US natural gas price falls 21.5% on export plant outage; US oil supplies at new 17½ year low, SPR at a 35 year low after the largest SPR release on record; gasoline supplies at a 6 month low; global oil surplus at 560,000 barrels per day in May, 4th straight surplus, even as OPEC output dropped to 1.049 million bpd below quota; natural gas rigs at a 33 month high....
.oil prices fell for the first time in 8 weeks after the Fed raised interest rates three-quarters of a percent and Russian oil output returned to pre-war levels...after rising 1.5% to a 13 year high weekly close of $120.67 last week as record high fuel prices showed no signs of dampening demand, the contract price for US light sweet crude for July delivery fell nearly 1.5% in Asian trading early Monday as pandemic-related concerns in China and higher-than-expected US inflation weighed on sentiment, and was off by $2 a barrel in trading trading in New York on worries that fresh COVID-19 outbreaks in China could lead to further lockdowns, but later spiked higher on reports that Libya had shut down nearly all Its oil fields and settled 26 cents higher at $120.93 per barrel, even as gasoline contracts plunged 3.3% and diesel contracts fell 1.9% at the same time, on concerns over the lost demand growth expected this summer as the US economy slowed in response to Fed inflation fighting policy...oil prices rose again early on Tuesday after credit rating agency Fitch Ratings increased its short- and medium-term oil price forecasts and after OPEC reported its oil production actually decreased in May, as tight global supplies outweighed worries that fuel demand would be hit by a possible US recession and fresh COVID-19 curbs in China, but the rally evaporated amid signs that Democrats were considering more energy legislation as they and the White House faced increasing pressure to curb US energy costs, and oil settled $2 lower at $118.93 per barrel, as traders repositioned ahead of the weekly inventory data release and the interest rate announcement from the Fed, where a 75-basis point hike was being considered...oil prices fell further in early morning trading Wednesday after the International Energy Agency (IEA) forecast that the global oil market was likely to rebalance in the second half of the year, driven by slowing demand growth and accelerated gains in non-OPEC oil supplies that would partially offset the loss of Russian barrels. and then extended its losses after the EIA reported an unexpected crude inventory build and a slowing of gasoline demand, and then fell sharply to settle $3.62 lower at $115.31 a barrel as traders worried about a fall in demand after the Fed hiked interest rates by three-quarters of a percentage point...oil prices erased early gains to fall to a two-week low on Thursday on inflation concerns highlighted by interest rate hikes in the US,Britain and Switzerland, though tight oil supply limited losses, and recovered from the day's lows to turn positive again, supported by tight oil supply and peak summer consumption, and advanced $2.28 to settle at $117.59 a barrel, supported by a sharp drop in the U.S. Dollar Index after a number of European central banks raised their interest rates....but global markets wobbled and oil prices sank on Friday over growing fears that inflation-fighting interest rate hikes by central banks could trigger a recession and was down roughly 5% to a three-week low by midday, led by a slump in US gasoline futures, as the US dollar rose to its highest since December 2002, and settled $8.03, or 6.8% lower at $109.56 a barrel, as traders worried that interest rate hikes from major central banks could slow the global economy and cut demand for energy...with that selloff, oil prices notched a 9.2% decrease for the week, with all petroleum contracts posting their first weekly loss since April, amid signs of a tentative rebound in Russian oil production supported by strong demand from Asian and European buyers..
natural gas prices also fell sharply this week, on the news that the Freeport LNG export terminal would be down for months, thus adding 2 billion cubic feet per day to domestic supplies,,,,after rising 3.8% to $8.850 per mmBTU last week as a rally to a 13 year high on record high temperatures was cut off after the explosion at Freeport, the contract price of natural gas for July delivery slid 24.1 cents, or almost 3% to a one-week low of $8.609 per mmBTU on Monday, as the shutdown of the Freeport export plant cut demand for gas, even though power demand in Texas hit an all-time high....natural gas prices then crashed early on Tuesday after representatives from Freeport reported that the company did not expect the export facility to be fully repaired for months, sending gas prices tumbling $1.42, or 17%, to $7.189 per mmBTU, the third largest drop on record, as a prolonged outage would leave more gas to refill low U.S. stockpiles before next winter...prices recovered a bit on Wednesday, regaining 23.1 cents to settle at $7.420 per mmBTU, as traders' focus returned to soaring demand amid countrywide heat waves....natural gas prices edged up again on Thursday, on forecasts for record power demand in Texas, soaring global gas prices and a small decline in U.S. daily gas output, and settled 4.4 cents higher at $7.464 per mmBTU, despite a bigger-than-usual stockpile build, a revised increase in the amount of gas in storage, and a decline in forecast U.S. gas demand...but prices tumbled again on Friday on forecasts for lower demand for the next two weeks, and on expectations that the extended shutdown of the Freeport plant would allow utilities to quickly rebuild low U.S. gas stockpiles, and settled 52 cents or 7% lower at a seven week low of $6.944 per mmBTU, and thus finished with a 21.5% loss on the week...
The EIA's natural gas storage report for the week ending June 10th indicated that the amount of working natural gas held in underground storage in the US rose by 92 billion cubic feet to 2,095 billion cubic feet by the end of the week, after gas in storage at the end of the prior week was revised from 1,999 billion cubic feet to 2,003 billion cubic feet to reflect resubmissions of data during the prior three-week period....that still left our gas supplies 330 billion cubic feet, or 13.6% below the 2,425 billion cubic feet that were in storage on June 10th of last year, and 323 billion cubic feet, or 13.4% below the five-year average of 2,418 billion cubic feet of natural gas that have been in storage as of the 10th of June over the most recent five years....the 92 billion cubic foot injection into US natural gas working storage for the cited week was more than average forecast for a 89 billion cubic foot injection from an S&P Global Platts survey of analysts, and more than the average injection of 79 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years, and more than triple the 28 billion cubic feet that were added to natural gas storage during the corresponding week of 2021...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending June 10th showed that after a big increae in our oil imports, another big oil withdrawal from the SPR, and an increase in oil supplies that could not be accounted for more than covered a near record jump in our oil exports, we had oil left to add our stored commercial crude supplies for the 7th time in 11 weeks, and for the 22nd time in the past 50 weeks…our imports of crude oil rose by an average of 831,000 barrels per day to an average of 6,985,000 barrels per day, after falling by an average of 64,000 barrels per day during the prior week, while our exports of crude oil rose by 1,493,000 barrels per day to 3,725,000 barrels per day, after falling by 1,758,000 barrels per day during the prior week, which meant that our trade in oil worked out to a net import average of 3,260,000 barrels of oil per day during the week ending June 10th, 622,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude from US wells reportedly rose by 100,000 barrels per day to 12,000,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,260,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,320,000 barrels of crude per day during the week ending June 10th, an average of 67,000 fewer barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 822,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 238,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+238,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....even so, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
week's 822,000 barrel per day decrease from our overall crude oil inventories left our total oil supplies at 930,326,000 barrels at the end of the week, our lowest oil inventory level since October 1st, 2004, and therefore a 17 1/2 year low….our oil inventory decreased this week even though 279,000 barrels per day were being added to our commercially available stocks of crude oil, because 1,102,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, the largest SPR withdrawal on record, at the same time....that draw on the SPR would now include the initial emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that is expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further at least up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address the initial Russian supply related shortfalls....the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption wrapped up in May.... including that, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 144,535,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 22 months, and as a result the 511,612,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since Januar 2nd, 1987, or at a 35 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's releases....so now, the total 180,000,000 barrel drawdown expected over the six months to November will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at today's consumption rate...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,641,000 barrels per day last week, which was 2.2% more than the 6,322,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day higher at 12,000,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,600,000 barrels per day, even as Alaska’s oil production was 10,000 barrels per day lower at 435,000 barrels per day andand and has no impact on the final rounded national total...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 8.4% below that of our pre-pandemic production peak, but was 42.4% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...
US oil refineries were operating at 93.7% of their capacity while using those 16,320,000 barrels of crude per day during the week ending June 10th, down from the 94.2% utilization rate of the prior week, but still a typical refinery utilization rate for early summer…but the 16,320,000 barrels per day of oil that were refined this week were a bit less than the 16,337,000 barrels of crude that were being processed daily during week ending June 11th of 2021, and 5.5% less than the 17,264,000 barrels that were being refined during the prepandemic week ending June 14th, 2019, when refinery utilization was also at a fairly normal 93.9% for the second weekend of June...
With the decrease in the amount of oil being refined this week, gasoline output from our refineries was also lower, decreasing by 21,000 barrels per day to 10,019,000 barrels per day during the week ending June 10th, after our gasoline output had increased by 73,000 barrels per day over the prior week.…this week’s gasoline production was 0.9% more than the 9,926,000 barrels of gasoline that were being produced daily over the same week of last year, but 4.1% below our gasoline production of 10,451,000 barrels per day during the week ending June 14th, 2019, ie, during the year before the pandemic impacted US gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 57,000 barrels per day to 5,944,000 barrels per day, after our distillates output had increased by 17,000 barrels per day over the prior week…and our distillates output was 2.2% less than the 5,056,000 barrels of distillates that were being produced daily during the week ending June 11th of 2021, and 8.0% less than the 5,371,000 barrels of distillates that were being produced daily during the week ending June 14th, 2019...
Even with the recent increases in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the eighteenth time in nineteen weeks, decreasing by 710,000 barrels to a six month low of 217,474,000 barrels during the week ending June 10th, after our gasoline inventories had decreased by 812,000 barrels over the prior week....our gasoline supplies decreased again this week even though the amount of gasoline supplied to US users decreased by 106,000 barrels per day to 9,093,000 barrels per day, because our imports of gasoline fell by 526,000 barrels per day to 650,000 barrels per day while our exports of gasoline fell by 31,000 barrels per day to 926,000 barrels per day ...and after 18 inventory drawdowns over the past 19 weeks, our gasoline supplies were 10.5% lower than last June 11th's gasoline inventories of 242,980,000 barrels, and 11% below the five year average of our gasoline supplies for this time of the year…
Even with the decrease in our distillates production, our supplies of distillate fuels increased for the 7th time in twenty-two weeks and for the 14th time in forty-one weeks, rising by 725,000 barrels to 109,709,000 barrels during the week ending June 10th, after our distillates supplies had increased by 2,592,000 barrels during the prior week….our distillates supplies rose by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 31,000 barrels per day to 3,619,000 barrels per day because our exports of distillates rose by 178,000 barrels per day to 1,379,000 barrels per day, and because our imports of distillates fell by 62,000 barrels per day to 158,000 barrels per day....but after forty-two inventory withdrawals over the past sixty-one weeks, our distillate supplies at the end of the week were 19.4% below the 136,191,000 barrels of distillates that we had in storage on June 11th of 2021, and still about 23% below the five year average of distillates inventories for this time of the year…
Meanwhile, after this week's big release of crude from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage rose for the 12th time in 29 weeks and for the 20th time in the past year, increasing by 1,956,000 barrels over the week, from 416,758,000 barrels on June 3rd to 418,714,000 barrels on June 10th, after our commercial crude supplies had increased by 2,025,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories rose to 14% below the most recent five-year average of crude oil supplies for this time of year, and to about 18% above the average of our crude oil stocks as of the second weekend of June over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude oil supplies as of this June 3rd were 10.3% less than the 466,674,000 barrels of oil we had in commercial storage on June 11th of 2021, and were 22.4% less than the 539,280,000 barrels of oil that we had in storage on June 12th of 2020, and 13.2% less than the 482,364,000 barrels of oil we had in commercial storage on June 14th of 2019…
Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 2,764,000 barrels this week, from 1,684,943,000 barrels on June 3rd to 1,682,179,000 barrels on June 10th, after our total inventories had risen by 3,682,000 barrels during the prior week....that left our total liquids inventories down by 106,254,000 barrels over the first 23 weeks of this year, and less than one million barrels from a 13 1/2 year low..
