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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Oil Falls 5% On Growing Inflation Fears

Crude prices fell more than 5% on Tuesday afternoon as a result of inflation fears and concerns about demand returned.

Chart of the Week

Can Germany’s Industry Withstand the Pressure?

- With the euro zone already in recession territory and most governments mulling the possibility of blackouts, the economic prospects of Germany are worsening by the day amid plunging German stocks. 

- Germany’s largest gas importer Uniper (ETR:UN01) requested an additional €4 billion of bailout money from the German government, having already fully drawn down an additional €9 billion credit line from state lender KfW.

- Soaring energy costs have resulted in Germany recording its first monthly trade deficit since 1991 this June, with the German economy becoming more dependent on China in H1 2022 amidst increasing investments, despite political pressure on Berlin to pivot away from Beijing.

- Seeking to halt runaway power prices, the idea of implementing a Europe-wide gas price cap is increasingly gaining traction, with rumors circulating that the September 09 emergency meeting of EU countries is aiming to do just that.

Market Movers

- US oil major ExxonMobil (NYSE:XOM) sold its Fayetteville shale assets in Arkansas to Flywheel Energy, an Oklahoma-based exploration company, for an undisclosed sum as part of its $15 billion divestment goal. 

- China’s largest oil refiner, the state-owned Sinopec (SHA:600028), reported an all-time high net profit of $5.8 billion in H2 2022, prompting it to start share buybacks for the first time on record. 

- Norwegian oil firm Equinor (NYSE:EQNR) has hired US investment bank Houlihan Lokey to advise on the sale of its 28% stake in the legacy Statfjord field, in production for more than 40 years, for up to $0.5 billion. 

Tuesday, August 30, 2022

The recent oil price surge triggered by rumors of an impending OPEC+ production cut has hit a ceiling and even though the meeting is just a week away, focus has shifted towards aggravating macroeconomic environment, dragging ICE Brent down to $100 per barrel. Inflation has roared back into public debate, however, this time around it is not the United States in the limelight but Europe. With almost every single major country seeing double-digit inflation and still not yet seeing the peak, the European Central Bank is already testing the idea of a steeper-than-expected interest rate hike of 75 basis points. And this might still be far from the end. 

OPEC+ Supply Cuts Getting Real. With most of OPEC+ heavyweights continuing to bemoan the alleged disconnect between paper and physical oil markets, with the United Arab Emirates and Nigeria joining the ranks of such countries, the chances of seeing a concerted production cut are increasingly higher. 

IEA Eyes More SPR Releases. With the 180-million-barrel US SPR release coming to an end in November, the head of IEA Fatih Birol advocated more strategic stock releases, saying that members should consider them whenever the prospect of supply disruption emerges. 

Canada Invokes 1977 Pipeline Treaty with US. With Michigan governor Gretchen Whitmer seeking to shut down the Enbridge-operated Line 5 pipeline, Canada invoked a 1977 pipeline treaty with the US to trigger negotiations that would settle the prolonged standoff between the two countries. 

ExxonMobil Threatens to Sue Russian Government. US oil major threatened to sue the Russian government if Moscow continues to block its divestment of a 30% stake in the Sakhalin-1 project, of which it is the operator, as the Kremlin banned foreign stakeholders from selling shares until the end of the year. Related: Oil Sinks By 3% As Economic Slowdown Fears Weigh On Market

US Authorities Issue Fuel Waivers on Whiting Fire. Last week’s fire at the 435,000 b/d Whiting Refinery in Indiana and its subsequent shutdown have compelled the US Transportation Department and the EPA to waive federal regulations for fuel volatility and maximum driving time rules for truckers. 

France’s Engie the New Gazprom Victim. According to French media, Russia’s gas major Gazprom (MCX:GAZP) will curtail deliveries to France’s Engie (EPA:ENGI) in a dispute over contracts, though the French firm has already managed to cut its Russia dependence to 4%, compared with 17% before the war in Ukraine. 

Sadr Puts Iraqi Future on Tenterhooks. News of the Iraqi Shia cleric Muqtada al-Sadr leaving politics amidst a prolonged government impasse have sparked riots in the capital city of Baghdad, with Sadrists storming the presidential palace with at least 15 protesters killed, potentially plunging the country into a longer period of unrest.

German Power Prices Can’t Stop Soaring. Rising for eight consecutive trading sessions already, German benchmark power prices for annual delivery in 2023 have surpassed the record €1000 MWh threshold this week, despite falling spot gas prices and water levels along the River Rhine increasing on the back of weekend rain. 

India to Double Down on Petrochemicals. India’s leading downstream firm Reliance Industries (NSE:RELIANCE) will invest $9.4 billion over the next 5 years to maximize oil-to-chemicals refining as well as to ramp up production of green hydrogen and solar modules. 

Iran and Russia to Sign Gas Swap Deal Soon. According to the Iranian Oil Minister Javad Owji, Tehran and Moscow will sign a gas swap deal in the very near future – despite last month’s contracts that saw Gazprom moving into three large-scale gas projects, the scope of swaps is still unknown. 

France Warns Industry They Will be Hit First. The French government urged companies to draft energy savings plans by next month, warning they would be the first to feel the impact of power rationing and adding the state would lead the way with its plan to curb energy usage by 10%. 

Russia to Sell Gasoline to Taliban. In what would probably be the least anticipated part of Russia’s Asian pivot, the Taliban administration of Afghanistan is reportedly in the final stages of talks with Moscow over the terms of a contract to purchase gasoline. 

Chinese Steel Prospects Improve by the Day. Battered by lockdowns and power utilization mandates, China’s steel industry seems to be finally on the uptake as steel rebar prices have gained 10% recently and profit margins for steel mills returning to positive territory of $50/mt. 

By Tom Kool for Oilprice.com

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