David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Biden's Demands for Oil Collide With Drillers Reining In Output

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    U.S. shale producers expect the oil price spike to be short-term, and shareholders don’t want companies investing capital in robust drilling programs delivering new production in 18 months, Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield said Wednesday. Oil futures indicate companies would get lower prices for crude that begins flowing in 12 to 18 months. 

    The administration’s approach assumes oil producers will turn on a dime in response to pleas from the same people “telling everybody that they are going to be obsolete in 30 or 40 years,” said Benjamin Salisbury, director of research at Height Capital Markets. 

    Investors in shale also have brushed aside arguments that drillers should crank up production because it’s their patriotic duty. Many still bear scars from the last boom-and-bust cycle, when companies chased production growth, ultimately contributing to a glut that drive down prices. 

    “The upstream industry is not a public service industry,” said Ben Dell, founder of Kimmeridge Energy Management. “For 10 years we made no money. The industry is profitable for two months, and the argument is that we’re supposed to price down the product or give away margins to support the consumer.”

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    A New World Energy Order Is Emerging From Putin's War on Ukraine

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “The U.S. can try to make Saudi Arabia increase production, but why would they accept a break in the alliance, which is key for them?” said Paolo Scaroni, former chief executive officer of Italian oil company Eni SpA. 

    There’s a political dynamic at play to explain the kingdom’s fidelity to Moscow beyond the gusher of oil revenue. 

    Where Donald Trump cultivated a particularly friendly relationship with Saudi Arabia — making his first foreign trip as U.S. president to Riyadh — ties have turned colder under President Joe Biden. On the campaign trail, Biden pledged to make the kingdom a “pariah,” in part because of the killing of columnist Jamal Khashoggi. He will only deal with the elderly King Salman, relegating Mohammed bin Salman to interact with more lowly officials despite being the kingdom’s defacto ruler. 

    By contrast, Riyadh’s OPEC+ partnership with Moscow calmed years of distrust between the two oil rivals, and saved the kingdom from relying exclusively on Washington.

    “Saudi Arabia doesn’t want to switch horses mid-race when they do not know if the other horse is actually going to show up,” said Helima Croft, chief commodities strategist at RBC Capital Markets. 

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    Ukraine Open to Neutrality But Won't Yield Territory, Aide Says

    This article from Bloomberg may be of interest. Here is a section:

    Ukraine is open to discussing Russia’s demand of neutrality as long as it’s given security guarantees, though it won’t surrender a “single inch” of territory, a top foreign policy aide to President Volodymyr Zelenskiy said.

    “Surely, we are ready for a diplomatic solution,” Ihor Zhovkva, Zelenskiy’s deputy chief of staff, said in an interview with Bloomberg Television on Wednesday. 

    The aide reinforced Ukraine’s demand for security guarantees “from the U.S., from Great Britain, from Germany” and others -- “only security guarantees from Russia will not be enough,” though he declined to spell out what those measures would entail. 

    Preconditions for talks with Russian President Vladimir Putin would be a cease-fire and the withdrawal of Russian troops, Zhovka said.

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    Satellite outage knocks out thousands of Enercon's wind turbines

    This article from Reuters may be of interest to subscribers. Here is a section:

    Germany's Enercon on Monday said a "massive disruption" of satellite connections in Europe was affecting the operations of 5,800 wind turbines in central Europe.

    It said the satellite connections stopped working on Thursday, knocking out remote monitoring and control of the wind turbines, which have a total capacity of 11 gigawatt (GW).

    "The exact cause of the disruption is not yet known. The communication services failed almost simultaneously with the start of the Russian invasion of Ukraine," Enercon said in a statement.

    The company said it had no further information on who or what may have caused the disruption.

    Enercon has informed Germany's cybersecurity watchdog BSI and is working with the relevant providers of the satellite communication networks to resolve the disruption, which it said affected around 30,000 satellite terminals used by companies and organisations from various sectors across Europe.

