The Energy Bulletin Weekly 11 January 2021

January 11, 2021

11 January 2021

Tom Whipple and Steve Andrews, Editors

[Dealing with leaking methane emissions from leaking abandoned wells in the Gulf of Mexico] “It’s really a matter of willingness,” a willingness, that has been slow to grow because “the issue of methane emissions was a very well-kept secret until very recently.”-Manfredi Caltagirone, United Nations Environment Program

1. Energy prices and production 

Oil:  Oil posted the biggest weekly gain since late September as Saudi Arabia’s plan to slice output spurred a surge in physical crude buying. In New York, futures advanced $3.72 this week, and Brent oil topped $55 a barrel for the first time since February. Last week’s pledge from Saudi Arab to cut production by 1 million b/d in February and March has made for a tighter supply outlook sooner than anticipated. Meanwhile, prospects for additional stimulus under a Biden administration spurred broader market gains.

US crude oil inventories saw their largest decline since July in the week ended Jan. 1st on the back of strong exports and rising refinery demand. Commercial oil stocks moved 8 million barrels lower to 485 million barrels last week, narrowing the nationwide surplus above the five-year average to 9.3 percent from 10.3 percent the week prior. Crude stocks declined in all regions outside of the NYMEX delivery point of Cushing, Oklahoma, where inventories climbed 790,000 barrels to 59.2 million barrels. On the US Gulf Coast, crude stocks declined 6.2 million barrels to an eight-week low of 258 million barrels.

Saudi Arabia’s surprise announcement has refiners in Asia scrambling to secure supplies from Europe, with record purchases of North Sea cargoes. While the Saudi move has been supporting oil prices all week, the tightening supplies out of the world’s top oil exporter have upended the plans of Asian oil buyers. A day later, the Saudis also raised the official selling prices of their oil for Asia for February, lifting the flagship Arab Light grade’s price by $0.70 a barrel.

Global floating oil storage declined rapidly in December as traders sold crude held on tankers in the absence of price incentives to store it and meet peak winter demand in Asia. The Brent futures curve has returned to backwardation, the state of the market signaling tighter supplies with prompt prices higher than those further out in time. When oil demand crashed in March and April, traders were rushing to hire supertankers to store oil for sale at later dates.

Higher demand for oil, natural gas, and coal due to colder than usual winter temperatures in many parts of the northern hemisphere is driving up the regional prices and international benchmarks of all three fossil fuels at the start of 2021. Oil demand is rising in northeast Asia, where not only is the weather freezing, but China is increasingly using diesel generators amid a tight supply of electricity. Thermal coal prices in Asia are also rallying, with Chinese prices surging due to tighter supply and industrial activity.

OPEC: At the beginning of last week, the oil markets were focused on the meeting between OPEC and its allies. Since late December, Russia had been pushing for a supply hike of about 500,000 b/d for February, and there was reason to think it would prevail. On Tuesday, Saudi Arabia shattered those assumptions by pledging an additional unilateral cut of 1 million b/d in February and March, while most of the rest of the group kept output steady. Russia and Kazakhstan were permitted to add a combined 75,000 b/d of supply in each of those months, a token increase that Iranian Oil Minister Zanganeh said would barely register on the market.

The Saudi surprise was an assertion of primacy over the global oil industry that came directly from the kingdom’s de-facto ruler. The move papered over cracks in the OPEC+ coalition and was a U-turn from some recent Saudi oil-policy priorities, but those things paled compared to the global impact of the decision. Crude prices jumped to a 10-month high and shares of energy giants in London and shale drillers in Texas surged. “We are the guardian of this industry,” Saudi Energy Minister Prince bin Salman said as he gleefully announced the cut on Tuesday. He emphasized that the decision was made unilaterally by Crown Prince Mohammad bin Salman himself.

OPEC’s production rose for a third month in December as a continued cease-fire in crisis-torn Libya enabled it to restore more supplies.  OPEC increased supply by 190,000 barrels a day in December to 25.45 million.

