Oil prices rallied this week on a set of bullish predictions from major investment banks but may have climbed too high too fast.
Friday, January 21st, 2022
Leading investment banks issued their outlooks for 2022 this week, with both Goldman Sachs and Morgan Stanley expecting crude oil prices to hit $100 per barrel this year as oil inventories continue to ebb further and OPEC+ spare capacity falls. These reports drove ICE Brent past the $90 per barrel mark for the first time since 2014 this week, but the oil rally fizzled out by Friday as the priced-in geopolitical premium weakened. Despite recurring forecasts of an impending supply shortage, the coming weeks should see more crude on the market - Libya is already back and Ecuador will be getting there soon, too. The wide backwardation in futures markets, with the Brent M1-M12 spread at $8 per barrel, indicates that market fundamentals still point towards a drop from here, rather than a rally continuation. By Friday, global benchmark Brent traded around $88 per barrel, whilst WTI was trending at $85 per barrel.
US Congress Has Another Go at Big Oil. A US congressional committee invited top officials from four leading oil majors - ExxonMobil, Chevron, Shell, and BP - to testify in February about the industry’s role in climate change, the next phase of the House oversight committee’s inquiry into fossil fuel companies blocking action on climate change.
Med Supply Disrupted by Ceyhan Pipeline Explosion. A falling power pylon caused a force majeure halt of pumping along the Kirkuk-Ceyhan pipeline that brings Kurdish crude to the Mediterranean, though the impact was relatively brief as it took Turkey a day to bring back the pipeline to nameplate capacity.
Chesapeake Lining Up to Buy Chief Oil & Gas. US oil firm Chesapeake Energy (NASDAQ:CHK) is reportedly in advanced talks to buy privately-owned Chief Oil & Gas for some $2.4 billion, a little less than half a year after the former emerged from bankruptcy and began refocusing its operations around gas production.
China Fines Petrochina for Trade Irregularities. Along with punishing independent refiners’ for evading fuel tax, China’s authorities also fined the country’s leading oil firm Petrochina for irregular trade of crude oil totaling 180 million tonnes since 2006, in turn ‘facilitating the blind development of outdated production capacity at independents’.
Oil Majors Quit Myanmar. Oil majors TotalEnergies (NYSE:TTE) and Chevron (NYSE:CVX) decided to quit Myanmar following last year’s military coup, getting out of the Yadana offshore gas project off the country’s southwest coast without any financial compensation.
UK Rejects Application to build UK-France power cable. Despite UK power prices soaring over the course of 2021, UK Business Secretary Kwasi Kwaryeng rejected the application to build a 16GWh high-voltage subsea power cable that would bring electricity from France.
Still-torn Libya Aims to Maximize Output in 2022. With Libya just a couple of days out of the woods after a month-long supply disruption, the head of the country’s NOC Mustafa Sanallh claimed Libya aims for an average annual production level of 1.2 million b/d in 2022.
World’s First Hydrogen Tanker to Test Waters. The world’s first liquid hydrogen carrier is set to start loading for the maiden voyage that would take it from Australia to Japan, with the Kawasaki-built (TYO:7012) Suiso Frontier getting the hydrogen from brown coal produced in Australia.
Turkey to Ration Electricity to Industry after Iran Pipe Halt. Turkey’s Energy Ministry stated it would impose mandated power outages to large industrial plants after Iran cut gas flows to Ankara for up to 10 days on the back of a technical failure on the Iran-Turkey gas pipeline.
Britain Refrains from Carbon Market Intervention. Whilst the British government retains the right to cool the UK carbon market by adding free allowances as part of its cost-containment mechanism, London has repeatedly decided against it, despite UK carbon prices already trading at £78 per mtCO2eq. ($105/mt) and draining industry margins.
Argentina Oil Production Reaches 10-Year High. According to Argentinian national statistics, oil production in the country rose to a 10-year high of 560,000 b/d, the highest since October 2012, boosted primarily by higher Vaca Muerta output, up 64% year-on-year.
ExxonMobil-SABIC JV Adds to USGC Petchem Capacity. Teaming with Saudi Arabia’s petrochemical giant SABIC, US oil major ExxonMobil (NYSE:XOM) commissioned a 1.8 million tons per year polyethylene plant near Corpus Christi, TX, representing roughly 20% of future polyethylene capacity coming up in the US Gulf Coast.
Rio Tinto Faces Serbian Lithium Project Collapse. Serbia revoked metal firm Rio Tinto’s (NYSE:RIO) lithium exploration license for production in the Jadar region, largely due to mass protests that took over the Balkan country’s public consciousness.
Calcasieu Pass on the Brink of Commercial Start. The largest LNG project coming on stream this year in the US, Venture Global’s Calcasieu Pass has seen the amount of gas flowing to the terminal more than double to 88 mcf per day this week, indicating the liquefaction plant should start producing LNG anytime soon.
By Tom Kool for Oilprice.com
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