reach a consensus in the maintenance of production cuts, but members of the group failed to reach an agreement so far on whether to maintain cuts to present production levels.

      Members on both sides expressed concerns that any addition to production would flood the markets with oil as the world economy has not started to recover from covid-related shutdowns and lower consumer spending.

      While some members wanted an extension to the cuts agreement that is due to expire in January, others worried about OPEC compliance. Russia wants to increase production starting in January by adding 500,000 barrels a day from OPEC+ agreement to put two million barrels a day back into the markets starting in January.

      OPEC+ meets again this Thursday to try and reach a consensus.

       Meanwhile, Norway has scheduled it’s oil industry to back into full production starting at the end of December, opening the prospects of OPEC reaction. The country shut down some production as a result of lower demand and a slump in prices earlier this year.

       Norway is not a member of the OPEC+ organisation and produces about 1.7 million barrels of oil per day.

 

Volkswagen actively looking...

Volkswagen is actively entering the electric vehicle markets again, this time with a new vehicle that will be marketed for less than most other EV’s at present.

     The company is in the development phase for an electric vehicle that will cost between $24,000 and $30,000 US.

     Tougher fuel standards and new stringent environmental regulations are turning the company towards the move, and ensuring that the company has entry into the consumer mass-market.

     In a presentation this past September, the new ID.4 SUV will be at a lower cost than the ID.3 model already on the market in September by the German company.

     Volkswagen said that the move would make EV’s about 60 percent of all its European vehicle sales by 2030.

     The ID.3 model’s largest market right now is in Norway where 60.8 percent of all new vehicle sales in October were of electric vehicles.

 

Everything is bigger...In Texas.

A company called Invenergy has announced it will begin construction of a large solar energy project it says will generate 1.8 gigawatts of electricity.

     The project already has companies lining up for the power, with telephone giant At&T lining up to purchase 500 megawatts of power, while Honda is buying another 200 megawatts.

      Several companies have already signed on to buy 100 megawatt or greater blocks of power. They include McDonald’s, Google and the city of Byron, Texas.

      The company has not disclosed how much they sold the power for.

 

US EIA inventory data

The latest Energy Information Administration inventory data is out, and crude stocks dropped by 800,000 barrels last week.

     Gasoline stocks reported a build of 2.2 million barrels, while distillates dropped 1.4 million barrels.

     Refiner capacity was reported at 78.7 percent.

     US domestic production was reported to be up another 100,000 barrels to sit at an even 11 million barrels per day, 1.9 million barrels less than a year ago for the same timeframe.

 

That’s it for this week!

 

Regards,

 

George Murphy

Twitter @GeorgeMurphyOil