Whispers of $100 Oil Return as Crude Shakes Off Covid’s Clasp
Ben Sharples, Bloomberg, February 23, 2021
While oil’s dizzying collapse is still fresh for many traders, rumblings are starting to emerge that by the end of next year prices could once again top $100 a barrel.
Azerbaijan’s Socar Trading SA predicts global benchmark Brent could hit triple digits in the next 18 to 24 months, and Bank of America sees potential spikes above $100 over the next few years on improving fundamentals and global stimulus. Speculators are also getting in on the action, increasing bets in the options market that oil will reach the vaunted level by December 2022.
The views are ultra-bullish, but they highlight increased confidence in the oil market after Brent rallied more than 200% after hitting an 18-year low during the pandemic. Demand has bounced back in key Asian markets, while OPEC+ is withholding barrels and a lack of investment is keeping shale supplies at bay. Goldman Sachs Group Inc. this week lifted its third-quarter forecast by $10 to $75 a barrel.
Option bets on oil prices rising above $100 for the December 2022 Brent contract have jumped in recent days, with open interest on the calls rising from 500 to 3,950 in the past week.
The $100 mark occupies a special place in the mind of many traders, as oil hovered around that level for several years in the early part of last decade as strong demand from emerging markets enticed drillers into ever more expensive locales, from deep ocean beds to Canada’s remote tar sands.
Keystone XL’s Death Sparks Rush to Ship Oil-Sands Crude by Rail
Robert Tuttle, Yahoo! Finance, February 24, 2021
U.S. President Joe Biden’s decision to cancel the Keystone XL pipeline is sparking renewed interest in shipping Canadian oil-sands crude by rail, and that comes with its own environmental risks.
Cenovus Energy Inc. and Imperial Oil Ltd. have increasingly turned to trains to move their crude, with oil exports by rail from Canada more than tripling since July. Now, Gibson Energy Inc. — an oil shipping company that signed a 10-year contract with ConocoPhillips to process oil-sands crude before loading it at its train terminal — expects other producers to follow suit.
Without Keystone XL, which was scheduled to enter service in 2023, rail is poised to become a more important way for Canadian oil to reach U.S. Gulf Coast refineries, which need the heavy crude to replace declining supplies from Mexico and Venezuela. That means the risk of derailments may also rise.
“Those U.S. refineries need that heavy crude oil produced by Canada,” Sean Brown, Calgary-based Gibson’s chief financial officer, said in a conference call Tuesday. “Discussions continue to heat up.”
Gibson expects that by the third or fourth quarter it will start a 50,000-barrel-a-day facility that will maximize the crude content in rail shipments by removing diluent used to move the crude through pipelines to its terminal in Hardisty, Alberta.
Plans for other diluent recovery units, or DRUs, are also emerging.
Water slows 2020 Red Dog zinc production
Shane Lasley, North of 60 Mining News, February 19, 2021
Teck Resources Ltd. Feb. 18 reported that the Red Dog Mine produced 490,700 metric tons (1.08 billion pounds) of zinc during 2020, a roughly 11% drop from the 552,400 metric tons (1.22 billion lb) of the galvanizing metal produced in 2019.
Lead production at the Northwest Alaska operation was also down slightly from the 102,800 metric tons (226.6 million lb) produced in 2019 to the 97,500 metric tons (214.9 million lb) produced last year.
Teck says climate related water management issues is a primary reason for the lower metals production at Red Dog last year.
“Climate change is affecting conditions in the receiving environment, which limited our ability to discharge treated water in 2020, leading to increased water in the storage facilities,” Teck penned in its fourth quarter 2020 report. “Throughout 2020, we completed several projects to increase storage capacity and implemented a breakthrough RACE21 project that significantly increased water treatment capability. In addition, a new water treatment plant was installed to increase the water discharge capacity when permit limitations allow. These projects removed the temporary restrictions from the mine plan put in place to manage water levels in 2020.”
The lifting of these restrictions could be seen in the improved production toward the end of the year.
Despite disagreements with Interior secretary nominee, Alaska Rep. Don Young tells senators ‘she will listen to you’
Alex DeMarban, Anchorage Daily News, February 23, 2021
Alaska Republican Rep. Don Young on Tuesday urged senators to support Interior secretary nominee Deb Haaland during a hearing before a Senate committee, calling her a friend who will listen to Republican concerns, even though he disagrees with her on oil and gas development.
Young told the Senate Energy and Natural Resources Committee that he believes Democratic President Joe Biden has the right to choose his “crew.” Young said he’s “quite proud” that Rep. Debra Haaland, D-N.M., is an American Indian, a Laguna Pueblo from New Mexico.
“I would suggest respectfully you’ll find out that she will listen to you,” Young told the 20-member committee. “She may not change, like she and I do not agree on carbon fuels, you know that we’ve said this before. But it’s my job to try and convince her that she’s not all right, and her job to convince me I’m not all right.”
If appointed by the full Senate, Haaland would be the first Native American presidential cabinet member. That’s been a “long time overdue,” Young said.
How Biden’s clean-energy jobs transition could work in fossil fuel hubs
Ben Geman, Axios, February 24, 2021
A new analysis shows lots of potential for regions with a high share of fossil fuel jobs to benefit from wind and solar development — with the right policies in place.
Why it matters: The idea of a “just transition” in the energy sector is discussed a lot in climate policy plans, including President Biden’s recent executive order.
- An aggressive shift to low-carbon energy to fight global warming creates risks for places where employment and the wider economy benefit from fossil fuel industries.
- Enter the Brookings Institution analysis of counties with dense concentrations of oil, gas and coal-related employment that also have high renewables potential.
The big picture: The paper finds “impressive overlap between where fossil fuel jobs are now and where renewable energy generation could be.”
- “A quarter of the counties in the U.S. with the greatest potential for both wind and solar electricity generation are also fossil fuel hubs.”
- It also concludes that targeted policies to make that happen could lower political barriers to emissions-cutting policies.
How it works: Brookings analyzed county-level employment to construct a map of these “fossil fuel hubs.”
- Those are places in the top 20% job density in a suite of sectors like oil-and-gas extraction, fossil power generation, coal mining, oil-and-gas pipelines, and distribution and more.
- They overlaid that with University of Texas data on regions with high potential for wind and solar development and the most competitive costs for doing it.
- That data relies on a metric called the levelized cost of electricity, which basically means the costs of building and then running, supplying, and maintaining power facilities over time.
The intrigue: They find that of the 155 congressional districts with high potential in at least one of the renewable technologies, 91 are represented by GOP lawmakers.
But, but, but: The right policies are needed for successful transitions, the paper argues, and it’s clear-eyed about the opportunities but also the challenges.
- It calls for steps like targeted job training efforts in “Goldilocks” communities — places reliant on fossil industries that also have strong renewables potential.
- More broadly, transition efforts should involve partnerships between government, schools, labor, community groups and other stakeholders.