OPEC's Report on Global Oil for May
Tuesday of this week saw the release of OPEC's June Oil Market Report, which includes details on OPEC & global oil data for May, and hence it gives us a picture of the global oil supply & demand situation at a time when major cities in China were under restrictive Covid lockdowns, while at the same time exports of Russian oil were curtailed by sanctions imposed by the West....in light of those offsetting circumstances, OPEC and aligned oil producers had again agreed to increase their output by 400,000 barrels per day for a tenth consecutive month, ie the 10th such increase from the previously agreed to July 2021 level, which was in turn part of the fifth production quota policy reset that they've made over the past twenty-three months, all in response to the pandemic-related slowdown and subsequent irregular recovery....note that with the course and impact of the Ukraine war and the pandemic still uncertain, we consider the demand projections made herein to be pretty speculative, and hence will not address any projections beyond the May estimates..
The first table from this month's report that we'll review is from the page numbered 47 of this month's report (pdf page 57), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC uses an average of production estimates by six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures...
As we can see on the bottom line of the above table, OPEC's oil output decreased by 176,000 barrels per day to 28,508,000 barrels per day during May, down from their revised April production total that averaged 28,684,000 barrels per day....however, that April output figure was originally reported as 28,648,000 barrels per day, which therefore means that OPEC's April production was revised 36,000 barrels per day higher with this report, and hence OPEC's May production was, in effect, just 140,000 barrels per day lower than the previously reported OPEC production figure (for your reference,here is the table of the official April OPEC output figures as reported a month ago, before this month's revision)...
As we can see from that table, the primary reason for the decrease in OPEC's output in May was the 186,000 barrel per day drop in oil production from Libya, where demonstrations against the prime minister had further curtailed production in a country already impacted by repeated bouts of civil strife...but Libya wasn't the cartel's only problem; production fell in more than half its members, and left a deficit that the Saudis and the Emirates, the two OPEC members with surplus capacity, couldn't make up..
According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, 2021, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day each month through December 2021, which was subsequently renewed at monthly meetings to include further 400,000 barrel per day production increases in January, February, March, April, May and June of 2022, and which would indicate an increase of 254,000 barrels per day each month from the OPEC members listed above, with the rest of the 400,000 bpd supplied by other producers. including Russia....but OPEC's decrease of 176,000 barrels per day nearly reversed their expected increase....and while the production decreases in Libya and Nigeria, which has ongoing pipeline theft and leakage problems, were obviously the major reason for the May decrease. several other OPEC members continue to be short of what they were expected to produce, as we'll see in the next table..
The adjacent table was originally included as a downloadable attachment to the press release following the 27th OPEC and non-OPEC Ministerial Meeting on March 31st, 2022, which set OPEC's and other aligned producers' production quotas for May... since war torn Libya and US sanctioned producers Iran and Venezuela are exempt from the production cuts imposed by the joint agreement that governs the output of the other OPEC producers, they are not shown here, and OPEC's quota is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,589,000 barrels per day in May....therefore, the 24,540,000 barrels those 10 OPEC members actually produced in May were 1,049,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for most of this month's shortfall, while only the UAE was able to produce what was expected of them...
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Recall that the original 2020 oil producer's agreement was to jointly cut their oil production by 23%, or by 9.7 million barrels per day, from an October 2018 baseline for just two months early in the pandemic, during May and June of 2020, but that initial 9.7 million bpd production cut agreement was extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in July of that year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August 2020 and subsequent months, which thus became the agreement that governed OPEC's output for the rest of 2020...the OPEC+ agreement for their January 2021 production, which was later extended to include February and March and then April's output, was to further ease their supply cuts by 500,000 barrels per day to a reduction of 7.2 million barrels per day from that original 2018 baseline...then, during a difficult meeting on April 1st of last year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month by a pre-set amount for each country over the following three months, thus extending their joint output cut agreement through July....production levels for August and the following months of last year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over the 2018 reference production levels, and a subsequent attempt to restart that meeting on July 5th was called off....so it wasn't until July 18th 2021 that a tentative compromise addressing August 2021's output quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August, and again by that amount in each of the following months, and also to boost reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022, which is now reflected in the OPEC production quota table you see above, and which now makes the effective monthly production increase 432,000 barrels per day....OPEC and other producers then agreed to increase their production in January 2022 by a further 400,000 barrels per day in a meeting concluded on the 2nd of December, 2021, and reaffirmed their intention to continue that policy with another 400,000 barrel per day increase in February at a meeting concluded January 4, 2022, and then agreed to stick to that 400,000 bpd oil output increase in March, despite pressure from the US to raise output more quickly, at a meeting on February 2nd....then, at a meeting on March 2nd, OPEC and its oil-producing allies, which included Russia, decided to hold their production increase at that level thru April in an OPEC+ meeting that only lasted 13 minutes, their shortest meeting ever...then on March 31, OPEC and aligned producers agreed to reaffirm the decisions of the prior Ministerial meetings and again limit their production increase for May to the agreed 400,000 barrels per day, because "the current [oil market]volatility is not caused by fundamentals, but by ongoing geopolitical developments"...then again, in an OPEC and non-OPEC Ministerial Meeting held on May 5th, they again reaffirmed the decision of the July18th 2021 meeting to increase production by 432,000 barrels per day in June of this year...most recently, however, in a meeting held June 2nd, they agreed to advance the 432,000 barrel per day increase scheduled for September, with that increase to be split evenly between July and August...hence, the production increase now scheduled for those two months is 648,000 barrels per day...
Hence OPEC arrived at the production quotas for August 2021 through MAY of this year by repeatedly readjusting the original 23%, or 9.7 million barrel per day production cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day output reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was subsequently raised to an 8.2 million barrel per day oil output reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during the Covid surge of February, March, and then later during April of last year....under the agreement prior to the current one affecting this month, OPEC's production cut in April 2021 was set at 4,564,000 barrels per day below the October 2018 baseline, which was lowered to a cut of 3,650,000 barrels per day from the baseline with the prior comprehensive agreement, which thus set the July production quota for the "OPEC 10" at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by that agreement....for OPEC and the other producers to increase their output by 400,000 barrels per day from that July 2021 level, each producer would be allowed to initially increase their production by just over 1% per month since that time...for OPEC alone, that meant a 254,000 barrel per day increase for each month from July 2021 to April 2022, at which time the incremental 32,000 barrels per day adjustment they arrived at in July 2021 kicked iN...adding together those monthly increases since last July, when the quota was at 23,033,000 barrels per day, is how they arrived at the 25,589,000 barrels per day quota for OPEC for May that you see on the table above..
The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from June 2020 to May 2022, and it comes from page 48 (pdf page 58) of OPEC's June Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....
after this month's 176,000 barrel per day decrease in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production decreased by a rounded 150,000 barrels per day to average 98.75 million barrels per day in May, a reported decrease which came after April's total global output figure was apparently revised up by 160,000 barrels per day from the 99.74 million barrels per day of global oil output that was estimated for April a month ago, as non-OPEC oil production inched up by 23,000 barrels per day in May after that upward revision, as 400,000 barrels per day production growth in non-OPEC Eurasia and Latin American countries was offset by output decreases totaling 400,000 barrels per day by Canada and the UK...
Even after that decrease in May's global output, the 98.75 million barrels of oil per day that were produced globally during the month were still 5.82 million barrels per day, or 6.2% more than the revised 93.93 million barrels of oil per day that were being produced globally in May a year ago, which was the first month that OPEC and their allied producers began their program of monthly production increases from the 7.2 million barrels per day production cut that had governed the production of the prior four months (see the June 2021 OPEC report (online pdf) for the originally reported May 2021 details)...with this month's decrease in OPEC's output greater than the global decrease, their May oil production of 28,508,000 barrels per day amounted to 28.9% of what was produced globally during the month, down from their revised 29.0% share of the global total in April....OPEC's May 2021 production was reported at 25,463,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,045,000 barrels per day, or 14.2% more barrels per day of oil this April than what they produced a year earlier, when they accounted for 27.2% of global output...
Even after the decrease in both OPECs and global oil output that we've seen in this report, the amount of oil being produced globally during the month was still more than the expected global demand, as this next table from the OPEC report will show us....
The above table came from page 28 of the June Oil Market Report (pdf page 38), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 over the rest of the table...on the "Total world" line in the third column, we've circled in blue the figure that's relevant for May, which is their estimate of global oil demand during the second quarter of 2022....OPEC has estimated that during the 2nd quarter of this year, all oil consuming regions of the globe have been using an average of 98.19 million barrels of oil per day, which is a downward revision of 250,000 barrels per day from their estimate for 2nd quarter demand of a month ago (that revision is circled in green)...but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 98.75 million barrels per day during May, which would imply that there was a surplus of around 560,000 barrels per day of global oil production in May, when compared to the demand estimated for the month...
In addition to figuring May's global oil supply surplus that's evident in this report, the downward revision of 250,000 barrels per day to second quarter demand that's shown circled in green above, combined with the 160,000 barrel per day upward revision to April's global oil supplies that's implied in this report, means that the 300,000 barrels per day global oil output surplus we had previously figured for April would now be revised to a surplus of 710,000 barrels per day...those daily surpluses would follow the 230,000 barrels per day surplus we had figured for March, and the 10,000 barrels per day surplus we had figured for February...so despite the oil shortage concerns that have driven oil prices over $100 a barrel since the war began, the world's oil producers have managed to produce more barrels of oil each day than anyone wanted over that entire span...
This Week's Rig Count
The number of drilling rigs running in the US rose for the 76th time over the prior 90 weeks during the week ending June 17th, but still remained 6.7% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 7 to 740 rigs this past week, which was also 270 more rigs than 470 rigs that were in use as of the June 18th report of 2021, but was also 1,189 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business….
The number of rigs drilling for oil increased by 4 to 584 oil rigs during this week, after rigs targeting oil rose by 6 during the prior week, and there are 211 more oil rigs active now than were running a year ago, even as they still amount to just 36.3% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 14.5% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 3 to 154 natural gas rigs, which was the most natural gas rigs deployed since September 6th, 2019, and up by 57 natural gas rigs from the 97 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two "miscellaneous" rigs still active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was up by one to fifteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's two more than the count of offshore rigs that were active in the Gulf a year ago, when all 13 Gulf rigs were drilling for oil offshore from Louisiana…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....
in addition to rigs offshore, we continue to have 3 water based rigs drilling through inland bodies of water this week, including a directional rig drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there was just one such "inland waters" rig deployed...
The count of active horizontal drilling rigs was up by six to 676 horizontal rigs this week, which was 248 more rigs than the 420 horizontal rigs that were in use in the US on June 11th of last year, but still 50.9% below the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the directional rig count was up by one to 39 directional rigs this week, and those were up by 14 from the 25 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 27 vertical rigs this week, while those were up by 7 from the 20 vertical rigs that were in use on June 11th of 2021….
