The calm before the storm in oil markets

The first week of May could have brought us a long-awaited paradigm shift, but markets are still weighing the impact of China’s COVID lockdowns amid mass testing taking place in Beijing and the likelihood of a full European embargo. on Russian oil. With no clear outcome on either, Brent futures remained tight, closing around $106 a barrel on Tuesday.

Amid shaky demand outlook

– While OPEC+ should largely accept a new monthly increase of 432,000 b/d, the growing gap between the oil group’s stated objectives and reality is becoming too glaring to be ignored.

– For March, the last month for which official OPEC+ data is availablethe gap stood at 1.45m bpd and is only expected to widen in April as Russian production declines.

– Africa has been a headache in itself, with Libya’s blockade of key infrastructure cutting some 550,000 bpd from global supply, while Nigeria and Angola continue to slide amid force majeure and terminal declines.

– The IEA’s release of 240 million barrels over the next few months and China’s demand drop of 1 million barrels per day on the heels of its COVID lockdowns have both mitigated problems on the demand side, but demand should rebound in the summer, tension could worsen further.

market movers

– Major French energy TotalEnergies (NYSE: TTE) said it would continue to ship LNG from the 17.5 mtpa Yamal LNG project in which it has a 20% stake, thereby protecting its core interests in Russia.

– American oil major Chevron (NYSE: CVX) raised its Permian production target of 15% from 2021 levels, starting to produce 725,000 bpd, while keeping the $10 billion buyout promise unchanged.

– from Portugal Galp Energy (ELI:GALP) is would have given the sale of its upstream business in Angola, one of its main production areas, signaling that its drive towards renewables is becoming increasingly timely.

Tuesday, May 03, 2022

Germany abandons its opposition to the Russian oil embargo. Senior German government officials confirmed that Berlin would be prepared to back an immediate European Union ban on Russian oil imports, although yesterday’s EU summit failed to overcome bloc-wide disagreements over the embargo.

The blockade of Libya is compressing stocks. The Libyan NOC has warned the country’s two warring governments that the risks of stockpiling certain Libyan qualities have long-term consequences – the likes of Bu Attifel require continuous heating, otherwise they solidify in tanks and pipelines due to their high wax content .

Rocket attacks shake Kurdish refinement. In a missile attack for which no one claimed responsibility, a series of rockets target two refineries in the Kurdish capital of Erbil, damaging oil storage capacity there, just two months after Iran’s IRGC carried out a missile strike in the area.

The Gulf of Mexico in the United States will see an explosion of new activities. The coming months will see commissioning floating production platforms BP’s Argos (NYSE:BP) and Shell’s Vito (NYSE:SHEL), aft of Murphy Oil’s recently commissioned King Quay platform, adding some 280,000 b/ j of new production capacity. Related: America’s Shale Patch Faces a Plethora of Problems

Shale pioneers stick to payments. Shale drillers Diamondback Energy (NASDAQ:FANG) and Devon Energy (NYSE:DVN) have boosted their dividend payments while keeping output essentially flat, with the former going as far as quintupling its quarterly payout, despite pressure from the Biden administration to increase output.

Unprecedented heat is skyrocketing demand for electricity in India. Seeing the hottest spring months in decades, India’s might request hit its all-time high last month at 135 billion KWh, simultaneously triggering widespread power outages across the country as supply fell short of demand by 2.4 billion units.

Russia wants to build Africa’s last gas pipeline deal. Timipre Sylva, Nigerian Oil Minister declared that Russia has expressed interest in investing in the long-considered Nigeria-Morocco gas pipeline, which has been under discussion since 2016, without specifying whether the route will be offshore or onshore.

South African coal miners grapple with logistics. South African mining companies have resorted trucking coal to ports amid widespread disruption to the country’s rail network – with Newcastle coal trading at $320 a metric ton, the cost is acceptable, despite rail being four times cheaper.

US gas futures rise again amid LNG pull. U.S. natural gas prices rose again, with June 22 first-month delivery contract just above $8 per mmBtu amid ever-increasing export of domestic gas production, with output falling slightly to 92-93 bcfd.

PEMEX surprises with first quarter earnings. The Mexican national oil company PEMEX reported $6.17 billion in net profit in the first quarter of 2022, reversing a loss of $2 billion a year ago, as production growth and higher crude prices allowed it to reduce total financial debt to $108 billion from $109 billion.

The British government is asking the oil industry to reinvest. UK Business Secretary Kwasi Kwarteng said writing businesses operating in Britain’s North Sea to set out a clear plan for reinvesting their profits in the North Sea, with growing sections of the opposition calling for a windfall tax on oil and gas producers gas.

Mauritania attracts investors for offshore licenses. Possessing several world-class offshore gas discoveries like BP’s (NYSE:BP) 13 TCF Bir-Allah, Mauritania has opened bids for 28 new offshore blocks surrounding the existing acreage, also seeking to attract hydrogen investment green for reliable low-cost energy supply.

Ukraine faces tight storage. According to the media, Ukraine should Face a major shortage of storage facilities, with grain and oilseed stocks having already reached a record high of 21 million tonnes amid limited export opportunities, weighing on agricultural prices around the world.

By Tom Kool for

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