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Oil Markets Bullish As Brent Breaks $90

Oil markets are looking increasingly bullish as geopolitical risks spike and inventories continue to drain.

Friday, January 28th, 2022

For the first time in seven years, Brent prices surged past $90 per barrel this week, buoyed by a series of bullish factors. First, low inventories remain the number one reason underlying investment banks’ $100 per barrel short-term forecasts. The fact that US commercial stocks just fell for the third time in a row has not helped that. Second, with much of Europe captivated by the prolonged Russia-Ukraine standoff, speculation that Russian oil might be embargoed from the market added another geopolitical premium to prices. Simultaneously, supply scarcity remains a global worry as corroborated by steep backwardation – the Brent six-month market structure was almost at $7 per barrel this week – with very little indication that OPEC+ would be willing to churn out more than it is supposed to under the terms of its agreement. Things are looking very bullish for oil markets indeed.

US Natgas Prices See Record One-Day Spike. With the weather forecast indicating colder weather to come, Henry Hub gas futures saw their sharpest one-day climb this week just as the February contract was about to expire, surging from $4.50 to $7 per mmBtu at the peak of trading, only to settle at $6.3 per mmBtu. 

Saudi Aramco Hits Out at Energy Transition. Saudi Aramco (TADAWUL:2222) CEO Amin Nasser said the current transition towards a sustainable energy future is not going smoothly, highlighting the need to invest in oil and gas if the markets are to avoid the current tightness seen right now in Europe and parts of Asia. 

Russia Expects Iran Deal Breakthrough in Q2. According to Russia’s envoy to the JCPOA talks on the revival of the Iranian nuclear deal, if the negotiations continue at their current pace an agreement would be reached by the end of February, though it might take another two months to have it finalized.

Nord Stream 2 Registers German Subsidiary, Awaits Decision. The operator of the Gazprom-led (MCX:GAZP) Nord Stream 2 pipeline has registered a subsidiary for the German section of the pipeline to meet the requirements of the country’s energy regulator BNetzA. 

Coal Prices Surge on Ukraine Tensions. The global coal benchmark Newcastle coal index has risen by more than 30% over January 2022, currently trending above $260 per metric tonne, as the belligerent rhetoric surrounding the Russia-Ukraine conflict sparked fears that Russia’s gas supplies might be cut

US Judge Annuals Gulf of Mexico Auction over Climate Concerns. A US federal judge annulled the latest Gulf of Mexico Lease Sale 257 held last November - assumed to be the last under the Biden Administration - arguing that the auction failed to assess the climate impact of prospective offshore drilling. 

Trafigura to Build Up a New Russian Base. Global trading house Trafigura plans to start base oil exports from the Russian port of Vyborg, creating a new export route from one of Russia’s least utilized export terminals, with a view to managing 15-20% of Russia’s total base oil production. Related: U.S. Natural Gas Prices Climb Most Ever In Single Day

Siemens Energy to Seek Full Integration of Wind Business. German energy conglomerate Siemens Energy (ETR:ENR) has reportedly stepped up efforts to carry out a full integration of its wind turbine business Siemens Gamesa (BME:SGRE), still unable to sort out the ownership structure of a spun-off entity that it does not control. 

Key US Shale Pipeline Jeopardized. The US Court of Appeals has nixed the federal permit issued towards the Mountain Valley Pipeline, a key conduit that would send Appalachian gas to Virginia and is more than 90% complete, arguing that government approvals did not consider erosion impacts. 

Ammonia Bunkering Safety Study Kicks Off. A Singapore industry group comprising the local authorities and shipping giants commissioned an ammonia bunkering safety study from industry registrar DNV that would seek to establish a preliminary regulatory framework for the nascent bunker fuel. 

Glencore Wants More Food in Portfolio. Global trading firm Glencore (GLEN) bought US grain trader Gavilon from Marubeni Corp for $1.125 billion, increasing its US grain exposure as well as becoming the third-largest exporter of Brazilian soybeans once the deal closes by 2023. 

BP Lures Renewables Executive from Orsted. UK major British Petroleum (NYSE:BP) hired an executive from Danish wind power Orsted (CPH:ORSTED) to head the company’s new offshore wind division in the second half of 2022, with an onshore wind and solar power unit set to be developed. 

Oman Launches First Spot Market in the Middle East. Oman has formally launchedthe first electricity spot market in the Middle East, with the stated aim of increasing the efficiency of power procurement, a delicate way of saying that Muscat would seek to avoid protests driven by high electricity prices.

Canada Greenlights Chinese Buying of Lithium Firm. Canada’s government approved the deal seeing Chinese firm Zijin Mining Group (SS:601899) buy Toronto-listed lithium miner Neo Lithium (CVE:NLC) for $720 million, despite heavy objections from opposition parties arguing that China’s clout over critical minerals keeps on increasing.

By Josh Owens for Oilprice.com 

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