The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 17th, the second column shows the change in the number of working rigs between last week’s count (June 10th) and this week’s (June 17th) count, the third column shows last week’s June 10th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 18th of June, 2021..
to determine where the 7 rigs added in New Mexico were located, we first check the Rigs by State file at Baker Hughes for the changes in the Texas Permian basin...there we find that there were three rigs pulled out of Texas Oil District 8, which is the core Permian Delaware, and that there were 4 rigs pulled out of Texas Oil District 7C, which includes the southern counties of the Permian Midland....since that means that the Texas Permian rig count was down by 7 rigs, then all 7 New Mexico rigs must have been added in the western Permian Delaware in the southeast corner of that state for the national Permian count to remain unchanged...
elsewhere in Texas, we find that two rigs were added in Texas Oil District 1, that one rig was added in Texas Oil District 3, and that another rig was added in Texas Oil District 4 but that one rig was pulled out of Texas Oil District 2....one of those four rig additions was in the Eagle Ford, and it's possible another one could have been, if the rig pulled out of District 2 had been targeting that basin...Texas also had a rig added in Texas Oil District 5, apparently targeting a basin that Baker Hughes doesn't track, and two rigs added in Texas Oil District 6, both of which were likely targeting natural gas in the Haynesville shale, because the Haynesville shale region of northwest Louisiana had a rig pulled out at the same...there was also a rig added in Texas Oil District 10, which would have been in the Granite Wash, thus suggesting that two rigs were pulled out of the Granite Wash in Oklahoma at the same time....note that Oklahoma's count remained unchanged as two oil rigs were added in the Cana Woodford and another oil rig was added in the Ardmore Woodford in the state at the same time...likewise, Louisiana's rig count remained unchanged because an oil rig was added in the state's offshore waters, while the natural gas rig was pulled out of the northwest corner of the state...however, the natural gas rig count was up by 3 because two natural gas rigs were added in a basin or basin that Baker Hughes doesn't track..
Riverbend Energy Sells Non-Operated Wells in Ohio Utica, Elsewhere - Riverbend Energy Group invests in oil and gas wells. The company mainly invests in non-operated oil and gas wells, although it also has some operated wells in its portfolio (and investments in renewables too). In May we told you that Riverbend was, according to sources speaking with Reuters, working with an unnamed investment bank to shop three portfolios of non-operated oil and gas assets for $2 billion–with one of the packages containing Utica Shale assets (see Riverbend Energy Shops Non-Operated Wells in Ohio Utica, Elsewhere). Reuters was right, as usual. The properties produce about 47,000 boe/d from 11,000 wells, the company said. A spokesperson would not comment on the name of the buyer. The transaction is expected to close during the third quarter.
EIA DPR: MU July NatGas Set to Increase More than Any Other Play ---Once again the number crunchers at the U.S. Energy Information Administration overestimated natural gas production in the Marcellus/Utica in the agency’s monthly Drilling Productivity Report (DPR). This is a pattern. Perhaps making such revisions is inevitable, but we find it disconcerting. Last month the EIA predicted total production in the Marcellus/Utica region (which they call Appalachia in the report) would be 35.67 billion cubic feet per day (Bcf/d). In the monthly DPR issued yesterday, EIA revised the June number down to 35.16 Bcf/d. Not a huge difference. It translates to 515 million cubic feet per day (MMcf/d) less in production–roughly 1/2 Bcf/d.
Pa. DEP splits up long-stalled oil and gas air pollution rule - Pennsylvania environmental regulators are moving forward with just half of a long overdue rule designed to limit air pollution from oil and gas well sites after objections from legislators and advocates for the state’s conventional oil and gas industry caused the proposed rule to be split in two. The state Environmental Quality Board voted Tuesday to advance a rule that only covers air pollution from unconventional, or shale gas, well sites and related equipment. The revised rule loses roughly 80% of the pollution reduction benefit that had been expected when the rule covered both the state’s shale and traditional well site infrastructure. Officials from the state Department of Environmental Protection said they are working to finish a second rule to address air pollution sources in the conventional oil and gas industry as soon as possible, likely by September. The agency is racing to salvage the rules to avoid sanctions by the U.S. Environmental Protection Agency that could threaten billions of dollars in federal highway funds. Sanctions that will require major new air pollution sources throughout Pennsylvania to offset double their emissions are set to take effect on Thursday, but the deadline to avoid federal highway sanctions is in mid-December, DEP officials said. DEP has currently identified four facilities that will be subject to the offset sanctions on June 16. Both types of sanctions are automatic under the federal Clean Air Act and the U.S. EPA does not have discretion over whether and when to impose them, an EPA spokesman said. Pennsylvania is more than three years past the deadline when it was required to implement the oil and gas air pollution controls, which are based on federal guidelines. They are designed to cut releases of a smog-forming group of chemicals called volatile organic compounds from the state’s existing oil and gas well sites while cutting emissions of methane, a potent greenhouse gas, as a side benefit. DEP contends it was not required to split the rule in two, but decided to do so after a Republican-led state House committee objected to the combined rule, which triggered a legislative review process that could stretch past the sanction deadline and into next year. Trade groups for the state’s conventional oil and gas industry also sued to block the rule from applying to their well sites, arguing that a 2016 state law requires conventional oil and gas wells to be regulated independently from Marcellus and Utica shale wells.
Major export terminal pitched in Chester sets up clash between Biden's LNG, environmental justice goals - Plans for a massive liquefied natural gas facility and export terminal in Chester along the Delaware River have quietly been shopped around to current and former elected officials and their representatives from Chester City Hall to the governor’s office in Harrisburg.WHYY News obtained details of the plan, as well as the company’s lobbying efforts, through Right-to-Know requests.Penn America Energy LLC, the New York-based company behind the estimated $4 billion-to-$8 billion project, wants to build on a 100-acre brownfield site along the Chester waterfront with the goal of exporting 7 million metric tonnes of LNG each year to countries in South America, Europe, and Asia, according to the documents.For comparison, six current LNG export terminals in the U.S. shipped 7.6 million metric tonnes of LNG overseas in March, according to the Energy Information Administration. Franc James, Penn America’s CEO, told WHYY News the project has been in the works for five years, and is “sourcing the cleanest environmentally responsible natural gas possible.”“As an environmentalist, I want to set a new standard for being the most environmentally responsible and sustainable project ever developed,” Franc said in an email. “Natural gas from the Marcellus is the cleanest natural gas in the world now and working to be even cleaner. That greatly appeals to us and in support of a new standard worldwide.”In response to questions about the relative cleanliness of Marcellus Shale, Penn America LNG provided a chart by the Clean Air Task Force, which says due to regulations and efforts by producers, natural gas production in the Appalachian Basin emits the least amount of methane worldwide.While James did not provide details or a timeline for the project, a February 2021 report by Penn LNG, obtained by WHYY News, describes the project. James said the site has not yet been secured, but others briefed on the plan say the company is eyeing the former Ford factory. James told WHYY News that anticipating a shipping date is premature. But a project overview in the report says the engineering firm Bechtel and Air Products would build a gasification plant that could freeze one billion cubic feet of Marcellus and Utica shale gas a day with a target to start shipping overseas in 2027 or 2028.
Louisiana is bracing for an LNG boom. The projects will emit millions of tons of greenhouse gases. - A report outlining the environmental impact of the United States’ roaring liquefied natural gas export industry says 25 impending LNG projects could spew out up to 90 million tons of greenhouse gases annually — more than would be generated in a year by all of the cars, trucks, buses and motorcycles in Florida. The majority of those 90 million tons — which will be added to the sector's existing 12.3 million tons — will originate in Louisiana. In all, 12 of the 25 projects are set to call Louisiana home, joining three of the nation’s seven operational export terminals. The projects include both new terminals and expansions of existing facilities. If they approach their permitted totals, the 12 Louisiana projects could produce a combined 56.9 million tons of greenhouse gases each year, according to a report from the Environmental Integrity Project, an environmental law nonprofit that tracks permit enforcement. That would account for about 63% of the 90 million new tons. The 90 million total is equivalent to 18 million passenger vehicles running for a year, the report said. For comparison, Florida has nearly 17 million registered motor vehicles, according to federal data. Louisiana has about 3.9 million. However, the Louisiana emissions figures are incomplete. G2 Net Zero LNG, a proposed Cameron Parish facility, has not revealed its projected emissions totals because it has not filed for a federal air permit. There’s one other caveat: the LNG facilities don’t always reach their limits. Sabine Pass LNG in Cameron Parish hit 42% of its allowed emissions in 2020. But it led the way for all U.S. export terminals with 4.5 million tons of greenhouse gases. Second was Cameron LNG in Hackberry with 3.7 million tons. Calcasieu Pass, which began production in January, is permitted for about 4 million tons per year. Of the four U.S. terminals under construction, Driftwood LNG in Calcasieu Parish and Plaquemines LNG in Plaquemines Parish have the two highest permitted thresholds at 9.5 million and 8.1 million tons, respectively. Louisiana’s 10 other LNG projects are either awaiting environmental permits or have made little progress since being announced..
U.S. natgas drops 3% as Freeport LNG outage cuts demand (Reuters) - U.S. natural gas futures slid about 3% to a one-week low on Monday as the shutdown of the Freeport liquefied natural gas (LNG) export plant last week cut U.S. demand for gas, leaving more of the fuel available to refill low stockpiles. That gas price decline came even though power demand in Texas hit an all-time high on Sunday and will likely break that record on Monday as economic growth boosts usage and homes and businesses keep air conditioners cranked up to escape a lingering heatwave. Freeport shut on June 8 after a pipe burst, according to energy research firm IIR Energy and others. Freeport LNG, the plant owner, has said the plant would be down for at least three weeks of maintenance. Analysts projected that the Freeport shutdown would reduce the gas available to the rest of the world, especially in Europe where most U.S. LNG has gone in recent months as countries look to wean themselves off Russian supplies after Moscow's invasion of Ukraine. But leaving more gas in the United States should give utilities a chance to rebuild extremely low stockpiles more quickly. Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a three-week shutdown would result in about 42 billion cubic feet (bcf) more gas being available to the U.S. market. U.S. storage is currently about 15%, or 340 bcf, below normal levels for this time of year, its lowest since April 2019. Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) fell 24.1 cents, or 2.7%, to settle at $8.609 per million British thermal units (mmBtu), their lowest since June 3. With the U.S. Federal Reserve expected to keep raising interest rates in coming months to reduce inflation, open interest in NYMEX futures fell to its lowest since September 2016 for a second day in a row on Friday as investors cut back on risky assets like commodities. U.S. gas futures were up about 126% so far this year as much higher prices in Europe and Asia keep demand for U.S. liquefied natural gas (LNG) exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe. Gas was trading around $25 per mmBtu in Europe and $23 in Asia.
