Bearish sentiment appears to be running rampant in oil markets, with OPEC+ production cuts and supply threats from Russia unable to significantly slow the oil price slide.
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Friday, September 9th, 2022
Weak macroeconomic data continues to rattle the oil markets, with ICE Brent trending around $90 per barrel, bouncing back from multi-month lows seen mid-week. News of weak Chinese trade data and ECB interest hikes seem to be overpowering a much more supply/demand-relevant story of the Iranian nuclear deal going astray, suggesting bearish sentiment is prevalent. That being said, Russian threats of supply cut-offs appear to have countered a very bearish EIA inventory report, with oil prices climbing early on Friday morning.
Gas-to-Oil Switching Boosts Crude Demand. Amidst ballooning gas prices, it seems that some power producers switching to fuel oil and other liquids has the potential to boost global oil demand by some 500-600,000 b/d over the winter season, with at least half of it happening in Europe.
Ecuador Strikes Deal with Indigenous Groups. In a bid to stave off street protests that have repeatedly crimped oil production, the Ecuadorian government agreed to declare a temporary moratorium on 16 oil blocks considered to be in ancestral indigenous territory.
Trading Majors Launch First Blockchain Oil Trade. Trading companies Gunvor and TotalEnergies (NYSE:TTE) have concluded the first blockchain-driven trade confirmation of a deal, using the VAKT ecosystem, a start-up co-owned by Shell (LON:SHEL) or Mercuria.
US Power Consumption to Hit Records This Year. According to IEA forecasts, this year’s power consumption in the US will rise to an all-time high of 4,029 billion KWh amidst hotter summer weather, up 3% year-on-year, with natural gas remaining the largest source of generation (37%).
UK PM Caps Energy Bills. New UK Prime Minister Liz Truss vowed to cap average household energy bills for the next 2 years at around £2,500, forcing the government to borrow some $115 billion for the financing of the freeze, sending the UK pound to its weakest against the US dollar since 1985.
Repsol Sells Upstream Unit to US Fund. Spanish oil company Repsol (BME:REP) has sold 25% of its upstream division, producing some 570,000 boe/d, to US investment fund EIG for $4.8 billion, with proceeds from the transaction earmarked for the firm’s renewables investments.
Russia Threatens Full Cutoff If Caps Implemented. Russia’s President Vladimir Putin threatened to cut off energy exports to any country that implements price caps on the country’s oil, gas, and coal, raising the stakes in Europe’s energy crisis as the EU mulls a pipeline gas price cap.
Indonesia Wants to Buy Out Shell Stake. Indonesia’s investment minister Bahlil Lahadalia said the country may form a consortium to take over a 35% stake in the Masela gas project from UK energy firm Shell (LON:SHEL) signaled its intent to quit the $20 billion project.
White House Mulls More SPR Releases. The US Strategic Petroleum Reserve is at its lowest level since 1984 following the release of 173 million barrels of SPR stocks, with only 7 million barrels left from the Biden Administration's 1 million b/d release, US Energy Secretary Jennifer Granholm signaled Washington is mulling further releases.
Tesla Set to Build a Lithium Refinery in Texas. The world’s leading EV producer Tesla (NASDAQ:TSLA) is considering setting up a lithium refinery that would process ore material into battery-grade metal, it said its final decision will be based on its ability to obtain tax relief from the TX authorities.
Venezuelan Output on the Rise. Venezuelan crude production saw a marked increase in August, increasing to 750,000 b/d. a 100,000 b/d month-on-month hike, as state oil company PDVSA ramped up production of heavy Orinoco Belt barrels thanks to the availability of diluents, mostly Iranian condensate.
Another German Company Bites the Dust. VNG, one of Germany’s biggest importers of natural gas, became the second major company to ask the government for funds to stay afloat, with soaring gas prices putting the company “in an increasingly critical financial situation through no fault of its own”.
Gazprom Switches to Hybrid Yuan-Rouble Payments. Russia’s Gazprom (MCX:GAZP) and China’s CNPC (SHA:601857) have amended the terms of their 30-year gas supply contract through the Power of Siberia-1 pipeline, moving to a hybrid routine of paying in roubles and yuan on a 50:50 basis.
Sichuan Woes Push Coal Prices Even Higher. Coal prices have been skyrocketing in the past weeks, however extreme drought in Sichuan, the hotspot of Chinese hydropower production, keeps on adding upward pressure to coal prices with ICE Newcastle readings hitting an all-time high of $460/mt this week.
By Tom Kool for Oilprice.com
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