Oil markets experienced one of the most volatile weeks in recent history, and there is no sign of things slowing down anytime soon. Russia's invasion of Ukraine is only intensifying, a nuclear deal with Iran is reportedly days away from being confirmed, and Libya has found itself once again on the brink of civil war.
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Friday, March 4th, 2022
Russia’s invasion of Ukraine has triggered arguably the wildest week in oil trading since Saddam Hussein’s attack on Kuwait back in 1990 - in fact, it was exactly 33 years ago that the oil markets were this backwardated. The risk of Russian barrels being barred from oil markets pushed prices to their highest level since 2008, with WTI touching $116 per barrel on Thursday and ICE Brent coming within touching distance of $120 per barrel. The war still rages on in Ukraine and, despite rumors reappearing about an imminent nuclear deal with Iran, there is still some work to do to finalize the nuclear covenant. As if this were not enough, renewed riots and force majeure events in Libya might trigger another civil war which would almost certainly push oil prices past the $120 per barrel next week.
OPEC+ Rubber-stamps April Production Increase. In what might be the briefest OPEC+ ministerial meeting in recent history, lasting a mere nine minutes, the oil group agreed to another 400,000 b/d monthly supply addition despite intensifying calls to produce more.
US Targets Russian Refining Sector. The Biden Administration announced another round of sanctions as it banned the export of specific refining technologies to Russia and Belarus, making it harder for both countries to modernize their downstream assets.
Germany Opposes Russia Energy Sanctions. In a refreshingly honest public utterance, Germany’s economy minister Robert Habeck stated Berlin would not support a Russian oil and gas embargo, citing potential civil unrest should fossil fuel prices go higher, with electricity prices already up 130% on the year.
Russia Seizes Ukraine’s Largest Nuclear Plant. Russian military forces attacked and seized Europe’s largest nuclear power plant, the 5.7 GW capacity Zaporizhzhia, shelling a training facility outside of the plant area, in a move that triggered another UN Security Council meeting.
US Strategic Inventories Fall to Lowest in 20 Years. As Cushing stocks continue their downward decline, crude oil held in US strategic inventories fell once again by 2.4 million barrels, dropping to a total of 580 million barrels – the lowest level since August 2002.
Total Could Lose South African Discoveries. French oil major TotalEnergies (NYSE:TTE) could see its South African offshore licenses repealed, despite finding two major gas fields Brulpadda and Luiperd, if it fails to present a production plan to local authorities by September 2022.
Chinese Refiners Get Creative with Russian Purchases. Chinese refiners are increasingly paying for Russian crude by means of cash transfers paid upfront, mitigating the banking risks after most Western banks shied away from issuing L/Cs, with state-owned trader Unipec reportedly buying as much as eight ESPO cargoes in the Far East.
Russia Gauges Yuan Payment Opportunities. Russian logistics firm FESCO (MCX:FESH) is actively seeking to move its payments into Chinese yuan, implying that against such a sanctioning squeeze even non-sanctioned companies are trying to find workarounds with potential Asian market outlets.
Exxon Hikes Guyana Production Forecast. Having discovered some 10 billion barrels of recoverable oil in Guyana’s offshore Stabroek block alone, US oil major ExxonMobil (NYSE:XOM) upped its production forecast for the South American country, saying it would produce 1.2 million b/d by 2027.
The Philippines to Revive Nuclear Power Capacity. Philippine President Rodrigo Duterte ordered that an inter-agency government panel look into the revival of the scrapped Bataan Nuclear Power Plant, completed in 1984 but subsequently shut two years later on the back of the Chernobyl disaster.
EU Carbon Prices Get Trashed as Speculators Flee. A wildly unpredictable macroeconomic outlook on the back of the Russia-Ukraine war, coupled with spiking gas, coal, and power prices have triggered a mass exodus of speculators from EU ETS trading, sending European carbon prices into a tailspin, with the Dec ’22 currently assessed at €67 per metric tonne, down almost €30/mt week-on-week.
Spiking Crude Prices Reignite Options Buying. With WTI trading at a little below $115 per barrel, the average number of US options contracts traded on CME doubled average February volumes in the first week of March, hitting some 240,000 contracts per day.
Finland Seeks to Extend Nuclear Reactors’ Lifespan. Confronted with surging natural gas and power prices, the government of Finland might extend the license of the 1 GW Loviisa nuclear plant operated by Fortum (HEL:FORTUM) until the end of 2050, despite it being in operation for 40 years already.
Aluminium Set for Biggest Weekly Gain Ever. Amid concerns about blocked Russian supplies of industrial metals, aluminum prices on the LME rose to $3,815 per metric tonne, marking the biggest week-on-week increase in prices at 14%.
By Tom Kool for Oilprice.com
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