Freeport LNG Out for Months, Stranding 2 Bcf/d and Rattling Global Markets - Representatives with the liquefied natural gas (LNG) facility in Texas that suffered an explosion last week, Freeport LNG, said early Tuesday that the company does not expect the export facility to be fully repaired for months. The company is now targeting late 2022 for a return to full service instead of the initial guidance of three weeks. Given that the explosion and fire that knocked the plant offline were contained to a small area, partial operations could begin in 90 days, said Freeport LNG Development LP. The announcement sent U.S. natural gas futures tumbling. The July New York Mercantile Exchange gas futures contract plunged by $1.42 to close at $7.189/MMBtu on Tuesday. It hit an intraday low of $7.008. The European benchmark Title Transfer Facility prompt contract surged more than $4 to finish Tuesday near $30. [Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.] An explosion last Wednesday at the terminal left market participants contemplating potential demand destruction of 2.0 Bcf/d through at least June. The much longer repair period could free up gas for domestic use and ease a feared supply crunch that had sent U.S. futures to a 14-year high this spring. Meanwhile, competition for LNG cargoes is poised to heat up between Asia and Europe given the potential lack of supplies through year’s end. “At this time, completion of all necessary repairs and a return to full plant operations is not expected until late 2022,” Freeport stated. A “resumption of partial operations is targeted to be achieved in approximately 90 days, once the safety and security of doing so can be assured, and all regulatory clearances are obtained.” The cause of the accident remains unclear and an investigation is underway. The company said Tuesday the incident occurred in pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the dock facilities. None of the liquefaction trains, LNG storage tanks, marine facilities or LNG process areas were impacted, the company said. Preliminary observations suggest the incident resulted from the overpressure and rupture of a segment of an LNG transfer line, “leading to the rapid flashing of LNG and the release and ignition of the natural gas vapor cloud,” Freeport said. The vapor cloud was contained within the facility’s fence line, the company said. The explosion lasted about 10 seconds. The fire and smoke that followed the blast were from materials that burned where it occurred, including pipeline insulation and cabling. The fire was extinguished in 40 minutes. No injuries were reported.
Natural gas plummets as Freeport delays facility restart following explosion -- Natural gas prices plunged on Tuesday, after Freeport LNG said its facility that had a fire last week likely won't be back up and running soon. "[C]ompletion of all necessary repairs and a return to full plant operations is not expected until late 2022," the company said Tuesday in a statement. The facility, located in Quintana Island, Texas, had an explosion last Wednesday."Given the relatively contained area of the facility physically impacted by the incident, a resumption of partial operations is targeted to be achieved in approximately 90 days," Freeport LNG said.U.S. natural gas fell about 16% to $7.22 per million British thermal units (MMBtu)."The U.S. natural gas market will now be temporarily oversupplied as 2 bcf/d or a little over 2% of demand for U.S. natural gas has been abruptly eliminated," ."U.S. natural gas supply will likely remain at current levels as producers won't reduce production by 2 bcf/d. The result is an oversupplied U.S. natural gas market," he added.Freeport's operation is roughly 17% of the U.S.' LNG processing capacity.Despite Tuesday's drop, natural gas prices are still up 93% since the start of the year. Demand has rebounded as worldwide economies emerge from the pandemic, while supply has remained constrained.Russia's invasion of Ukraine upended a market that was already tight. As Europe looks to move away from Russian energy, record amounts of U.S. LNG are now heading to the continent.Surging prices are adding to inflationary pressures across the economy. Drivers are already grappling with record prices at the pump with the national average for a gallon of gas topping $5 over the weekend, and now utility bills are also set to rise.Natural gas prices surged above $9 per MMBtu in May, hitting the highest level since August 2008.After the explosion at Freeport's facility last week, the company initially said the plant would be shut for several weeks."The incident occurred in pipe racks that support the transfer of LNG from the facility's LNG storage tank area to the terminal's dock facilities," the company said Tuesday. "None of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted," the company added.
U.S. natgas plunges 17% on long Texas Freeport LNG outage - (Reuters) - U.S. natural gas futures plunged about 17% to a five-week low on Tuesday on expectations an extended outage at the Freeport liquefied natural gas (LNG) export plant in Texas would leave more gas to refill low U.S. stockpiles. In addition, news that the Freeport restart could take 90 days rather than the initial three-week estimate, following an explosion last week, exacerbated concerns over gas shortages in Europe. Gas prices at the Title Transfer Facility in the Netherlands soared by 15%. Freeport shut on June 8 after a pipe burst, according to energy research firm IIR Energy and others. Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would result in about 180 billion cubic feet (bcf) more gas being available to the U.S. market. "Freeport's outages will place a ceiling on demand, providing additional power behind expected storage injections in the near term," U.S. storage is currently about 15%, or 340 bcf, below normal levels for this time of year, its lowest since April 2019. Front-month gas futures for July delivery fell $1.42, or 17%, to settle at $7.189 per million British thermal units (mmBtu), their lowest close since May 9. That was the biggest daily percentage drop since a 26% fall in late January in what has already been an extremely volatile year for gas trade. The price drop came despite record power demand in Texas, forecasts for more gas demand over the next two weeks than previously expected, a reduction in daily gas output and low wind power. Power demand in Texas failed to hit a new all-time high on Monday due to less hot weather, but will likely break peak use records on Tuesday and later this week as homes and businesses keep air conditioners cranked up to escape a lingering heatwave. Low wind power forces generators, including those in Texas - the state with the most wind power - to burn more gas to keep the lights on. U.S. gas futures were still up about 96% this year as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe. Gas was trading around $30 per mmBtu in Europe and $23 in Asia. The average amount of gas flowing to U.S. LNG export plants fell from 12.5 bcfd in May to 11.8 bcfd so far in June, with the Freeport outage, according to data from Refinitiv. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG.
U.S. Natural Gas Rises Over 4.5% Amid Pre-Summer Heat Wave - After plunging to a 5-week-low on Tuesday, natural gas prices in the U.S. have ramped up again, gaining 4% on Wednesday on excessive temperatures expected to last through next week. By 3:05 p.m CT, Henry Hub natural gas prices were at $7.514, up 4.52%, up over 109% year-to-date.July Nymex natural gas (NGN22) on Wednesday closed up +0.231 (+3.21%).Demand for natural gas to power air-conditioners is expected to rise significantly as one-third of the United States is witnessing extreme heat warnings. Over the next few days, heat indexes are expected to break records, putting additional pressure on electricity providers. Heat waves are also spreading across Europe, where natural gas prices surged more than 20% on Wednesday. Gas prices in Europe continue to spike not only on temperature but on Russia’s move this week to curb gas supplies via Nord Stream. On Tuesday, Gazprom said it would cut gas flows to Germany via Nord Stream by 40%, citing equipment repairs, prompting German officials to accuse Moscow of further weaponizing natural gas. On Wednesday, Gazprom said it had reduced the flow of gas to Italy, as well. In the United States, Tuesday saw natural gas prices plunge on news of a 90-day shutdown of the Freeport, Texas, LNG export terminal following an explosion last week. ″[C]ompletion of all necessary repairs and a return to full plant operations is not expected until late 2022,” the company said Tuesday in a statement. Freeport’s delayed restart takes approximately 2% of demand off the market, suggesting potential oversupply of natural gas. As of Wednesday, potential oversupply, ahead of the Energy Information Administration's (EIA) release of natural gas inventory data on Thursday, was being counterbalanced by a heat wave that suggests an uptick in demand.
Natural Gas Futures Bounce Back After Third-Largest Drop on Record - After slumping $1.420 in Tuesday’s session in the wake of news that the liquefied natural gas (LNG) export project on Quintana Island, TX, Freeport LNG, won’t see a return to full service until late this year, the July Nymex gas futures contract on Wednesday regained 23.1 cents day/day and closed at $7.420. August rose 22.6 cents to $7.406. Cash prices recovered from a slump of their own. NGI’s Spot Gas National Avg. gained 27.5 cents to $7.540 on Wednesday following a $1.370 loss a day earlier. The Freeport outage, caused by an explosion and brief fire last week, translates into a loss of about 2.0 Bcf/d of LNG feed gas for at least three months, not three weeks, as initially telegraphed by the company. What’s more, with full service delayed until near the end of 2022, export volumes at the facility will likely remain below capacity at a time when global demand supports maximum volumes. As such, feed gas that would have found its way to Freeport for export likely will now be used domestically, including for injections into storage. Other American LNG facilities are maxed already and cannot absorb more. That means low supplies in the United States relative to overall demand – as the summer nears – are bound to get a boost, helping to balance the market. Prices had skyrocketed to 14-year highs this spring on supply worries. The Freeport news and expected impact on storage eased those concerns and dragged prices down Tuesday. Prompt month prices plunged as low as $7.008 intraday. The Schork Report’s analysts noted that, from peak to trough, Tuesday’s drop marked the seventh-largest decline on record. The settlement represented the third-largest day/day decline in Nymex records dating to 1990, they said. “The second-largest exporter of U.S. LNG just went offline on the cusp of the peak cooling season,” the analysts said. The Energy Information Administration (EIA) printed a 97 Bcf injection into Lower 48 storage during the week ended June 3. The build lifted stocks to 1,999 Bcf, but supplies in storage remained 14.5% below the five-year average. [Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.] With an extended outage for the Freeport terminal, deficits are likely to shrink and the odds of summer natural gas prices surpassing the $10 mark have “materially lessened,”
US natural gas storage levels increase by 92 Bcf, slimming deficit: EIA -US natural gas working stocks rose by 92 Bcf during the week ended June 10, reducing the deficit to the five-year average and slowing the momentum of a two-day recovery for gas futures. Storage inventories rose to 2.095 Tcf for the week ended June 10, the US Energy Information Administration reported June 16. The build was slightly higher than an S&P Global Commodity Insights' survey of analysts calling for an 89 Bcf net injection. The weekly injection was more than triple the 28 Bcf build reported during the corresponding week in 2021, and 13 Bcf more than the five-year average build of 79 Bcf, according to EIA data. The above-average build reduced storage's deficit to the five-year average to 323 Bcf, or 13.4% from 336 Bcf, or 14.4%, the previous week. The NYMEX Henry Hub July contract's settlement came in far lower than that was observed in early morning trading, suggesting that the above-average build into storage helped stymie a fledgling futures rally. In June 16 trading, before the weekly gas storage report was published at 10:30 am ET, the July contract was on a path toward retracing its steps back toward $8/MMBtu. The Henry Hub prompt traded around $7.87/MMBtu in the minutes before the report was released, up more than 40 cents from the June 15 settlement of $7.42/MMBtu. Within an hour of the report's launch, the contract had dropped to $7.70/MMBtu and fell further as the trading session went on. The NYMEX Henry Hub July contract settled at $7.464/MMBtu June 16, up 4.40 cents from the prior day, preliminary settlement data from CME Group shows. Looking ahead to the week in progress, a forecast by S&P Global's supply and demand model calls for a much smaller draw of 52 Bcf for the week ending June 17, which would erase this week's gains against the deficit. While the Freeport LNG outage is expected to loosen supply-demand balances in the South Central region, heightened cooling demand from record-high temperatures in the Midwest, Southeast, and Texas has soaked up some of the excess supply, leaving less gas available to flow into storage in the near term. S&P Global data shows that gas-fired power demand in Texas and the Southeast has come in 1.5 Bcf/d, or 9%, higher month to date than year-ago levels. Similarly, gas demand in the Midwest and Midcontinent has come in nearly 800 MMcf/d, or 6%, higher so far this June compared with last.
