Bearish sentiment has well and truly taken hold of oil markets, with fears of a global recession still the main factor in oil markets. There are plenty of bullish catalysts looming this winter and at the start of 2023, but that isn't enough to distract markets from current conditions.
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Friday, September 16th, 2022
With stocks firmly in the red, house prices trending downwards, US yields hitting multi-year highs, and the threat of a global recession still looming, fears of an economic downturn certainly seem well founded. Amidst widespread expectation that next week’s Fed meeting will see another aggressive interest rate hike, sentiment in the oil market is decidedly bearish, with oil prices on track to record a third consecutive weekly decline. While there are plenty of bullish catalysts in the not-so-distant future for oil markets, none of them are immediate enough to counter current economic fears.
Oil Majors Accused of Climate Gaslighting. According to an investigation conducted by Democrats in the US House of Representatives, US oil majors such as ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX) and BP (NYSE:BP) are “gaslighting” the public about the ambition of their climate goals.
Germany Edges Closer to Nationalizing Uniper. Germany’s largest gas importer Uniper (ETR:UN01), whose federal bailout package has already grown to $19 billion, said that Berlin might take a controlling stake in the company as the firm seeks further aid, potentially paving the way for a full nationalization.
Guyana Seeks to Avoid Errors of the Past. The Guyanese government intends to increase its take in the new production-sharing agreements in its upcoming offshore auction, getting as much as the “Norwegian” rate of 75% instead of the current level of just over 50%.
Averted Rail Strike Scares US Energy Sector. With US railroads and unions agreeing to a tentative deal this week and avoiding a nationwide rail shutdown, the risk of a major disruption to commodity markets has subsided. Before the announcement, gas futures soared 10% in just one day as the strike would have blocked rail deliveries. This scare highlights just how delicately balanced U.S. energy markets are currently.
Colombian Oil Industry Warns Against Export Tax. Colombia’s Petroleum Association has warned against plans of the new President Gustavo Petro to slap a 10% tax on exports if prices are higher than $48 per barrel, saying the extra costs would undermine investment in the country’s future production.
India to Start Trading in Rupees with Russia. India is set to start trading with Russia in rupees after the South Asian country’s State Bank agreed to facilitate the new trading mechanism, implying that an increasing volume of commodity transactions will be carried out without the US dollar.
Russia Mulls Pipeline to Pakistan. Russian President Vladimir Putin said that pipeline gas supplies to Pakistan were possible and that some of the necessary infrastructure was already in place. Moscow is already involved in building the Pakistan Stream pipeline, connecting the LNG terminal in Karachi with the north.
EU Sees €180/MWh Price Cap for Non-Emitters. The European Commission wants to cap the price of non-gas-fueled electricity at €180 per MWh, skimming off windfall revenue for renewable and nuclear power generators, with the German Cal’ 23 contract still trading above €500/MWh.
White House Reinstates Lease Sale 257. The White House has reinstated the results of Lease Sale 257, totaling 307 tracts in the US Gulf of Mexico with Chevron and Anadarko taking most of those, as part of the Manchin-Schumer deal that has effectively saved the passage of the IRA bill.
Trading Nickel In Increasingly Unpopular. The London Metal Exchange, the world’s oldest metal trading venue, has seen an unprecedented outflow of participants following the March 2022 meltdown and subsequent cancellation of trades, with trade volumes falling a whopping 50% year-on-year.
Venezuela Under Threat of Further Sanctions. The US State Department threatened Venezuelan leader Nicolas Maduro with more sanctions if negotiations with the Guaido-led opposition fail to yield any results, having already sanctioned more than 140 entities including the Central Bank and PDVSA.
China’s Winter Depends on Coal Stability. As China has lowered its LNG intake and maximized coal-powered electricity generation, Beijing has called on coal companies to comply with their contractual commitments and keep prices low, coming on the back of recent price surges in northern regions.
US Sets Offshore Wind Expansion Targets. The Biden Administration launched a new drive to have 15 GW of floating offshore wind capacity along its coastlines by 2035, starting off with a lease auction this year for areas off the Californian coast, to be followed by Oregon and Maine.
Renewables Chief Named New Shell CEO. UK-based energy major Shell (LON:SHEL) announced its current CEO Ben van Beurden will step down at the end of 2022, to be replaced by the company’s head of renewables Wael Sawan in a sign that the 2050 net-zero ambition will be increasingly gaining traction
By Michael Kern for Oilprice.com
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However, the absolutely strict measures China is taking will soon dispel these fears and invigorate global oil demand and prices.
Therefore, analysts and authors shouldn't as usual go over the top in their exaggerations of these concerns. Very soon global oil demand and prices will resume their surge particularly that the global oil market fundamentals are still very strong.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert