Will Biden's Infrastructure Plan Threaten The U.S. Oil Industry?

Much was made about the impact of Biden's infrastructure bill on the U.S. oil and gas industry, but details suggest there is nothing to worry about.

Chart of the Week

-     The long-awaited bipartisan infrastructure bill worth more than $1 trillion was opened for debate on the Senate floor yesterday.  

-     Unless the bill’s provisions get tightened, the scope of potential demand destruction for the oil industry remains narrow – the $10 billion allotted for electric vehicle infrastructure might be perceived as eschewing broad-scale ambition.

-     In fact, oil refiners might benefit from the record investment pouring into rebuilding the US’ highways and transportation infrastructure, which should increase residue demand in the mid-term. 

-     Natural gas producers might be tempted to cash in on the bill’s natural gas fueling infrastructure and plentiful hydrogen-related dimensions. 

-     In addition, the bill calls for $12.5 billion in funding for carbon capture programs, including some $2 billion for carbon dioxide pipelines across the country. 

Market Movers

-     As spodumene concentrate prices rose to an all-time high on robust Chinese buying, reaching almost $1,300 per metric ton FOB Australia, stocks of Australian producer Orocobre (OTCMKTS:OROCF) attained record highs, flying past the $6 per share mark.  

-     The Australia-based Oil Search is reportedly close to agreeing to Santos’ $6.2 billion merger offer in a deal that would form a Top 20 global oil firm, sending Oil Search (ASX:OSH) stock soaring as Monday saw an impressive 5% rise. 

-     Prompted by domestic pressures to expedite its green transformation, Royal Dutch Shell (NYSE:RDS) is seeking to sell its Permian Basin oil acreage, in a deal assessed at some 10 billion, Bloomberg reports, with Chevron and ConocoPhillips rumored to be interested. Shell stocks have been stagnant over the past couple of days. 

Tuesday, August 03, 2021

Teheran Blamed for Oil Tanker Attack. Israel and US officials blamed Iran for an alleged drone attack on a product tanker sailing to Fujairah, which triggered two casualties. Teheran dismissed the allegations as “contradictory, false and provocative”, vowing to react to any possible measures. 

US Majors Cash In on Solid Fundamentals. US majors Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) posted net profits for the second time in a row, as their Q2 results exceeded analysts’ expectations. Chevron reported a $3.1 billion quarterly net income, whilst the Q2 profits of ExxonMobil stood slightly higher at $3.2 billion.

Russia Backtracks on Iraqi Divestment. Russia’s LUKOIL (OTCMKTS:LUKOY)backtracked on its intention to sell its stake in the supergiant West Qurna-2 field to Chinese companies,Bloomberg reports. ExxonMobil’s (NYSE:XOM) departure, however, is unlikely to be swayed by last-minute bargaining. 

European Spot Prices Surge on Low Wind Output. With wind generation rates remaining significantly below average levels, wholesale spot power prices in both Germany and France rose by more than 30% yesterday, just several euros shy of the €100/MWh threshold.

Maersk Upgrades its 2021 Outlook. The world’s largest container shipping company, Maersk (OTCMKTS:AMKBY), lifted its outlook for this year as global supply chain disruptions have pushed freights rates higher than anticipated – it now expects its full-year 2021 EBITDA in the range of $18-19.5 billion, some $5 billion higher than previously. 

Renault Locks In Lithium Deal. The French car-making giant Renault (EPA:RNO) signed a long-term deal with Vulcan Energy (ASX:VUL) on the supply of 6-17 thousand tons of lithium annually, produced in Germany by means of a more sustainable geothermal production process. 

US Copper Demand on the Rise. Amidst a solid rebound in demand, the US copper market shows all signs of a supply shortage as backwardation on the forward curve continues to steepen, just as the London LME copper market is firmly in contango. Citibank estimates that Jan-May copper consumption in the US increased by 22% year-on-year.  

Eni Strikes Oil in Mexico Again. Italian major ENI (NYSE:E) found another oil play in Mexico’s offshore Block 10, with the discovered Sayulita prospect assumed to contain some 200 million barrels of oil equivalent. The adjacent Saasken discovery, of similar size, might be developed in conjunction with the new find. 

China Cuts Red Tape to Boost Coal Production. A total of 38 open-cast mines with a (prospective) nameplate production capacity of 67mtpa have seen their land use rights approved by authorities in the province of Inner Mongolia, in what is a concerted effort to expand domestic coal output as global prices continue to spiral out of control.   

Ecopetrol Wants to Buy National Electricity Firm. Colombia’s national oil company Ecopetrol (NYSE:EC) submitted a non-binding offer to buy 51.4% of Colombia’s electricity transmission firm Interconexion Electrica, worth some $4 billion. 

Ghana Seeking Money to Speed Up Oil Development. Ghana’s government is seeking parliamentary approval to borrow funds to the order of $1.65 billion, with the aim of speeding up the nation’s oil and gas projects so as not to be left with stranded assets as decarbonization progresses.  

Brussels Prolongs Tariffs on US Biodiesel. The European Union extended union-wide tariffs on US biodiesel for a further 5 years into 2026, arguing that scrapping them could expose domestic producers to artificially low (dumped) prices, Reuters reports. The current tariffs range from zero to almost $200 per metric ton. 

Brazil Fails to Sell Its Refineries. The Brazilian national oil company Petrobras (NYSE:PBR) failed to meet another deadline on the presumed sale of three refineries amid weaker-than-assumed demand, so far managing to sell only one downstream asset out of the total number of 8 refineries – it sold the largest 333kbpd RLAM to Mubadala for $1.5 billion.