The Phil Flynn Energy Report 

Oil Choppy Ahead Of OPEC+

The crude oil world is swinging as the congestion trade continues. The market awaits the OPEC+ decision that, at this point, looks like a foregone conclusion as it celebrates the reopening of the Suez Canal. 

Reports that Russia is favoring an extension of the OPEC+ cut of 8 million barrels per day (bpd) seemed to get the market juiced up, giving it a close above recent congestion. Now oil’s retreating, as the market is looking at the reopening of the Suez Canal as some type of watershed bearish event. The reality is that the market’s in a battle to establish a bottom as we head into the high-demand season or it'll give into the pessimism surrounding permanent demand destruction from the Covid-19 pandemic.

There’s also news that, despite reports that Russia is on board with a rollover of production cuts, Russian Deputy PM Novak said that he has been in contact with his OPEC+ colleagues and, so far, Russian President Vladimir Putin has had no discussion with Saudi Arabia. 

There are also concerns about Iran's sale of oil to China. Iran and China are openly challenging the Biden administration to see if they’ll do something to enforce sanctions. It appears Biden will stand down. Yet in February, OPEC compliance was 124% and non-OPEC was at 94%, according to JTC. Now the Saudis are saying they’ll extend cuts until June according to Amena Bakr, which should at some point send oil prices higher. We like buying this break for a long-term move. 

Biden's answer to OPEC: Well, you may win the battle, but we’ll win the war with the wind. The Biden administration announced massive wind spending plans that they say will create good-paying union jobs to replace the jobs they’re already losing in the energy space. In their own words:

“The Interior Department’s Bureau of Ocean Energy Management (BOEM) is announcing a new priority Wind Energy Area in the New York Bight—an area of shallow waters between Long Island and the New Jersey coast—which a recent study from Wood Mackenzie shows can support up to 25,000 development and construction jobs from 2022 to 2030, as well as an additional 7,000 jobs in communities supported by this development. The study indicates the New York Bight lease area also has the potential to support up to 4,000 operations and maintenance jobs annually, and approximately 2,000 community jobs, in the years following. This new Wind Energy Area is adjacent to the greater metropolitan Tri-State area— the largest metropolitan population center in the United States that is home to more than 20 million people and their energy needs. The next step is for BOEM to publish a Proposed Sale Notice, followed by a formal public comment period and a lease sale in late 2021 or early 2022.

Establishing a Target of Employing Tens of Thousands of Workers to Deploy 30 Gigawatts (30,000 megawatts) of Offshore Wind by 2030. The Departments of Interior (DOI), Energy (DOE), and Commerce (DOC) are announcing a shared goal to deploy 30 gigawatts (GW) of offshore wind in the United States by 2030, while protecting biodiversity and promoting ocean co-use. Meeting this target will trigger more than $12 billion per year in capital investment in projects on both U.S. coasts, create tens of thousands of good-paying, union jobs, with more than 44,000 workers employed in offshore wind by 2030 and nearly 33,000 additional jobs in communities supported by offshore wind activity. It will also generate enough power to meet the demand of more than 10 million American homes for a year, and avoid 78 million metric tons of CO2 emissions.

DOI action to unlock deployment potential: To position the domestic offshore wind industry to meet the 2030 target, DOI’s Bureau of Ocean Energy Management (BOEM) plans to advance new lease sales and complete review of at least 16 Construction and Operations Plans (COPs) by 2025, representing more than 19 GW of new clean energy for our nation.

Massive supply chain benefits of deploying offshore wind energy at scale: Meeting the 2030 target will catalyze significant supply chain benefits, including new port upgrade investments totaling more than $500 million; one to two new U.S. factories for each major windfarm component including wind turbine nacelles, blades, towers, foundations, and subsea cables; additional cumulative demand of more than 7 million tons of steel—equivalent to 4 years of output for a typical U.S. steel mill; and the construction of 4 to 6 specialized turbine installation vessels in U.S. shipyards, each representing an investment between $250 and $500 million.

2050 implications of meeting the 2030 goal: Achieving this target also will unlock a pathway to 110 GW by 2050, generating 77,000 offshore wind jobs and more than 57,000 additional jobs in communities supported by offshore wind activity – all while creating further economic opportunity and ensuring future generations have access to clean air and abundant renewable power.

Advancing critical permitting milestones for the Ocean Wind Offshore Wind Project. BOEM is announcing a Notice of Intent (NOI) to prepare an Environmental Impact Statement (EIS) for Ocean Wind, putting it in line to become America’s third commercial scale offshore wind project. Ocean Wind has proposed an offshore wind project with a total capacity of 1,100 megawatts (MW) — enough to power 500,000 homes across New Jersey. BOEM previously announced environmental reviews for Vineyard Wind (MA) and South Fork (RI), and anticipates initiating the environmental reviews for up to ten additional projects later this year.

Investing in Port Infrastructure to Support Offshore Wind. The U.S. Department of Transportation’s (DOT) Maritime Administration today is announcing a Notice of Funding Opportunity for port authorities and other applicants to apply for $230 million for port and intermodal infrastructure-related projects through the Port Infrastructure Development Program. Port Infrastructure Development Grants support projects that strengthen and modernize port infrastructure, and can support shore-side wind energy projects, such as storage areas, laydown areas, and docking of wind energy vessels to load and move items to offshore wind farms. In addition to supporting our nation’s long-term economic vitality, DOT’s review process will consider how proposed projects can most effectively address climate change and environmental justice imperatives.

From this point forward, the Biden administration owns U.S. wind power. Its success or failure will be directly held to their account; let's wish them well.

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