Oil markets are once again bullish as supply shortages mount and global oil demand growth continues unabated.
Friday, July 1, 2022
As uncertainty mounts over OPEC+ supply capacity and oil demand rages despite expectations of demand destruction, bullish sentiment is building in oil markets. Now, to add to this bullish sentiment, another form of supply disruption is popping up around the world: strikes. Operations at the French Fos refinery were halted by strikes and Norwegian offshore production was also hit hard. The oil market appears to be under siege from all sides, from fundamental tensions to underinvestment, disruptions related to the war in Ukraine and now strikes.
The OPEC+ summit did not impress. OPEC+ agreed to maintain a 648,000 b/d increase in its output target for August, keeping its commitment unchanged despite mounting evidence that spare capacity within the oil group has thinned to its lowest level in years.
US Supreme Court limits federal powers to set emissions. In a blow to US President Biden, the US Supreme Court has ruled that the Environmental Protection Agency does not have the authority to regulate greenhouse gas emissions from existing coal and gas-fired power plants.
Negotiations on the Iran nuclear deal are falling apart. According to Reuters, the chances of reviving the Iran nuclear deal after this week’s Doha talks are even lower than before, calling the talks “treading water”.
LNG restart ban at Freeport lowers US Natgas prices. U.S. natural gas prices fell a whopping 15% on Thursday after U.S. regulators banned Freeport LNG from restarting until risks to public safety, property or the environment are fully addressed, which could delay its startup beyond Q4 2022.
Government bailout for German gas giant on the horizon. Germany’s largest gas consumer and electricity producer Uniper (ETR:UN01) is reportedly in talks with the government about a potential bailout of the firm as soaring gas prices and curbs on Russian exports have cast a long shadow over its liquidity.
Fossil fuels are returning to the EU. With European statistics for 2021 published by Eurostat, fossil fuels have once again become the largest source of electricity generation in the European Union, thanks mainly to a 4% year-on-year increase in gas use despite its soaring price.
ExxonMobil gets Canadian shale gas. American oil major ExxonMobil (NYSE:XOM) sold its Canadian shale gas assets, which are jointly owned with its subsidiary Imperial Oil (TSE:IMO) over 600,000 acres Whitecap Resources (TSE:WCP) in a cash transaction for $1.5 billion.
Algeria wants to play on European gas prices. As gas prices are traditionally linked to oil prices, Algeria’s national oil and gas company Sonatrach wants to reassess its prices to EU buyers to include a partial link to the spot gas price, with the TTF trading on a per-barrel basis several times higher than for oil.
Switzerland wants to look at commodity traders. Switzerland is poised to step up regulatory scrutiny of Swiss-based commodity traders, with the state having no official data on the sector as commodity trading is not listed as a separate activity in the country and firms do not report the goods they trade.
Gazprom refuses to pay dividends for the first time since 1998. Russian gas export monopoly Gazprom (MCX:GAZP) announced this week that it would pay no dividends on its 2021 results for the first time since 1998, despite the company’s board proposing its biggest payout to date.
The Mexican refinery was commissioned despite being incomplete. Mexico will go ahead with the inauguration of the 340,000 bpd Olmeca refinery in Dos Bocas this week, even though cost overruns ($12 billion instead of $8 billion) and delays are still months, if not a year, away from starting commercial production.
Russia takes over the stalled Sakhalin-2 project. Russia has created a new firm to take over the rights and responsibilities of Sakhalin-2, Russia’s only LNG project in the Far East, effectively giving itself the power to decide which foreign partner gets to stay, jeopardizing the stakes Shell (LON:SHEL) as well as Mitsubishi and Mitsui.
Ecuador reaches agreement with indigenous protesters. Ecuador’s government and protesting indigenous leaders have reached a deal to end the country’s debilitating wave of protests and end a two-week standoff that has seen the Latin American country’s output more than halve to 230,000 b/d.
Libya declared force majeure in key oil ports. After appeals to Libya’s National Oil Company were largely ignored, it declared force majeure at Es Sider and Ras Lanuf ports due to continued protests, limiting potential export capacity to just 400,000 b/d, a third of the country’s exports in February.
By Tom Kool for Oilprice.com
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