Uncertainty appears to have overtaken oil markets once again as a potential OPEC+ agreement gives hope to oil bulls while fears of weak gasoline demand in the U.S. adds downward pressure to prices.
Friday, July 16th, 2021
The baseline amendment agreement between Saudi Arabia and the UAE foreshadowed a familiar path forward for the oil markets, at the same time the lack of detail on how exactly major OPEC+ producers would bring back production maintains a hefty level of uncertainty. Meanwhile, weak demand numbers from the US have cast doubts upon the health of gasoline demand amidst peak driving season.
2022 To See A Full Crude Demand Rebound. OPEC foresees a return to pre-pandemic demand levels in 2022, with the annual average reaching 99.86mbpd next year on the back of improved containment of COVID-19, 3.4% higher year-on-year.
Surging Electricity Needs Keep Fossil Fuel Demand Alive. Global electricity demand is growing faster than aggregate renewables capacity, meaning that more fossil fuels will be required to meet the increasing needs, warns the International Energy Agency (IEA). The IEA sees 2021 power consumption rising by 5% year-on-year, followed by another 4% increment in 2022.
Chinese Steel Output Slows Down (Temporarily). Chinese steel output droppedalmost 6% in June, to 93.9 million tons, down from an all-time high recorded in May. In large part, the decrease in activity is owing to Chinese authorities ramping up environmental controls ahead of the CCP's centenary.
Gold Relieved On Fed Assurances. Gold rose to a 1-month high, moving above $1,825 per ounce, as the US federal reserve chair Jerome Powell played down concerns of monetary tapering, stating that the "US market is still ways off" where the Fed would like to see it.
India Tries To Lure Upstream Investors. India curbed the number of regulatory approvals required to launch an exploration project, to 18 from 37 previously, in a bid to breathe life into the country's upstream sector. Facing structural decline, India produces some 770kbpd of crude and is 80% reliant on imports.
Nigeria Petroleum Bill Gets Stuck Again. More than 10 years in the making, Nigeria's Petroleum Bill failed to see a final approval from the Lower House of Parliament as MPs started arguing over funds designated to oil-producing communities in the regions. There is no clear timeline for future proceedings.
China's Bitcoin Crackdown Good For Environment. Rystad Energy stated that China's crackdown on Bitcoin, having previously mined some 65% of the world's total digital currency whilst mostly running on coal-generated electricity, will ease the pressure on electricity grids. Most of the cryptocurrency was mined in remote provinces such as Xinjiang, Nei Mongol, and partially Sichuan, using up more than 1% of China's total electricity demand.
PEMEX Bans New Deals With Trafigura. According to Reuters, Mexican national oil company PEMEX temporarily nixed all new dealings with Swiss international trader Trafigura as several countries in Latin America launch investigations into bribes of public officials. Valid contracts, including the one seeing Trafigura supply LNG cargoes, remain in effect.
Related: Huge Dividend Cripples World's Largest Oil Company
U.S. Reiterates Prime Condition for Venezuela Sanction Removal. Following the authorization of LPG sales to Venezuela, exempting cooking gas from the stringent sanctions regime that Washington has created to pressurize President Nicolás Maduro, the U.S. State Department foresees no sanctions-related change until Venezuela holds free and fair elections.
Japan Mulls Extending Nuclear Plants Beyond 60 Years. Wary of public outcry on any new nuclear plant projects, Japanese authorities are currently considering the possibility of extending the maximum service period of currently operating units beyond 60 years. The government intends to submit a draft bill allowing such extensions next year.
Volkswagen To Switch To Dual-Fueled LNG Ships. Volkswagen (OTCMKTS: VWAGY) vowed to use dual-fuel engines that can run on LNG to reduce its carbon footprint on cargo movements between regions. Four new LNG vessels would replace current diesel-fuelled ones by 2023, with the possibility of retrofitting them further with battery cells.
ADNOC Invests In Monster Drilling Contracts. The national oil company of the UAE, ADNOC, is backing up its OPEC+ oil ambition with an almost 0.8 billion set of drilling-related contracts signed this week with Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), and its own drilling unit. Seeking to boost spare production capacity to 5mbpd by 2030, these contracts will expand the output potential of the Upper Zakum crude stream.
Congo Sets Cobalt Price For Artisanal Miners. Congo's national cobalt company EGC set up a price floor of $30 000 per metric ton for the cobalt miners find as both the government and international investor seek to push out unregulated middlemen. EGC signed a 5-year supply deal with Trafigura for a total of 45 000 metric tons.
EU To Ban ICE Vehicles By 2035. The European Commission proposed banning the sales of new diesel and gasoline cars from 2035 onwards, with the aim of seeing "nearly" all vehicles on European roads becoming zero-emission cars by 2050.
By Tom Kool for Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations More
Comments
Argentina is hyperinflating again as well.
The USA is "remote hosting an invasion of Cuba" as well by turning the internet back on there. Any US Army occupation there of of that would crush the price of nickel and dramatically advance the adoption of pure BEV's particularly in Florida.
Putin's Russia can cut off natural gas supplies to Europe but Putin still needs US Dollars to fight all his illegal Wars of Aggression everywhere. As with the KSA as with Mexico as with Venezuela as with Canada...the whole World will need to start flooding the USA with energy product as US natural gas prices are still the lowest on Earth despite having tripled over the past 6 Months.
Cold weather in the US South with record high temperatures in Western Canada and the USA upper Midwest seems pretty bearish to me for this time of Year and provided that oddball weather forecast actually plays out.
Certainly lumber prices have crashed anyways.
Copper prices could head south in a hurry too if US Treasury market interest rates are to be believed (recession USA big time.)
Coal, steel, corn, pork, chicken...you name it those prices could really be in for a spectacular collapse next week.