Crude prices fell significantly at the start of the week despite robust US economic data coupled with strong employment numbers and a positive industrial PMI.
Chart of the week
Late and lax, oil price cap fails to impress markets
– Oil prices are in freefall this week, with WTI returning to levels just above $75 a barrel, as markets remain unimpressed with the G7 oil price cap which has resulted in no anticipated oil shortages. supply.
– The EU and US have both agreed to a 45-day transition period during which parties can still legally purchase rough, provided it is delivered to the final destination by January 19, 2023.
– Additionally, physical traders who typically wait weeks to learn the final price have raised their reserves, saying the price cap is pushing them to take unnecessary risks without impacting Brent or WTI quotes .
– Most oil shipments across the planet are priced on a forward and floating basis, implying that if G7 buyers wanted to ensure they were within the price cap, they would have to buy at a fixed price, a rarity in the markets.
– American oil major Chevron (NYSE:CVX) is set to resume its Petropiar joint venture with Venezuela’s national oil company PDVSA this week, with production up to 200,000 bpd within a year.
– The private equity firm Carlyle Group reportedly in talks for a multi-billion deal with an Austrian oil and gas company OMV (VIE:OMV) which would see it take over most of the assets upstream of the latter.
– American oil producer EQT (NYSE:EQT) said it received a request from the Federal Trade Commission regarding its $5.2 billion purchase of THQ Appalachia, with the antitrust regulator reviewing market concentration.
Tuesday 06 December 2022
News of economic prowess rarely causes a massive drop in oil prices, however, strong US economic data this week, with labor numbers and the industry PMI well above expectations, helped to do the opposite. Along with Russia’s oil price cap, Chinese demand and others, the prospect of the US keeping interest rates higher for longer is slowly becoming mainstream as inflationary pressures weigh on market sentiment. in the medium and long term. Related: Europe faces stress test as Arctic blast drives demand for electricity
Saudi Arabia is getting closer to China. Saudi Crown Prince Mohammed bin Salman will host Chinese President Xi Jinping this week, indicating that Riyadh is ready to diversify its key partnerships at a historic low point in Saudi-US relations and sees Beijing as a crucial economic partner in diversification away from oil. and gas.
The oil price cap becomes a reality. After the Group of Seven agreed to a price cap of $60 a barrel last Friday, the new measure came into effect this week amid repeated Russian promises not to sell oil to countries participating in the price cap.
The White House asks oil companies to help Ukraine. The Biden administration will convene a meeting with oil and gas leaders this week to discuss how the United States could support rebuilding Ukraine’s energy infrastructure as winter approaches.
Flotilla of tankers anchors off the Bosphorus. The Turkish government has started requiring every tanker crossing the Turkish Strait to provide Protection and Indemnity (P&I) insurance documentation, with at least 21 tankers held up in Black Sea moorings.
American Refiners Yard Chevron. After Chevron was re-authorized to operate in Venezuela and expand production, U.S. refiners such as Valero (NYSE:VLO) or PBF Energy (NYSE:PBF) expressed interest in gaining access to new Venezuelan production from the oil major.
Libya ready for upstream investment. Libya’s Tripoli-based GNU government has lifted force majeure for oil and gas operations in the country, inviting all international oil companies that have valid contracts with the LNOC to resume drilling on their respective projects. Related: Europe faces stress test as Arctic blast drives demand for electricity
Venezuela’s production increases slightly. Up 16% from October, Venezuela exported just south of 620,000 bpd of oil last month, thanks to increased production from two restarted crude upgraders that PDVSA operates with CNPC, the Chevron agreement paving the way for further increases.
Shell goes to court to sell its stake. Nigeria’s Supreme Court has allowed British energy giant Shell (NYSE:SHEL) to appeal a ruling that fined it $1.8 billion for an oil spill, an element key in a dispute that has so far prevented the oil company from selling its shares in Nigerian Onshore Assets.
US gas prices lower than a year ago. Ending a month-long price rise, U.S. gasoline prices are falling again, with every state seeing declines in the past week and the national average price dropping 16 cents from a year ago. a week at $3.4 a gallon.
The UN fights against the global agreement on plastics. A UN-brokered round of negotiations on a global plastics treaty confirmed the political interest of such a move, however, as usual, countries are divided on whether the targets should be global. and mandatory, or voluntary and country-specific, with the latter group being represented. by the United States and Saudi Arabia.
Investors drop futures ahead of price cap. For the third week in a row, investors sold oil futures and options, with the most recent readings showing they took out an equivalent of 42 million barrels, almost all of which was offset by the Brent contract (-39 million barrels).
Trading Major now supplies gas to Germany. The second-largest commodity trading firm, Trafigura, has signed a four-year, $3 billion loan to supply gas to struggling German gas trader Sefe, formerly known as Gazprom Germania, with the loan being syndicated by more than 25 banks.
US, EU tariffs on Chinese metals. The United States and the European Union are considering new tariffs on Chinese steel and aluminum, which represent 60% and 57% of global production respectively, arguing that China’s overcapacity poses an increased climate risk.
By Tom Kool for Oilprice.com
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