The US didn’t import any Saudi crude last week for the first time in 35 years, a reversal from just months ago when the kingdom threatened to upend the American energy industry by unleashing a tsunami of exports into a market decimated by the pandemic. Eliminating the reliance on Middle East oil has been the dream of every US Administration since the presidency of Jimmy Carter in 1977. Just 12 years ago, when Joe Biden became US Vice-President, American refiners were routinely importing about 1 million barrels a day of crude from Saudi Arabia, the second-largest supplier to the US after Canada and seen as a significant security risk.

Shale Oil: The 2020 crisis put an abrupt end to the growth in US crude oil production, which had just hit 13 million b/d before oil prices and demand collapsed with the spread of the pandemic. Between March and May 2020, US oil production plunged by over 2.5 million b/d as companies slashed spending on drilling and curtailed output in response to the low oil prices. In May, US oil production hit 10 million b/d —its lowest monthly level since late 2017.

After the trough in May, oil output in the US has been gradually growing as producers restore curtailed volumes and oil prices recover part of the losses from earlier in 2020, due to encouraging news about vaccines, which gave the market hopes that the long-awaited oil demand recovery was in sight.

For the immediate future, US shale oil production is caught between the rising price of WTI and the continuing spread of the coronavirus across the US and EU. While the vaccines should ultimately control the virus, it will be many months before they have a significant impact on oil demand. While some shale oil producers see prices that may make the better wells marginally profitable, industry officials warn not to expect a renaissance.

Devon Energy Corp.’s new boss said he won’t let last week’s rally in oil prices tempt him to return to the days of rampant production growth at any cost, becoming the latest shale executive to call for restraint. “I have a hard time seeing the need for US producers over the next several years to get back to double-digit growth,” Chief Executive Officer Rick Muncrief said in an interview. “For this management team, if we think about 2021, let’s keep it flat.”

According to a forecast from Fitch, defaults by US oil and gas producers are set to outstrip all other sectors again in 2021 as an industry battered by last year’s price crash faces more pain yet. Energy will account for $15 billion to $18 billion of US bond defaults in 2021, Fitch predicted. However, that volume will be well below the $48 billion racked up by energy companies during 2020. According to Fitch, the default rate in the energy sector is likely to be 7-8 percent in the coming year, down from more than 15 percent over the past 12 months — the highest since 2017 — but well above the historical average of 4 percent.

US banks want to continue choosing whether to lend money to the oil and gas industry according to risk and reputation management practices, asking a regulator not to proceed with a new rule that could force them to deal with such companies. The Office of the Comptroller of the Currency has recently proposed a new rule to ensure fair access to financial services and aims to finalize a rule soon. The Biden administration is likely to have other ideas about rules aimed at helping the fossil fuels industry.

Natural Gas: Warnings from meteorologists about the potential for polar vortex weather to develop in the central and eastern US later this month are fueling a rally in Appalachia’s gas market, where wellhead freeze-offs could pose a significant and prolonged risk to upstream supply. Since late December, first-quarter forwards prices at Appalachian benchmark Dominion South have surged to their highest since mid-November, gaining nearly 30 percent, or about 50 cents, to settle at an average $2.27 per million Btu on Jan. 7th.

Recovering LNG demand and the highest spot LNG prices in more than half a decade are set to encourage more US exports of LNG this year. The economics of US LNG exports are looking attractive again, with the US benchmark Henry Hub prices well below the spot prices in Asia. US LNG export capacity rose during 2020 and is set to increase further this year, while high global prices this winter season and a quicker-than-expected recovery in global natural gas demand drive a surge in US exports of LNG.

Natural gas seems to be locked in a range that prevents it from being genuinely economic across the demand cycle. For about half of 2020, it was below the $2.00 mark. Weather forecasts for a cold winter, beginning in August of 2020, began to ramp it toward its ultimate 2020 high of ~$3.50 per million cf on Oct. 30th. If you average out the 2020 sales price for gas, you get something like $2.17 per million. That’s a price that most gas drillers can make a little money on, but it does nothing for their stocks. Four of the five largest US gas drillers have lost value over the past six months.

The US natural gas industry seems to have a brighter future than its oil sister under a Biden administration, even though the president-elect has pledged to push an ambitious emissions-cutting agenda during his term, aiming for a net-zero electricity sector by 2035 and a net-zero economy by 2050. According to industry sources, the sharp rise in investor appetite for environmental, social, and governance investments will not affect the natural gas space in the near term.

