Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
In many cases, future oil shortages are born in a period of oversupply. The recent crash in oil prices due to Covid 19 demand destruction, has set in motion the largest energy investment pullback in energy history. This is being confirmed in a new report from the International Energy Agency(IEA). The IEA says the Covid-19 pandemic has set in motion the most significant drop in global energy investment in history, with spending expected to plunge in every significant sector this year – from fossil fuels to renewables and efficiency.
The IEA says that the unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions. The IEA says that at the start of 2020, global energy investment was on track for growth of around 2%, which would have been the largest annual rise in spending in six years. But after the Covid-19 crisis brought large swathes of the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20%, or almost $400 billion, compared with last year. “The historic plunge in global energy investment is deeply troubling for many reasons,” said Dr. Fatih Birol, the IEA’s Executive Director. “It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.” Investment in shale is anticipated to fall by 50% in 2020, and that is going to reduce U.S. oil and gas output.
So millions of barrels of future oil supply will not be there as the industry recovers from its trillion-dollar Covid 19 hit. For oil traders, they know that as demand comes back, supply will tighten, and it looks like the market will be in balance in just a few months justifying the oil markets’ historic price snapback.
Stocks are also soaring, and that should support oil. Talk of E.U. stimulus is offsetting fear about rising tensions with China. MarketWatch reported, “President Donald Trump is displeased with China over its efforts to crack down on Hong Kong, White House press secretary Kayleigh McEnany said Tuesday, adding he believes “it’s hard to see how Hong Kong can remain a financial hub if China takes over.” U.S. officials have warned that China’s efforts to impose new national-security laws in Hong Kong could jeopardize the city’s special trade status. McEnany declined to go into further detail during the regular White House press briefing.”
E.U. leaders are also sending a message to China that the crackdown on Hong Kong is not within international norms and threatens the global order. How will these rising tensions impact trade and Chinese oil demand. China’s rising oil demand has been one of the reasons for oil’s big price comeback.
We get the American Petroleum Institute Report tonight, and there is talk that we could see another crude oil draw. Oil is finding places to go, and private services are reporting that supply in Cushing, Oklahoma will fall again, easing fears of oversupply.
China is planning to have its sovereign digital currency ready in time for the 2022 Winter Olympics. Bloomberg News reports that the People’s Bank of China Gov. Yi Gang released a statement on the digital currency but did not specify a firm timetable for the release.
Maybe they should look at Cloud Coin based on Rada Technology! Full disclosure, here, I am an investor in Cloud Coin and Raida and advisor but I am very excited that the company received a patent for its technology that could make blockchain obsolete. It is only the second digital currency to ever receive a patent according to the company and they are very excited about the future. Unlike blockchain that can slowdown when clearing many transactions, Raida Technology, instead of computers, clears trades in the cloud opening up the door for instantaneous transactions. Sean Worthington, the inventor of the technology, says that this patented technology can solve the some of the problems with blockchain. He says that, “these are foundational technologies and not just decorative technologies. These technologies make huge changes to our civilization possible.” It will be fun to watch this and I am very happy for Sean and the whole Raida Tech team. Congratulations.
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