WTI crude has fallen back to pre-OPEC cut announcement levels, with Brent crude falling back below $90 per barrel on global recession fears.
Chart of the Week
U.S. to Confront Higher Power Prices
- Electricity prices along the Atlantic coast of the United States are set to increase 50-60% year-on-year as gas supplies become squeezed to meet winter heating and generation needs.
- Whilst New England on-peak power prices have averaged slightly below $80/MWh in September, forward electricity prices for December 2022 have been trending well above $200/MWh recently.
- Still facing pipeline constraints for gas coming from the Marcellus-Utica basin, the operator of New England’s power grid has already warned of potential blackouts in the winter in case of a severe cold spell.
- Despite the havoc wreaked upon Florida by Hurricane Ian, power prices in Florida (FRCC), Georgia or the Carolinas are tangibly lower looking into November-December, with both FRCC and SERC recording notable year-on-year increases in gas-powered electricity generation.
Market Movers
- U.S. oil major ExxonMobil (NYSE:XOM) confirmed it left Russia completely, with President Putin expropriating its assets after seven months of failed talks over an orderly transfer of its stakes.
- Energy major BP (NYSE:BP) is set to buy U.S.-based biogas producer Archaea Energy (NYSE:LFG) for some $4.1 billion, the largest ever transaction for a company dealing with renewable natural gas.
- German energy firm Siemens Energy (ETR:ENR) sold a 65% stake in its Russian gas turbine JV to its local partner, potentially a huge step for the servicing of foreign-made gas turbines.
Tuesday, October 18, 2022
Oil prices have seen choppy movements in recent trading sessions, with fears that the U.S. and EU will continue facing headwinds in taming inflation still dominating the public discourse across the Atlantic Basin. Earlier this week, the bearishness of the U.S./EU was somewhat offset by Chinese promises of stimulating the economy and reorienting their oil industry to a more export-oriented focus. However, in Tuesday’s trading the Chinese spell has all but disappeared after Beijing delayed the publication of official data, without giving a specific date for the delayed issuance. With the White House chipping in with rumors of potential SPR releases further out, ICE Brent dropped below $90/barrel again. Related: EU Publishes Emergency Gas Cap Proposal
OPEC+ Members Defend Production Cut. Several major OPEC+ members, ranging from Iraq to Oman and Algeria, have voiced their support for the November 2 million b/d target cut, saying it was based on economic indicators and was taken unanimously, rebuffing U.S. claims to the contrary.
Still No Clarity on Russian Oil Price Cap. U.S. Treasury Secretary Janet Yellen stated that the exact dollar level of a price cap on Russian oil had not yet been determined, disavowing market speculation that the cap will be set in the $60 per barrel range.
Beijing Delays October Data. With the twice-a-decade Communist Party congress in full swing, Chinese authorities have delayed the publication of the country’s latest economic data, including GDP, trade and production figures, stoking fears that China’s economic slowdown might be worse than thought.
Continental Is Going Private (Again). US shale producer Continental Resources (NYSE:CLR) said it had agreed to a higher offer from founder Harold Hamm to take the company fully private at a valuation of $27 billion, marking the end of Continental’s 15-year stint as a publicly traded firm.
French Refinery Strike Rages On. Even though France’s TotalEnergies (NYSE:TTE) agreed to a salary deal with the country’s more moderate trade unions, the most left-wing CGT union has vowed to continue its month-long refinery strike that debilitated the country’s downstream industry.
Europe Warns Against Price Caps. According to the European Central Bank, Europe’s energy subsidies including its price cap schemes will reduce the current rate of inflation, expected to come in at 10% in September 2022, however at the expense of future higher rates.
Russia Advises Europe to Cap U.S. LNG Prices. Whilst Europe is still struggling to formalize its gas price cap, Russian deputy prime minister Alexander Novak said the United States should cap U.S. LNG prices going to Europe as they are sold at prices four times higher than Henry Hub.
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Guyana Launches Tender for Refinery. One of the rising stars of South American oil production, Guyana has called for proposals to design, finance, and build a 30,000 b/d refinery in the country, assumed to be completed by the end of 2025
Japan Wants to Extend Nuclear Plants’ Lifespan. The Japanese government is considering extending its 60-year limit on the operation of nuclear power plants as Tokyo is working to restart as many idled plants as possible, faced with limited LNG supply globally and exorbitant costs.
Norway Investigating Drone Threat. A string of mysterious drone sightings has been keeping Norway on edge amidst rumours that Russia might be behind them, while in the country’s Arctic regions a Russian-Israeli citizen was arrested when police found two drones in his car.
Nigerian LNG Goes Into Force Majeure. Following months of limited supply due to theft, the 22mtpa capacity Nigeria LNG has now declared force majeure amidst widespread flooding in the African country that forced all gas producers in the area to shut in production.
Chinese Major to Leave North Sea. As Chinese oil majors are preparing to exit operations in the UK, U.S. and Canada are wary of prospective sanctions, it is reported that Norway’s Equinor (NYSE:EQNR) is considering buying the North Sea oilfields of CNOOC (HKG:0883) for $2.0-2.8 billion.
Europe’s LNG Buying Spree Hits Capacity Limits. At least 35 LNG carriers are sailing around the Mediterranean as importers are unable to secure slots to unload amidst maximum utilization of available liquefaction capacity, raising concerns about the EU’s ability to process all the LNG it needs in times of peak demand.
By Tom Kool for Oilprice.com
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It's actually true to say New York State is a massive energy producer as well. At one time the US State of Michigan was as well. With advancements of truly amazing ability both offshore and onshore it's quite possible as observable the biggest collapse in US energy prices since the Great Depressions. The US oil market is unlike any other on Earth with a surprisingly peculiar and odd dependency upon *"Detroit Success"* which when Tesla was truly and in awesome fashion pushing Detroit to The Max to succeed absolutely drove oil prices to nosebleed levels. Now that Tesla is starting to fail however well, if you thought natural gas speculation was a Widowmaker Trade wait until wait until some ugly market corner in oil suddenly be realized. Haven't seen one of those since the infamous Copper King of Japan in the 1990s was exposed.