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Brent Temporarily Breaks The $80 Mark

  • Brent surged to its highest level in almost 3 years on Monday morning on the back of an industry-wide supply crunch.
  • One of the most noteworthy developments of the past several months has been inventory draws across all continents, the largest on record, spearheaded by China’s five consecutive months of stock declines.
  • It remains to be seen how OPEC+ will react when it conducts its next meeting on the fourth of October, but internal documents have already highlighted that global oil demand might be boosted by 370kbpd if natural gas prices remain elevated. 
  • The surge in crude prices came on the back of trading firms and investment banks, most notably Trafigura and Goldman Sachs, painting a rather bullish picture for oil prices, stating that the supply deficit is much larger than the market currently anticipates.

Brent front-month contracts broke the psychologically important $80 mark on Monday morning before tumbling back below $79 as fears of backwardation grew.

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Oil Price Chart of the Week

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Energy Market Movers 

- Seeing its shares surge 6% over the past 5 trading sessions, Russia’s gas giant Gazprom (MCX:GAZP) has seen gas supplies to Europe via the Yamal pipeline halve on Tuesday, a drop it considers temporary. 

- French major TotalEnergies (NYSE:TTE) announced it would buy back $1.5 billion of its shares in Q4 2021 and would use windfall profits from high oil prices to finance its pipeline of renewables projects, reaching 35 GW renewable capacity by 2025.

- Canadian pipeline firm Enbridge (NYSE:ENB) clinched partnership deals with Royal Dutch Shell (NYSE:RDS.A) on prospective hydrogen production as well as Vanguard Renewables on utilizing renewable natural gas as it seeks to add substance to its net-zero by 2050 objectives.

Oil Prices Today Tuesday, September 28, 2021

For the first time since October 2018, Brent futures exceeded $80 per barrel, though it needs to be pointed out that it was only November ICE Brent that breached that psychological barrier as all subsequent months dipped deeper into backwardation. It wasn't long before Brent fell back to $79, however, with traders locking in gains. This week’s surge in prices was largely driven by concerns of tight oil supply in the upcoming months, on the back of US Gulf of Mexico outages, Angola and Nigeria struggling to produce as much as they could, and a global inventory decline. Demand, on the other hand, is still looking robust.

Goldman Sachs Launches Bullish Battlecry.

US investment bank Goldman Sachs (NYSE:GS) indicated it expects Brent crude prices to add another $10 per barrel over Q4 and trade around the 90 per barrel mark by year-end 2021, primarily led by the ongoing supply deficit.

UK Gas Stations Slowly Run Dry.

Showing one of the ugliest facets of post-Brexit Britain, an acute shortage of truck drivers resulted in UK downstream firms rationing their fuel deliveries, in its turn triggering a wave of nationwide panic buying, despite assurances from the likes of BP (NYSE:BP) and Shell (NYSE:RDS.A) that the situation is under control.

ADNOC Halts Voluntary Export Cuts.

Abu Dhabi’s national oil company ADNOC informed all its term buyers that it would scrap its voluntary term nomination cuts, already lowered to 5% for November-loading cargoes, meaning that it would provide full December allocations on all four of its main crude grades.

PennEast Becomes Latest Pipeline to Run Aground.

PennEast Pipeline, a proposed 1.1 Bcf per day capacity pipeline that would have run from the Marcellus/Utica shale gas play in Pennsylvania to New Jersey, has joined the ranks of other scuttled projects amidst manifold regulatory challenges, further increasing the risk of Appalachian gas output remaining trapped.

Al Gore Company Buys Out UK Power Supplier.

Generation Investment Management, an investment management company co-founded by Al Gore, agreed to take a stake of 13% in the UK’s embattled power retailer Octopus Energy for $600 million in additional investment.

China Releases Strategic Metal Stocks for the Fourth Time.

Unable to contain runaway commodity prices, China’s National Food and Strategic Reserves Administration will auction the fourth batch of metal stocks this year – this time releasing 70,000mt of aluminum, 50,000mt of zinc, and 30,000mt of copper at an open-bidding event to be held 09 October.

Azeri Gas to Flow to Turkey Again.

After a 6-month hiatus, the Shah Deniz consortium led by UK major BP (NYSE:BP) and Turkey’s state-owned gas company BOTAS agreed on an extension to the 20-year supply deal sending gas from Shah Deniz Phase One that expired this April, without specifying the details thereof. Related: Crude Stocks At Cushing Have Dropped By 42% So Far This Year

CNOOC Wants Mainland China Listing.

Currently listed on the Hong Kong exchange, China’s state-controlled offshore oil company CNOOC has given up on hopes of seeing itself listed on the New York Stock Exchange after being blacklisted over alleged ties to the Chinese military and will seek a listing at one of mainland stock exchanges.

Ecopetrol Bets on Carbon-Offset Crude.

Colombia’s national oil company Ecopetrol (NYSE:EC) believes demand for carbon offset crudes will increase as refiners start checking the carbon impact of their imports, preparing for its first-ever carbon-compensated Castilla delivery that it believes would propel the firm to first-mover category.  

Saudi Aramco Teams up with Air Products for Hydrogen Supply.

Saudi Aramco (TADAWUL:2222) and US industrial gas company Air Products (NYSE:APD) have finalized an agreement that would see the two operate air separation, gasification, and power generation units for Aramco’s 400kbpd Jazan Refinery. Related: Europe’s Energy Crisis Is Driving Up Natural Gas Prices Worldwide

ExxonMobil Relocates Service Hub to Guyana.

Vowing to get as much oil out of the ground as quickly as possible, the US major ExxonMobil (NYSE:XOM) has decided to move its oil services hub from Trinidad and Tobago to Guyana, as it seeks to expedite the development of the three deepwater blocks it operates, aiming to spud 24 further wells by year-end 2025.

Chevron Forced to Delay Tengiz Expansion.

US oil major Chevron (NYSE:CVX) announced one of its main future projects abroad, the 260kbpd Tengiz Future Growth Project, will be delayed by 3 to 7 months on the back of pandemic restrictions and COVID-19 flareups among workers, with its full commissioning expected by November 2023.

India’s BPCL to Invest $13 Billion into Diversification Drive.

India’s third-largest refiner and second-largest fuel retailer, the state-owned Bharat Petroleum (NSE:BPCL) will invest $13.6 billion over the next five years to diversify its assets, with at least one-third of that sum going into petrochemical upgrades.

By Tom Kool for Oilprice.com 

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Leave a comment
  • Randy Redburg on September 29 2021 said:
    Profit taking. Quite normal to see a small drop as sellers sell up and exit. Nothing can stop the new oil boom from coming now. Not even fake news.

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