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Oil Markets Are Balanced On A Knife Edge
Following the volatility seen in recent weeks, there was only limited price movement this week with ICE Brent hovering firmly within the $100-105 per barrel range. By no means does this mean that there were no big stories, quite the opposite, the return of Libya and the ECB hiking rates for the first time in many years provided sufficient downside risks for crude. On the other hand, prompt crude supply is still lagging demand, with backwardation in the front months of the Brent and WTI curves remaining as steep as ever, creating a balancing mechanism where neither the upside nor the downside is strong enough to pull prices.
European Gas Blues Continues Despite Restart. As Russia and Germany argue over who is stalling the delivery of the Nord Stream 1 turbine, European gas markets are in trepidation again with TTF prices rising above €160/MWh again, brushing aside the restart in pipeline gas flows.
Mexico Goes on the Defensive in Energy Policy Spat. With the US and Canada joining ranks for dispute settlement talks with Mexico over the country’s allegedly discriminatory power market policies, Mexican President Andres Manuel Lopez Obrador denied the claims, saying there was no violation of the USMCA trade deal.
European South Opposes German Gas Cuts Suggestion. Portugal, Spain and Greece have voiced their opposition to a German-backed EU proposal for member states to cut power usage, saying their isolated power grids have little connection to continental developments and need more gas amidst historically weak hydro generation.
Biden Announces Wind Plans for Gulf of Mexico. Just as oil companies seek to leave the Gulf of Mexico, the Biden administration said it had identified 700,000 acres for potential offshore wind farms, with special focus placed on Galveston, Texas and Lake Charles, Louisiana.
China Loses Interest in LNG. China is set to cede the hard-fought title of the world’s largest LNG importer to Japan this year, following a substantial drop in LNG buying – expected to be lower 14% year-on-year at 69 million tons – amidst record high prices and booming coal production levels.
Chevron Pushes Forward with Cyprus Gas Find. US oil major Chevron is movingahead with its 4.5 tcf Aphrodite gas field in offshore Cyprus, preparing to drill another appraisal well over the upcoming months, brushing aside delays stemming from the field stretching into Israel’s maritime zone.
Biden’s Smog Crackdown to Limit Permian Output. Oil majors operating in the Permian Basin that the Biden government’s proposal to cut smog limits in drilling hotbeds in Texas and New Mexico, above the federal ozone threshold of 70 ppb, risk slowing down drilling activity there.
Nigeria’s Petrol Subsidy Balloons Out of Proportion. Nigeria’s finance minister Zainad Ahmed warned that if the country maintains its current fuel subsidy policy, it could spend up to $16.2 billion on it next year, up 70% year-on-year, aggravating the pressure on the federal government’s budget.
Ford Clinches Lithium Supply Deal for US Plants. US carmaker giant Ford (NYSE:F) announced it would buy lithium for its US EV battery plant from Nevada-focused miner ioneer Ltd (ASX:INR), starting from late 2025, in a first binding agreement between an American producer and US lithium company.
Oil Majors Eyeing GOM Exit. Oil majors Shell (LON:SHEL) and ConocoPhillips (NYSE:COP) are exploring the sale of their stakes in Gulf of Mexico projects, with the former seeking to sell smaller stakes for $1.5 billion in order to focus on the Whale project, whilst the latter wants to quit the GoM completely.
There is Never Enough Coal for China. With Beijing already clearing 125 million tons of coal production capacity in H1 2022, spread across twenty projects, Chinese authorities approved another $0.5 billion coal mine in Inner Mongolia this week, with a production target of 4 mtpa.
Gazprom Explores Gas Closer to China. With Power of Siberia-1 throughput ramping up and another pipeline on its way, the Russian gas firm Gazprom has turned its exploration focus on Eastern Siberia, to keep producing assets close to their final destination.
Good Old Dr. Copper Gets Some Respite. Copper prices are on track for their first weekly increase in seven weeks, with the benchmark LME contract trading at $7,390/mt, up 3% compared to last week, buoyed by lower-than-expected US rate rises and pledges of Chinese stimulus.
Germany Bails Out Uniper with a $15 Billion Package. The German government agreed on a $15 billion bailout package for embattled gas firm Uniper (ETR:UN01), taking a 30% stake in the company that was heretofore majority-owned by the Finnish Fortum (HEL:FORTUM), sending the shares of both into a double-digit tailspin.
-OilPrice.com