U.S. natgas drops 7% to 7-wk low on demand decline, oil price plunge - -- U.S. natural gas futures dropped about 7% to a seven-week low on Friday on forecasts for lower demand this week and next and expectations the extended shutdown of the Freeport liquefied natural gas (LNG) export plant in Texas would allow utilities to quickly rebuild low U.S. gas stockpiles. Traders also noted gas futures were following a collapse in oil prices due to concerns interest rate rises could cause a recession that reduces demand for energy. Prices declined despite record power demand in Texas, forecasts for hotter weather and much higher U.S. gas demand in two weeks, and small declines in U.S. gas output in recent days. The Freeport shutdown on June 8 reduced the amount of U.S. gas available to the rest of the world, especially in Europe where most U.S. LNG has gone as countries there wean themselves off Russian energy after Moscow invaded Ukraine. Freeport, which said the plant will remain out of service for about 90 days, declared force majeure on LNG shipments until September, according to a Bloomberg report. Gas prices at the European benchmark Title Transfer Facility in the Netherlands were up about 4% on Friday after Russia reduced pipeline exports to Europe. Analysts said leaving more gas in the United States should give utilities a chance to rebuild extremely low stockpiles more quickly. The Freeport facility, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would make about 180 billion cubic feet (bcf) more gas available to the U.S. market. Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) fell 52.0 cents, or 7.0%, to settle at $6.944 per million British thermal units (mmBtu), their lowest close since April 28. For the week, the contract was down about 22% after rising 4% last week. That was the biggest weekly decline since early December when it dropped 24%. With the Federal Reserve expected to keep raising interest rates, open interest in NYMEX futures fell on Thursday to the lowest level since September 2016 for a sixth day in a row as investors continued to cut back on risky assets. U.S. gas futures are still up about 88% so far this year as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe. Gas was trading around $38 per mmBtu in Europe and $34 in Asia. Russia cut pipeline exports to Europe to 3.8 bcfd on Thursday from 4.7 bcfd on Wednesday on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with an average of 11.6 bcfd in June 2021.
LNG plant had history of safety issues before explosion - The explosion and fire in Texas last week that shut down about one-fifth of the country’s liquefied natural gas export capacity wasn’t the first time flames have bedeviled the Freeport LNG facility.When an electrical fire broke out in an enclosure at the terminal in 2020, the company’s call for help was routed to Houston, more than 60 miles away.After that delay, local firefighters responded. But they couldn’t find their way into the facility. Federal regulators would later say there weren’t enough Freeport personnel helping direct them. The mix-up is part of a record of safety lapses at Freeport, a massive facility that handles a product that currently is crucial to meeting the world’s energy needs. The terminal has had a string of incidents in recent years, and federal regulators have hit it with more enforcement actions than any of its competitors along the Gulf of Mexico.“The question is, what’s going on here? Is it something systemic?” said Richard Kuprewicz, a chemical engineer who worked for years in the oil and gas industry and now consults on safety. “Is there a recurring theme coming up?”Freeport LNG announced yesterday that the facility would be shut down for about three months (Greenwire, June 14). That’s a dramatic increase from the estimate, on the day of the explosion, that it would be at least three weeks. Considering the facility’s size and the current gas crunch, the development has been wreaking havoc on gas prices.But the three-month estimate is for only partial operations. The company’s statement said it did not expect a return to full operations “until late 2022.” The shutdown deals a blow to President Joe Biden’s efforts to help Europe wean itself quickly from Russian gas by expanding LNG exports from the United States. The U.S. oil and gas industry has also promoted its role in supplying gas to Europe before and after the invasion. But a significant portion of that supply is now unavailable.Before last week’s blast, federal inspectors had conducted six “failure investigations” of the operation since the beginning of 2015, according to federal records reviewed by E&E News. One opened just last month when, according to a National Response Center report, a spill of 100 gallons of triethylene glycol sent an employee to the hospital. Freeport has been hit with 11 enforcement actions from the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) since early 2015, agency records show, more than any other Gulf Coast LNG facility.Problems at the facility have affected shipments and customers, as well. Last year, industry media reported that persistent concerns about the quality of gas going into the plant and loading issues caused Freeport to reduce the number of cargoes available for export.The explosion last week was the fourth incident reported to PHMSA since mid-2019 at the plant, which began operations in 2008 as an import terminal. The site began exporting gas in 2019.A safety expert called the frequency of incidents “alarming,” and possibly a sign of poor planning.“LNG is a beast when it comes to hazard and particularly fire and explosion,” said Faisal Khan, director of the Mary Kay O’Connor Process Safety Center at Texas A&M University. “It can easily escalate.”
Several thousands of gallons of oily material in Flint River (AP) — Several thousands of gallons of an oil-based, dark black material with a petroleum smell spilled into the Flint River in Flint, authorities said Wednesday. The spilled appeared to be 5 miles (8 kilometers) miles long, Jill Greenberg, a spokeswoman for Michigan's environmental agency, told MLive.com. “Booms are being deployed and investigators are working to determine a source,” the agency said on Twitter. Officials said drinking water was not threatened. Flint used the river for drinking water in 2014-15 before lead contamination caused the city to return to a regional water supplier. The U.S. Environmental Protection Agency is sending two on-scene coordinators to Flint in response, an EPA spokeswoman said. Agencies from the city of Flint, Genesee County and the state of Michigan were among those that responded initially to what the state has said was a spill of several thousands of gallons of an oil-based, dark black material with a petroleum smell. They’ve said the spilled material, located within a 10-mile stretch of the river, looks similar to motor oil. Representatives of the state agency took samples from the affected area of the river Wednesday, but Greenberg said results were not immediately available. “We’re still in emergency response mode ...,” said Jill Greenberg, an EGLE spokeswoman. “We’ve identified a potential source, but we are still investigating.”
Biden ready to use "emergency authorities" to boost fuel output, lower gas prices --President Biden will warn CEOs of the nation's largest oil companies on Wednesday that he's considering invoking emergency powers to boost U.S. refinery output, according to a letter obtained by Axios. Biden's direct engagement with the oil giants is part of an ongoing White House effort to tame fuel prices despite limited options — and cast oil companies as responsible for consumers' higher bills.The letter, which calls on the companies to boost output, signals how gasoline and diesel prices have become both an economic and political shock reaching the highest levels of the administration. Biden tells seven big refiners and fuel companies that he's "prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term.""I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office," he writes. "But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable."Adding an olive branch, the letter — sent to the heads of ExxonMobil, Chevron, BP America, Shell USA, Phillips 66, Marathon and Valero — calls for them to offer "concrete, near-term solutions."Biden says he wants ideas to address inventory, price and refinery capacity issues in the coming months, as well as transportation measures to bring fuel to market. "The crunch that families are facing deserves immediate action," Biden writes. : In seeking help from the oil industry, Biden is walking a political tightrope, eager to lower the cost at the pump without alienating his base, which backs policies to combat climate change.: Biden said Energy Secretary Jennifer Granholm will convene an "emergency meeting on this topic." Biden's letter focuses on the drop in U.S. refinery capacity in recent years. It has dropped by about 1 million barrels per day compared to pre-COVID levels, according to the industry and federal data.
The Loss Of US Refining Capacity Is Helping Drive Record Diesel Prices, And It Won’t Improve Anytime Soon - Analysts and casual observers of oil markets rely on a very simple number to determine the strength of refined petroleum products relative to a barrel of crude: the 3:2:1. There are far more complex models out there, but the beauty of the 3:2:1 is that anybody can calculate it. Take the futures price of Brent or West Texas Intermediate (WTI) and multiply it by three. Then take the price of reformulated blendstock for oxygenate blending (RBOB) gasoline, an intermediate product used to produce finished gasoline, multiply the cents-per-gallon price by 42 to get dollars per barrel, and then do the same with one barrel of ultra-low-sulfur diesel. Add the RBOB and diesel prices together, subtract the crude price, and you have your 3:2:1 number. In 2019, the last full pre-pandemic year, the 3:2:1 for WTI averaged $18.63 a barrel, based on data from the daily settlements of the CME Group Inc. commodity exchange. It regularly dipped below $10 a barrel during the pandemic-gripped market of 2020. At the start of this year, it stood at around $20 a barrel. The 3:2:1 for WTI in recent days has hovered just under $60 a barrel, and traders are shaking their heads because they readily admit they have never seen anything like it. Crude is up, but products such as diesel are up a lot further. Oil markets are starting to accept that while the cutoff of an unknown quantity of Russian crude from the markets is clearly a factor in the surge in petroleum prices, markets also are getting hit with upward pressure from several years of refinery closures, particularly in the U.S. Combine that with pandemic-induced slowdowns in new refineries being built in other parts of the world and you have a squeeze on refining products that is clearly visible in that eye-popping 3:2:1 margin. More complex models of refining yields also are at levels not seen for years, if ever. And it’s coming as high prices do not yet appear to be having a significant impact on demand. Product supplied, a proxy for U.S. demand in data supplied by the Energy Information Administration, was about 900,000 barrels per day less than the first week of June in 2019, but it’s also the second-highest level ever. And GasBuddy, a service that provides gasoline retail price information and demand, tweeted Sunday that weekend gasoline demand continued to show no signs of a downturn. Because oil products can be put on ships and moved thousands of miles, all consumers are impacted by the global refining market. A U.S. consumer does benefit from a barrel of new refining capacity built in Southeast Asia. And as the most recent BP Statistical Review shows, the world has been adding refining capacity at a steady clip, rising to 101.9 million barrels per day in 2020 from 93.8 million barrels per day in 2010. It was notable that the increase from 2019 to 2020 was small, just 200,000 barrels per day. There were other years during that span in which the annual jump was more than 1 million barrels a day. (The data goes through 2020.) But as Charles Kemp, a vice president at the refinery consulting firm of Baker & O’Brien, said, not all refinery additions are equal. Looking over the loss of refining capacity in the U.S. in recent years, Kemp told FreightWaves in a phone interview that “a factor that has not been accounted for is that yes, we lost some refining capacity. We could have lost some simple refining capacity without a significant fuel shortage. But we also lost complex conversion capacity.”There are refineries that simply cook crude in a crude distillation unit — the most basic building block in a refinery — with a yield of products that are mostly considered intermediate products which require further processing is necessary to make a product such as gasoline. These refineries are often known in the industry as “teapots.” And then there are giant refining complexes with a tremendous amount of what is known as conversion units. They have units such as cat crackers and cokers that can squeeze a high percentage of desired products such as gasoline or diesel out of those units.