Prognosis: Money managers started 2021 with optimism that oil prices will benefit from a rise in economic activity as vaccines are being rolled out. Hedge funds and other portfolio managers held at the end of December 2020 the most bullish overall position in the most traded oil futures and options contracts since the beginning of 2020.

Saudi Arabia’s unexpected production cut announced on Tuesday is likely a sign that the Saudis expect oil demand to weaken in the coming weeks due to the renewed strict lockdowns in significant economies. According to a note from Goldman Sachs, the Saudis move is indeed surprising, and while it will support oil prices in the near term, it also signals that the kingdom expects weakening oil demand in the first quarter of 2021.

2. Geopolitical instability 
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)

Iran: In anticipation of the Biden Administration taking charge of US foreign policy later this month, Tehran is taking steps to bolster its negotiating posture in advance of talks to lift the US embargo on Iranian oil exports. Last Monday Iran resumed 20 percent uranium enrichment at its sensitive Fordow nuclear facility— a significant step away from a 2015 nuclear deal struck with world powers. The move could complicate the incoming Biden administration’s plans to restart nuclear talks with Tehran.

Also, Iran claims that the US should pay it as much as $70 billion as compensation for lost oil revenues due to the US sanctions as a prerequisite for a return to the nuclear deal. The chairman of Iran’s Strategic Council on Foreign Relations—a body advising Iran’s Supreme Leader Ayatollah Ali Khamenei—said this payment would be required if President-elect Biden wants to return to the so-called Iranian nuclear deal.

Iran has signaled it has no intention to negotiate the South Korean fuel tanker’s release that the Iranian military seized earlier this week in the Strait of Hormuz. Korean media quoted a statement by the Iranian Foreign Ministry that said there was no agreement on “any form of visit” by Korean government officials and that “There is no need for a diplomatic visit.” The Islamic Revolution Guards Corps of Iran seized Korean-flagged Hankuk Chemi earlier this week, claiming it was polluting the Persian Gulf.

Supreme Leader Ayatollah Ali Khamenei banned Iran’s government from importing COVID-19 vaccines from the US and Britain. “If the Americans were able to produce a vaccine, they would not have such a coronavirus fiasco in their own country.” Iran, the country that has been worst hit by the novel coronavirus in the Middle East, started trials of its first domestic COVID-19 vaccine candidate last month. The government says it will defeat the pandemic despite US sanctions that affect its ability to import vaccines.

Iran’s parliament has lowered the government’s oil export target from 2.3 million to 1.5 million to manage expectations. The proposed budget had aimed to sell over 2 million b/d of crude both in domestic and international markets. However, the figure was questioned due to strict US sanctions and the COVID-19 impact on demand. Both factors have capped Iran’s sales below 1 million b/d over the past year.

Iraq: December oil production, including from the semi-autonomous Kurdistan region, rose 4.7 percent month on month to 3.85 million b/d. OPEC’s second-largest producer had a 3.80 million b/d quota for December under the OPEC+ deal. Production from the federal government rose 4.2 percent to 3.36 million b/d in December, while output from Kurdistan increased 7.7 percent to 491,000 b/d. Iraq struggled for most of 2020 to comply with its OPEC+ quota amid the low oil price environment, the pandemic, and a financial crisis gripping the country.

Last week, Baghdad announced plans to boost southern crude oil export capacity by 72 percent within the next three years. It signed a $2.625 billion deal with South Korea’s Daewoo Engineering to build out the Al-Fao main export depot to the south of Basra. In broad terms, Iraq affirmed the Ministry’s renewed intention to increase the storage capacity at Al-Fao to 8.7 million barrels.

The US has granted Iraq a 90-day waiver for its energy trade with Iran, which takes it months into the incoming Biden administration that is likely to take a less hardline stance on punishing sanctions against Iran. However, Iraq is still waiting for Iran to resume supplying the country with sufficient gas for power generation. Cash-strapped Iraq owes Iran billions of dollars in unpaid bills for natural gas.

