Why Big Oil Expects Record Cash Flow In 2021

The world’s largest oil companies are set for a cash flow bonanza this year, probably at record levels, as massive cost cuts in the wake of the 2020 oil price and oil demand collapse have significantly lowered the corporate cash flow breakevens for many firms.

After posting record losses in 2020, a year which company executives described as one with “the most challenging market conditions,” Big Oil is looking at 2021 with increased optimism, mostly because oil prices have rallied in recent weeks. Moreover, the ultra-conservative capital spending plans and the huge cost cuts have allowed international oil companies (IOCs) to materially lower their cash flow breakevens.

These factors are set to result in a record cash flow for the biggest oil firms this year if oil prices average $55 per barrel, Wood Mackenzie said in new research.

Currently, investment banks largely believe that a tightening oil market, easy monetary policies from governments to boost economies, and oil as a hedge against inflation for investors would lead to oil prices averaging around $60 a barrel this year, with possible spikes to $70 and even $75 before or during the summer.

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Source: Oil Price


Can Abandoned Oil Wells Be Used To Generate Geothermal Power?

“The decade of geothermal” is a phrase that is becoming increasingly common in media and energy industry gatherings as the international zero-emission push comes to include one of the most fascinating—and clean—ways of extracting energy from the earth: geothermal power.

To reach the heat that the mantle of the Earth radiates into the core, geothermal companies need to drill—and they need to drill deep. In fact, one of the biggest challenges for this emerging industry is drilling deep enough to get to the really high temperatures: drilling so deep is risky and costly.

Yet geothermal can do pretty well even at smaller depths. According to a recent analysis by Rystad Energy, to generate electricity from the vaporized water heated up in geothermal wells, a power generation facility needs temperatures of 240 to 300 degrees Celsius. The analysis adds that as much as 70 percent of geothermal output right now is used for electricity generation.

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Source: Oil Price


Texas Refinery Restarts Could Take Until April

The restart of Shell’s Deer Park refinery in Texas could take until April, Reuters has reported, citing unnamed sources familiar with the issue.

A spokesman for the company told Reuters no timeline has been set for the refinery’s return to normal operation.

Shell shut down the two crude processing units at the 318,000-bpd refinery in the middle of this month, before the cold spell that hit Texas’ energy industry and shut down several other refineries as well, because of a pump seal malfunction.

Then the Arctic blast hit, and the supermajor shut down the rest of the refinery’s operations. The cold wave shut down more than 6 million bpd in refining capacity in the Lone Star state, according to calculations from IHS Markit. It also took down 4 million barrels in daily oil production capacity.

Exxon is also taking its time in restarting two units at its Baytown refinery, according to a Reuters report citing unnamed sources from the company.

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Source: Oil Price

Photo: File


Goldman Sachs Sees $75 Oil In Q3 2021

Goldman Sachs is now even more bullish on oil, expecting Brent Crude prices to hit $75 a barrel in the third quarter this year, on the back of faster market rebalancing, lower expected inventories, and traders hedging against inflation.

In a note on Sunday, cited by Forexlive, the investment bank’s analysts forecast Brent Crude prices reaching the $70 a barrel mark during the second quarter of this year, and hitting $75 in the third quarter. Goldman Sachs is thus lifting its previous Q2 and Q3 forecasts by $10 per barrel.

“Faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,” said Goldman Sachs.

“We further believe that this additional rally will be supported by the current repositioning for a reflationary environment with investors turning to oil, buying a lagging real asset that benefits from a stimulus-driven recovery and has demonstrated an unmatched ability to hedge against inflation shocks,” the analysts noted.

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Source: Oil Price

Image Credit: BSEE/Flickr


Saudi Arabia Raises Oil Prices To U.S. And Europe

The world’s top oil exporter, Saudi Arabia, raised on Thursday the prices of all its crude oil that will go to the United States and Europe in March while leaving unchanged the official selling prices of its crude to its key market in Asia.

The Saudi state oil giant Aramco raised the prices of all its crude grades to the U.S. by $0.10 per barrel, while the Saudi oil prices to Europe were lifted by between $1.30 and $1.40 a barrel, according to Bloomberg.

The price of the Saudi flagship Arab Light crude grade to Northwest Europe was raised by $1.40 a barrel for March compared to February and set at a discount of $0.50 a barrel against ICE Brent, Reuters reported, citing a pricing document it had seen.

Last month, a day after surprising the market with a 1-million-bpd additional production cut for February and March, the Saudis raised the official selling prices (OSPs) of their oil for Asia for February. Saudi Aramco lifted the price of the flagship Arab Light grade by $0.70 a barrel to a premium of $1 per barrel against the Middle East benchmark, the Oman/Dubai average.

This month, however, the Saudis are leaving the prices to Asia unchanged for March compared to February, after the extra production cut created a rush among refiners in Asia in January, with buyers scrambling to secure crude oil supplies from Europe.

