Oil Gains as China's Demand Outlook Improves

Advertisements

Oil prices continue their gradual creep upwards, with this week seeing additional impetus coming from Ukraine’s drone strikes on Russian refineries as well as key OPEC+ members Saudi Arabia and Iraq agreeing to export less crude over the upcoming months. Saudi Arabia will be supplying less as it ramps up domestic refining, Iraq will be cutting its exports after several months of undercompliance with OPEC+ commitments. With the outlook on Chinese demand improving into the summer, $90 per barrel is no longer that far away.

Despite the current pace of buying 3 million barrels each month, U.S. Energy Secretary Jennifer Granholm vowed that at the end of this year US strategic crude stockpiles would be at or exceeding the level prior to the 180-million-barrel release in 2022.

Saudi Aramco CEO Amin Nasser said global oil demand will not peak for some time and policymakers around the world should abandon the “fantasy of phasing out fossil fuels”, expecting demand to reach a new high of 104 million b/d in 2024.

Having produced significantly more than its 4 million b/d production quota, Iraq has pledged to cut its crude exports to 3.3 million b/d in the coming months to compensate for its overproduction, with Saudi Energy Minister Prince Abdulaziz in Baghdad this week.

Faced with drought for the fourth straight year, the government of Alberta started water-sharing negotiations among license holders that might impact oil production as scarce water resources would limit drilling.

Three US right-wing groups have sued the Biden administration this week over its approval of Dominion Energy’s (NYSE:D) Coastal Virginia Offshore Wind project, saying it should be halted pending a new analysis of environmental risks to whales.

China’s production of thermal coal has dropped for the first time in years, down 4.2% from a year earlier at 705 million tonnes for January-February combined, with mine safety checks hindering output while coal-fired power generation keeps on rising.

After Colombia scrapped gasoline subsidies, the price of the fuel soared to $3.75 per gallon this month, prompting thousands of owners to retrofit their cars to natural gas with conversions already up by 63% last year and accelerating further in 2024.

The world’s largest solar manufacturer, Longi Green Technology (SHA:601012) said it would lay off about 5% of its employees amidst shrinking margins and global production overcapacity, however, will not fire 30% of its workforce as was rumoured.

Venezuela’s Ministry of Petroleum signed a deal with a UK seismic surveyor to cover the country’s offshore waters, using the temporary respite in US sanctions to set the scene for an offshore licensing round geared towards gas fields.

Confronted with the Biden administration’s opposition to a proposed $15-billion takeover of US Steel by Japan’s Nippon Steel (TYO:5401), the Japanese conglomerate vowed to move its US headquarters to Pittsburgh if the deal goes through.

US oil major ExxonMobil (NYSE:XOM) reported another oil and gas discovery in Guyana’s prolific Stabroek offshore block, with its recently spudded Bluefin well encountering 197 feet of hydrocarbon-bearing sandstone in 4,244 feet of water.

Russia intends to defend its oil and gas facilities with missile systems such as the Pantsir anti-aircraft weapon, with the most recent wave of Ukrainian drone attacks halting bringing the total shut-in refining capacity to 370,000 b/d.

Germany’s state-controlled trading firm Sefe, formerly Gazprom Germany, signed a 15-year deal with the national oil company of the UAE, ADNOC, under which it will supply 1 million tonnes of LNG per year to Germany for 15 years beginning in 2028.