Iraq confirmed that it selected a Chinese company for a multibillion-dollar oil-supply deal, as Baghdad seeks funds to bolster its economy. SOMO, which oversees Iraq’s petroleum exports, picked a Chinese company after receiving bids from several traders. Bloomberg reported last month that ZhenHua Oil Co., a subsidiary of China’s largest state-owned defense contractor, was the winner.

3. Climate change

New research shows that stopping greenhouse gas emissions will break the cycle of warming temperatures, melting ice, wildfires, and rising sea levels faster than expected just a few years ago. There is less warming in the pipeline than we thought, said Imperial College climate scientist Joeri Rogelij, a lead author of the next primary climate assessment from the Intergovernmental Panel on Climate Change.  “It is our best understanding that, if we bring down CO2 to net zero, the warming will level off. The climate will stabilize within a decade or two,” he said. “There will be very little to no additional warming. Our best estimate is zero.”

The general idea that decades, or even centuries, of additional warming, are already baked into the system, as suggested by previous IPCC reports, was based on an “unfortunate misunderstanding of experiments done with climate models that never assumed zero emissions.”  Those models assumed that concentrations of greenhouse gases in the atmosphere would remain constant, that it would take centuries before they decline, said Penn State climate scientist Michael Mann. The idea that global warming could stop relatively quickly after emissions go to zero was described as a “game-changing new scientific understanding” by Covering Climate Now, a collaboration of news organizations covering climate.

Like the start of every year in recent history, the planet is getting warmer, climate disasters continue to strike, and emissions aren’t falling fast enough. However, unlike other years, some positive developments in recent months set us up for a healthier 2021. “The last few months of 2020 were genuinely encouraging,” says Joss Garman, U.K. director of the European Climate Foundation. “You saw significant climate commitments, despite there not being much spotlight or political pressure and despite the economic carnage caused by the pandemic.” These included net-zero announcements from China, Japan, South Korea, the European Union’s Green Deal, the UK’s climate-disclosures mandate, and the election of Joe Biden as the next US president.

The financial risk posed to companies by natural disasters keep growing and growing, and the size of potential losses is enormous. Moody’s Investors Service says 18 sectors have a combined $7.2 trillion of debt with “high inherent exposure to physical climate risks,” such as devastating wildfires, storms, and other calamities.

Exxon Mobil disclosed emissions data on customers’ use of its fuels and other products for the first time after coming under pressure from investors. The company’s so-called Scope 3 emissions from petroleum-product sales were equivalent to 730 million metric tons of carbon dioxide in 2019. That’s about the same as Canada’s entire country and is the highest of all major Western oil companies.

4. The global economy and the coronavirus

Despite growing access to a vaccine, January looks grim around the globe as the coronavirus resurges and reshapes itself from Britain to Japan to California, filling hospitals and threatening livelihoods. England headed back into lockdown. Mexico City’s hospitals hold more virus patients than ever. Germany reported one of its highest daily death tolls to date. South Africa and Brazil are struggling to find space for the dead. According to a model developed by researchers at the Centers for Disease Control and Prevention, people without symptoms are now thought to transmit more than half of all cases of the novel coronavirus.

Even before the pandemic, the World Bank had lowered its projections for global growth in the ten years that began in 2020. The pandemic is exacerbating that trend, raising the prospect of a “lost decade” ahead.

China’s light-speed recovery from the pandemic has reignited the debate about how long the dollar’s 50-year dominance of global markets can persist. The US’s struggle to control the coronavirus and revive its economy contrasts sharply with the Asian nation, where growth has roared back. That divergence — which saw the greenback’s worst performance since 2017 as the yuan advanced — has bolstered China’s tilt at dollar hegemony.

United States: Dr. Antony Fauci, the top infectious disease expert in the US, predicted that the daily death toll from the coronavirus would continue to rise for weeks to come and counseled patience with the vaccination program gearing up across the nation. Hours later, officials across the US reported yet another daily record for deaths, over 4,000. The total deaths for the pandemic in the US have surpassed 375,000.

