Oil Bulls Are Optimistic As Brent Holds Above $82

Chinese authorities have reformed natural gas pricing in the country, linking retail residential gas prices to distributors’ purchasing costs to avoid squeezing the margin of power-generating companies too much.

The deregulation of natural gas prices in China has almost immediately engendered a wave of retail price increases, mostly between 10%-15%, with China Gas expecting its gross margin to increase 30% in 2023, reports OilPrice.com.

The pricing reform is expected to boost two areas: coal-to-gas projects that were previously suppressed by the price caps and LNG imports as passing on purchasing costs to customers becomes the norm.

LNG prices in Northeast Asia hit an all-time high of $69.9 per mmBtu last August, but weaker-than-expected Chinese buying and higher LNG supplies have depressed the JKM marker to $11 per mmBtu currently.

Late July is usually the off-season for major market developments, but oil prices have been edging higher as the few factors out there are mostly bullish ones. China’s repeated pledges to stimulate economic activity as well as physical tightness that ramped up backwardation have been duly noted by the market, seeing ICE Brent move above $82 per barrel, the highest since May.

Energy ministers of the G20 group failed to reach common ground on curbing fossil fuel emissions, not even being able to agree on whether the final communique should stipulate a “phasedown” of “unabated” fossil fuels or not, worsening the outlook for COP28.

The US Environmental Protection Agency will provide up to 1.55 billion in government funding to reduce methane emissions from the oil and gas sector, with half of the financial assistance allocated to state authorities.

The Egyptian government refuted claims that its supergiant Zohr gas field, located in the Mediterranean waters of the African country, was having problems after several news outlets reported that production started declining.

The Canadian government has set up a framework to revoke fossil fuels subsidies that it considers inefficient, becoming the first G20 nation to start a phase-out of state support for oil and gas even if ongoing subsidy agreements are to stay in place.

Italian oil major ENI (BIT:ENI) is set to sign an agreement with US major Chevron (NYSE:CVX) to fully take over the latter’s stake in the Indonesia Deepwater Development Project comprising at least three confirmed gas fields for an undisclosed sum.

In a rare display of honesty, Venezuela’s energy minister Pedro Tellechea admitted the country’s oil production rate will remain near the current 830,000 b/d for the rest of 2023 and will not reach the previously mulled 1 million b/d mark.

Iraq renewed its agreement with Lebanon to provide the crisis-ridden Middle Eastern country with up to 2 million tons of crude per year, also helping it to overcome a years-long economic downfall by doubling the amount of fuel oil it provides to Beirut.

After ExxonMobil invested in two US-based lithium-producing projects, US oil major Chevron (NYSE:CVX) said it is considering opportunities to produce lithium and that it has no plans to spend big on wind or solar because of low returns and high competition.

US oilfield services firm Liberty Energy is considering cutting the number of active frac fleets on account of weakening demand, saying it might reduce the fleet count by one to three fleets all the while seeking to maintain current pricing.

After a suspected leak was reported at the offshore Forcados terminal in Nigeria two weeks ago, oil flows to the plant were curtailed and remain such until this day, but the project operator Shell (LON:SHEL) is still yet to declare force majeure.

As Russia’s leading LNG producer Novatek is eyeing a late 2023 commissioning of its 19.8 mtpa Arctic LNG 2 project, it wants to supply Japan with more than 2 million tonnes of LNG as a Japanese consortium comprising JOGMEC and Mitsui owns a 10% stake.

The European chemical industry is facing a perfect storm of high energy prices and weak demand, the industry body CEFIC has warned, predicting that chemical output in Europe will fall by 8% this year and that utilization rates will decline to 75%.

As the metals market eagerly anticipates the meeting of China’s Politburo this week, CME copper prices shot up to almost $8,500 per metric tonne whilst the Shanghai futures exchange moved sideways amidst caution about Beijing’s stimulus package.