Oil 12 (Feb 21 - Dec 24)

[winston]

Global oil demand fell to 92.2 mb/d in 2020, a 9% decline from the year before, according to a new EIA estimate.

[winston]

What if oil hits US$80 or higher?

Brent crude oil prices have already breached US$70/bbl and show little signs of fatigue

Oil plays are looking at much improved earnings in FY21/22, but share prices are still below their 2020 highs despite the better outlook

If the oil price rally continues, earnings upgrades could range from 30-60% at US$80 oil price and even double at the US$100 mark

CNOOC is the most leveraged to oil price upside

Source: DBS

https://researchwise.dbsvresearch.com/R ... =gbcfdkhab

[winston]

not vested

Crude Oil

Crude oil is also among the commodities worth considering for the foreseeable future.

Last year was one of the worst on record for the oil and gas industry. West Texas Intermediate crude slipped into negative territory in April 2020. Of course, that was a moment of extreme panic. Oil has gradually trended higher with hopes of economic expansion in the current year. For example, Brent oil is trading near $70 per barrel.

According to the International Monetary Fund, global GDP is likely to grow at 5.5% for the year and by 4.2% for FY2022. This is a key reason for oil trending higher. Additionally, as the global economy recovery and interest rates remain artificially low, commodity price inflation seems likely.

It’s also worth noting that OPEC and allies have decided against a big increase in output. This will keep the supply-demand scenario relatively tight. With these triggers, it’s likely that oil will sustain at higher levels. According to Goldman Sachs (NYSE:GS), oil is likely to trade around $70 to $75 per barrel.

In terms of exposure to oil stocks, I am bullish on Chevron Corporation (NYSE:CVX). The stock offers a healthy dividend yield of 4.71%. Further, Chevron has a quality balance sheet and is well positioned for aggressive growth if oil upside continues.

I also like Borr Drilling (NYSE:BORR) among the small-cap stocks. The offshore drilling company is well positioned for recovery in backlog and EBITDA margins as oil trends higher. With the recent capital raise, Borr Drilling also has a decent liquidity buffer.

Overall, renewable energy might have been in focus in the recent past. However, the crude oil bull story is far from over. With a sector rotation strategy, funds seem to be flowing into the commodity space. And crude oil stands to benefit.

Source: Investor Place

[winston]

Goldman Sachs predicts crude oil at US$80

The market has underestimated a rebound in demand even with a possible resumption in Iranian supply.

Even "aggressively assuming" a restart of Iranian exports in July, Brent prices would still reach the $80 mark by the fourth quarter, it said.

Goldman Sachs said a demand recovery in developed markets would offset a recent coronavirus-led hit to consumption and likely slower recovery in South Asia and Latin America.

Global demand could increase by 4.6 million barrels per day through year-end, with most of the gains likely in the next 3 months.

OPEC+ could offset any ramp-up in Iran production by halting for two months an increase in its output in the second half of 2021.

Source: The Standard

https://www.thestandard.com.hk/breaking ... l-at-US$80

[winston]

Russia predicts 1m barrels a day global oil deficit

The global oil deficit is now seen at about 1 million barrels per day (bpd), Russia's deputy prime minister Alexander Novak said on Wednesday, days before the OPEC+ top negotiators are expected to meet, Reuters reports.

The Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, is bringing back 2.1 million bpd of oil production through July, easing cuts to 5.8 million bpd. Their next meeting is set for June 1.

Any increase of oil production by Iran if indirect talks between Washington and Tehran lead to a lifting of sanctions, can potentially add between 1 million to 2 million bpd on top of the gradual rise OPEC+ supply, analysts estimate.

"We have always kept in mind a return of Iranian barrels," Novak told reporters on Wednesday. "We need to consider this... We will jointly calculate the (supply and demand) balance."

Iran's government spokesman Ali Rabiei said he was optimistic Tehran would reach agreement soon, although Iran's top negotiator said serious issues remained.

