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By Oil Price – Josh Owens
May 10, 2022
Chart of the Week
– Russian crude exports have reached post-pandemic highs despite falling production rates, with robust buying coming on the back of heavily discounted barrels.
– The main export grade of Russia, the medium sour Urals, has been trading at discounts below -$30 per barrel to Dated Brent, becoming arguably the cheapest major crude stream on the market.
– Crude exports out of Russia’s terminals averaged 5.03 million b/d in April, spearheaded by a vast uptick in Indian buying, quadrupling to 900,000 b/d compared to February numbers.
– That being said, flows might drop after May 15 when EU sanctions barring transactions with Rosneft and Gazpromneft come into effect.
Market Movers
– Norway’s national oil company Equinor (NYSE:EQNR) sold its stake in Norway’s giant legacy Ekofisk field to private equity-backed Svar Energi, along with a 19% in the Martin Lange field, for a total of $1 billion.
– The Canadian government has fast-tracked talks with Spain’s Repsol (BME:REP) and Canadian Pieridae Energy (PEA) to build two LNG terminals on the country’s east coast, simultaneously negotiating with potential European buyers.
– Shareholders of Occidental Petroleum (NYSE:OXY) vetoed a proposal by Dutch activist investor group Follow This to extend the oil firm’s current carbon emissions reduction targets.
Tuesday, May 10, 2022
Fears of an economic slowdown are bleeding into the oil market. Oil demand is being threatened by extended lockdowns in China, inflation-driven interest rate hikes, and fears of Europe potentially dropping into recession if the Russia-Ukraine war continues to escalate. Ebbing inventories, with the US poised to see stock draws across the crude/product spectrum, contributed some support but failed to halt ICE Brent futures from falling towards the $100 per barrel mark.
Saudi Arabia Blames High Fuel Prices on Lack of Investment. Insufficient investment in global refining capacity has been one of the key drivers in soaring product prices, according to Saudi Arabia’s energy minister Prince Abdulaziz bin Salman, reiterating the claim that lack of investment is keeping oil markets from rebalancing.
EU to Offer Defiant Countries More Funds. The European Commission plans to offer Eastern European EU nations that have so far objected to an embargo on Russian oil (Hungary, Slovakia, and the Czech Republic) more money to upgrade oil infrastructure, though their sanctions waivers are still to be agreed upon.
US NatGas Futures Plunge. With meteorologists moderating their forecasts for a milder-than-expected May and European demand weakening amidst high rates of gas inventory replenishment, front-month Henry Hub gas futures have dropped some 15% to $7 per mmBtu.
EU to Drop Shipping Sanctions Against Russia. The European Union is expected to drop a proposed ban on EU-owned vessels from transporting Russian oil anywhere in the world, with Greece, the continent’s leading shipping nation, threatening to veto the sanctions proposal if it were maintained.
Venezuela Starts Refining Heavy Iranian Oil. Venezuela has begun importing Iranian heavy crude to feed its domestic refineries, widening the swap agreement between the two countries that first saw PDVSA importing condensate to dilute its heavy waxy crude.
Germany Hits Negotiation Roadblock with Qatar. According to media reports, Germany and Qatar have hit difficulties in talks over their LNG deal, with emissions-cutting Berlin remaining wary of committing to 20-year contracts whilst Qatar opposes any form of reselling clause.
Iraq Goes Hard on Kurdish Crude. Federal Iraqi authorities said they would startbringing oil production from the semi-autonomous Kurdistan region under their control after talks with the regional government in Erbil ran aground, with the allocation of oil revenues remaining the key point of contention.
US Mulls Revival of Oil Spill Tax on Crude Exports. The Biden Administration is appealing a 2019 court ruling that found US crude exporters should be exempt from a 9 cent per barrel oil spill cleanup tax, saying the decision blocks a critical source of funding.
South Sudan Wants to Nationalize its Oil Industry. The government of South Sudan intends to take over the operations of international oil firms in the country after respective production-sharing contracts expire, impacting primarily China’s CNPC (SHA:601857)and Malaysia’s Petronas.
Petrobras Vows to Keep Fuel Pricing Market-Based. Newly appointed top executives at Brazil’s national oil company Petrobras (NYSE:PBR) stated they would stick to market-oriented pricing policies, hiking diesel prices by 9%, despite public criticism coming from President Jair Bolsonaro who wants to see fuel prices capped.
Israel Sees Another Offshore Gas Discovery. Mediterranean-focused gas producer Energean (LON:ENOG) announced it had made another commercial gas discovery off the coast of Israel, although the 8 bcm of recoverable gas reserves was just a fraction of the pre-drilling 21 bcm resource estimate.
Indonesia’s President to Meet Elon Musk over Nickel Deal. Indonesian President Joko Widodo is expected to meet Elon Musk during an official US visit, with EV car maker Tesla (NASDAQ:TSLA) reportedly closing in on a nickel supply deal that could see a larger part of the supply chain remain in the country.
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