Brent oil tops $50 in Biden bounce

Saving the planet will not be cheap, say oil watchers

Brent Crude oil eclipsed $50 a barrel for the first time since March in what is signaling a new day in global oil markets. West Texas Intermediate is not far behind closing in on the $47 level.

The move not only signals better demand growth in an improving economy, but it also reflects more coming regulation from President-elect Biden. 

More regulations on energy, perhaps the harshest environmental regulations in history, will lead to higher prices, say oil bettors.

TickerSecurityLastChangeChange %
BNOUNITED STS BRENT OIL FD LP UNIT ETV17.50+0.60+3.55%

Oil markets are coming off obliteration as demand stopped due to the coronavirus. The fallout caused oil to fall below zero. Yet those days are a distant memory, and now it seems that with a potential approval by the FDA of a coronavirus vaccine, the risk to oil prices now is on the upside. We see demand in China start to eclipses pre-corvid levels. Now with a vaccine on the horizon, U.S. oil demand will not be far behind.

A CORONAVIRUS VACCINE AND OIL PRICES

TickerSecurityLastChangeChange %
USOUNITED STATES OIL FUND L.P.44.44+1.37+3.18%

The fallout from the crash in oil prices caused massive capital spending to drop in energy. ExxonMobil, Chevron and independents like Occidental and Marathon, have sliced and diced over $100 billion from exploration and production companies’ budgets in 2020.

BIDEN'S FRACKING PLAN IS A JOB KILLER: ENERGY SEC.

TickerSecurityLastChangeChange %
XOMEXXON MOBIL CORP.60.85+2.18+3.72%
CVXCHEVRON CORP.108.84+4.39+4.20%
MROMARATHON OIL12.98+0.62+5.02%
OXYOCCIDENTAL PETROLEUM CORP.31.18+1.31+4.39%

Now the oil market looks like those cuts have gone too far. Forced into action, oil producers moved to lay off workers and cut costs to survive and had to react like the COVID-19 demand drop was going to last forever. To be fair, they did not have a choice as it was cut or die, and even some that made cuts, especially in the shale space, did not survive. 

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This will cause many oil companies to wait before they ramp up spending. We may need to see oil well above $50 before they reverse spending plans.

Make no mistake about this. You will soon be seeing that reality when you start to pull up to the pump or pay your electricity and getting oil bills. Saving the planet will not be cheap and the incoming administration will expect you to pay for it.

Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com.

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