Why Biden's refinery push may run into trouble - President Joe Biden raised the stakes in his campaign against high fuel prices yesterday, calling on U.S. refiners to cut their profit margins and help consumers who are struggling with energy costs to pay their bills.The White House also suggested the president could use “all reasonable and appropriate federal government tools” to increase refining capacity in order to get record gasoline prices down, including the Defense Production Act to order refiners to bring some of their shuttered plants back online. But analysts and oil-price watchers said there’s little the Biden administration — or the industry itself — can do to cut into the high profit margins at refiners. The lingering effects of the Covid-19 pandemic and the Russian war in Ukraine are likely to last into next year, they say. But reopening refineries will be a heavy lift. It would cost hundreds of millions of dollars for each site, and it would take months, John Auers, a refinery consultant at Turner, Mason & Co., said in an interview.Yesterday, trade groups said the administration’s focus on climate change and environmental issues is one of the obstacles keeping the industry from investing in refineries. As a candidate, Biden promised to “end fossil fuel” and he’s taken a series of steps to cut pollution from automobiles and control greenhouse-gas emissions, the heads of the American Petroleum Institute and the American Fuel & Petrochemical Manufacters said in a joint letter to the White House.“Refiners do not make multi-billion-dollar investments based on short-term returns,” the trade group chiefs, Mike Somers of API and Chet Thompson of AFPM, wrote. “They look at long-term supply and demand fundamentals and make investments as appropriate.”Some refineries were also closed because of disasters. An explosion destroyed part of the Philadelphia Energy Systems plant in 2019, and its owner filed for bankruptcy a few months later. Last year, Phillips 66 closed its Alliance Refinery outside New Orleans after it flooded during Hurricane Laura. During the pandemic, companies concentrated on the most profitable operations and closed their older, often lower-tech, refineries (Energywire, May 5, 2020).Even with the pandemic waning, there’s little incentive for companies to reopen their plants. The industry still expects gasoline and diesel use to be flat for the next few years, Auers said. And the Biden administration has been signaling since 2020 that it wants to move the U.S. away from its reliance on fossil fuels.“It certainly doesn’t fit in — their whole policy goal is to move away from oil,” Auers said. Likewise, the structure of the refining business means there’s no economic incentive for companies to voluntarily cut their profit margin. “They have lucked into these high margins, they didn’t create the high margins,” Auers said.In an emailed statement yesterday, Exxon said it intends to increase its refining capacity 250,000 barrels a day. “We have been in regular contact with the administration to update the President and his staff on how ExxonMobil has been investing more than any other company to develop U.S. oil and gas supplies,” the company said.Other projects are also likely to come online in 2023, Auers said, including at Valero’s Port Arthur refinery and a privately owned refinery in St. Croix, U.S. Virgin Islands.Still, high oil prices and high margins are likely to continue into 2023, according to a report yesterday from the International Energy Agency.Oil production is expected to rise next year, but demand will rise even faster, which will keep prices high, the Paris-based organization said in its Oil Market Report. More than 1 million barrels of refining capacity is expected to come online this year, followed by 1.6 million barrels in 2023.“Nevertheless, product markets are expected to remain tight, with a particular concern for diesel and kerosene supplies,” IEA said.
Premature Closure Of Houston Refinery Could Worsen The Fuel Crunch - U.S. refining capacity could take a hit from an earlier than planned closure of a major refinery in Houston, which could worsen the refining and fuel crunch in the country.LyondellBasell—which announced in April that it would cease operation of its Houston Refinery by the end of 2023—could close the facility prematurely if a major equipment failure affects processing units, two sources with knowledge of the chemicals giant’s operations told Reuters on Tuesday.LyondellBasell’s 268,000-bpd Houston refinery has the ability to transform very heavy high-sulfur crude oil into clean fuels, including reformulated gasoline and low-sulfur diesel. Other products include heating oil, jet fuel, olefins feedstocks, aromatics, lubricants, and petroleum coke.The firm, however, said earlier this year that “we have determined that exiting the refining business by the end of next year is the best strategic and financial path forward for the Company.”LyondellBasell did not immediately respond to a request for comment from Reuters.If the Houston refinery closes much earlier than the end of 2023, it could exacerbate the already strained refining capacity in the United States.Some 1 million bpd of refinery capacity in America has been shut permanently since the start of the pandemic, as refiners have opted to either close money-losing facilities or convert some of them into biofuel production sites.In the United States, operable refinery capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data. U.S. refineries cannot catch up with demand, which has rebounded from the COVID lows and is still robust despite the record-high gasoline and diesel prices in America. Inventories of fuel are at multi-year lows as the Russian invasion of Ukraine upended oil trade flows and constrained supply.
Biden Tells USA Oil Refiners Record Profits Not Acceptable - President Joe Biden told US oil refiners that unprecedented profit margins are unacceptable and called for “immediate action” to improve capacity as the soaring price of gasoline feeds record inflation and fears of a recession. “At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Biden said in a letter sent Wednesday to top oil companies. Biden said his administration was prepared to take any “reasonable and appropriate” steps that would help companies increase output in the near term, and said he’s ordering Energy Secretary Jennifer Granholm to hold an emergency meeting on the subject in the coming days. The president added that the federal government will open talks with the National Petroleum Council -- an advisory committee representing the industry -- and called on companies to provide the Energy Department with an explanation of why they have cut capacity and what could be done to address gas prices that now average more than $5 per gallon nationwide. But restarting shuttered refineries isn’t as easy as flipping a switch. More than 1 million barrels a day of US oil refining capacity -- or about 5% of the total -- has been shut since the start of the pandemic. Some aging facilities were closed permanently as the virus crushed fuel demand. Others are being modified to produce renewable diesel instead of petroleum-based fuels amid a web of federal policies spurring a shift to green energy; those conversions may be too far along to reverse course.
ExxonMobil Made More Money Than God This Year -ExxonMobil made more money than God this year. That’s what U.S. President Joe Biden said on June 10 in White House briefing room remarks on inflation and actions taken to lower prices and address supply chain challenges. “We’re going to make sure that everybody knows Exxon’s profits,” Biden said in the statement. “Exxon made more money than God this year,” he added. “One thing I want to say about the oil companies, they talk about how we have, they have 9,000 permits to drill. They’re not drilling. Why aren’t they drilling? Because they make more money not producing more oil,” Biden said in the statement. “The price goes up, number one. And, number two, the reason they’re not drilling is they’re buying back their own stock - which should be taxed, quite frankly - buying back their own stock and making no new investments. So, I - I always thought Republicans are for investment. Exxon, start investing, start paying your taxes,” Biden went on to say. When Rigzone contacted ExxonMobil for comment on Biden’s statement, a company spokesperson sent through the below response via email. “We have been in regular contact with the administration, informing them of our planned investments to increase production and expand refining capacity in the United States”. “We increased production in the Permian Basin by 70 percent, or 190,000 barrels per day, between 2019 and 2021. We expect to increase production from the Permian by another 25 percent this year. We’re spending 50 percent more in capital expenditures in the Permian in 2022 vs 2021 and are increasing refining capacity to process U.S. light crude by about 250,000 barrels per day – which is the equivalent of adding a new medium sized refinery”. “We reported losses of more than $20 billion in 2020, and we borrowed more than $30 billion in 2019 and 2020 to support our investments in production around the world. In 2021, total taxes on the company’s income statement were $40.6 billion, an increase of $17.8 billion from 2020”.
House Democrats probe PR industry's role in advertising for Big Oil - The Washington Post -Two House Democrats are pressing public relations and advertising firms on their work to improve the environmental images of fossil fuel companies, despite their role in the climate crisis. House Natural Resources Committee Chair Raúl M. Grijalva (Ariz.) and Rep. Katie Porter (Calif.), who chairs the panel's Subcommittee on Oversight and Investigations, are asking five PR firms to turn over information about their campaigns for oil and gas clients on the topic of climate change, according to letters shared exclusively with The Climate 202. Advertisement “For decades, fossil fuel companies and associations have engaged in public relations campaigns to downplay the threat of climate change and the central role fossil fuels have played in causing it,” the lawmakers wrote. “These influence campaigns were intended to prevent the country from taking critical steps to address the climate crisis.” The letters were addressed to five PR and advertising firms — Blue Advertising, DDC Public Affairs, FTI Consulting, Singer Associates and Story Partners — as well as the American Petroleum Institute, a trade association. The lawmakers requested all documents and communications concerning the firms' work for the fossil fuel industry from Jan. 1, 2013, to the present. They also asked for invoices that show the payments from each oil, gas or coal company. The recipients of the letters have two weeks — until June 27 — to provide this information. If they fail to meet this deadline, Grijalva could wield his subpoena power to compel them to do so.
ExxonMobil hits back after Biden threatens energy producers -ExxonMobil fired back at President Biden after he threatened them with "emergency powers" if they don’t boost supply to temper surging gas prices. In a statement released Wednesday from the company, ExxonMobil said it has been in regular contact with the administration providing updates on how it has been investing "more than any other company to develop U.S. oil and gas supplies." ExxonMobil said had invested $118 billion on new oil and gas supplies over the past five years, compared to a net income of $55 billion – resulting in an almost 50% increase in its U.S. production of oil during that period. ExxonMobil said it has been investing through the economic downturn to increase refining capacity to process U.S. light crude by some 250,000 barrels per day, which equates to a new medium-sized refinery. "We kept investing even during the pandemic, when we lost more than $20 billion and had to borrow more than $30 billion to maintain investment to increase capacity to be ready for post-pandemic demand," the company said. The statement ended imploring the Biden administration to – rather threaten emergency powers – "promote investment through clear and consistent policy that supports U.S. resource development." Biden has been facing a flood of criticism lately for a lack of executive action aimed at curbing inflation. On higher gas prices, the president has pivoted between blaming Russian President Vladimir Putin for his invasion of Ukraine and oil company’s profit motives.
US oil refiners lay out their realities ahead of DOE meeting | S&P Global Commodity Insights - Two prominent oil industry groups in a June 16 letter addressed to President Joe Biden outlined the realities faced by US refiners in response to his June 14 letter requesting they meet with the Department of Energy to find a way to increase gasoline and diesel output to bring down the price of gasoline and diesel for US consumers. The letter from the American Fuel & Petroleum Manufacturers and American Petroleum Institute said they and their member companies told the president they "appreciated the opportunity to make contact with your administration -- as recently as this week -- both to share data and analysis on what is happening in global energy markets and to provide concrete and practicable solutions for addressing today's high price environment."The AFPM and API explained that refined product prices are determined on the global market, with the price of crude accounting for about 60% of the price of gasoline. Crude prices are soaring as demand for refined product returns, with Dated Brent averaging $112.23/b so far in Q2 2022, up from the $29.41/b in Q2 2021, Platts assessments show. US refinery utilization is running near record rates, the groups pointed out, at 94% of capacity, which is expected to rise in coming days. In the US, Platts Analytics forecast refinery outages will decline to about 2 million b/d as refiners return from planned work. This includes the ramp-up of Calcasieu's 135,000 b/d Lake Charles, Louisiana, plant, closed in 2020 in the midst of the coronavirus demand drop, which made it uneconomic to run. However, the meat of the letter revolves around policy-driven decisions put into place that discourage expansion of the oil and gas industries, keeping refiners from making long-term business decisions based on the president's stated campaign promise "to end fossil fuel." "EPA just set Renewable Fuel Standard (RFS) volumes at the highest levels ever, which by its nature is designed to reduce demand for refined petroleum products and incentivizes gasoline and diesel exports," the letter to the president said. Refiners have responded to annual increases in renewable fuel blending volumes by converting plants and units to make renewable fuels. This accounts for almost half of the estimated 1 million b/d of shut US refining capacity. However, other policies on federal and state levels are also keeping refiners from making long-term business decisions, the letter said. This includes the recently finalized EPA light-duty vehicle standard "that incentivizes at least 17 percent electric vehicle sales by 2026" from the current 5%, the National Highway Traffic Safety Administration, new fuel economy standards that will reduce gasoline consumption by more than 200 billion gallons through 2050, and making the cost of capital more expensive through new rules from the Security and Exchange Commission. Despite these roadblocks, US refiners have continued to invest in and increase capacity. ExxonMobil is adding 250,000 b/d of refining capacity at its Beaumont, Texas, plant to process increased production from its Permian holdings, while Valero is adding a coker at its Port Arthur, Texas, plant, which will increase capacity there by 50,000 b/d.
