Mission impossible: predict the oil market
It was another busy week for oil and gas markets as Putin threatened European gas imports, a storm knocked out a major oil pipeline and a Saudi oil terminal was attacked by missiles. Brent is back above $120 a barrel as bullish sentiment remains dominant, but many bearish factors are still looming.
Oil price alert. Bullish factors in oil markets are piling up, from attacks on Saudi oil infrastructure to the potential end of Russian oil exports to Europe. As these geopolitical and fundamental factors combine, our analysts are working hard to keep GEA Members ahead of the news and ahead of the markets.
Friday, March 25, 2022
The beauty of the oil market is its unpredictability. This week’s big story – storms damaging Kazakhstan’s flagship 1.2 million bpd CPC-grade export facility – was expected to lower oil prices on Friday when loadings resumed. Just as it looked like Brent could drop below $120 a barrel, the specter of a Saudi supply disruption re-emerged with an oil storage facility hit by a missile in Jeddah, presumably from Houthi militias from Yemen. Coupled with the dormant Iran nuclear deal and ongoing European wrangling over the right way to sanction Russia – even a coal embargo could not be agreed – predicting the evolution of the oil market is becoming increasingly difficult.
The United States signs a new LNG supply agreement with Europe. American producers will seek to supply 15 billion cubic meters of LNG to the European Union in 2022 in order to wean the continent from Russian gas dependence.
The breakdown of the Caspian terminal increases the differential heat. Europe’s largest light sweet crude stream, the 1.2 million bpd CPC which incorporates most of Kazakhstan’s output, saw its releases braked dramatically this week after a storm reportedly damaged two of the three berths at the CPC export terminal.
Related: Big Oil Is No Longer ‘Unbankable’
OPEC expresses its concern over the threat of a Russian European embargo. According to media reports, OPEC officials have informed the European Union that a possible EU ban on Russian oil would hurt consumers and advised against it, indicating that Riyadh and Abu Dhabi want to keep the OPEC+ group in life.
Putin’s Ruble Payment Threat Triggers Gas Markets. Russian President Vladimir Putin demanded the conversion of Gazprom (MCX:GAZP) long-term gas contracts in rubles, shock waves among European gas importers who could see another record spike in gas prices if the threat materializes.
Floating mines will make shipping in the Black Sea high risk. Marine insurance companies have urged customers operating in the northwestern Black Sea to be wary of floating mines drifting south after breaking loose from their moorings in Ukrainian ports.
ICE is increasing its trading margins as default risks proliferate. Intercontinental Exchange (ICE) increase crude Brent futures margins of 19%, the third margin update this year already, with wild volatility swings forcing it to increase collateral required from market participants to cover default risk .
Shell signs an agreement on a German LNG terminal. British oil major Shell (LON:SHEL) at engaged to set aside a substantial part of the Brunsbuttel LNG import terminal to be built in northern Germany by 2026, marking an important first step for the 8 billion cubic meter capacity plant.
India benefits from Russian oil deals. Indian buyers, namely the private company Nayara Energy and the state-controlled company CIO (NSE: CIO), to have bought An additional 5 million barrels of medium-sour Urals benchmark crude from Russia this week, with Urals still trading at a discount of around $30 a barrel to Dated.
Dutch ING ends financing of oil and gas projects. Dutch bank ING Group (NYSE: ING) announcement it would no longer finance oil and gas projects, the largest bank to have done so so far, adding that it would simultaneously target a 50% increase in lending for renewable energy projects by 2025.
The United States begins to buy fuel oil from the Middle East. American refiners have started mop up fuel oil shipments from the Middle East to supplant sanctioned Russian HSFO flows, with 4 million barrels from Saudi Arabia, Kuwait and Iraq expected to arrive on the US Gulf Coast next month, i.e. a third of the 2021 total.
Indigenous Australians are pursuing a $3.6 billion LNG project in South Korea. A group of Indigenous Australians took the Santos-led $3.6 billion Barossa gas project (STO) off Australia in a South Korean court, asking the project’s South Korean lenders to block loans due to negative environmental impact of the field on wildlife.
Germany is betting on helicopter money to fight energy inflation. The German government finalized a deal that would see a one-time energy allowance of €300 ($330) for each taxpayer, subsidized public transportation, and a temporary reduction in federal gasoline taxes as a policy response to soaring energy costs.
The mining favorite of billionaires starts drilling in Greenland. KoBold Metals, the mining exploration company backed by Jeff Bezos and Bill Gates, declared it would start drilling in Greenland, targeting nickel, cobalt and platinum-group metals to ease commodity pressure on electric vehicles.
Red tape causes another delay in Newfoundland and Labrador auction. The Canadian government once again postponed bids for exploration blocks off Newfoundland and Labrador believed to contain 11 billion barrels of potential oil resources, raising fears that Ottawa could hamper their development.
By Josh Owens for Oilprice.com
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