Oil prices held near 7-week highs on Tuesday morning as strong demand data from China fueled optimism in markets.
Chart of the week
Influx of Russian crude cools Asian oil prices
– In less than two weeks, the EU embargo on imports of products from Russia is about to come into force, and despite a downward trend, Russian diesel deliveries to the EU still amount to some 450,000 bpd.
– A spike in diesel prices seems almost inevitable as middle distillate inventories in OECD Europe remain some 30 million barrels below the 5-year average and diesel production in the United States is crippled by unused refining.
– As Europe braces for the impact of the diesel ban, strikes have begun at three French refineries, cutting the supply of middle distillates and gasoline to the country at the worst possible time.
– Europe’s leading diesel futures contract, the first-month ICE diesel contract, broke above the $1,000 per metric ton mark for the first time since November 2022, indicating that diesel compression is underway.
market movers
— UK Energy Major Shell (LON:SHEL) recorded another commercial hydrocarbon discovery off Namibia with its wildcat Jonker-1, the third major discovery in less than a year.
– Freeport LNG says it has completed repairs to the liquefaction facility and has asked US regulators to partially resume operations, although the decision is still subject to a safety review by FERC.
– Dutch authorities will stick to their promise to close Europe’s largest onshore gas field in Groningen by October due to recurring earthquakes, which will shake the portfolio of JV partners Shell (LON:SHEL) and ExxonMobil (NYSE:XOM).
Tuesday, January 24, 2023
The start of the Lunar New Year in China has finally reduced the amount of news dealing with increases in Asian power demand in 2023 and brought the United States back into the spotlight. Torn between the urge to replenish SPRs and bring WTI back below $80 a barrel, weak US refining coupled with weeks of heavy maintenance ahead could become that bad apple that spoils the barrel.
The White House vetoes the SPR bill. Senior US officials have said President Joe Biden would veto a Republican-sponsored bill that seeks to limit the president’s power to exploit the National Strategic Oil Stockpile, provided the bill passes. by Congress.
US softens tone on commodity price cap. US Treasury Secretary Janet Yellen said the Price Cap coalition was working to propose caps on Russian petroleum products, which were supposed to come into effect on February 5, but the markets “are complicated and there is a chance that things don’t go as planned.”
Investors are once again wandering the market. Portfolio investors added positions in the oil and commodity futures and options markets at the fastest pace in more than two years, buying the equivalent of 89 million barrels (mostly crude) at the during the week ending January 17. Related: U.S. gasoline prices continue to climb
Russian oil exports soar despite cap. Loadings of Russian crude from Baltic ports are expected to rise 50% from December to 1.7m b/d, dispelling fears of a peak in oil prices that would weigh on production, majority of cargo heading to India.
The government of Kuwait resigns. Amid relentless parliamentary protests demanding that the government buy back consumer loans and raise wages from its oil wealth, the entire government of Kuwait (appointed by the ruling family, as opposed to the elected assembly) resigned this week.
Colombia will stop new oil projects. The Colombian government has announced that it will not issue new oil and gas exploration contracts (currently, the Latin American country has 381 active projects) and that Bogota will instead direct investments towards tourism and sources of energy. renewable energy.
Protesters storm the BNP. Activists from the Extinction Rebellion movement gathered outside the headquarters of the French bank BNP Paribas (EPA:BNP) after funding the $3.5 billion TotalEnergies-developed (NYSE: TTE) East African crude oil pipeline, linking Uganda to the Tanzanian coast.
Dark clouds on the offshore wind. The setbacks of two large offshore wind companies, Orsted (CPH:ORSTED) The write-down of a huge US project and the $0.5 billion impact of Siemens Gamesa due to faulty turbine components, highlight the headwinds for wind energy in times of cost inflation and higher financing costs.
Permian growth will soon dissipate. The EIA’s latest short-term energy outlook projects that in 2023 the Permian would still account for 80% of U.S. crude oil production growth of 540,000 bpd, but the annual increase in the superbasin of shale should be reduced to 270,000 b/d in 2024.
China finally gets its hands on Bolivian lithium. After years of negotiations, a Chinese consortium made up of the battery giant CATL (SHE: 300750) and mining major CMOC (SHA: 603993) signed an agreement with Bolivia to develop the world’s purest and largest lithium reserves in the Salar de Uyuni.
OPEC experiences with green bonds. The OPEC Fund for International Development raised $1 billion by selling its first-ever bond last week, with the 3-year bond paying investors 4.5% as the money raised will go to sustainable projects in the field of food security or renewable energies.
China still has big coal plans. According to the China Electricity Council, the Asian power plant will add 70 GW of coal-fired power generation capacity this year, nearly double the 40 GW seen in 2022, with only solar seeing larger capacity increases (100 GW) .
Portugal will launch its first wind energy auction. The Portuguese government is preparing to launch its first-ever offshore wind energy auction by Q4 2023, seeking to secure 10 GW of installed capacity by 2030, boosting its already renewable energy generation rate. increased from 60% to nearly 90% by the end of the decade.
By Tom Kool for Oilprice.com
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