AG urges Corps of Engineers to not redundantly review pipeline projects - Attorney General Derek Schmidt has urged the U.S. Army Corps of Engineers to not redundantly review pipeline projects and hamper efforts to fight record-setting gas prices.Kansas Attorney General Derek Schmidt says on Tuesday, June 14, that he opposed the latest effort by President Joe Biden’s Administration to add requirements for the nation’s energy producers. He said the regulatory action would further hamper efforts to maintain reliable sources of energy and fight record-setting fuel prices.AG Schmidt said he joined 20 other state attorneys general to send a letter to the U.S. Army Corps of Engineers to object to its proposed review of Nationwide Permit 12. He said the permit is one of several regulatory actions which govern the activities related to pipeline and other energy infrastructure projects - including construction and routine maintenance.Schmidt said the Corps is required to review NWP 12 every 5 years and seek public comment. However, he said the current review is the second in two years and he argues that the review is redundant and would harm the domestic energy industry.“This so-called review won’t address the real concerns facing our citizens – prominently, historically high energy prices. It will instead inject unnecessary, duplicative, and inequitable red tape into an already bureaucratically laden process,” the attorneys general wrote. “Far from alleviating our current crisis, the Corps appears to be poised to take measures that will undermine NWP 12′s purpose and further jeopardize the Nation’s energy security and prosperity.”The AG argued that changing the rules would undermine projects already underway across the nation. He said Congress specifically gave the Corps the authority to review NWP 12 every 5 years under the framework of the Clean Water Act.Schmidt noted the last review was held in 2021, however, the Corps can reconsider NWPs at the request of outside parties.
Environmental law groups sue Biden administration to block 3,500 oil and gas drilling permits - Three environmental law groups have sued the Biden administration in an attempt to block more than 3,500 permit applications from energy companies to drill for oil and gas on public lands. The environmental groups filed the lawsuit in the District Court of Washington, DC, against the Bureau of Land Management, saying the permit approvals in Wyoming and New Mexico violated several federal laws, including the Endangered Species Act. Climate advocates have been keen to hold President Joe Biden to his campaign promise to ban all new oil and gas drilling on public land -- a promise he has been unable to deliver on. But that promise has also recently become a political punching bag for Republicans as the price of gas has soared to over $5 per gallon amid Russia's invasion of Ukraine. Citing the severity of the climate crisis, the Center for Biological Diversity, the Western Environmental Law Center and the WildEarth Guardians are trying to stop oil and gas companies drilling new wells on federal lands. "The federal government's oil and gas program accounts for almost one-tenth of annual greenhouse gas emissions in the nation," said Kyle Tisdel, climate and energy program director with Western Environmental Law Center, in a statement. "The Bureau of Land Management has admitted that continued oil and gas exploitation is a significant cause of the climate crisis, yet the agency continues to recklessly issue thousands of new oil and gas drilling permits."The groups said in a statement that drilling and burning the fossil fuel from these permits will "damage ecosystems across the United States, and harm more than 150 climate-imperiled species, including Hawaiian songbirds, polar bears and coral reefs." "Fossil fuels are driving the extinction crisis, and the Bureau of Land Management is making things worse by failing to protect these imperiled species," said Brett Hartl, government affairs director at the Center for Biological Diversity, in a statement.
Wyoming wants to export its natural gas. The West Coast won't let it. After a very expensive winter, home heating costs are beginning to fall. Household use of natural gas fluctuates with the weather, and as furnaces go dormant, utility bills ease. But that seasonal decline is masking a breakneck rise in price. The spot price of U.S. benchmark Henry Hub has doubled since March, according to Insider. It surpassed $9 per thousand cubic feet last week — triple its spot price at this time last year — for the first time in almost 14 years. Some natural gas companies in the Intermountain West say the region’s lack of access to overseas markets is partly to blame. “If we were able to export the natural gas that’s trapped in Wyoming, Colorado and Utah to Asia, that would lead the price around the world,” said H. Howard Cooper, president of Colorado-based Three Crown Petroleum. The problem for Wyoming and its landlocked neighbors is that they can’t export that gas on their own. Their only access to international markets comes through coastal states. But the country’s existing capacity is concentrated along the distant shores of the East Coast, the Gulf of Mexico and Alaska, all too far away to be of much use. As temperatures rise and air conditioners kick on, people consume more electricity — much of it generated from natural gas. And the supply of natural gas isn’t keeping pace with that demand.Europe’s search for non-Russian sources of natural gas has also exacerbated the imbalance. The U.S. — forecast to be the world’s top LNG exporter this year — maxed out its export capacity as European prices soared. Its LNG shipments went up 18% in the first four months of 2022, according to the Energy Information Administration, and aren’t expected to slow anytime soon.
Puget Sound Energy launches RNG program with landfill gas production - In Washington, Shoreline Area News reports that Puget Sound Energy (PSE) launched a voluntary Renewable Natural Gas program, a key part of its proposed pathway to reduce carbon emissions to net zero by 2045. Through RNG, renters, homeowners and businesses can replace a portion of their conventional natural gas usage with carbon neutral renewable natural gas. PSE’s RNG program will offer utility customers the option to replace an equal amount of their conventional natural gas use with renewable natural gas. For every block of RNG a customer purchases, they see a credit on their bill for an equivalent amount of conventional natural gas not used. Already, more than 1,200 PSE customers have enrolled in RNG since its launch in December of 2021. Supply for RNG comes exclusively from a long-term contract with Klickitat Public Utility District. Methane from a Washington landfill is captured, processed into pipeline quality gas and transported to PSE’s natural gas system.
Freeport LNG Texas terminal outage hurts Europe, may help African exporters (Reuters) - Global liquefied natural gas (LNG) buyers - especially in Europe - and some U.S. shale producers have been reeling since a June 8 blast shut Freeport LNG's massive export terminal in Texas. Reverberations also are being felt in Africa, where LNG producers could get a boost from the months-long shutdown to repair the Texas terminal, analysts said, noting that European buyers moving away from Russian gas and pipeline operators have few supply alternatives. The Freeport facility accounts for roughly 20% of U.S. LNG processing capacity, drawing 2 billion cubic feet per day (bcfd) of natural gas from U.S. shale producers. A full restart of the facility will not happen until late this year, the company said this week. The outage sent U.S. gas NGc1futures down 18% from the price a day before the fire, while European gas TRNLTTFMc1prices have surged more than 60%, with an additional boost from less gas on Russian pipelines. Some 75% of Freeport LNG's feed gas, or 1.47 bcfd, relies on Boardwalk Pipeline's Gulf South Pipeline, with a unit of BP PLC BP.Lsupplying roughly half of that capacity, according to consultancy East Daley Capital. JERA Energy America and Osaka Gas Trading also are shippers on that line, at about 0.355 bcfd and 0.220 bcfd, respectively. The day after Freeport suffered the explosion, pipeline operator Gulf South said its flows to the facility were zero. "Shippers will not be able to easily shift volumes to alternate delivery points without amending their contracts with the pipeline in which case the pipeline can raise rates or require a separate contract," said Alex Gafford, a capital markets analyst with East Daley Capital. BP is working "though the closure's impact on our LNG operations," a spokesperson said on Thursday. Boardwalk Pipeline Partners, JERA Energy America, Osaka Gas Trading, and Uniper, also a shipper on Gulf South, did not respond to requests for comment. French energy company TotalEnergies SE TTEF.PA, which supplies about 0.322 bcfd of gas to the facility through the Texas Eastern Gas Transmission line, declined to comment. African LNG exporters could benefit from the outage. Nigerian and Algerian plants have "been running at levels far below nameplate capacity," said Sindre Knutsson, Rystad's vice president of gas and LNG. "Africa is in a good position to feed more gas to Europe in the medium to long-term," he said, noting Nigeria could produce more LNG as gas production resumes following declines from COVID-19 related losses. Other U.S. exporters, such as Cheniere Energy Inc LNG.A and Sempra LNG, are increasing their efficiency and producing more fuel that can help offset some of Freeport's losses.
Enbridge to raise natural gas prices by as much as 23 per cent July 1 -- Enbridge is set to raise natural gas prices in Ontario — and the province’s oversight body is warning there could be more increases to come. A decision from the Ontario Energy Board released Thursday approved Enbridge Gas Inc.’s June application for an increase, after the utility company outlined North American gas shortages.The approval, which comes into effect July 1, 2022, represents an 18.5 per cent to 23.2 per cent increase or about $240 to $250 for the typical residential consumer, depending on their area, including Union Gas rate zones.The estimated impacts are based on an assumed 2,200 cubic metres to 2,400 cubic metres of consumption. Homeowners’ final bills will depend on their individual use.The OEB, which sets rates quarterly, approved a way to reduce costs to residents in this period, as proposed by Enbridge — the fourth consecutive mitigation strategy the company has applied for, the decision said. Without it, bills would have been affected by about $270 to $315, the board said.Beyond this summer, when residential gas consumption is at its lowest, the OEB said the International Energy Agency is “warning of continued significant upward pressure on prices beyond this quarter,” saying that North American production of natural gas has not been able to keep up with demand.
Oil Spill Case Postponed in Provincial Court - The case involving the largest oil spill in the province’s history was called—and promptly postponed again in provincial court Wednesday morning. It’s been 3-and-a-half years since the spill, which dumped 250,000 litres of oil into the ocean about 350 kilometres east of St. John’s. It happened on November 16th, 2018 due to a leak in a flowline connected to the SeaRose FPSO. At the time, crews were trying to restart production that had been halted because of rough weather the day before. Husky Energy, which has since been acquired by Cenovus, faces six counts in total, including alleged breaches of the Atlantic Accord, fisheries regulations and Migratory Birds Convention Act. In court Wednesday morning, lawyers said they are continuing discussions toward a resolution, and a possible guilty plea in the case. That’s now expected to happen in late August. Four months before the SeaRose incident, Husky was fined $600,000 in connection with a spill involving a pipeline leak in western Saskatchewan.
BP Sells Oil Sands to Cenovus - BP Plc sold out of Canada’s oil sands, divesting its stake in the Sunrise project to Cenovus Energy Inc. while acquiring offshore exploration from the same company in the east of the country. The oil-sands disposal aligns with BP’s plans to divest polluting projects as investors demand greater efforts to tackle climate change. Companies such as Shell Plc and ConocoPhillips have also offloaded such ventures, which have a particularly high carbon footprint because of the energy required to extract bitumen from deposits underground. Cenovus agreed to buy BP’s 50% interest in Sunrise for C$600 million ($467 million) in cash and a contingent payment of as much as C$600 million which expires after two years. The Calgary-based company will also hand over its 35% interest in the Bay du Nord oil project off Newfoundland and Labrador. The offshore oil project, operated by Equinor ASA, won Canadian government approval earlier this year despite environmental opposition. The $12 billion development is estimated to have recoverable reserves of around 300 million barrels of oil. BP plans to reduce its total oil and gas production 40% by 2030 and says it will focus on “resilient hydrocarbons” -- those which have a lower cost and carbon footprint. The London-based major has also said it will no longer explore for fossil fuels in new countries.