The US economy shed 140,000 jobs in December, leaving the unemployment rate at a stubbornly high 6.7 percent and exacerbating fears that the new coronavirus surge is stalling America’s recovery. It is the first net monthly loss of jobs in the US since the early stage of the pandemic in April. Leisure and hospitality shed 498,000 jobs, making it one of the hardest-hit sectors by far. Governments lost 45,000 jobs, while education and healthcare services lost 31,000. However, retailing, manufacturing, and construction kept adding new positions.

President-elect Biden said Americans need more economic relief from the coronavirus pandemic now and that he will deliver a plan costing “trillions” of dollars this week.  He said the proposal includes relief for state and local governments grappling with the pandemic, as well as new support for people who lost their jobs or cannot afford rent. Biden also called for raising the minimum wage to $15, a campaign promise, and sending out $2,000 in direct cash payments.

Brightening the prospects for the climate agenda of incoming Democrats is that they have regained control of the US Senate. Democratic control could expand the scope of what Biden can achieve as part of his energy transition plan, with implications for renewable and clean investment and reversing President Donald Trump’s deregulatory efforts.  That said, the Democrat’s margin is the smallest possible: 51 to 50.

China: On Wednesday, authorities imposed travel restrictions and banned gatherings in the capital city of Hebei province, which surrounds Beijing, in the latest escalation of measures to stave off another coronavirus wave.  The province, which entered a “wartime mode” on Tuesday, accounted for 20 of the 23 new locally transmitted COVID-19 cases reported in mainland China on Jan. 5th. Steel production in Shijiazhuang, the capital city of Hebei province, has been under lockdown since Jan. 7th due to a resurgence in COVID-19 cases.

China will provide COVID-19 vaccines free of charge once they become available to the general public, government authorities said on Saturday. Three vaccines had already been given to limited groups at high risk of infection, including medical workers, through an emergency-use program. In mid-December, the country widened the inoculation scheme to more key groups, such as employees in the food and public transport sectors, to stem a resurgence during the winter and spring.

The coldest winter in China since 1966 has sent coal and gas prices soaring as power demand surges. Gas prices hit a three-year high, while coal prices ticked up by 4 percent this week. Reuters noted that despite record liquefied natural gas imports, the cold spell caused a supply crunch. China went on an LNG-buying spree last year amid low prices caused by oversupply. China is on course to become the largest importer of LNG by 2022.  Several major Chinese cities have reportedly gone dark as authorities limit power usage, citing a coal shortage.

Crude and bitumen blend import for China’s independent refineries jumped 42.2 percent on the year to a record high of 188 million tons during 2020. The private refining sector’s annual crude import growth during 2020 outpaced the 25 percent increase in 2019 and a 14 percent rise in 2018. The sharp increase was mainly attributed to low oil prices during the first half of 2020. Independent refineries had actively purchased feedstock cargoes when prices were hovering between $20 and $30 per barrel.

China purchased more wheat from US farmers during the week ended Dec. 31st, continuing the country’s buying spree for the eighth straight week. US wheat exports to China are expected to remain strong over the coming weeks. China’s total commitments for US wheat in the 2020-21 marketing season have now reached 2.4 million tons, a seven-year high.

European Union: Extended lockdowns in response to the continuing surge in Covid-19 infections have quashed hopes that fuel demand on the continent could rebound in the first half of the year. Citing data from the Oxford stringency index, which tracks school and office closures and travel restrictions, the Reuters report notes that most of Europe is in the grips of the most severe movement restrictions, affecting fuel demand negatively. Traffic data supports the warning as Germany and Italy extend lockdowns that were already in place and England introduces a third national lockdown to contain the virus. The new lockdown will be in force until mid-February. Europe’s oil demand was already lower in the final quarter of 2020 compared with the third quarter.

Economic activity in the eurozone contracted more sharply than previously thought at the end of 2020 and could get worse as renewed lockdown restrictions imposed to contain the coronavirus hit the bloc’s dominant service industry. Fears of an uncontrollable winter wave of coronavirus infections have prompted a growing number of European governments to close schools, breaking with a previous consensus that face-to-face teaching must be maintained. The UK, Ireland, Germany, Denmark, and some northern Italian regions have all ordered schools to shut for several weeks to contain infections, in some cases on the back of extended Christmas holidays.

