Note from BofA Equity Research - Nov 18

Note from BofA Equity Research - Nov 18

Postby dan_s » Fri Nov 19, 2021 8:34 am

White House dissatisfaction with OPEC+ after its Nov 4th meeting is well documented.
But in a day of moderately constructive EIA inventory data vs consensus that saw draws
across crude, gasoline and distillate, headlines suggesting potential for a coordinated
release of strategic petroleum reserves with other countries was the trigger seemingly
for paper markets to hit the offer on elevated technical markets. WTI has now fallen by a
full $7 from its recent peak on Oct 26th, and has once again fulfilled our technical team’s
view that absent additional fundamental support, oil could be vulnerable to a short-term
pullback. We reviewed this in OIM 570 (…one step back). But there are caveats: a glance
at US strategic petroleum reserve data shows a cumulative consecutive draw of 15mm
bbl since Sept 3rd (and 32mm bbls draw since April 2nd) and 3.2mm draw this week
(457,000 bpd). Curiously, this past weeks draw is accompanied by a 573,000 bpd jump in
crude oil exports – but real time satellite data from Kayrros suggests the draw in global
crude oil stocks over the past week reached a record of 6.5mm bbls, now standing below
pre-COVID levels. The bottom line: whether President Biden succeeds in securing a
coordinated SPR release, it is already unilaterally adding crude to the market – but any
such move is transitory and does not alter the medium term narrative that is still,
recovery in demand, secular underinvestment and OPEC+ back in control of oil markets.
Near term, yearend tax selling of inventories is a risk that may keep spot prices under
pressure and our technical team’s corrective target in the low $70’s in focus; but the
long end of the curve remains $5 higher than one month ago.

Feedback from Energy conference day 1
OPEC+ in control; don’t count out old energy just yet!

Day 1 of our 2021 energy conference featured an inaugural appearance from Saudi
Aramco and 5 separate panel discussions focused on the macro outlook: a preliminary
summary puts OPEC+ in the driver’s seat for the future oil outlook, anchored by our
geopolitical panel where Mr. Denis Derushkin, from the Russian Center of Energy
Research opined that given limited non-OPEC investment, OPEC+ now dominates
available spare capacity and thinks about $60 - $80 as a trading range for Brent! In the
US, the risk of outsized growth from private operators is seen overstated by Public Co.
CEO’s – but their impact on inflation is real! Carbon Capture stands to be a
differentiated advantage for those with a first mover advantage; but a view on a
diminishing role for oil & gas in any energy transition needs a reality check.
By all
accounts COP 26 may have fallen short on firm, enforceable commitments to reduce oil
& gas consumption; but the world is using a lot more energy. New energy sources such
as wind and solar are more additive to higher overall energy supply as opposed to
displacing oil & gas – the contention of our final speaker, Mark Mills from the Manhattan
Institute.
That’s not to say that an energy transition is impossible, but recognizing the
massive scale of inputs including energy intensive raw materials needs to be a part of
the discussion.
Dan Steffens
Energy Prospectus Group
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Re: Note from BofA Equity Research - Nov 18

Postby Fraser921 » Fri Nov 19, 2021 9:04 am

Good day for bargain hunting imho
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