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    Email of the day on The Chart Seminar and a uranium ETF

    hello Eoin 1) could you please suggest a trustworthy ETF on Uran, with a well balance geopolitical profile 2) I would very much welcome a chart seminar, I hope you will be able to organize one in the not too distant future.

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    Chevron Doubles Buyback as Spending Cap Helps Lift Cash Flow

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    As a result, operational cash flow per share, a key metric watched by analysts, will grow 10% every year through 2026 with Brent crude at $60 a barrel, Chevron said. The international oil benchmark rose as much as 5.4% to $103.22 a barrel on Tuesday.

    Chevron’s plans will mean repurchasing shares at elevated price levels. The stock touched a record high Monday after Russia’s invasion of Ukraine sent crude surging. Chief Executive Officer Mike Wirth has said the company will maintain the buyback even if oil prices dip. It’s part of his pledge for shareholders to reap the benefits of $100 oil in contrast to previous upturns a decade ago when spending on mega-projects to grow production was the priority.

    Chevron is also using its rising cash flow to invest in the energy transition. It announced the $3.1 billion purchase of biofuel maker Renewable Energy Group this week, a deal that will make it one of North America’s biggest producers of renewable fuels.

    But that’s doesn’t mean Chevron is moving away from fossil fuels. It expects oil and gas production to grow to more than 3.5 million barrels a day by 2026, about 13% higher than last year, the company said Tuesday. Most of that growth will come from shale production in the Permian Basin and the giant Tengiz development in Kazakhstan.

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    Solar Stocks Rally as Tariff Expiration Nears With No Decision

    This article from Bloomberg may be of interest to subscribers. Here it is in full:

    Solar stocks rally Monday, with Enphase Energy and SolarEdge among the 10 best performers on the S&P 500 Index amid a broader rebound in growth stocks.

    “The solar industry faces short-term volatility as political pressure mounts around the expiration of U.S. solar duties on Feb. 6,” writes Bloomberg Intelligence analyst Clelia Imperiali

    It’s likely that President Joe Biden will renew the tariffs, which would support the domestic upstream solar industry but penalize downstream players that import solar cells and modules, she writes in a note

    A key impact of the tariffs has been to ease competition for domestic producers like First Solar (up 4% on Monday)

    * The Invesco Solar ETF (TAN) is up 4.3% at 10:33 a.m. in New York, with the top gainers including Shoals Technologies +12%, Canadian Solar +9.3%, Daqo New Energy +7.6%, Array Technologies +7.2%, Beam Global +7.2%, Enphase +7.1%

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    The Invasion of Ukraine Is a Tragic Sin

    This article by Leonid Bershidsky for Bloomberg may be of interest to subscribers. Here is a section:

    I have met Putin, and I have watched him as a journalist since before he became president. My analysis of his actions was always based on the assumption of his rationality. There was always something to gain, a manageable risk of losing. Perhaps I was wrong from the start. Perhaps Putin has changed in recent years as his close circle narrowed and negative selection expelled people with a broader vision from the ranks of his advisors. Quite likely, Ukraine has long constituted an exception from Putin’s rationality, as most of its people time and time again chose the Western path, away from Putin’s vision of the Russian World.

    I left Russia after the Crimea annexation because I couldn’t accept it and felt it was a great historical wrong — both for Ukraine and for Russia. But I ended up returning to that assumption of rationality. I analyzed Putin’s moves from a cost and benefit perspective. I have a lot of rethinking to do.

    The invasion is an irrational move. It makes any further negotiations with Putin and his clique pointless: There is, quite clearly, nothing he won't do, no line he won’t cross, no matter what he says or what deal he makes. From this point on, autarky is the only feasible economic choice for Russia, and a retreat into isolation is the only remaining cultural and political choice. At the same time, Russia's dependence on China, which has grown in recent years, is no longer a matter of choice. Any security benefits from turning Ukraine — and neighboring Belarus, from whose territory Putin also attacked — into a buffer state are illusory since Russia also borders actual NATO member states, which now will arm themselves as heavily as possible. 

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