This year is going to be much weaker for the European LNG market than was generally assumed. Moreover, the prime reason for LNG failing to repeat the all-time highs of the 2019/2020 winter season lies not with COVID-19 and its ramifications but with impressive competition between Europe’s pipeline suppliers between each other as well as between pipeline gas in general and LNG deliveries from different continents. With this, the battle for a European market share begins once again.

In the international electricity markets, countries fall into three categories: those that provide adequately for their needs, those with excess reserves, and those in deficit. The UK is in a deficit by about 7 percent of its annual requirements. Undersea cables linking the UK’s grid to mostly nuclear power stations in France and the Netherlands make up this deficit. But as part of Brexit negotiations concluded recently, the French government tied the UK’s access to bulk electric power to EU fishing access to UK waters. Both fishing rights and electricity access will be up for renegotiation at the same time in 2026. That does not leave a lot of time to secure alternative bulk wholesale power if the Europeans cut the cord. The UK has been trying to develop power alternatives, with a focus on new nuclear plants.

Poland plans to have 2 GW of hydrogen electrolysis capacity and 2,000 hydrogen fuel cell buses on its streets by 2030 as part of a new strategy to promote hydrogen fuel use. According to the government’s website, the country’s “Hydrogen Strategy to 2030 with a perspective to 2040” is set to be approved in the first quarter of this year.

Russia: Moscow produced around 10.04 million b/d in December, according to preliminary data released by the Russian energy ministry.  Output was up slightly on the 10.03 million b/d made in November 2020. Production was down 11 percent from the 11.27 million b/d produced during December 2019.

Russian refineries are expected to reduce throughput in January on poor economics and fewer working days due to the New Year holidays. According to sources, some will process from stocks or run in “hot circulation mode.” More large refineries that cover domestic demand are also likely to reduce runs but to a lesser extent. As a result, more volumes have been directed to exports, with Urals monthly exports at a very large combined monthly level since April, when Russian refineries cut throughput significantly due to the nationwide lockdown.

One of the most paradoxical developments of the US-Russia energy relationship is that American refiners have become the number one buyer of Russia’s fuel oil production. With Venezuelan crude squeezed out from the American market, Iranian exports kept at bay by a similar set of sanctions, and Mexico remaining in decline, Russian fuel oil remains one of the very few feedstocks that is still not too pricey and available in sufficient volumes. However, the winter months of 2020/2021 have witnessed a sharp decline in Russian fuel oil exports towards the US and a hike in their supplies exported to Europe.

Saudi Arabia:  The kingdom delivered what Russian Deputy Prime Minister Alexander Novak called “a New Year’s gift” to the oil market with its surprise announcement of an extra 1 million b/d production cut. Saudi Arabia will hold its February and March crude production to 8.119 million b/d, well below its quota of 9.119 million b/d, to help bring down oil inventories that had bloated from the pandemic. “We do that to support our economy, the economies of our friends and OPEC+ countries, and for the betterment of the industry at all levels,” energy minister Prince Abdulaziz bin Salman said in a post-meeting press conference.

The Saudis raised pricing for oil customers in Asia and the US after its production cut sent crude prices climbing. A day after its unilateral decision to slash oil production by 1 million b/d next month, and in March, the kingdom opted to increase prices for all grades shipped to the two regions in February. Saudi Aramco raised its flagship Arab Light oil to Asia, its biggest market, to $1 above the benchmark, the highest since August. The increase of 70 cents from January’s shipments was more than the market had expected. Aramco lowered prices for the northwest European and Mediterranean regions, where new coronavirus lockdowns have hit energy demand over the past month.

5. Renewables and new technologies

It will be later in the 2020s and 2030s when hydrogen likely becomes important as an energy source. A widespread view, held by the major energy agencies and others, is that hydrogen hubs will play an important role in getting carbon-free hydrogen going. These industrial locales, in which electrolysis facilities are located close to industrial users, shipping, and transport infrastructure, should offer scale efficiencies. Numerous regional plans to achieve such concentrations are now appearing.

