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Oil Prices Under Pressure Despite Looming Fuel Embargo

Oil prices

Oil prices are under pressure from a slew of bearish news coming out of the United States this week, but the looming EU embargo on Russian oil products could still change that.

Oilprice Alert: Whether you are new to the oil and gas industry or an energy market veteran, you will regret not signing up for Global Energy Alert. Oilprice.com's premium newsletter provides everything from geopolitical analysis to trading analysis, and all for less than a cup of coffee per week.

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Crude oil





Friday, February 3rd, 2023

Whilst this week may not have been as volatile as much of 2022, oil prices did have a relatively abrupt change of direction as several events added downward pressure to oil markets. Repeated crude stock builds amidst Gulf Coast refinery woes, the slowing down of industrial activity, and the appreciation of the US dollar combined forces to bring WTI back below $76 per barrel. Some upward correction might come from the G7 product price cap, but at the time of writing there is still no clear indication of whether the Price Cap coalition would manage to iron out their differences on Friday, the last working day before the February 5 deadline. 

OPEC+ Sticks to its Plan. The Joint Ministerial Monitoring Committee of OPEC+, meeting for less than 30 minutes on Wednesday, endorsed the current production policy of the oil group and kept output targets unchanged as hopes for higher Chinese demand raised the specter of increases. 

EU Product Price Cap Still Missing. Despite Brussels proposing a draft version of the product price cap which applies a limit of $100 per barrel on high-value products of Russian origin (diesel, jet, gasoline) and a $45 per barrel cap on low-value products (fuel oil, naphtha), the EU is still yet to agree on the price cap. 

Ballooning Pipe Costs Sink TC Energy. Canada’s first gas pipeline towards the Pacific Coast, TC Energy’s (TSE:TRP) Coastal GasLink, saw another upward price re-evaluation amidst rising labor costs and contractor disputes, now assumed to cost $11 billion, up $2.2 billion from previous assessments. 

US NatGas Prices Sink on Warm Weather. Impacted by a much smaller than usual inventory draw (151 bcf) and forecasts of warm weather staying through the US through mid-February, Henry Hub futures have plunged to their lowest since April 2021, settling at $2.45 per mmBtu on Thursday. 

Activists Attacks Shell for Greenwashing. Activist group Global Witness filed a complaint with U.S. securities regulator SEC against energy major Shell (LON:SHEL), arguing that it has grossly misstated its commitments to renewable energy as its alleged 2021 investments were only a tenth of the reported $2.4 billion.

White House OKs Smaller Alaska Oil Deal. The Biden administration announced this week that it would support a scaled-back version of ConocoPhillips’ (NYSE:CON) $6 billion Willow gas and oil project, in the westernmost part of Alaska’s North Slope, although it is yet to make a final decision on the issue.

Industry Warns Against Negative Wind Bidding. The CEO of Danish wind giant Orsted warned that Germany’s ongoing wind tender will promote a race to the bottom for developers, and the most willing to pay would most probably be the least experienced or financially disciplined bidder. 

Rifts Appear Between Iraq and TotalEnergies. Two years after French oil major TotalEnergies (NYSE:TTE) and the government of Iraq signed a $27 billion megadeal, the two sides’ widely differing views on the project have become public as Baghdad insists on its taking a 40% share in it. 

India to Investigate Adani Share Collapse. Indian authorities have started an investigation into the downfall of Gautam Adani’s Adani Enterprises (NSE:ADANIENT) after a report from Hindenburg Research, a U.S. short-seller firm, triggered a 60% stock market value loss in the past two weeks. 


Study Predicts Further EV Price Cuts. US investment bank Morgan Stanley (NYSE:MS) predicted Tesla’s 13% to 20% price cuts will be replicated by other producers of electric vehicles and that cost advantages coming from Gigafactories will maintain the downward pressure on prices amidst slower economic growth.

New Mexico Drilling Jeopardized by Courts. The 10th Circuit Court of Appeals decided that New Mexico regulators have failed to carry out a comprehensive environmental review on 199 approved permits in the state’s San Juan basin, citing an inadequate analysis of people’s exposure to greenhouse gas emissions. 

Australia’s Hunt for Missing Radioactive Capsule. For several days Australia was in the thrall of a nationwide search for a lost capsule of radioactive Caesium-137, part of a gauge used at Rio Tinto’s (NYSE:RIO) Gudai-Darri iron ore mine, which was ultimately found by the wayside some 100 miles away.

Norwegian Oil Firms Quit Ammonia Project. Norway’s two leading oil producers Equinor (NYSE:EQNR) and Var Energi (LSE:0AAY) have left the pioneering Barents Blue project that was set to produce ammonia from natural gas, capture the CO2 and store it under the seabed, dealing a heavy blow to it.

Freight Costs Ease Amid Tanker Oversupply. Simultaneously to US crude stocks weighing on WTI prices, freight rates for VLCCs loading in the US Gulf Coast have fallen to their lowest in five months, meaning the costs of supplying a super-large tanker into China dropped to $3.6 per barrel, half of what they were in November.

By Michael Kern for Oilprice.com

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