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Oil Prices Continue To Climb On Supply Disruptions

Oil prices are heading for another weekly gain as supply disruptions led to tighter supply. The risk of traders taking profits, however, could push prices lower.  

Friday, September 24, 2021 

Oil prices are heading for a third straight week of gains despite a slight downward correction on Friday, buoyed by ongoing supply disruptions in the United States and several OPEC+ countries (such as Nigeria and Angola) failing to increase production according to their production targets. The anticipated Chinese SPR sale turned out to be a marginal blip on the screen, with most of the discussion now focusing on countries’ capabilities and willingness to meet robust demand across the globe. As of Friday, global benchmark Brent traded around $77 per barrel, whilst WTI was most recently assessed at $73 per barrel. Barring the Hurricane Ida period, the Brent-WTI spread is at its widest since late March 2021. 

Chinese SPR Sale Fails to Impress. Of the 7.3 MMbbls of crude on offer, only 4.4 MMbbls were allocated amongst two bidders, state-owned Petrochina (SHA:601857) and private refiner Hengli (SHA:600346). Despite them paying a relatively low price of $65 per barrel on all crudes except Upper Zakum, the desired effect of sending a strong signal to markets didn’t materialize. 

World’s Largest Floating Wind Farm Comes Online. The 50MW Kincardine floating offshore wind park, located 15km off the coast from Aberdeen, Scotland, has been brought online this week, with Norway’s Statkraft purchasing all electrical output under a guaranteed feed-in price until 2029. 

US Majors Not Reporting Payments Abroad. US oil majors Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) reportedly failed to publicly disclose their taxes and other payments to foreign governments that are not members of the Extractive Industries Transparency Initiative (EITI), such as Angola, Pakistan, or Qatar, Reuters reports. 

JPMorgan Under Brazilian Scrutiny. Leading US investment bank JP Morgan & Chase (NYSE:JPM) is being investigated by Brazilian authorities for participating in a bribery and money laundering scheme that reportedly existed all the way back in 2011, with the bank seemingly getting fuel oil deliveries from Petrobras with artificially low prices. 

Tin Prices Keep the Metals Heat On. Tin prices reached record highs this Friday, with the Shanghai Futures Exchange contract jumping to 288,000 yuan per metric tonne ($44,500 per mt), as inventories in both LME and ShFE were nearing all-time lows of 1180 and 1700 metric tonnes respectively. 

Vitol Moves into EV Infrastructure. Oil trading major Vitol has formed a partnership with China’s BYD (SHE:002594), pledging an initial $250 million to expand electric vehicle infrastructure and charging grids, having already invested into EV charging infrastructure in Colombia. 

Brazil LNG Imports Set Record in September. Overall LNG imports into Brazil are heading for an all-time high this month (at 1 million tons LNG) with Petrobras (NYSE:PBR) and others continuing to buy US cargoes. 

UK Sees a Nuclear Way Forward. The government of Great Britain initiated nuclear talks with US nuclear firm Westinghouse to build a new atomic plant in Wylfa, Northern Wales on the back of the ongoing energy crunch, reviving an erstwhile Hitachi project that ran aground last year. 

BASF Boosts Battery Recycling Segment. Germany’s leading chemicals firm BASF (ETR:BAS) has been developing a global network for the reuse of cathode materials in a bid to recycle metals used in EV batteries such as cobalt and nickel as their supply becomes harder to come by.  

ConocoPhillips Sells Secondary US Acreage. Following its $9.5 billion mega-deal to buy Shell’s Permian assets, US major ConocoPhillips (NYSE:COP) decided to sell some of its conventional acreage in west Texas and New Mexico worth roughly $0.5 billion, in a bid to partially offset the effect on its balance sheet. 

US Arrests Senior Manager of Russia’s LNG Champion. Mark Gyetvay, deputy head of Russia’s leading LNG producer NOVATEK (MCX:NVTK) who holds both US and Russian passports, has been arrested in the United States on tax charges related to $93 million hidden in offshore accounts in Switzerland.  

Energy Crunch Prolongs Coal Plants’ Life. UK-based utility company Drax Group (LON:DRX) announced it could keep its coal-fired plants operating beyond their planned closure deadline in 2022, on the back of exorbitantly high gas prices pushing power prices to all-time highs. 

US Natural Gas Firm Up for Sale. US natural gas upstream-focused company Gulfport Energy (NYSE:GPOR) is reportedly considering a possible sale, only months after control of the company was transferred to creditors on the back of its completing a Chapter 11 bankruptcy process. Gulfport’s current market value hovers around $1.6 billion. 

Citi Admits Blocking PDVSA Payments. In a US court hearing this week, executives from Citigroup acknowledged they blocked an attempt by Venezuela’s national oil company PDVSA to pay its debt to an oilfield equipment provider, boosting the former’s argument that its debt repayment efforts were stymied by banks. 

Russia Prepares Its Own Carbon Tax. Wary of being subject to the European Union’s carbon border mechanism tax that is supposed to come into effect in the mid-2020s, Russia is reportedly drafting its own carbon tax to avoid cross-border taxes. The Russian government expects to have draft legislature ready in 12-18 months.

The market movers this week, ConocoPhillips, Citigroup, and ExxonMobil

ConocoPhilips (COP) has had a very active week, becoming the second-largest oil and gas producer in the U.S. following its $9.5 billion purchase of Shell’s Permian assets. Its move to sell some secondary oil acreage was also positively received by investors, with the stock having climbed more than 15% this week. The natural gas crunch around the world is only going to add to ConocoPhillips’s (COP) momentum in the coming week.

Citigroup (C) is unlikely to be hurt by its recent admission that it blocked PDVSA from paying debt to an oilfield equipment provider, with media attention surrounding Venezuela very much focused on sanctions and Chinese influence. Investors in Citigroup (C) are more likely to be interested in higher interest rate expectations following the fed meeting, with the bank sure to benefit if the economy strengthens.

ExxonMobil (XOM) appeared to be unaffected by revelations that it had concealed payments to some governments, with its stock price climbing through the week. Exxon is one of several oil majors benefitting from the remarkable rally in natural gas prices, and its commitment to maintaining its dividend also appears to be serving it well. As Exxon's (XOM) cash and earnings surge once again, it may soon move from one of Wall Street’s most hated stocks to a hot favorite once again.

By Josh Owens for Oilprice.com 

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Leave a comment
  • George Doolittle on September 24 2021 said:
    I fail to see any disruptions in the least to North American supplies with indeed an actual flood of product pouring forth continuing to be the actual issue facing ever dwindling demand for the likes of gasoline and diesel fuel continuing to impact the US economy.

    Anyhow no such thing as a bubble the Washington DC People didn't love goes without saying.

    With global demand going off a cliff should make for some crazy trading on Monday no doubt as far as US Dollar trading for product to in fact be delivered in the USA.

    "Someone trying to move 50 tons of olive oil in 5 minutes" might raise an eyebrow or two even amongst all those Jewish fags.

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