Oil Prices Bounce Back As Sentiment Shifts

Advertisements

Whilst this week started off with a commodity-wide selloff, driven by concerns about Chinese protests damaging demand even further, by now that sentiment has shifted into a tacit anticipation of good news coming our way. There is hope that the anti-lockdown protests will force Beijing to ease its strict zero-COVID policy and allow for more of the unrestricted growth that we have gotten used to over the past years. With OPEC members having dispelled rumors that they might boost production, the market is now considering the possibility of another OPEC+ cut – sending Brent back above $85 per barrel.

China Protests Add to COVID Woes. As daily Covid cases swung above 40,000 in China this week, a series of public protests calling for the relaxation of Beijing’s stringent lockdown policies has rocked the country, sending oil prices into a tailspin that was halted only by news of potential OPEC+ cuts.

US Greenlights Chevron Venezuela Expansion. In what has been seen as the first step in relaxing sanctions restrictions on Venezuela, the White House has allowed US major Chevron (NYSE:CVX) to sell crude cargoes from its JV with PDVSA, including to the United States with the measure having no expiration date.

EU Third Time Unlucky, Still No Russian Price Cap. EU governments failed to agree on a price cap on seaborne Russian oil for the third time in a row, with Poland reluctant to agree to a price range that reportedly dovetails with the $65-70 per barrel bandwidth proposed by the G7.

UAE Aims for 5 Million b/d Capacity by 2027. The Emirati national oil company ADNOC intends to reach its long-term production capacity target of 5 million b/d by 2027, three years earlier than it had initially announced, buoyed by robust oil discoveries recently and windfall profits this year.

Strike Continues at Europe’s Second-Largest Refinery. The ongoing strike at the 395,000 b/d Rotterdam refinery operated by BP (NYSE:BP) shows no signs of ending, despite the restart of one crude distillation unit for safety reasons, with the wage demands of refinery trade unions rejected by the UK major.

Can Nord Stream Restart in 2023? Raising the prospect of restarting the blown-up Nord Stream 1 pipeline, the project operator company updated the end date of the unplanned outage at the German exit point of Greifswald to April 01, 2023.

Europe Wants More Continental Clearing. Seeking to reduce Europe’s reliance on clearing houses in London, the European Union will require banks across the continent to prove they aren’t overly reliant on UK clearing and have taken steps to move operations to Frankfurt or Paris.

LME Fends Off Nickel Claims. Facing a combined $472 million lawsuit from US hedge funds Elliott Associates and Jane Street, the London Metal Exchange argued it had the regulatory obligation to cancel the nickel trades in March as prices of the metal soared to $100,000/mt in one day.

US to Build Largest Oil Terminal in Texas. Almost surreptitiously amidst COP27 talks in Egypt, the Biden Administration has approved plans to build a 2 million b/d capacity oil export terminal in Freeport, TX, with the soon-to-be-largest port expected to start operations by the end of 2025.

Hyped Suriname Wildcat Disappoints. US oil producer APA Corp. (NASDAQ:APA) ended drilling operations at the Awari-1 exploration well in Suriname’s Block 58 as it was deemed non-commercial, the second high-impact well that turned out to be dry this year following the Dikkop-1 fiasco in August.

Namibia Builds Rail for Coal Exports. With South Africa’s coal transshipment capacity curbed by repeated disruptions, Namibia is readying to double exports of coal coming from Botswana by rail to its Walvis Bay port at an initial capacity of 100,000 tons per month.

South Sudan Rebukes Khartoum for Oil Diversion. The South Sudanese government accused its northern neighbor of diverting 28,000 b/d of oil throughout this year, worth $446 million so far, saying it had already paid off all its debt to Sudan as part of a three-year transit deal.

Shell Eyes Smaller North Sea Exposure. UK energy major is seeking to downscale its ownership of North Sea assets with a planned sale of two minority stakes in the Eastern Trough Area project and a 180 MMbbls discovery field in offshore waters east of Scotland.