Power Up: Oil buying on the up as bulls take the reins

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Get ready to pay more at the servo if the bullish sentiment around oil prices that has led hedge funds to boost oil buying for the fourth week running is any indication.

Hedge funds and other money managers purchased the equivalent of 40 million barrels (MMbbl) in the six most important petroleum futures in the week to May 4, taking the total purchased over the last four weeks up to 102MMbbl.

Reuters noted the rate of hedge fund oil buying is accelerating and widening to include both crude and refined fuels, which is consistent with growing confidence about an economic recovery and cyclical upturn in petroleum consumption.

This increase in oil buying is due at least in part to the massive surge in COVID-19 infections in India and Iran increasing production to become OPEC’s fourth-largest producer being offset by continued expectations that oil consumption will increase later in the year and a flattening in the number of rigs drilling for shale oil in the US.

Meanwhile, Macquarie Group has said that it will stop financing coal projects by 2024 though oil and gas developments would still pass muster.

Chief executive officer Shemara Wikramanayake said recently that the company will fully divest any remaining interest in the coal industry within three years, joining major local banks such as Australia and New Zealand Banking Group, Commonwealth Bank of Australia and Westpac.

Renewable energy continues to shine

The International Energy Agency has flagged that India could double the already ambitious deployment of 450 gigawatts (GW) of renewable energy by 2030 to 900GW by 2040.

The Institute for Energy Economics and Financial Analysis believes that while India’s power system will have to evolve and modernise to respond to grid stability challenges brought about by the increasing share of renewables, an accelerated deployment of utility-scale battery storage as seen in other markets could help with this challenge.

Australia is certainly no stranger to battery storage with several utility-scale projects being developed across the country.

However, it’s not all positive with Federal Minister for Resources, Water and Northern Australia Keith Pitt blocking public funding of a windfarm and battery project in northern
Queensland.

In a letter to the Northern Australian Infrastructure Facility, which had already approved up to $280m in funding for the project, Pitt said the renewable energy project would not provide dispatchable generation into the grid and that he was not convinced that it would lower prices.

Project developer Neoen Australia told the Courier Mail that while it was disappointed about the decision, it remained committed to the project, which already has a power purchase agreement in place with Queensland government agency CleanCo.

Here’s how a basket of ASX stocks with exposure to oil, gas, uranium and coal are performing>>>

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Small cap energy plays

Lion Energy (ASX:LIO) +121%

The company released its green hydrogen strategy, which includes the formation of a Hydrogen Advisory Board and the appointment of experts to systematically analyse optimal electrolyser locations in Australia.

It will also look to secure land rights, determine the best value and fit for purpose technology and appoint a feasibility study consultant with appropriate experience.

Additionally, Lion will establish joint ventures with global players to build large scale solar/wind farms and relevant energy storage facilities to produce green hydrogen.

Leigh Creek Energy (ASX:LCK) +55%

Shares in the company climbed after it reached a binding heads of agreement with South Korea’s DL E&C Co., Ltd to exclusively negotiate terms of a proposed agreement for the feasibility study, front-end engineering design work as well as engineering, procurement, construction and commissioning contract for its urea manufacturing facility.

The Leigh Creek Energy Project in South Australia is intended to developing low-cost nitrogen-based fertiliser for local and export agriculture markets.

Alligator Energy (ASX:AGE) +28%

With a strategic agreement in place with global commodities trader, Traxys, Alligator has now taken a key step towards becoming a uranium producer.

Under the deal, Traxys will provide a full scope of work for Alligator’s uranium project, which includes marketing services on future uranium production, long term off-take contracting, and project development financing.

Traxys will also assist Alligator in project acquisition opportunities.

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