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Crude Oil Slumps One Day After OPEC Deal to Cut Output

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Oil Jump Jack

Despite the decision of the Organisation of Petroleum Exporting Countries (OPEC) to cut output by 200,000-700,000 barrels per day to achieve price recovery, oil prices fell yesterday after the gains recorded on Wednesday.

This was just as Royal Dutch Shell on Thursday in Rio de Janeiro, Brazil, launched its “#makethefuture” programme, where it unveiled six new technologies from different youth entrepreneurs around the world to provide sustainable and cleaner energy than conventional energy sources.

OPEC agreed on Wednesday to implement modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival, Iran, amid mounting pressure from low oil prices.

Under the deal, OPEC would reduce output to a range of 32.5 million barrels per day to 33 million barrels per day from the current estimates of 33.24 million bpd.

The Wall Street Journal reported that OPEC’s surprise proposal prompted the largest gains in crude prices since April on Wednesday, but the rally ran out of steam as investors wondered if the cartel’s members would stand by an agreement.

Concerns have also been raised over how much sway the cartel now has over a market still brimming with crude from around the world.

The group reached an understanding at a meeting Wednesday in Algeria that there was a need to scale back production.

However, analysts also argued that the scope of the reduction—between 200,000 and 700,000 barrels a day—was inadequate to arrest the supply growth and bring balance back to the supply-demand dynamics.

OPEC members will wait until the next official meeting in November to complete the details, including the quota for individual producers.

But despite the agreement, Brent crude, the global oil benchmark, yesterday fell 0.8 per cent to $48.85 a barrel, while West Texas Intermediate futures were trading down 0.5 per cent at $46.85 a barrel.

Meanwhile, Royal Dutch Shell Plc’s “#makethefuture” programme launched in Brazil yesterday was targeted at bringing bright energy ideas into action to benefit local communities around the world, and also highlighted the need for greater global collaboration to create more energy to meet the world’s growing population.

The six new energy solutions include: Pavegen, which converts kinetic energy generated by footsteps into electricity; and Capture Mobility, which converts human and vehicular traffic into electricity.

The Pavegen solution has been deployed in Nigeria where Shell built Africa’s first human and solar-powered football pitch at the Federal College of Education, Akoka, Lagos.

Others include GravityLight, which generates electricity from falling objects; Insolar, which provides communities easy access to solar energy; MotionECO, which turns waste cooking oil into energy; and Bio-bean, which converts waste coffee into energy.

Speaking at the launch of the programme, Shell’s Global Head of Integrated Brand Communications, Malena Cutuli, identified the lack of access to cleaner energy as one of the greatest challenges facing the world.

She advocated the need for donors and sponsors to support entrepreneurs around the world to develop ideas and power of innovative options for communities to access cleaner energy.

“We want to improve our lives, our communities, and our countries, and we are constantly developing new technologies and methods to do so. But we thereby face a global problem: the more we reach for a brighter future, the more energy we consume along the way.

“Our current access to energy is neither enough to satisfy our growing energy needs, nor is it sustainable. The ways in which it is being provided now contribute to climate change, as well as costing the planet valuable resources. We need more and cleaner energy. But we can’t do it alone,” she explained.

She further stated that the “#makethefuture” campaign was the company’s call for collaboration to create smart energy solutions that would generate more and cleaner energy across the world.

“It is a privilege to see how ideas are transformed into realities,” she added.

“Working together, we are turning gravity into light, coffee into energy, cooking oil into fuel, footsteps and roofs into power sources, and roadside turbulence into electricity.

“Communities in Brazil, Kenya, China, United States and UK will experience, first hand, the benefits of these new sources of energy. And we will all see how a different future is possible, a future that is in our hands to create,” Cutuli said.

Also speaking, Shell Brazil’s External Relations Manager, Glauco Paiva, described Brazil as the world’s leader in the oil and gas business of exploration and production (E&P), adding that Brazil would host Shell’s Eco Marathon competition where any technology that consumes less energy would emerge the winner.

In an apparent justification of Shell’s investment in the project in the face of the slump in oil prices, Paiva noted that the energy need of the world’s population of seven billion would continue to grow, thereby providing justification for investment in renewables.

Six artistes selected across the world, including Nigeria’s award-winning Yemi Alade, Brazil’s Luan Santana and British singer, dancer, actress and song writer, Pixie Lott, performed at the event to promote cleaner energy solutions.

In his remark, the founder of Paven and British entrepreneur, Laurence Kembell-Cook, stated that his idea harnesses kinetic energy generated by footsteps to generate electricity.

According to him, before he built Africa’s first human and solar powered football pitch at the Federal College of Education, Akoka, Lagos in Nigeria, Shell and football icon, Pele, had helped Pavegen to launch the world’s first people-powered football pitch in Morro da Mineira, a favela in Rio de Janeiro, adding that the technology had been deployed in various high-football locations around the world.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Oil Holds Near Highest Since 2018 With Global Markets Tightening

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Crude Oil - Investors King

Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.

Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.

China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.

Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.

“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.

At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.

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Energy

Unlocking Investments into Africa’s Renewable Energy Market

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green energy - Investors King

The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT. 

The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.

Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.

In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.

Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustain­able energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.

The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.

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Energy

Shell Signs Agreement To Sell Permian Interest For $9.5B to ConocoPhillips

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Shell profit drops 44 percent

Shell Enterprises LLC, a subsidiary of Royal Dutch Shell plc, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.

“After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition,” said Wael Sawan, Upstream Director. “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions.”

Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.

The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.

Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.

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