Economic Fears Put Oil Prices Under Pressure

While oil prices rebounded slightly on Friday morning, they remain on course for a weekly decline. Worrying economic data in the U.S. and the expectation of another interest rate hike have added significant downward pressure to oil markets this week. While promising signs of oil demand in China and a report of inventories declining gave oil prices some support, bearish sentiment appears to be driving the market.

The number of Americans filing for unemployment benefits increased last week, suggesting that the labor market is cooling. Expectations of another interest rate hike from the Federal Reserve have only added to bearish sentiment in oil markets, with fears of weaker demand offsetting falling inventories. The next two weeks should be dominated by macroeconomics-related drivers still, in anticipation of the Fed and ECB meetings in early May.

The Biden administration said that concerns raised by Republican lawmakers that last year’s 180-million-barrel drawdown of strategic petroleum stocks damaged the SPR salt caverns were unfounded, despite both Bryan Mound and Bayou Choctaw seeing maintenance work until the fall.

Chile’s President Gabriel Boric announced this week that he would nationalize the country’s lithium industry, the second-largest producer globally, seeking in time to transfer control from lithium majors SQM (NYSE:SQM) and Albemarle (NYSE:ALB).

The Alberta Energy Regulator is now reconsidering its earlier decision from September 2022 to allow Suncor Energy (NYSE:SU) to extend the prolific Fort Hills oil sands project into nearby wetlands after a local environmental group warned of serious risks.

Nigeria’s attorney general Abubakar Malami has called on outgoing President Muhammadu Buhari to end a multi-year dispute with oil majors Shell (LON:SHEL) and ENI (BIT:ENI) over bribes involved in the OPL 245 block, wary of “disappearing opportunities” to produce.

Declining water levels at lakes forming part of the Panama Canal have compelled the channel authorities to lower draft restrictions on the largest ships passing through it (neo-Panamax class) to 47.5ft, forcing them to transport less goods if they are to sail through.

The two largest oil companies in the US, ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) have been testing renewable gasoline blends that allegedly bring down emissions from fossil-fueled cars to levels compatible with EVs, up to 75% lower than currently.

The Chinese government has called on national coal companies to embrace smart technologies and replace human labor with remote-controlled unmanned mining vehicles to avoid human casualties, with the 2022 death toll reaching 245.

Mining majors such as BHP (NYSE:BHP) and Antofagasta (LON:ANTO) have warned against Chile’s proposed royalty tax rate increase which would take the overall tax load of copper mining in the world’s No.1 producer to 48%, stymieing new projects.

Endowed with magnificent shale oil deposits onshore, the Argentinian government is mulling a new licensing round for offshore oil and gas blocks this year, to be held concurrently with the drilling of the first offshore well drilled in its waters, expected in H2 2023.

Turkey’s President Tayyip Erdogan inaugurated the country’s largest natural gas field in the Black Sea, the 710 bcm Sakarya, promising free gas for all low-consumption households for the next month, just before the May 14 presidential election.

US frac fleet firm Liberty Energy (NYSE:LBRT) said service companies in the country have some 30 new frac fleets in development and roughly half of those will hit the market this year, adding to the 250 fleets currently available amidst an ongoing shortage of completion equipment.

The LNG market is in for a surprise after media reports surfaced that Chinese engineering company Wison (HKG:2236) won an EPC contract for a new LNG plant in Nigeria, but the project remains a mystery as there were no new projects in the pipeline.

Japanese conglomerate Mitsui (TYO:8031) bought a 92% stake in a shale gas project in Texas, seeking to produce at least 200 MCf per day and increase the firm’s exposure to the US LNG market as natural gas is increasingly seen as the bridge fuel en route to net zero Japan.

The House and Ways Committee of the US House of Representatives voted in favor of restoring tariffs on solar panels imported from four Asian countries, suspended by the White House last year to promote the proliferation of renewable energy.

Source: OilPrice.com