Crude prices fell on Friday morning, erasing some gains as traders remain cautious to go long on crude again.
Friday, August 12th, 2022
This week has been quite tumultuous in the oil markets, starting off with a pervasive feeling of demand gloom yet recording a weekly gain in the end, greatly aided by flat US inflation data and pipeline supply disruptions in Europe. One of the most interesting developments has been the increasingly diverging worldview of OPEC and the IEA. OPEC has been lowering its demand forecasts for 2022, this week by another 260,000 b/d on the back of recessionary pressures, whilst the International Energy Agency has increased its outlook, effectively arguing that elevated gas prices will be incentivizing higher crude utilization.
IEA Raises Oil Demand on Gas Switching. In stark contrast to OPEC, the International Energy Agency raised its outlook for 2022 crude demand by 380,000 b/d to 2.1 million b/d, arguing gas-to-oil switching will provide a boost to the recession-wary oil markets.
Leak Forces Shutdown of 7 USGC Platforms. An onshore pipeline leak, causing two barrels of oil to spill onto the ground, has forced US Gulf producers Shell (LON:SHEL), Chevron (NYSE:CVX) and Equinor (NYSE:EQNR) to shut some 600,000 b/d of output on Thursday until repairs are concluded on Friday.
Germany Rejects Nord Stream 2 Revival. The German government rejected the idea of commissioning the 55 bcm per year capacity Nord Stream 2 pipeline to ramp up gas flows, despite regulators warning of a 20% consumption cut over the winter months, with Berlin reiterating its backing of sanctions.
Chinese Majors Start Delisting from NYSE. Five Chinese state-owned companies including oil majors Sinopec (SHA:600028) and PetroChina (SHA:601857) said they would delist from the New York Stock Exchange as the US-China diplomatic spat keeps rippling through business interests.
Europe’s Inland Navigation Grinds to a Halt. Shipping operations along the River Rhine are set to be halted completely this weekend as a sustained period of dry weather brought water levels at the key measuring point of Kalb to 47cm, within touching distance of the non-navigable threshold of 40cm.
Egypt Wants to Ration Electricity to Boost LNG Exports. The Egyptian government has approved a plan to ration electricity by 15% across the country – with shops limiting their use of strong lights and air conditioning being kept at no cooler than 25° C – to maximize LNG exports.
China Hails Another Supergiant Discovery. China’s state-controlled oil company Sinopec (SHA:600028) has discovered a supergiant oil field in the Tarim Basin, reportedly containing 1.7 billion barrels of oil, however due to it being tight and ultra-deep recovery will be significantly hindered.
US Refiners Continue to Take SPR Volumes. A total of 9 companies will buy 20 million barrels of US SPR crude released in the latest sale that saw September-October deliveries allocated mostly to Gulf-focused refiners, such as Chevron (NYSE:CVX), Marathon (NYSE:MRO) and Shell (LON:SHEL).
Nigeria’s Spare Capacity Sees Major Cut. The International Energy Agency has cut Nigeria’s sustainable oil production levels by some 200,000 b/d to 1.3 million b/d, a reflection of the African country’s gradually declining production rates and lack of progress on sabotage and oil theft.
Mexico Sees Fine Line Between Prosecution and Cooperation. Merely a year after Mexico broke all ties with global energy trader Vitol amidst an ongoing investigation into widespread bribery, the country’s oil company PEMEX admitted that is seeking to resume doing business with the company on oil products deliveries.
Slower Renewable Roll-Out Keeps Coal Plants Alive. Delays in wind power supply chains and soaring import tariffs on solar panels have led to many coal-powered plants in Milwaukee, Indiana, Wisconsin and New Mexico seeing their closure deadline extended into 2025-2026 recently.
Freeport LNG Retracts Force Majeure. The largest exporter of US liquefied gas, Freeport LNG, has retracted the force majeure it declared after an explosion in June, arguing that the blast was a result of human error, a development that could cost its term buyers billions of dollars as they can no longer exit their own agreements to deliver the gas to end users.
Argentina Wants to Sweeten Terms for Upstream Investors. Argentina’s economy minister Sergio Massa said the country is planning to provide upstream investors tax and customs benefits, most notably allowing them to access foreign currency if they increase production.
EU Ban on Russian Coal Kicks Off. This Wednesday marked the beginning of the European Union’s sanctions on Russian coal following a four-month wind-down period and unsurprisingly API2 front-month futures gained almost $50/mt on the week, currently trading around $340/mt.