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Tight Crude Inventories Push Oil Prices Back To Mid-$70s

Oil prices have risen back to the mid-$70s this week as a result of tighter U.S. crude inventories and a force majeure on Libyan crude oil exports.

Friday, December 23rd, 2021 

The interdependence of oil prices and Omicron news updates has subsided somewhat this week as the overall decline in US crude stocks and the Libyan supply disruption have been moving prices upwards. Despite US crude supply hovering around 11.6-11.7 million b/d, robust demand triggered another week-on-week decline in inventories at a whopping 4.7 million barrels. Libya degenerating into another bout of internal strife has taken off some 300,000 b/d of crude in an instant, providing a welcome Christmas gift for the oil bulls. As of Tuesday, Brent traded around $75.5 per barrel whilst US benchmark WTI was last seen around $73 per barrel. 

European Gas Prices Drop Off Yesterday’s Peak. Just as Gazprom is filling up the second line of Nord Stream 2, to be ready by year-end, day-ahead TTF futures dropped 20% day-on-day to €132 per MWh ($48 per mmBtu), potentially signaling more Russian supply coming to Europe soon. 

Iran Talks Reconvene for Post-Christmas Round. The eight iteration of negotiations on Iran’s nuclear program will start 27 December in Vienna, less than two weeks after the previous session was cut short by the Iranian delegation. 

Argentina to Build Vaca Muerta Gas Pipeline. Despite Argentina’s near-default state, its authorities are reportedly set to sign a decree to start the construction of a major gas pipeline that would connect the plentiful Vaca Muerta shale play to Buenos Aires, boosting YPF (NYSE:YPF) prospects. 

EU Still Probing Gazprom Actions in Europe. With European day-ahead gas prices hitting a new record of €182/MWh (equivalent to $63 per mmBtu) earlier this week, the European Commission has re-energized its probe into the actions of Russian gas firm Gazprom (MCX:GAZP), despite having found no evidence of speculation earlier. 

ADNOC Wants to Decarbonize Offshore Oil Production. Emirati national oil company ADNOC launched a new $3.6 billion project to connect its offshore production operations to the primarily solar and nuclear-supplied onshore electricity grid by means of a 3.2 GW high-voltage, direct-current subsea transmission line. 

Nigeria Crude Exports Hit By Another Force Majeure. The Nigerian subsidiary of oil major Shell (NYSE:RDS) was forced to declare force majeure at the Forcados export terminal this week after a malfunctioning barge continues to block tanker access and loading operations, the second FM this year already. 

ExxonMobil Resumes Cyprus Drilling. US oil major ExxonMobil (NYSE:XOM)resumed drilling in Cyprus’ offshore Block 10 following a 20-month COVID-triggered hiatus, drilling an appraisal well to the 2019 Glafcos discovery that is assumed to hold as much as 8 trillion cubic feet (225 bcm). 

US SPR Inventories Drop to Lowest in 19 Years. With the US pushing through with its planned SPR releases, the total stock of strategic crude reserves fell to 596 million barrels, the lowest it has been since November 2002. 

Iran Seeks to Build a $10 Billion Heavy Oil Refinery. According to a draft budget for the next Iranian year starting in March, Teheran is looking into the construction of a 300,000 b/d new oil refinery named after Qasem Soleimani in Bandar Abbas, to be geared towards heavy oil refining. 

Mexico Claims Deer Park Refinery a Done Deal. The Mexican government statedthat the bid of its national oil company PEMEX to buy the 303,000 b/d Deer Park refinery from Shell (NYSE:RDS) received the approval of the US government and that the long-delayed deal would, at last, be finalized in early 2022. 

German Firms Clinch Russian Ammonia Term Deals. Russian LNG major Novatek (MCX:NVTK) signed a long-term sales agreement with Germany’s utility firm Uniper for 1.2 mtpa of ammonia, to be transformed into gaseous hydrogen once it hits German soil, the second such deal this year already. 

Albemarle Shakes Off Chile Election Hit. Despite having lost 15% of its market value this month on the back of the Chilean President-elect wanting to set up a national lithium company, lithium producer Albemarle (NYSE:ALB) said it does not expect its operations to be affected thanks to a “unique” contract structure. 

Shipping Giant Maersk Doubles Down on Chinese Storage. Container shipping firm Maersk (CPH:MAERSK) agreed to buy Hong Kong-based storage company LF Logistics that owns a network of more than 200 warehouses across Asia for $3.6 billion as it seeks to gain a foothold in Asia Pacific. 

Exxon’s Baytown Refinery Suffers Major Accident. The integrated 560,000 b/d Baytown refining complex operated by ExxonMobil (NYSE:XOM) in Texas saw a major industrial accident after a bypass line leak caused a fire in the refinery’s desulfurization unit. 

Sri Lanka to Repay Oil Debt to Iran by Bartering Tea. Struggling to repay its debt commitments, Sri Lanka plans to settle its $251 million debt in oil import dues to Iran by bartering tea throughout the upcoming four years, in a bid that would not trigger US sanctions. 

By Tom Kool for Oilprice.com 

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