Daily Update: March 16, 2021

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The outlook for a recovery across Latin America is improving, but the direction of the rebound could determine economies’ eventual energy dependence.

Activity in Argentina, Brazil, Chile, Colombia, Mexico, and Peru was stronger than anticipated in the fourth quarter of 2020, spurred by continued resilience across manufacturing and commodities industries, and S&P Global Ratings expects a pickup in growth in the second quarter despite a slower start to this year. In addition, S&P Global Platts Analytics projects global oil demand will reach 102.6 million barrels per day by the fourth quarter—marking the highest level since the same period in 2019, when demand averaged 103.9 million barrels per day. But the global oil market is still beleaguered, political pressures and geopolitical tensions are simmering, and the U.S. and Europe are outpacing Latin America’s energy transition. The combination of macroeconomic factors creates potential to disrupt Latin America’s energy mix over the long-term.

Mexico’s economy, which has suffered from high amounts of coronavirus cases and inadequate medical infrastructure to combat the spread, depends heavily on petroleum. Although the country has seen demand for gasoline and diesel slowly increase, a full recovery will likely surface only when full economic activity returns, Carlos Garcia, the director-general of the independent oil refiner Valero, told S&P Global Platts.

State-owned oil company Pemex is expected today to share details of its "big discovery" of a large area of oil fields in the state of Tabasco during a national event to commemorate the anniversary of Mexico’s 1938 expropriation of foreign oil assets. The discovery would be a boon for Pemex, which has faced deteriorating crude production since 2004. President Andres Manuel Lopez Obrador has worked to revitalize Pemex to help spur economic development.

But some industry experts don’t expect the latest discovery to yield meaningful results. "At the end of the day, Mexico has no shortage of reserves, it is the environment for investments in the country that is deteriorating," Marco Cota, the CEO of the Mexico-based consultancy Talanza Energy, told S&P Global Platts. He said that the discovery can be considered successful if it becomes commercially viable, but that Pemex has a history of identifying new areas and not being able to develop them.

Brazil has also experienced pressure during the pandemic on its petroleum markets. The resurgence of COVID-19 deaths has depressed mobility across the country and prompted the state of Sao Paulo, Brazil's biggest fuel consumer, to announce a new lockdown this month. Already this year, state-owned oil company Petrobras has faced a series of stressful situations: Brazilian President Jair Bolsonaro ousted its CEO; the company repeatedly raised fuel prices amid pressure from independent importers; and it is selling off eight of its 13 refineries.

Across Latin America, dependence on fossil fuels hasn’t budged even as the global transition toward renewable energy intensifies. Some economies, like Colombia, are beginning to expand their emissions-reduction efforts in order to compete for international investment, but the region largely lags behind others.

“In this moment, when the energy transition is being accelerated by large oil firms and governments amid political pressure, Europe and now the United States are taking the lead through carbon neutralization measures. I don’t see policies as aggressive in this region,” Decio Oddone, the CEO of Brazilian oil and gas producer Enauta, told Reuters during last week’s annual CERAWeek conference, organized by IHS Markit.

Today is Tuesday, March 16, 2021, and here’s today’s essential intelligence.

Market Volatility

Steel Spreads Analysis: U.S.-China HRC Price Difference Hits Historic High

The price difference between U.S. Midwest hot-rolled coil and China domestic HRC has reached its highest level since S&P Global Platts started assessing these prices in 2008. The shortage of available spot material in the US saw the HRC price jump $32.50/st day on day to reach $1,299/st March 12, up almost 200% since last August.

—Read the full article from S&P Global Platts

Banking Sector Under Pressure

Sabadell Faces Further Cost-Cutting Pain as Bank Prepares For Fresh Leadership

The Spanish lender Banco de Sabadell has undertaken a sweeping cost-cutting program, entered and then walked away from merger talks with domestic rival Banco Bilbao Vizcaya Argentaria SA, and announced a new CEO and CFO, all in less than five months.

—Read the full article from S&P Global Market Intelligence

GCC Banking Sector: A Long Climb To Recovery

S&P Global Ratings expects GDP growth in the Gulf Cooperation Council (GCC) countries to slowly recover from last year’s sharp recession triggered by the COVID-19 pandemic and low oil prices. However, S&P Global Ratings sees long-lasting adverse effects from the 2020 shock on GCC economies and banking sectors.

