Oil Gains Momentum On Strong U.S. Economic Data

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Oil continued to gain momentum this week, and despite fears of a slowdown in economic growth, the reopening of the Chinese economy is providing tailwinds for oil.

Persevering through inflation, rising interest rates and other shocks, stronger-than-expected U.S. GDP data have rekindled hopes of market bulls that fears of sluggish long-term economic growth might be overblown. The oil markets are still largely mirroring macroeconomic events – the fact that U.S. refining is still below 15 million b/d and is headed into a massive round of maintenance continues to go almost unnoticed.

European Union officials stated they’d seek to set the price cap of high-value Russian products at $100 per barrel and of low-value ones at $45 per barrel, with now the ball in the court of EU governments who have to agreed on the measure before February 5.

The Federal Energy Regulatory Commission gave Freeport LNG the approval to restart some operations, with a minor flow of natural gas already flowing into the facility, however, worries persist that a return to full capacity would only come by March.

Citing “tough market conditions”, UK energy major Shell (LON:SHEL) is considering exiting its home energy retail business in the UK, Germany and the Netherlands, only several years after it entered the segment and garnered more than 1.5 million customers.

The Qatari state oil company QatarEnergy is in talks with French major TotalEnergies (NYSE:TTE) to buy into the latter’s $27 billion commitments in Iraq comprising solar, gas and water projects, reportedly seeking to buy a 30% stake.

Italy’s oil and gas major ENI (BIT:ENI) is set to sign a set of deals with Libya’s National Oil Corporation to develop two offshore gas fields in the Mediterranean for an estimated cost of $8 billion, looking for additional sources of supply to scrap Russian gas purchases.

U.S. oil major ExxonMobil (NYSE:XOM) announced it had stopped routine flaring of natural gas from its operations in the Permian Basin, calling for more stringent regulations to find and fix gas leaks as the US still flares 300 bcf of natural gas.

Mexico’s under-construction Olmeca refinery, wielding a capacity of 320,000 b/d and the ability to refine heavier barrels, is set to begin crude processing in July 2023, paving the way for the country’s self-sufficiency in gasoline and diesel.

U.S. shale producer Matador Resources (NYSE:MTDR) agreed to purchase Advance Energy Partners Holdings for $1.6 billion in cash, the largest ever deal in the company’s history that would add some 25,000 bdoe of production to its portfolio.

According to media reports, Norway’s oil giant Equinor (NYSE:EQNR) has launched the sale of its Nigerian onshore assets, hiring Standard Chartered to run the sale process as it seeks to raise up to $1 billion from the transaction.

UK oil major BP (NYSE:BP) and Danish wind producer Orsted (CPH:ORSTED) are developing two projects – a pioneering carbon capture site and an offshore windfarm, respectively – on an overlapping zone of 110 km2, with both sides expecting the other to cede territory.

According to a new study, imports of green hydrogen into the EU might be more cost-efficient than domestic production, assessing the cost of producing it in Germany at €4-5/kg whilst Morocco and Spain would be able to generate clean hydrogen at a cost of €3.1-3.2/kg.

U.S. energy infrastructure firm Sempra Energy (NYSE:SRE) signed a 20-year term deal with the Polish oil company PKN Orlen (WSE:PKN) for the supply of 1 million tons per annum of LNG from its Port Arthur LNG Phase 1 project, fully committing all its 10.5 mtpa capacity.

India’s energy conglomerate Adani Group (NSE:ADANIENT) saw its shares tank 20% this week after U.S. short seller Hindenburg Research published a report flagging widespread tax evasion and unreported debt levels, with Adani mulling legal action against the latter.

The U.S. Interior Department banned mining in northeast Minnesota for 20 years citing concerns of waterway pollution, halting the development of Antofagasta’s (LON:ANTO) underground Twin Metals mine, slated to become the country’s largest copper mine.