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Source: Oil Price


$100 Oil: Big Banks Believe A New Oil Supercycle Is Beginning

Some of the world’s biggest names in oil trading and analyzing can’t seem to get on the same page when it comes to predicting what will happen next for the volatile commodity.

Some, like Jeffrey Currie of Goldman Sachs and Christyan Malek of JPMorgan, according to the Financial Times, are confident that oil is ready for the next supercycle—a prolonged rise in the price of oil.

And when they refer to this rise, they’re talking $80, or even $100 per barrel.

Others, like oil analyst Arjun Murti who correctly predicted the last $100+ per barrel achievement seen between 2008 and 2014, say that talk of this next supercycle may be a bit hasty.

For Malek, he sees a situation where demand outstrips supply, before “we don’t need it in the years to come.”

The reason for supercycle predictions is simple: stimulus packages, most notably the stimulus package that the U.S. government is expected to roll out, are expected to boost consumption.

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Source: Oil Price


Chile Could Save Argentina’s Shale Boom

Latin America just seems to be unable to synchronize its long-mooted upswing with global energy trends. Venezuela boasts the largest reserves on earth yet just as it starts to recover from the havoc US sanctions cripple its entire oil and gas industry, Argentina was assumed to be the next non-US shale oil sensation yet just as international majors started drilling in earnest and exports started to flow out of the country COVID-19 has upended everything. Now Venezuela might be quite a challenge to save under the current circumstances, Argentina, however, is far from being a lost cause despite all the political infighting that surrounds YPF’s activities.

A recent infrastructure deal between Argentina and Chile might provide another ray of hope for Buenos Aires. The embattled Argentinian government concluded on January 26 a hope-revamping policy move, having officially signed up to the refurbishment and recommissioning of the Trans-Andean crude pipeline (TAP). The 115kbpd capacity crude conduit running some 425km from the Neuquen Basin to the Chilean city of Concepcion was commissioned in 1992 and was specifically designed to withstand the hardships of transporting via the Andean Mountains. Its utilization, however, lasted for a bit less than 15 years, shutting down in 2006 after the Argentine government saw off the Chevron supply contract and decided not to continue with Argentinian crude exports towards Chile.

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Source: Oil Price

Image Credit: Max Phillip/Beyond Coal @ Flickr


Oil Hits $60 For The First Time Since Pandemic Started

Brent Crude prices hit $60 a barrel early on Monday, rising above that threshold for the first time since the start of the COVID-19 pandemic early last year.

As of 8:54 a.m. ET on Monday, Brent Crude was trading at $60.10, up by 1.28 percent, and WTI Crude was up 1.25 percent at $57.56.

Continued production restraint from the OPEC+ group and the extra cut from the alliance’s key member and world’s top oil exporter, Saudi Arabia, supported oil prices at the start of this week, after oil posted last week its third consecutive weekly gain.

The tightening of the oil market, combined with prospects of a rise in demand later this year with COVID-19 cases now falling and vaccination rates increasing, have been boosting oil prices since the start of February.

The Brent futures curve is also strengthening in backwardation, the state of the market signaling tighter supplies with the prices of the nearer futures contracts higher than those further out in time.

Prompt oil prices are now at more than a one-year high—the last time Brent was above $60 a barrel was in late January 2020.

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Source: Oil Price

Image: Off shore oil rig about twenty minutes past sunset. Credit: arbyreed/Flickr

Will U.S. Shale Finally Reward Shareholders?

U.S. oil prices above $50 a barrel are helping the shale patch to generate more cash flow, especially after the massive capital spending cuts last year. But higher prices are also reviving the good old dilemma of U.S. shale producers—raise production or raise payouts to shareholders, who have grown increasingly frustrated in recent years with the lack of meaningful returns while drillers were sinking cash flows, and even spending beyond cash flow generation into breaking production records.

Most analysts believe that this time around, there won’t be much of a dilemma as shale producers will have to show investors they can be more profitable, return more of those profits to shareholders, and “not drill themselves into oblivion,” as Harold Hamm warned the industry back in 2017.

As oil prices are steadying above $50 per barrel, producers are vowing, once again, capital and drilling restraint, while distributing more cash to shareholders now that the shale patch is set to generate higher cash flows.’

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Source: Oil Price

Natural Gas Prices Explode On Cold Weather Reports

Natural gas prices exploded on Monday, with spot prices soaring more than 10% as cold weather threatens the Northeastern part of the United States.

At 1:30 p.m. EST, the spot price for natural gas was $2.833 per MMBtu, a 10.49% increase on the day or an increase of $0.269.

That price is about 50% higher than this time last year when it was trading around $1.80 per MMBtu.

Front-month natural gas futures (NG1) were $2.84 at that time, as traders anticipate increased demand for the commodity as a massive storm heads toward the northeastern United States.

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Source: Oil Price