The primary energy agencies anticipate the emergence of ‘green hydrogen corridors’ and shipping routes that will link hubs to regions rich in renewable energy. The latter naturally includes southern Europe, the southern US, Brazil, Chile, China, India, and Mexico. Areas of apparently great potential include Australia as well as the Middle East and North Africa (MENA).

In its recently published report Green Hydrogen: A guide to policymaking, the International Renewable Energy Agency asserts that much of the infrastructure for transport can be built up by repurposing with modification of existing natural gas networks and power grids even across international boundaries and waters. These exist notably between North Africa and Europe across the Mediterranean.

6. The Briefs (date of the article in the Daily Energy Bulletin is in parentheses)

Ship fuel quandary: Shipowners facing looming deadlines to use less-polluting fuels have slashed the number of new vessels on order because they don’t know which alternative technology to switch to.  With a commercial ship’s life averaging around 20 years, opting for a technology that doesn’t take off could be very costly. Ship orders fell almost 10 percent in 2019 and then more than 50 percent in 2020 to the lowest in at least two decades (1/9)

Qatar’s energy exports are unlikely to get a boost even as the almost four-year rift between Doha and three Gulf countries are set to ease.  (1/5)

Nigeria’s oil industry looks set for a challenging 2021 as a delay in implementing vital legislative reforms compounds problems for a sector still reeling under the weight of OPEC+ output cuts and the impact of the coronavirus. Faced with declining demand for oil and lower revenue, Nigeria will aim to trim oil production costs to $10/b in 2021, from the current range of $15-$35/b. (1/5)

Nigeria’s crude and condensate output in December fell 9 percent month on month to 1.52 million b/d. Crude production alone fell to 1.17 million b/d last month.  Fire at a critical export terminal caused the imposition of force majeure. (1/8)

In Nigeria, a coalition of nine militant groups yesterday backed out of peace talks with the government, accusing President Muhammadu Buhari of not doing well for Niger Delta and threatening to bomb oil infrastructure. (1/6)

In Brazil, crude oil output from Petrobras fields hit a record last year despite the pandemic, at an average of 2.3 million b/d, comparable to Kuwait’s production rate. (1/9)

The US oil rig count increased by 8 to 275 while the gas rig count inched up by 1 to 84, Baker Hughes reported. Canada’s combined rig count increased this week by 58 to 117.

Leaking wells: The Gulf of Mexico is littered with abandoned oil and gas wells, and toothless regulation leaves climate-warming gas emissions unchecked.  An abandoned well that has not been adequately plugged could leak methane and other harmful gases in perpetuity. There are 55,315 offshore wells in US federal waters, 97 percent of which are in Mexico’s Gulf. (1/6)

For Alaska, Interior Secretary David Bernhardt signed into effect Jan. 4 a significant land management change for the 23-million-acre National Petroleum Reserve-Alaska, a long-anticipated action to open areas along the northern coast of the reserve to leasing. (1/5)

ANWR go-ahead: A federal judge rejected a request by environmentalists to block the sale of oil drilling rights in the Arctic National Wildlife Refuge (ANWR).  In Anchorage, Alaska, US District Judge Sharon Gleason rebuffed arguments that the auction would cause irreparable damage. While there is a risk of “bureaucratic momentum” from the sale, the court can issue an injunction preventing other activity on leases even after they are issued. (1/6)

Alaska lease sale = dud: The Trump administration on Wednesday found few takers at its sale of drilling leases in ANWR, with an Alaska state agency emerging as the sole bidder for most of the acreage. The sale’s weak results were sure to disappoint Alaska’s decades-long effort to open up drilling in the ANWR to attract jobs and boost the state’s waning oil production. (1/7)

Trump’s dry hole: Delivering the ANWR lease sale just two weeks before leaving office was one of President Donald Trump’s last-minute efforts to expand fossil fuel and mineral development in the US. Trump’s successor, President-elect Joe Biden, has pledged to protect ANWR and to ban new oil and gas leasing on federal lands. (1/7)

Baker Hughes, one of the world’s biggest oilfield servicers, bought technology that enables companies to capture carbon emissions to store them underground. The industry faces growing pressure over its contribution to climate change. (1/5)