Source: The Standard

https://www.thestandard.com.hk/breaking ... il-deficit

[winston]

OPEC+ discussing raising oil output 'from August'

OPEC+ is discussing a further easing of oil output cuts from August as oil prices rise on demand recovery, but no decision had been taken yet on the exact volume to bring back to the market, two OPEC+ sources said on Tuesday, Reuters reports.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, is returning 2.1 million barrels per day (bpd) to the market from May through July as part of a plan to gradually unwind last year's record oil output curbs. OPEC+ meets next on July 1.

"It is highly possible to increase gradually from August," said one of the sources, adding that no final decision had been made and the exact volumes are yet to be agreed on.

The talks mean that OPEC and Russia are likely to find common ground again on oil production policy. Moscow has been insisting on raising output further to avoid prices spiking, while key OPEC producers, such as Saudi Arabia, have given no signals on the next step until now.

Russian producers see August as a good time to further ease oil output cuts despite the expected return of Iranian barrels as the market is in deficit, an industry source told Reuters on Tuesday.

"Limping" U.S. production also supports the case for easing the curbs, the Russian source said.

Source: The Standard

https://www.thestandard.com.hk/breaking ... om-August'

[winston]

Global Energy Sector – What a ride it has been

After a tumultuous 2020, the story for the Energy sector so far this year has been one of recovery, along with other themes such as the energy transition.

This is in keeping with our earlier sector report, “Riding the reflation theme” on 13 January 2021, where we reiterated our Overweight rating and mentioned that “due to the prospects of more aggressive fiscal stimulus and stronger economic growth, US inflation expectations have broadly risen and this should spur reflation trades going ahead.”

As we step into 2H21, we take stock of the landscape. Year-to-date, the energy sector is the best performing one within the MSCI ACWI indices and our bank has also recently upgraded our 6 and 12-month Brent crude forecasts from USD72/bbl previously to USD80/bbl.

Optimism has returned but too much of a good thing would in itself be self-defeating if marginal suppliers are encouraged to activate wells again.

Overall we are still witnessing capital discipline for the bigger players in the sector as fresh memories of earlier oil price swings, the energy transition, and continued focus on environmental issues mean that major producers are still hesitant to increase capital expenditure in a big way.

This kind of cautious optimism, in our view, is just right for a sector where unbridled optimism (and even pessimism) only serve to produce volatile price swings, which are unhelpful for companies operating in the sector.

While we still see upside for stocks, the easy gains have been made and investors are advised to be more selective.

Within our coverage, there are still a few names in each part of the value chain with good upside (e.g. TotalEnergies and ExxonMobil under Integrateds, CNOOC under E&P, Kinder Morgan under Midstream), while the segment which has the most BUY-rated names is Oilfield Services (e.g. Schlumberger), where stocks are generally more volatile.

Source: OCBC

[winston]

The Real Reason Oil Prices Aren’t At $80

The UAE’s awarding last week of a slew of huge drilling contracts aimed at increasing its crude oil output capacity from around 4 million barrels per day (bpd) to 5 million bpd underlines that the principal market risk from an oil trader’s perspective is still skewed towards further supply against a backdrop of an uneven bounce back in demand following the height of the global COVID-19 crisis in 2020.

In the short- and medium-term, significant supply increases are likely to come from ongoing failures in the OPEC decision and implementation structure, and in the longer term from a potential flood of new crude from Iran in the official oil markets and increases from non-OPEC crude producers.

It is estimated that every US$10 per barrel change in the price of crude oil results in a US$0.25 change in the price of a gallon of gasoline.

The ‘danger zone’ for U.S. presidents starts at around US$3.00 per gallon and at US$4.00 per gallon they are being advised to pack their bags in Pennsylvania Avenue or start a war to divert the public’s attention.

Source: OilPrice.com

https://finance.yahoo.com/news/real-rea ... 00106.html

[behappyalways]

China's Oil Sale Is A Clear Message To OPEC+
https://www.zerohedge.com/energy/chinas ... ssage-opec

[behappyalways]

All Hell Is Breaking Loose In Energy Markets
https://www.zerohedge.com/markets/all-h ... gy-markets