Why oil prices are finally falling
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Chart of the week
– Mobility levels in California have seen little growth in recent weeks despite a seasonal uptick across the country, indicating that a prolonged period of high fuel prices would temper seasonality patterns.
– Retail gasoline prices averaged $5.70 a gallon over the last reporting week in California, about $1.50 a barrel above the national average, with prices daily already at $5.92 per gallon.
– Against this backdrop, weekend mobility data in California has decoupled from the national growth pattern, persisting at levels seen in early 2022.
– Loss of oil demand from high fuel prices in the US could amount to 300,000 bpd and would mainly result in lower discretionary driving (mainly on weekends).
– The French government is said to be in talks with the country’s energy major TotalEnergies (NYSE: TTE) to build a floating LNG terminal in the northern port of Le Havre, which will become the country’s fifth LNG plant.
– A wildcat drilled by an international consortium led by ExxonMobil (NYSE:XOM) in waters off Brazil proved dry, marking the first wildcat in the Sergipe-Alagoas basin, believed to be one of Brazil’s most promising frontiers.
– A new study from the Australian GCI claims that BP (NYSE: BP) Net Zero 2030 plans will not result in absolute company emissions reductions, as refined and physically traded products and crude oil are exempt. If these claims are true, BP will likely face further backlash from environmentalists.
Tuesday, March 29, 2022
An apparent breakthrough in peace talks between Russia and Ukraine has provided oil markets with some much-needed bearish news. Just after European countries dropped threats to sanction Russian oil, Russia promised to scale back military operations in northern Ukraine. Russia’s promise raised hopes that the war in Ukraine might finally begin to deescalate. Meanwhile, China’s zero-COVID strategy has led to more lockdowns, lockdowns that are likely to reduce demand for the Asian giant. WTI threatens to fall back below $100 on the news, although oil markets still remain tight.
OPEC warns against politicizing supply. In a thinly veiled response to the IEA, OPEC heavyweights Saudi Arabia and the United Arab Emirates warned against politicizing oil supply issues, arguing that the exclusion of any member of the alliance would only raise prices and hit customers even harder.
Chinese independents hit by a double whammy. Already under pressure from growing government interference, China’s COVID lockdowns, including but not limited to the shutdown of Shanghai, are forcing teapot refiners to sell their shipments delivered in April, with the sale being limited to public refiners due to destination restrictions.
Related: Saudi Arabia Raises Oil Prices Despite Record Russian Crude Discounts
The battle over the payment of the gas ruble is looming on the horizon. G7 nations have rejected Russian President Vladimir Putin’s demands that ‘unfriendly’ countries pay for Russian gas with roubles, setting the stage for a seemingly protracted battle as Putin gave his government an end-of-March deadline to modify the pricing conditions.
Chevron cuts Kazakh production over port issues. American oil major Chevron (NYSE: CVX) Reduced production rates at Kazakhstan’s largest oilfield, Tengiz, after only one of the CPC terminal’s three single point moorings remains operational, the other two will tentatively take 3-4 weeks to repair.
The United States will impose tariffs on solar imports from Southeast Asia. U.S. trade officials said they would launch an investigation into solar energy imports from Malaysia, Thailand, Vietnam and Cambodia, as Chinese producers moved production to those countries to avoid paying the American rights.
Iran sends warning signal to Kurdish gas plans. According to media reports, Iran attacked the Kurdistan region of Iraq earlier this month in order to warn Kurdish officials who have started talks with Israeli and American energy officials to ship Kurdish natural gas to Turkey via a new gas pipeline.
Bolsonaro replaces the CEO of Petrobras. Brazilian President Jair Bolsonaro has decided to fire Joaquim Silva e Luna, CEO of the state-controlled oil company Petrobras (NYSE: PBR), following soaring transport fuel prices in the country, market-oriented academic Adriano Pires has been tapped for the role.
India wants Russian coking coal. With India becoming by far the biggest buyer of Russian crude spot cargoes, Delhi now wants to double its coking coal imports from Russia, contrary to pre-2022 developments. Australian supplies.
Spain and Portugal receive a price cap waiver. The European Commission has authorized Spain and Portugal to cap their electricity prices in a departure from the classic EU hands-off policy, limiting the wholesale price to €180 per MWh, apparently due to the high share of renewable energies in the electricity production of the two countries.
Colombia launches hydraulic fracturing pilot project. The Colombian government has approved the environmental permit for the Kale fracking pilot project in the Middle Magdalena Basin, led by Ecopetrol (NYSE: CE)amid mounting pressure from environmental groups who want the country’s high court to ban the practice.
Orsted sells a 50% stake in the world’s largest offshore wind farm. Danish renewable energy company Orsted (CPH:ORSTED) agreed to sell half of the 1.3 GW Hornsea 2 offshore wind project in the UK to a French consortium made up of insurer AXA and banking giant Crédit Agricole (25% each).
Ukraine’s peace promise repels aluminum. Apparent progress in peace talks between Russia and Ukraine slowed aluminum’s one-month peak, falling more than 5% on Tuesday alone, with three-month LME prices falling to $3,400 the metric ton.
Fuel storage has never been so cheap. In a desperate attempt to induce oil companies to increase their gasoil stocks, storage companies in the ARA region have lowered storage costs to an all-time low of €1.5 to €2.0 per cubic meter, but even with that, Europe remains strained against the seasons and undersupplied.
By Tom Kool for Oilprice.com
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