Fleet MPG declines: A new report says gas mileage for new vehicles dropped and pollution increased in the model year 2019 for the first time in five years. The mileage increase comes as Americans continue to buy SUVs and trucks, shifting away from more efficient vehicles. (1/7)

GMs EV push: As CEO Mary Barra announced the acceleration of General Motors’ rollout of 30 vehicle models in November, she said the carmaker was “committed to fighting for EV market share until we are number one in North America”—overtaking Tesla in the process.  (1/6)

GM’s EV future: General Motors on Friday unveiled a new corporate logo, its first significant logo change since 1964, as part of a new campaign to accelerate the automaker’s focus on electric vehicles. The “m” in the new GM logo is a nod to an electrical plug’s shape. (1/9)

Battery price history: The price of a lithium-ion battery pack used to power an electric vehicle has plunged 89 percent in the last decade. About a decade ago, the cost of a lithium-ion battery pack was around $1,110 per kilowatt-hour. That figure now stands at roughly $137 per kilowatt-hour and likely to plunge to about $100 per kilowatt-hour in the next couple of years. (1/4)

In California, Governor Gavin Newsom’s 2021-22 State Budget proposal includes $1.5 billion to achieve the state’s zero-emission vehicle goals by 2035 and 2045, including securitizing up to $1 billion to accelerate the pace and scale of the infrastructure needed to support zero-emission vehicles. (1/9)

Bitcoin = energy consumption: Mining Bitcoin online might not sound like a resource-intensive process, but it requires almost unbelievably vast amounts of energy. Thanks to the climbing price of Bitcoin, this week, the cryptocurrency’s energy consumption topped that of Pakistan –a nation of more than 200 million people. (1/4)

Another year of record-high heat punctuated a decade-long increase in global temperatures that has placed the Earth’s economies dangerously close to climate tipping points.  Greenhouse gas emissions continued to accumulate in the atmosphere, propelling the world closer to crossing the 1.5 degree Celsius warming threshold that climate models predict will lead to more frequent superstorms and higher sea levels. (1/8)

Global CO2 levels will be 50 percent higher this year than before the start of the Industrial Revolution. It took more than 200 years to concentrate CO2 in the atmosphere to grow 25 percent by the end of the 1980s. The majority of the damage has been wrought in the last 30 years as the pace of deforestation, and fossil fuels’ burning picked up rapidly. (1/8)

Hottest years: 2021 is already set to be among the hottest on record, even as the planet experiences the La Nina phenomenon’s temporary cooling effect.  The six warmest years on record have all occurred since 2015. (1/8)

The $$$ of warming: The second-warmest year on record brought storms, fires, and floods that killed at least 8,200 people and cost the world $210 billion in losses, according to a report by Munich Re. US damages totaled at least $95 billion. The year’s most costly single event was monsoon floods in China (image below), which cost $17 billion, with only 2 percent of that insured.

Polar vortex splitting: A dramatic spike in temperatures—by as much as 30 degrees is at high altitudes above the North Pole, where the air is thin and typically frigid. Known as a sudden stratospheric warming event, experts say it’s likely to have potentially significant repercussions for winter weather across the Northern Hemisphere for weeks to possibly months.  This powerful event may increase the potential for paralyzing snowstorms and punishing blasts of Arctic air. (1/6)

Sweden’s coronavirus strategy has changed. To combat the pandemic, the government this week proposed an emergency law that would allow it to lock down large parts of society; the first recommended use of face masks came into force, and the authorities gave schools the option to close for pupils older than 13. (1/8)

MA’s climate toolkit: Massachusetts lawmakers have sent to the governor’s desk a bill, a so-called climate toolkit, that aims to chart the state’s path to net-zero emissions by 2050. It “focuses on reducing greenhouse gases, creating jobs, and protecting the vulnerable.” (1/6)

Tom Whipple

Tom Whipple is one of the most highly respected analysts of peak oil issues in the United States. A retired 30-year CIA analyst who has been following the peak oil story since 1999, Tom is the editor of the long-running Energy Bulletin (formerly "Peak Oil News" and "Peak Oil Review"). Tom has degrees from Rice University and the London School of Economics.  

Tags: geopolitics, oil price