Oil markets: It’s terrible time for OPEC+ to resolve differences

It seems that the news of Saudi Arabia and the UAE ironing out their OPEC+ policy differences could not have come at a worse time for oil markets. The news came against the background of increasing COVID-19 cases globally, triggering concerns that OPEC+ will be bringing production back just at a time when demand would be subdued again. Under the deal, the UAE would see its production baseline hiked by 0.5 mbpd from May 2022 onwards, in return for joining the combined effort to bring back 2mbpd of crude by the end of 2021.

Goldman Sachs Sees Upside to Oil Prices. US investment bank Goldman Sachs (NYSE:GS) stated the extension of the OPEC+ deal supports its view on oil prices and present a modest upside to its $80 per barrel summer Brent forecast. Whilst oil prices took a walloping Monday, Goldman did issue a caveat that upcoming weeks should see tangible “gyration” due to risks from rising Delta variant headwinds.

European Union Goes All Out on “Fit for 55”. Europe’s largest industrial conglomerates have given the EU’s ambitious “Fit for 55” emissions-curbing package a rather cold shoulder as Brussels seeks to include shipping and aviation in Europe’s ETS trading scheme, increase taxation on energy and simultaneously roll out renewable energy projects. The proposals put forward by the European Commission still need to be approved by the European Parliament and EU member states, implying that much of the initial zeal might be mitigated by mid-2022.

Chinese Coal Plants Ordered to Build up Stocks. China’s state development agency, the National Development and Reform Commission (NDRC), has ordered all coal power plants to build mandatory 7-day inventories as Chinese coal consumption readings hit all-time highs. According to Reuters, average daily consumption surpassed 2.2 million tons already, sending total inventories to their lowest on record despite the government’s 10 million ton strategic reserve release.

Oil Majors Go Big on Scottish Wind Auction. Scotland’s first seabed leasing off in more than a decade has seen a flurry of oil and gas majors wrestle for floating offshore wind acreage on offer in Europe’s windiest region. Whilst tendering results will only become known in early 2022, it is certainly a noteworthy feat that bids were presented by such giants as Royal Dutch Shell (NYSE:RDS.A), Engie (EPA:ENGI), ENI (NYSE:E), TotalEnergies (NYSE:TTE), BP (NYSE:BP), and Equinor (NYSE:EQNR).

Copper Prices Fall on China’s Reserve Release. Copper prices fell to a four-week low as slowing demand in China, combined with the government’s release of 20 000 tons of strategic stocks designated to depress prices, have weighed on the previous months’ metals rally. LME benchmark prices dropped to just above $9200 per metric ton, further weakened by the US dollar strengthening.

Germany and US Close to Nord Stream-2 Entente. Washington and Berlin are close to reaching a long-awaited agreement on Gazprom’s (OTCMKTS:OGZPY) Nord Stream 2 pipeline, Reuters reports. Under the new deal, the US would scrap sanctions in return for increased investment into Ukraine’s energy transformation and energy security as the new gas conduit inevitably reduces its transit revenues.

Argentina Eases Biodiesel Requirements. Global soy oil prices are expected to decrease as Argentina, the world’s No.1 soy oil producer, has relaxed biodieselrequirements blended into common diesel fuel. The previous 10% limit was eased to 5% in a bid to generate more hard currency amidst a COVID-triggered slump in economic activity, leaving Argentinian producers like Glencore (LSE:GLEN) or Louis Dreyfus with more volumes to export.

First Iranian Cargo from Jask to Load This Week. Iranian officials stated that the first cargo to avoid Strait of Hormuz exposure, loading from the newly commissioned terminal at Jask will be loading anytime soon for a departure at some point during this week. Currently, the terminal’s handling capacity is some 300,000 barrels per day, with crude coming in from the West Karun oil fields. Most Iranian exports, impossible as they are to track and locate, end up with Chinese buyers.

Japan Central Bank to Finance Energy Transition. Japan’s Central Bank will provide interest-free long-term loans to companies that act towards the country’s 2050 decarbonization target. The BoJ will also buy foreign government’s green bonds using its foreign reserves to increase its exposure to international non-polluting markets.

Greenland Gives Up on its Oil Bounty. Greenland officially rejected all plans for future oil exploration, despite wielding a completely untapped reserve bounty of some 18 billion barrels. Whilst oil revenues could have been used to boost Greenland’s claim for independence, the potential environmental risks tipped the balance. Copper and gold exploration, however, continues unabated.

Ethiopia Starts Monster Hydro Dam. Ethiopia has completed the second-year filling of the Grand Ethiopian Renaissance Dam (GERD), the largest hydro object in Africa the capacity of which amounts to 6500MW. Sudan and Egypt continue to object to GERD operating, expressing fears over the dam’s safety and potential consequences for their own hydropower systems.


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