Bullish Sentiment is Building in Oil Markets - OIR 271222

We will take a quick look at some of the critical figures and data in the energy markets.

Chart of the Week

- Daily natural gas output in the United States has been trending around 90 billion cubic feet this week, some 10% below normal as the extreme cold swept across two-thirds of the country.

- The impact of the freeze was felt most markedly in North Dakota where 300-350,000 b/d of Bakken production remains idled, approximately a third of pre-storm readings.

- Day-ahead prices in Western Texas jumped to $9/mmBtu before the weekend, although with the south expected to warm up significantly on Tuesday spot prices are almost certain to decline from here onwards.

- The pain is still felt in New England where the cold will be slower to subside, day-ahead prices at the Algonquin pricing hub are still above $20/mmBtu, after trading late last week at the level of Asian LNG.

Market Movers
- US LNG producer Venture Global signed a 20-year deal with Japan’s Inpex (TYO:1605) to supply it with 1 million tons LNG per year, to be sourced from the upcoming Calcasieu Pass 2 facility.

- UK energy firm BP (NYSE:BP) signed a 20-year extension to its production sharing contract for three fields in West Papua, Indonesia, feeding the Tangguh LNG plant, remaining operator of the fields until 2055.

- ENI’s Norway-focused offshoot Vaar Energi (OSL:VAR) made a 57-132 MMboe gas discovery near the Goliat field in the Arctic Barents Sea, the largest discovery on the Norwegian Continental Shelf this year.

Tuesday, December 27, 2022
China is gradually winding down its coronavirus-related restrictions, with the Asian country’s National Health Commission announcing it would end its quarantine requirements in January, providing yet another boost for oil demand across the country. Russia’s claim that it could cut production by 5-7% in 2023 and a winter storm devastating the U.S. both added to the bullish mood that pushed WTI past the $80 per barrel mark again.

WTI Open Interest the Lowest in 16 Years. According to CFTC numbers, open interest held in WTI NYMEX futures and options fell to its lowest since August 2006 over the week ended 20 December, coming in at a mere 1.82 million contracts, down 25% year-on-year.

USGC Refiners Adapt to Freeze. Most refiners in the US Gulf Coast have increased flaring over the past days as operations were disrupted amid equipment failures driven by freezing temperatures, despite not seeing any power outages that the eastern coast has seen.

Winter Storms Trigger Massive US Outages. Over 700,000 homes and businesses experienced power outages in the US this weekend as winter storms battered the eastern half of the country, with the greatest number of them taking place in the New England region.

Albertan Crude Can Flow Again. The US pipeline regulator PHMSA has approved TC Energy’s (NYSE:TRP) plan to restart the idled section of the Keystone pipeline from Steele City to Cushing, Oklahoma, without specifying the exact date and adding that works would still take “several days”.

Turkey Puts Cyprus Back on the Agenda. Less than a week passed since Cyprus hit another offshore gas discovery led by ENI (BIT:ENI), the Turkish government accused the island nation of increasing tension in the Eastern Mediterranean, saying it would not allow exploration without its consent.

US Faces Alaska Lawsuit for Neglecting Beluga Rights. Cook Inletkeeper, an environmentalist group, is preparing to sue the US government for not considering adequately the risks to endangered species such as the beluga whale in its upcoming Lease Sale 258, offering acreage in Alaska’s Cook Inlet.

Nigeria Offers 7 New Offshore Oil Blocks. The first major upstream licensing round to take place in cash-strapped Nigeria over the past 15 years, will see the African country’s upstream regulator NUPRC offering seven offshore blocks in the Benin basin in water depths of 1,150m to 3,100m.

Japanese Insurers Seek Reinsurance to Resume Russian Coverage. Key Japanese insurance companies are in talks with new reinsurance companies after their previous providers walked away, as marine war insurance is required to lift Japan’s equity LNG production from Sakhalin.

Russia says it's Ready to Restart Idled Pipeline. Russian deputy PM Alexander Novak said Moscow is ready to resume gas pipeline deliveries to Europe via the Yamal-Europe pipeline that was halted in December 2021, however for it to happen it would need to first lift sanctions against the operator of the pipe’s Polish section.

Turkey Finds Even More Gas in the Black Sea. Turkish President Tayyip Erdogan announced the discovery of a new gas field in the Turkish part of the Black Sea, with the Caycuma field adding 58 bcm of reserves on top of the massive 650 bcm Sakarya discovery.

Global Zinc Stocks Hit Rock Bottom. As zinc stocks held in London Metal Exchange-registered warehouses fell to the lowest this century, a bare 36,500 tonnes, with Shanghai inventories equally depleted, the galvanizing metal is experiencing quite the supply squeeze despite plentiful smelter closures.

Russian Bank Takes Glencore to Court. Russia’s largest bank Sberbank (MCX:SBER) filed a lawsuit against international trading firm Glencore (LON:GLEN) for not paying some $120 million over two oil consignments delivered in March 2022, with the latter citing restrictions caused by sanctions.

Iron Ore Jumps on China Policy Support Pledge. After the People’s Bank of China called for strengthening the country’s real estate policy to kickstart growth again, iron ore prices rose to $119 per metric ton on the Dalian exchange, brushing aside soaring coronavirus cases.