On Friday the Oil Futures ended higher for the fourth month in a row. “Oil futures [markets] remain hyper-focused on draws to U.S. crude and product inventories and are likely positioned on the expectation that draws will continue through the coming month, as strengthening refining margins should entice stronger crude runs in the final month of U.S. driving season,” said Troy Vincent, market analyst at DTN.
WTI gained 33 cents to settle at $73.95 which is the best performing front-month finish since July 13.
Earnings for the Big Oil Companies are in a profits frenzy, and investors are thrilled about the returns and stock buy-back programs announced. France’s TotalEnergies BP, and Shell all announced stock buy-back programs.
Reuters posted on Friday:
“We wanted to be really clear and signal to the market the confidence that we have in our prospects and our cash flows,” Chief Executive Ben van Beurden said on Thursday after Shell launched a $2 billion buyback program and boosted its dividend for a second consecutive quarter, a year after cutting it for the first time since the 1940s.
Energy companies have come under heavy pressure from climate campaigners, governments, and shareholders to speed up the shift from fossil fuels to cleaner sources.
While some investors welcome the change as they perceive carbon-intensive, fossil fuel energy as unsustainable, others are worried about the implications for profit margins of new business models.
BP, as well as Shell, TotalEnergies, and Equinor, plans to sharply reduce greenhouse gas emissions in the coming decades while reducing reliance on fossil fuels.
Oil prices are expected to remain elevated in the coming years as supplies stay tight because of lower investments.
High fossil fuel prices are double-edged. They can tempt operators to maximize conventional output, but they also produce the income needed to invest in lower-carbon sources.
Shell’s free cash flow – money left after deducting spending and shareholder payouts – soared in the second quarter to $9.7 billion, its highest in a year, while debt also declined.
THE BOTTOM LINE
WTI will continue to see a steady increase in August through the end of the summer driving gas demand.
We may see a dip in September in inventory draws if the Delta variant gains traction and more lockdowns occur.
The Big Oil companies are using the high prices to fuel their renewable energy migration, while not spending on the required E&P reserve replacement.
The rig counts are at 439 which is an increase of 224 over the same time last year. The oil field service companies are looking for crews and hiring.
The Middle East oil producers, Big Oil, and the United States Shale producers are all enjoying the profits and do not want to see the markets flooded and prices fall.
Greed and hypocrisy from the Big Oil companies will overcome any large downward oil price. That helps the U.S. independent compete and remain profitable.
I would like to hear from you about your thoughts on the current market. Please reach out to me at the King Operating offices for a discussion on market information and what our research team sees on the investment horizon.
Look forward to talking with you soon.
Jay R. Young, CEO, King Operating
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Stu Turley, CEO, and President, Sandstone Group
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