Oil prices extended their longest winning streak in two years for a ninth straight day yesterday, supported by producer cuts and global vaccine rollouts.
Crude prices eased in early trading today, with the WTI down 0.6% at $58.31/bbl and Brent down 0.7% at $61.03/bbl. Natural gas was 2.2% higher at $2.97/MMBtu.
Crude prices in North Dakota’s Bakken shale region hit their highest levels in six months, a result of producers reigning in output amid the uncertain future of the Dakota Access Pipeline.
The Energy Information Administration upped its average price forecast for WTI crude spot prices to $50.21 in 2021 and $51.56 next year.
A recent report calculates that oil producing nations face a $9 trillion income decline as the world shifts to renewable energy, prompting a warning for oil-dependent countries to diversify their economies.
Brookfield Infrastructure made a $5.6 billion unsolicited offer to acquire Canadian midstream giant Inter Pipeline, which manages 4,300 miles of pipelines, 5 million barrels of oil storage in western Canada, and a PDH/PP complex under construction in Alberta.
In a strategy update yesterday, Royal Dutch Shell said its oil production has peaked and will decline by 1% to 2% annually moving forward, with its production of “traditional fuels” down 55% by the end of the decade. The company also said it will freeze salaries and eliminate bonuses this year to preserve cash.
Baystar, a joint venture between Total and Borealis, will start its new Port Arthur, Texas, ethane cracker by the end of March with over a million-tonnes-per-year capacity, while a new 625,000-tonne-per-year polyethylene unit in Pasadena will start by March 2022.
Despite slashing its capital expenditures for 2021, ExxonMobil plans to complete a new ethane cracker, polyethylene and mono-ethylene glycol chemical complex in Corpus Christi by the end of the year, several months ahead of schedule.
Braskem is forecasting a tight market for North American polypropylene in early 2021 due to low inventories and non-pandemic-related maintenance issues.
Renewable energy such as wind and solar power is expected to surpass natural gas as the predominant source of U.S. electricity generation by 2030. Around the same time, U.S. crude production is expected to level off as Wall Street investment shifts away from fossil fuels.
Supply Chain
A 7.7 magnitude earthquake struck the South Pacific region yesterday, triggering tsunami warnings.
The impacts of a global computer chip shortage are spreading:
General Motors posted a $2.8 billion profit in the fourth quarter, but warned that global semiconductor shortages could cause a $2 billion hit to profits in 2021.
Toyota, raising 2021 earnings forecasts by more than 50%, said it has a four-month stockpile of chips and is not expecting production hits.
A surge in e-commerce warehouse construction in Houston the last few years is creating a glut of space, driving vacancies up and rents down.
Hapag-Lloyd raised nearly $900 million in green financing to support building six new 23,500-teu liquified natural gas-powered box ships, early evidence of an expected surge in newbuild ship orders placed this year and next.
Vietnam port container volumes rose by 8.5% in 2020.
Logistics conditions remain strained, with trucking demand exceeding availability, continuing congestion at ports, and backlogs at warehousing and packaging facilities due in part to operating challenges related to the pandemic. Shipping containers are in short supply, with demurrage charges rising. Clients are advised to provide expanded lead times on orders to help ensure delivery dates.
Markets
There were 94,704 new COVID-19 infections in the U.S. yesterday and 3,364 fatalities.
The White House is considering domestic travel restrictions as several virulent strains, including from the U.K., South Africa and Brazil, spread in Florida, threatening hard-fought progress against the pandemic.
More than 5 million COVID-19 vaccines have been distributed in California. The state reported its first two cases of a virulent strain from South Africa yesterday.
The World Health Organization says countries should keep rolling out AstraZeneca/Oxford’s COVID-19 vaccine, including those battling the South African strain of the virus.
Merck & Co. could begin helping manufacture COVID-19 vaccines in addition to two virus therapies currently in development.
The White House is opening more mass-vaccination sites in Texas and New York with a focus on minority and underserved communities.
The Federal Reserve will continue the path of low interest rates and hefty asset purchases to bolster the economy, noting that the real unemployment rate is closer to 10% rather than the official 6.3% reported by the government. Bank officials also are calling on a “society-wide commitment” to returning employment for minorities and those terminated from lower-paying jobs during the pandemic.
The U.S. budget gap hit a record $736 billion during 2021’s first four fiscal months, an 89% increase from the year-ago period, led by a record $163 billion deficit in January, five times the previous year, as new coronavirus relief payments were sent out.
American goods exports to China rose 17.1% last year as the U.S. reduced its overall trade deficit in goods by 10%.
American businesses and consumers increased borrowing last year but paid back even more as lenders saw their loan books shrink in 2020 for only the second time in 28 years, leaving banks flush with cash and hopeful loan growth will pick up this year.
Despite skyrocketing sales in recent quarters, Best Buy is cutting jobs and reducing hours in a transition to greater e-commerce.
Southwest Airlines and airline unions are asking the White House not to impose COVID-19 test requirements before domestic flights, warning about the effect on the already battered industry.
Mercedes-Benz spinoff Daimler Trucks is investing $20 million in its Detroit Diesel plant in Michigan to make electrical powertrain parts for the North American e-truck market.
Coronavirus patients in Spain will have to wait six months before being vaccine eligible, the first measure in Europe that assumes reinfection with the virus is unlikely.
About 90 people in China were infected with coronavirus-like symptoms two months before the virus broke out full force, suggesting a wider spread than first thought. The WHO’s probe into the origins of COVID-19 in Wuhan ended yesterday, with a full report expected soon.
The global travel and hospitality sectors are bracing for a slow recovery:
Same-store sales at Mexican retail businesses fell 8.2% in January compared to the same time last year.
France’s industrial output was weaker than expected in December, falling 0.8% from the previous month amid a 1.3% decline in fourth-quarter GDP.
A digital currency issued by the Canadian central bank could come sooner than expected with the pandemic, although officials give no timeline.
The European Union is asking for a two-month extension to ratify Britain’s exit from the bloc.
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