In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets.
Chart of the Week
Influx of Russian Crude Cools Down Asian Oil Prices
- The influx of Russian crude into the Asian markets is changing the market dynamics in the region and easing pricing pressures, to the relief of many buyers.
- India’s imports of Russian crude rose to 1.2 million b/d last month, overtaking Iraq and Saudi Arabia, simultaneously displacing a lot of those Middle Eastern barrels elsewhere in Asia.
- As a consequence, the Dubai market structure continues to trend lower as the cash to futures spread plummeted below $1 per barrel, even lower than a year ago.
- With India and China hoovering up Russian crude, Japan, South Korea and Thailand have all witnessed substantial increases in Middle Eastern barrels in 2022.
Market Movers
- UAE national oil company ADNOC signed a memorandum of understanding with German engineering giant ThyssenKrupp (ETR:TKAG) to develop industrial-scale technologies that extract hydrogen from ammonia.
- Norway’s national oil company Equinor (NYSE:EQNR) has been suffering recently as its recently launched phase 2 of Johan Sverdrup remains halted after a power outage and is likely to restart in 10 days.
- U.S. oil major ExxonMobil (NYSE:XOM) is preparing to greenlight its fifth oil project
Tuesday, January 17th, 2023
China’s 2022 data has brought a fair number of bearish fears back into the market as Beijing’s GDP growth last year came in at 3%, well below the mandated level of 5.5% and the worst reading in 45 years. The official confirmation that 2022 was indeed the annus horribilis of Chinese oil demand, with refinery throughputs declining 3.4% year-on-year only added salt to the injury. Offsetting this, OPEC came out firmly in support of a robust Chinese rebound this year, helping ICE Brent to settle back around the $85 per barrel mark.
Europe to Have Its Own IRA. At the annual WEF meeting in Davos, top EU officials confirmed the European Union would mobilize state aid and create a fund that would keep clean energy firms from moving to the United States, hoping to formalize it in a new Net-Zero Industry Act.
European Gas Prices Slump. Natural gas prices in Europe have plummeted to the lowest level since September 2021 amid relatively warm weather and ample supply, aggravated by Chinese importers diverting their shipments towards the European continent, with TTF falling to €55 per MWh.
Markets Place Their Trust into Copper. As LME copper prices broke through the 9,000 per metric tonne threshold last week, copper futures contract have seen a massive influx of bulls, with CME’s net long figure of 28,796 contracts being the most bullish since April 2022.
EU Fails to Launch LNG Price Assessment. The European Union wants to launch a new benchmark price for LNG, however, its regulatory agency could not publish its first price as expected last Friday because only two of nine transactions reported to it were eligible for inclusion.
India and the UAE to Connect Grids. According to media reports, the governments of India and the United Arab Emirates will soon sign a major agreement on a subsea energy interconnection between the two countries’ grids, aiming for higher solar and wind grid connectivity.
Eni Finds Mediterranean Gas Again. Italy’s oil major ENI (NYSE:E) and its project partner Chevron (NYSE:CVX) made another gas discovery in Egypt’s offshore zone in the Eastern Mediterranean, with the Nargis-1 well drilled in 1,014 feet of water and hitting 200 net feet of gas-bearing sandstones.
Syria Told to Pay up for Iranian Oil. Iranian authorities have doubled the price of oil going to Syria to a market rate of 70 per barrel and are now demanding that Damascus pay in advance, in a bid to maximize revenue as the Middle Eastern country struggles to contain surging 48% inflation.
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U.S. Refining Capacity Boost Coming Soon. U.S. oil major ExxonMobil (NYSE:XOM) is set to launch its $2 billion expansion of the Beaumont refinery in Texas that would almost double the refinery’s capacity to 619,000 b/d and pave the way for enhanced refining of light sweet crude from the Permian. Related: OPEC Is ‘Cautiously Optimistic’ About Global Oil Demand In 2023
Total Cleared of War Crime Complicity Charges. A French court dismissed charges of TotalEnergies’ (NYSE:TTE) complicity in war crimes in Ukraine filed by activist groups at the Paris public prosecutor’s office after the French major took its time to leave its Russia operations.
Emissions Mar Credentials of Canada’s LNG Project. UK-based energy major Shell (LON:SHEL) decided to start building the 2nd phase of its LNG Canada project with gas-powered turbines as there is not enough renewable energy currently available, setting it on a collision course with the government of British Columbia.
Public Shale Companies Spearhead Drilling Drive. According to a note issued by JPMorgan Chase, publicly traded U.S. oil firms such as Occidental Petroleum (NYSE:OXY) and EOG Resources (NYSE:EOG) have added 18 rigs in Q4 2022, whilst private companies boosted their count by only 11.
Beijing Summons Iron Ore Traders. With iron ore futures adding 60% over the past three months on hopes of Chinese recovery, China’s NDRC economic planner has asked for iron ore trading firms’ recent trading records and asked for meetings this week, raising fears Beijing will intervene soon.
Chinese Refinery Burns Down. The entire Panjin Haoye Chemical refinery with a nameplate capacity of 130,000 b/d was shut down after a huge blast killed five people and left eight missing, denting oil products supply into the gradually opening Chinese oil market.
By Tom Kool for Oilprice.com
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