While oil prices were up on Tuesday morning, having just posted the first monthly gain since May, worrying industrial data out of China is holding prices back.
Chart of the Week
- As US oil majors such as ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) see their stock prices hit all-time highs, soaring 75% and 52% in 2022 to date, the Biden administration might be increasingly tempted to squeeze them for funds.
- The five largest global oil companies have posted net income totaling almost 60 billion in Q3 2022 alone, increasing the risks of government intervention including a US windfall tax (see below).
- Chevron has already warned that increasing taxation on oil production will just reduce output, a risky development at a time when upstream investment is still more than 45% below the 2014 peak.
- Even though the motion faces headwinds, Senate Democrats have already suggested institutionalizing a gasoline export ban whenever the national domestic price reaches at least $3.12 per US gallon over the prior seven days’ averages.
Market Movers
- Beating analysts’ forecasts, Saudi national oil company Saudi Aramco (TADAWUL:2222) posted a net income of $42.4 billion in Q3, almost 40% higher year-on-year and slightly lower than the all-time high Q2 results.
- Market shares of Brazil’s state-controlled oil company Petrobras (NYSE:PBR) plummeted by almost 10% after Lula da Silva won the second round of the country’s presidential elections by a narrow margin.
- US oil major ConocoPhillips (NYSE:COP) will be the third and final international partner for Qatar’s 16 mtpa North Field South LNG project, having been handed a 6.25% stake (smaller than TotalEnergies’ and Shell’s 9.375% stake).
Tuesday, November 01, 2022
Oil prices have recorded their first monthly gains since May, with ICE Brent finishing October just below the $95 per barrel mark. However, the relative strength recently has been tainted by China’s ongoing woes, with its October industrial and services activity seeing a huge month-on-month drop, highlighting the pain and insecurity that the zero-Covid policy continues to wreak in the country.
UN-Brokered Ukraine Grain Deal Collapses. Global wheat prices soared by 5-6% following the collapse of the Black Sea grain deal that renewed Ukrainian grain shipments, with Russia suspending its participation in the deal after a drone attack on its fleet in Crimea.
White House Mulls Oil Windfall Tax. US President Joe Biden called on oil and gas companies to stop “war profiteering” and use their record profits to lower the cost of transportation fuels for Americans, implicitly threatening them with a windfall tax if they fail to do so.
OPEC Really Believes in the Oil Markets. In its 2022 World Oil Outlook, OPEC raised its medium- and long-term oil demand forecasts, anticipating a further 8 million b/d of growth by 2030 to 108.3 million b/d, in stark contrast with the fossil-fuel-pessimistic forecast published last week by the IEA.
US East Coast Feels the Diesel Squeeze. With US East Coast diesel inventories half of what they normally should be at this time of year, retail prices in PADD1 (a huge heating oil demand hub) have soared above $6 per gallon recently, some $1.3/USG higher than retail prices in Texas.
Nigeria Unveils First Real Auction in 15 Years. The government of Nigeria is planning to auction seven deep-water offshore oil blocks in waters outside of Lagos next year, more than 15 years after it had last conducted market bidding for new acreage (back then it was for 45 oil blocks).
No Freeport LNG Restart before Checks. US federal regulators have informed Freeport LNG to provide the information required for the planned restart of the plant after a June 2022 pipeline explosion, with time running short for the planned November reboot of liquefaction.
Ecopetrol Board Chaos Weakens Colombian Peso. Colombia’s state-controlled oil company Ecopetrol (NYSE:EC) replaced the head of its board of directors only one day after his appointment, increasing risks of further state interference and hitting the Colombian peso hard last week.
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EV Battery Production Faces Headwinds. A recently published S&P Global Mobility report stated EV battery producers are facing an uphill battle in securing raw materials as lithium-ion battery demand is set to increase to 3.4 TWh by 2030, singling out lithium, nickel, and cobalt.
US Wants Wider Export Controls on China. The ongoing US-EU trade talks also touched upon Europe’s increasingly troublesome cooperation with China, with US Trade Representative Katherine Tai advising the EU to implement an export-control regime, a route that Europe is still wary to take.
Russia Price Cap Remains an Enigma. The US Treasury Department indicated that vessels of Russian petroleum loaded before and unloaded at their destination before January 19, 2023, will not be subject to the price cap, oddly enough easing the pressure on Russian cargoes this month.
US to Build First-Ever Polish Nuclear Plant. The Polish government announced that US nuclear firm Westinghouse, to be sold soon to Canada’s Cameco (NYSE:CCJ) for $7.9 billion, will build the country’s first nuclear plant with an assumed commissioning date of 2033.
Colombia Flaunts Oil Cooperation with Venezuela. Colombian President Gustavo Petro arrived today in Caracas for his first official visit, seeking to discuss the revival of three exploration and production projects in Venezuela that could see Ecopetrol (NYSE:EC) and PDVSA working together.
The EV-Metals Partnership That Was Too Good to Happen. US carmaker Tesla (NASDAQ:TSLA) was in talks with Glencore (LON:GLEN) to buy up to 20% of the mining and trading giant, in a move that would guarantee the supply of key EV metals, but the deal fell through due to Tesla’s environmental concerns.
By Michael Kern for Oilprice.com
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