Back Peddling and Mis-Selling. The Energy Report 02/12/2024

OPEC says that other agencies are backpedaling on predicting future oil demand while the Financial Times (FT) reports that, “Total Energies Patrick Pouyanné has warned that governments are” mis-selling” the energy transition if they fail to acknowledge the shift to a less-polluting system will lead to higher energy costs.

The green energy movement has been pushed with large inaccuracies about the real costs of the transition and predictions about supply and demand that fit a narrative but do not fit reality. Patrick Pouyanné, as reported by the FT said that, “Policymakers and campaigners were naive, he argued, to think it would be possible to shrink oil and gas production before sufficient renewable energy is available to take its place, given continued growth in global energy demand. “The pace of transition will not be the same everywhere,” he said. “We cannot ask African countries just to avoid developing the resources because we have developed their resources for our own comfort for 20 years.”

OPEC also has been warning about the energy transition that is being built on false assumptions that seem to justify green energy pointing out that politicians and agencies like the International Energy Agency have been selling us a fake green energy bill of goods. Amena Bakr pointed out that the Saudi energy minister Abdulaziz bin Salman Al Saud says, “he’s not a fortune teller when it comes to predicting future demand, but noted that OPEC’s numbers have been consistently accurate while others keep “back peddling”. Bakr said that the OPEC demand growth number this year is 2.2 million bpd and it’s expected to pick up during the 2nd half of the year. “We at the ministry look at all the numbers,” said Prince Abdulaziz and said that they are ready to tweak supply up or down as required by the market.

Crude oil prices this morning are down a bit but the trend for oil has turned decisively higher. Product tightness is going to keep the diesel market and the crack spread strong. Gasoline demand is expected to pick up in the coming weeks. The market is heading into refinery maintenance season and that’s going to create some strange movement and spreads but ultimately the demand globally for oil will continue to be strong.

The investment in the value of many energy stocks is creating movement on the merger and acquisition front. The Wall Street Journal reports, “Two Permian rivals, Diamondback Energy and Endeavor

Energy Resources, are finalizing a merger that would create an oil-and-gas behemoth worth more than $50 billion. Diamondback could announce a deal with the closely held Endeavor as soon as Monday, according to people familiar with the matter, assuming the talks don’t hit a last-minute snag. Endeavor, founded by wildcatter Autry Stephens, has long been one of the most  prized businesses in the consolidating Permian Basin, the largest U.S. oil patch that straddles West Texas and New Mexico. In striking a deal for Endeavor, Diamondback fended off competition from other  parties including ConocoPhillips, some said.  The stock-and-cash deal would value Endeavor at around $25 billion, and Diamondback shareholders would own the majority of the combined company after it closes, they said. Diamondback, based in Midland, Texas, has a market value of around $27 billion.

Natural gas futures hit a 3 1/2-year low, the market is seeking signs of winter. EBW Analytics wrote that the forward curve continued to erode lower as the market increasingly internalized the extent of extremely mild near-term weather. Another pair of sub-100 Bcf injections are on the way. On a longer-term basis, the market remains oversupplied by 1.0 Bcf/d. Further, bullish hopes for a cold end to February and early March appear largely dashed in recent days. Although a spurt of chillier temperatures may occur in the 6-10 day window, any cooling appears to be fleeting—suggesting another leg lower for natural gas.

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