First Major Oil Supply Disruption Of 2023

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In what is set to be the first major supply disruption of 2023, Russia has announced a 500,000 bpd voluntary production cut due to growing pressure from price caps and embargoes.

After months of macro-driven price swings, the introduction of the oil products price cap has awakened the spirit of the oil market and brought fundamentals back into the spotlight. Russia’s announcement that it would curb output as a reaction to sanctions is arguably the first major supply disruption of 2023 as protests in Colombia failed to trigger any notable market reaction. Nigerian presidential elections are only three weeks away, so Russia’s production cuts might be the first of many to come.

According to Russia’s deputy prime minister Alexander Novak, Russia will cut oil production by 500,000 b/d in March 2023 as a reaction to the recently introduced product price cap and EU import ban, pledging not to sell its exports to members of the price cap coalition.

Veteran investigative journalist Seymour Hersh, the one to break the stories of the My Lai massacre and Abu Ghraib prison abuse, published a report saying the Nord Stream explosions last September were carried out at the direction of US President Biden.

The United States slapped another round of sanctions on companies active in the production, sale, and shipment of Iranian petrochemicals, specifically six Iran-based companies and three firms in Malaysia and Singapore, wary that higher crude exports might soon be matched by higher product outflows, too.

Pipeline operator TC Energy (NYSE:TRP) said the Keystone pipeline oil leak in early December was caused by a weld flaw that was exacerbated by bending stress over time, with total remediation costs coming in at $480 million.

The EIA cut its 2024 US production forecast to 12.65 million b/d from an earlier projection of 12.8 million b/d, citing the overall maturation of Bakken shale as the main reason, with wells in North Dakota increasingly producing natural gas instead of oil.

As Chinese state-owned energy companies on spot LNG purchases, trading firm Unipec signed a supply deal with Oman LNG that would see the latter providing the Chinese side with 1 million tons of LNG for four years starting 2025, the first term deal between Oman and China.

According to Reuters, it will be leading electric utility firms with renewable projects in the pipeline such as Duke Energy (NYSE:DUK) or Dominion (NYSE:D) that will benefit the most from the Biden Administration’s $430 billion IRA tax credits and payments.

The French energy company TotalEnergies (NYSE:TTE) will be spending half of its 2023 exploration budget on offshore Namibia after the 6-billion-barrel Venus discovery last year, the largest in 2022, propelled the frontier region to global limelight.

Following two previous Master Plan vision statements in 2006 and 2016, the CEO of Tesla (NASDAQ:TSLA) Elon Musk said the third part of the company’s Master Plan for a sustainable energy future for Earth will be held on March 1.

The Alberta Energy Regulator (AER) in Canada issued an environmental protection order to Imperial Oil (TSE:IMO), giving it a week to fix industrial wastewater seepage from tailing ponds, including dissolved iron and arsenic, at its Kearl oil sands project.

The Geneva-based trading powerhouse Trafigura will take a $577 million loss in the first half of 2023 after several nickel cargoes delivered by India’s UD Trading Group didn’t contain nickel at all, despite the two sides interacting since at least 2015.

The German energy regulator BNetzA said the country’s gas consumption remains in the “critical” range for the third consecutive week with temperature-adjusted demand only 12% lower than the 2018-2021 average, whilst Berlin mandates a 20% cut.

As the global hunt for lithium deposits intensifies, the Geological Survey of India announced that it found lithium deposits for the first time in the country, though the 5.9 million tonnes of inferred resources were found in Jammu-Kashmir, a territory disputed by Pakistan.

Squeezed by lower European and Chinese demand as well as the fire-sale of coal by the beleaguered Adani Group, coal prices have fallen to their lowest in a year with the March ’23 ICE Newcastle contract already trading below $200/mt and Europe’s API 2 benchmark down at $125/mt.