Dear Member ,
In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets.
We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.
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Chart of the Week
- The conflict between two rival governments in Libya is set to worsen as calls to replace the head of the national oil company (NOC), Mustafa Sanalla, intensify. Meanwhile, skirmishes in the country show no sign of letting up.
- If Libya’s NOC does shut down all ports in the Gulf of Sirte (see below for detail), total exports could drop as low as 400,000 b/d, bringing the tally of idled production capacity to 800,000 b/d.
- Political talks held in Geneva between the Tripoli and Benghazi governments failed spectacularly earlier this month, leaving prospects for a comprehensive settlement at a low point.
- Even before the NOC ultimatum, Libyan production had fallen to 700,000 b/d recently, almost halving from output rates earlier this year as key producing fields remain blocked by the Petroleum Facilities Guard.
Market Movers
- Chinese oil major Petrochina (SHA:601857) is considering the sale of its gas projects in Australia and Canadian oil sands, diverting funds away from jurisdictions that might sanction China.
- In a move to safeguard its Iraqi drilling contracts, US-based oil services major Schlumberger (NYSE:SLB) said it will not apply for any oil and gas drilling tenders in Iraqi Kurdistan.
- Brazil’s state-controlled oil firm Petrobras (NYSE:PBR) elected its second CEO in two months, with Caio Paes de Andrade facing an uphill battle to halt the surge in transportation fuel prices.
Tuesday, June 28, 2022
As we predicted last week, the temporary weakness in oil prices coming from a widespread futures sell-off by speculators was nothing more than just a respite before another upwards climb. The unchanged physical tightness in oil markets, which can be seen from backwardation, combined with French President Macron highlighting the lack of spare production capacity of Middle Eastern oil producers stoked bullish sentiment. With Libya potentially losing another 300,000 b/d of its production/exports in the coming days, a jump above $120 per barrel later this week is very much on the cards.
Western Powers Mull Russian Oil Price Cap. G7 countries have agreed to explore imposing a ban on transporting crude that has been sold above a capped price, despite analysts warning that such measures dramatically increase the likelihood of sudden supply cuts from Russia.
G7 Summit Might’ve Blown OPEC+ Narrative. At this week’s G7 summit in Bavaria, French President Emmanuel Macron cited the heads of the UAE and Saudi Arabia, saying that both had informed him that they can barely increase production over the short term.
Iran Nuclear Talks Might Resume This Week. Following a European push to revive the long-stalled negotiations on Iran’s nuclear program, indirect talks between Tehran and Washington are set to restart over the upcoming days in the capital of Qatar, Doha.
EU Fossil Car Phase-Out Might Run Aground. According to Reuters reports, at least five countries (amongst them Italy and Portugal) want to delay the European Union’s 2035 deadline to ban sales of petrol and diesel cars, postponing it to 2040 amidst widespread fears of slower-than-assumed charger rollouts.
Libya Risks Another Protest-Triggered Wave of Force Majeure. Libya’s National Oil Corporation could declare force majeure within the next two days unless production and oil terminal operations resume in the Gulf of Sirte, hosting four major crude export terminals (Es Sider, Ras Lanuf, Brega, and Zueitina).
Kurdistan Sees Ramp Up of Missile Attacks. Kurdistan’s Khor Mor natural gas field has seen its third rocket attack in less than a week, with missile hits on Kurdish assets proliferating amidst an intensifying conflict between federal authorities in Baghdad and the breakaway government in Erbil.
US EPA Seeks to Toughen Ozone Restrictions for Drillers. Potentially lengthening permitting procedures and enhancing government supervision, the Biden Administration is seeking to toughen anti-smog requirements in the Permian Basin as it has seen above-normal ozone levels amidst intense drilling.
Nigeria Fakes it Until it Makes It. Despite its oil production being more than 500,000 b/d below the 1.8 million b/d required to keep its budget breakeven, Nigeria’s Oil Ministry said the African country would be able to meet its OPEC+ production quota by the end of August.
India’s Power Shortages Ease Thanks to Wind and Hydro. The arrival of the monsoon season into India, as evidenced by higher production rates from hydro and wind power plants, alleviated the pressure on Indian power generation, with grid frequency falling below the minimum threshold only 9.8% of the time in May.
Shipping Profitability Falls to Lowest in Two Months. The Baltic Exchange’s main freight index, the most frequently used gauge of the profitability of dry bulk shipping, has fallen to 2,204 points, the lowest in two months as ongoing weakness in China-bound deliveries drags earnings down.
Offshore Uruguay Might be the Next Hotspot. Now that the Venus wildcat drilled in offshore Namibia has created shockwaves across the market, UK major Shell (LON:SHEL) and US independent Apache (NASDAQ:APA) won exploration rights for three offshore blocks in Uruguay, seeking to find analogies with the Namibian giant discovery.
Stellantis Buys Stake in Lithium Miner. Potentially a wider trend in the car-making industry, the French-Italian automobile consortium Stellantis (BIT:STLA) is set to buy an 8% stake in lithium miner Vulcan Energy, less than a year after the two signed a 5-year supply deal that would see Vulcan deliver up to 100,000 tons of battery-grade LiOH.
Latin American Diesel Price Surge Come At the Worst Time. Just as Latin American agriculture powerhouses are heading into harvest season, the price of diesel continues to hover around all-time highs recorded mid-month, with Brazilian CFR cargoes assessed at some $183 per barrel.
Best regards,
Tom Kool
Editor, Oilprice.com |