Waiting for the IEA to make a decision

The 2021 oil boom in the US and around the world continues to advance at a surprisingly measured pace. Self-discipline abounds across the industry spectrum, US producers curb their normal drive to emerge from a state of prosperity, and OPEC + sticks to its conservative strategy of gradually increasing production and exports to meet global demand for crude. that recovers quickly.

However, the same cannot be said for government entities in their respective roles in the energy space, as the Biden / Harris administration and the International Energy Agency (IEA) continue to create unnecessary destruction and confusion through their political decisions. , public reports and pronouncements. It often seems that when it comes to governments, self-discipline and consistency are not seen as desirable core competencies.

The Biden / Harris administration, in its relentless efforts to win the favor of its big funders in the environmental lobby, got a big skin nailed firmly to the wall last week with the decision to TC Energy to formally cancel its Keystone XL pipeline. The president’s decision to arrogantly eliminate the thousands of jobs and billions of investments already made by TC Energy was a watershed moment in the presidential irresponsibility when it comes to US energy policy, forever diminishing the level of confidence that any company can have in the consistency of the application of laws and regulations by the federal government.

As noted in a previous article, the Department of the Interior also made the recent decision, based on suspicious reasoning, to indefinitely suspend 9 oil and gas leases that the Trump Administration sold at the Alaska National Wildlife Refuge in January. This was another decision made to placate the radical green community, one that, unlike the Keystone XL fiasco, will have little practical impact on the oil and gas industry, as none of the 9 leases sold in January were tendered by real oil and gas companies. . The industry itself seems to have recognized that trying to drill at ANWR is simply too costly, both from a dollar and reputational standpoint, even if other interests have not.

Meanwhile, the internationalists who run the IEA seem unable to make a collective decision on what they want the global oil and gas industry to do. On Friday, a the agency spokesperson urged OPEC + members to “turn on the taps” to help meet recovering demand, even as he said in his next breath that uneven distribution of vaccines could jeopardize the ongoing recovery.

As if that wasn’t confusing enough considered in a vacuum, Friday’s notice from the IEA came just a couple of weeks after a widely publicized report in which he urged the global community to halt all future investments in new oil and gas resources to meet the emissions targets of the Paris Climate Agreement. With the agency now admitting that global demand will rebound to pre-pandemic levels over the next year and continue to grow for years to come, it seems not to acknowledge that “turning on the taps” and continuing to meet the growing demand for crude will in fact do so. they require massive investments in exploration and production of new oil reserves.

All of these conflicting warnings and reports from a global energy authority should make many oil executives feel like spectators at a tennis match. Please make up your mind.

As all of that was going on, the price of a barrel for West Texas Intermediate topped the $ 70 mark on Thursday for the first time in three years. With the international price of Brent at $ 72.69 over the weekend, the projection of Goldman sachs

GS
$ 80 oil in late summer looks pretty strong.

The active home platform counts for both Baker Hughes

BHI
Y Enveres they have now been essentially static for a full two months, even in the face of a rapid improvement in commodity prices during that time period. This is an indicator of both the continued self-discipline exercised by corporate drillers and the likelihood that concerns about faster drilling by private companies have been overblown.

With the financial community continuing to push this rapidly consolidating industry to be more efficient and improve investor returns, the next benchmark will come in July and August, when corporate producers start executing on their drilling budgets. revised for the second half of the year. . During booms of the past, this would have been a time when we would have seen new spikes in rig counts and drilling permits as companies tried to take advantage of higher prices. These spikes, of course, helped create global oversupply and price collapses in a fairly short time frame.

It seems increasingly likely that today’s industry, which has just gone through two major boom / bust cycles in the last six years, is focused on avoiding the mistakes of the recent past. Only time will tell.

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