—Read the full report from S&P Global Ratings

Technology & Innovation

U.S. Tech Credit Had A Year Of Downs Then Ups In 2020; Favorable Trends Set Up Solid 2021

The macroeconomic recession turned out to be less severe for U.S. tech than S&P Global Ratings originally feared: The sector started recovery in second-half 2020, leading to a positive trend in rating actions, including a reversal of several of the negative actions from the first half.

—Read the full report from S&P Global Ratings

Amazon's Driver Cameras Protected Under State Law, but Privacy Concerns Remain

Amazon.com Inc.'s plan to deploy surveillance cameras inside its delivery trucks has raised privacy concerns among some U.S. lawmakers, but legal experts say it falls within the bounds of state employment laws that allow employers to monitor workers on the job.

—Read the full article from S&P Global Market Intelligence

Warner Media CEO Maps Global Path To 150 Million Subs For HBO/HBO Max

Warner Media LLC substantially boosted its global subscriber targets for HBO Max/HBO, but many variables, particularly outside the U.S., will impact its ability to reach those upgraded goals.

—Read the full article from S&P Global Market Intelligence

2021 Outlook: Challenges, Opportunities Facing U.S. TV, Radio Stations

The U.S. broadcast station industry, with record 2020 political revenue behind it, has a transitional year ahead. Opportunities for broadcasters to boost revenues and relevance include Next Gen TV, new diginets, and broadcast over-the-top launches for TV and digital streaming. Radio station podcasting initiatives could spark new revenue streams. However, major challenges could compress the sector's sales and margins. National and local spot advertising budgets may move further away from legacy media to digital alternatives. Distribution fee revenue growth from traditional multichannel retrans fees could also slow as more virtual, subscription video-on-demand and over-the-top options emerge.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Asia Too Alluring for Middle East Oil Producers to Drop the Ball on Hydrogen

The fast-changing energy need of Asian oil importers is prompting Middle Eastern oil producers to accelerate their hydrogen efforts to ensure they can supply both oil and hydrogen to their biggest customers, a strategic push to prevent losing out a part of their future business to potential exporters like Australia.

—Read the full article from S&P Global Platts

Renewables Insurer Unfazed by Texas Freeze but Extreme Weather Risks Set To Rise

While utilities brace for a hit in the tens or even hundreds of millions of dollars from February's brutal cold spell and subsequent disruption in Texas, one renewable energy insurer with nearly 10 GW of wind assets under coverage in the state is not expecting a surge in claims.

—Read the full article from S&P Global Market Intelligence

Texas Crisis Fuels Investor Interest In Grid Management Startups, Rooftop Solar

Two weeks after a winter storm nearly took down Texas' power grid in February, a software company called Uplight Inc. that promises to make the U.S. energy system more resilient vaulted to unicorn status with a new round of funding valuing the firm at $1.5 billion.

—Read the full article from S&P Global Market Intelligence

International Seaways Orders Three Dual-Fuel Vlccs to Achieve ESG Goals

Despite shipowner reluctance to engage in newbuilds due to unclear future fuel and propulsion technology and environmental regulations, tanker owner International Seaways in partnership with Shell ordered three dual-fuel LNG VLCCs for delivery in 2023, president and CEO Lois Zabrocky said on March 12.

—Read the full article from S&P Global Platts

Top SEC Official Signals ESG Disclosures Are Coming

U.S. Securities and Exchange Commission acting Chair Allison Herren Lee is making the case for the regulator to develop a mandatory environmental, social and governance reporting framework for issuers to follow.

—Read the full article from S&P Global Market Intelligence

The Future of Energy & Commodities

Watch: Market Movers Europe, Mar 15-19: Green Policies, Petrochemical Feedstock Prices In The Spotlight

In this week's highlights: Oil markets focus on Europe's slow pandemic recovery, EU environment ministers debate recovery funds, plastics recyclers fear feedstock shortages, and the styrene market eyes imports amid a price surge.

—Watch and share this Market Movers video from S&P Global Platts

V-Shaped Recovery In 2021 to Support Steel Demand: Celsa

A strong V-shaped recovery is expected in the global economy in 2021, following the shrinkage seen in 2020 due to the COVID-19 pandemic, which is expected to support steel demand and prices, Alexander Gordienko, international sales manager of Celsa Group, said at the Irepas conference March 15.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.