BP Oil Sands Exit May Not Be the Last - BP Plc has become the latest international oil company to exit Canada’s high carbon-emitting oil sands -- but it almost certainly won’t be the last. The decision by the London-based energy company to sell its non-operating 50% interest in the Sunrise project to Cenovus Energy Inc. is just the latest in a recent string of divestments from Alberta’s oil sands, one of the largest crude reserves in the world. Companies including Shell Plc, ConocoPhillips, Equinor ASA and Devon Energy Corp. have divested big stakes in the mines and well sites of Northern Alberta to local companies in recent years, increasingly concentrating control of the oil sands in the hands of Canadian producers such as Cenovus, Canadian Natural Resources Ltd. and Suncor Energy Inc. And more deals are seen as likely as local producers sit on cash hoards from $100-plus oil prices. Chevron Corp.’s 20% stake in the Athabasca oil sands mine could be the next asset to be sold, said Matt Murphy, analyst at Tudor, Pickering, Holt & Co LLC. It’s not a “core asset” to the company and could become the next sale, probably to majority owner Canadian Natural, he said. While Athabasca generates “pretty good cash flow,” it’s not strategic, Michael Wirth, chief executive officer, said last year. TotalEnergies SE is another big-name company in the region with assets that might make sense to offload. The Paris-based company has been divesting holdings in the oil sands for several years and pledged to no longer invest in the region. It recorded a $7 billion impairment of its Canadian oil sands portfolio in 2020 as part of a wider review but continues to hold a 50% stake with ConocoPhillips in the Surmont site as well as a minority stake in Suncor’s Fort Hills mine. Finding a local buyer for Surmont could be challenging because it’s a non-operating position, Murphy said. Emails to Chevron, Total and Canadian Natural weren’t immediately returned. The recent exodus from oil sands comes as Big Oil pledges to curtail and even zero out carbon emissions amid pressure from investors to tackle climate change. Crude from the oil sands must be dug from mines or forced from wells injected with steam, making them some of the highest carbon-emitting grades of oil in the world and something of a pariah for investors seeking greener alternatives. Norway’s sovereign wealth fund and large pension fund Caisse de Depot et Placement du Quebec have pledged to sell oil sands holdings.
UK Drivers Pay More Than $128 to Fill Up Car With Diesel - for the first time, piling further pressure on Britons hit by a cost-of-living crisis. The average price of diesel rose to a record 190.92 pence a liter on Sunday, while gasoline reached a high of 185.04 pence, according to data from motoring group RAC. “The speed and scale of the increase is staggering,” RAC fuel spokesman Simon Williams said in a statement. “Incredibly, the government is now raking around £46 in tax from every full tank.” Transport fuel prices have risen to all-time highs in Britain, the US and other countries around the world amid soaring energy costs. The price of oil has surged since Russia’s invasion of Ukraine, while a slew of sanctions on Russian energy have also exacerbated supply concerns. Filling up a 55-liter family car with diesel costs £105.01, according to RAC data. The cost is £101.77 for gasoline.
Why Is The UK Sending Gasoline To America As Prices Explode? The UK shipped 1.85 million barrels of gasoline and gasoline blending components to the United States in May, the highest monthly exports of those products since December 2021, Bloomberg News' Julian Lee reports, citing data from shipping analytics company Vortexa. On the face of it, the flow of gasoline from the UK to the U.S. looks counterintuitive to market forces as UK gasoline prices are $3 a gallon higher than the gasoline prices in America.But gasoline in the UK is taxed much more than the levies on gasoline in the U.S., that's why British drivers pay much higher prices at the pump, as do most other motorists across Europe. If taxes are left out of the equation, it actually makes sense for UK exports of gasoline and blending components to flow to the United States, Bloomberg's Lee notes.Regardless of how much various taxes weigh on the final price consumers pay and the specifics of the different markets, gasoline prices in the UK and the U.S., and in many other countries, are breaking records these days. That's because crude oil prices are at $120 per barrel, global refining capacity has shrunk since COVID, and the Russian war in Ukraine and the subsequent Western sanctions on Russia are upending trade flows of crude and refined products. Gasoline prices in the UK—where total taxes on gasoline account for an average 46% of the retail price, per the UK's motoring organization RAC—saw this week the highest daily price jump in 17 years. The average UK gasoline price this week was the equivalent of more than $8.60 per U.S. gallon. Records continued to be broken in the following days until the average cost of filling a 55-liter family car passed the £100 ($125) mark, the first time in history that drivers are paying triple digits for a full tank. The UK government cut fuel duty by the equivalent of $0.062 per liter in March, but wholesale gasoline costs have already jumped fivefold that amount since then, RAC fuel spokesperson Simon Williams said on Thursday."A further duty cut or a temporary reduction in VAT would go a long way towards helping drivers, especially those on lower incomes who have no choice other than to drive," Williams added. Even at $8.63 per gallon gasoline, the UK is not the most expensive fuel market in Europe. Drivers in the Netherlands and Sweden pay more than $9 a gallon, while gasoline prices in Finland, Denmark, and Norway—traditionally the most expensive markets in Europe—are now paying more than $10 per gallon, according toGlobalPetrolPrices.com. That's no consolation for U.S. drivers, who are now paying a national average of$5 per gallon, for the first time ever, and there is no immediate relief for the pain at the pump in sight. Gasoline demand is rising despite record-high prices while gasoline stocks dropped again, per the latest EIA weekly inventory report. Gasoline inventories decreased by 800,000 barrels last week and are now about 10% below the five-year average for this time of year, the EIA said on Wednesday. At 416.8 million barrels, U.S. crude oil inventories are about 15% below the five-year average for this time of year. "This dynamic between decreased supply and increased demand is contributing to rising prices at the pump. This coupled with increasing crude oil prices means that the price of gas will likely remain elevated for the near future," AAA said in a Thursday comment on the soaring gasoline prices.
Shell eyes new pipeline for high-impact North Sea exploration target --Shell and Deltic Energy have set out development options and a date for drilling a high-impact exploration target in the North Sea. In an AGM presentation released on Wednesday, Deltic said the Pensacola prospect, operated by Shell, will be drilled in late September. The firm, which owns 30% of Pensacola with Shell holding the remaining 70%, said it has prospective potentially recoverable resources of 309 billion cubic feet of gas. In a low volume case scenario of circa 75 BCF, Shell and Deltic plan to develop Pensacola as a tie-back to the Ineos-operated Breagh platform in the Southern North Sea, around 45 miles off the east coast of England. But in a mid/high case the preferred option is to install a new pipeline to tie the prospect back to the Teesside gas processing facility onshore. Deltic has previously described Pensacola as “one of the highest impact exploration targets to be drilled” in the Southern North Sea in recent years. The company said an unnamed jack-up drilling rig will be mobilised from its current well location in the Dutch sector for drilling at Pensacola. Well operations are expected to last 60-80 days once it has been spudded. Deltic highlighted to investors that its 30% working interest gives it the option to divest or farm down during the appraisal stage. Pensacola has a 55% geological chance of success. Shell is also farmed into Deltic’s Selene prospect in the southern gas basin, targeting 318 BCF. Deltic said it is committed to drilling the prospect, pending a well investment decision from Shell who are paying 75% of costs of the first well up to a cap of $25 million.
Norway Gasoline Hits $10 a Gallon -While US drivers despair over gasoline topping $5 a gallon, spare a thought for motorists in oil-rich Norway, where prices sit at $10. Gas stations in Oslo were selling the unleaded fuel for about 27 kroner a liter, or about $10.30 a gallon, on Friday. That makes it the most expensive European country to fill up and second only to Hong Kong globally. Almost half of the pump cost in the Nordic nation is made up of road, carbon and sales taxes, according to the Norwegian Automobile Federation. Norway is Europe’s top petroleum producer and the surge in oil and gas prices due to the war in Ukraine has boosted its coffers. But its consumers — like those across the continent — have been hit by rising pump prices at a time when they’re being squeezed by higher energy and near-record food costs. While Norway’s government has stepped in to subsidize household energy costs, it’s not so keen to do so when it comes to gasoline. With inflation exceeding 5%, speculation is mounting that the central bank will be forced to double the size of its planned interest-rate hike next week. That may not leave the state with a lot of room to help with gasoline prices. Still, higher fuel prices could help drive the shift toward zero-emissions vehicles in Norway, where four out of five new cars sold so far this year were electric. Much of that has been thanks to a slew of incentives, including reduced taxes on new purchases that’s part of a goal to eradicate sales of new petroleum-fueled cars by 2025.
Wildcat well comes up dry for Equinor - Norwegian oil and gas company Equinor has concluded the drilling of a wildcat well near the Ormen Lange field in the Norwegian Sea but failed to find hydrocarbons. The wildcat well 6305/5-C-3 H is located in production licence 209 where Equinor is the operator with Petoro, Shell, and Vår Energi as partners. The well was drilled about 137 kilometres west-northwest of Kristiansund in the Norwegian Sea. As informed by the Norwegian Petroleum Directorate (NPD) on Wednesday, the objective of the well was to prove petroleum in reservoir rocks in the Lange Formation and the Lysing Formation in the Upper Cretaceous (Turonian and Coniacian Ages, respectively). The well encountered mainly siltstone with thin layers of sandstone and dolomite stringers in both formations. Data acquisition has been carried out. Attempts to collect pressure data and sampling indicate that the formations have low permeability and are partly tight. The well is dry. This was the sixth exploration well in production licence 209, awarded in the 15th licensing round. Equinor drilled the well 6305/5-C-3 H to a vertical depth of 4320 metres below sea level and was terminated in the Shetland Group from the Turonian. The water depth at the site is 925 metres. The well has now been permanently plugged and abandoned. The well was drilled by the Transocean Barents drilling rig, which will now continue in the same location to drill a production well 6305/5-C-3 AH. While this was a dry well for Equinor, the Norwegian company has recently made a minor oil and gas discovery near its operated Johan Castberg field in the Barents Sea, using another Transocean-owned rig, the Transocean Enabler.
May European LNG imports dip as capacity limits sink prices -Following a record month for physical LNG imports in April due to historic price spikes, monthly European receipts decreased in May as limitations in downstream transport pressured local hub prices, an analysis of S&P Global Commodity Insights data showed. As Europe grapples with the problem of replacing lost pipeline supply from Russia, limited inland transportation infrastructure had a part to play in the global dynamic during the month, with some participants deterred from targeting discounted markets as a result. Across S&P Global’s assessed hubs — France, Spain, Italy, Belgium, the UK and the Netherlands — a total 8.45 million mt of LNG, or 11.661 billion cu m of natural gas equivalent, was imported in May. This represented a 17.9% drop month on month, but also rose a third on the year, and the eighth consecutive year-on-year increase. Pan-European imports — including Turkey and minor trading hubs — amounted to 10.764 million mt during the month, equating to 14.854 Bcm of natural gas. This measure was down just 7.1% on the month, demonstrating a robust import from smaller hubs as the continent rushed to replace missing pipeline imports. With Russian exports via the Yamal pipeline through Poland now effectively banned, significantly lower transit through Ukraine compared to previous years, and more recently direct supply curtailments as a result of contractual disputes over payment in rubles, Europe has turned to the global LNG market to offset the missing supply. However, much of Europe’s LNG regasification is isolated from neighboring markets, meaning that additional supplies cannot always get to premium markets. There is no physical reverse capacity between France and Germany, just a 20 million cu m/d interconnector linking Spain with France, while nameplate capacity of pipelines from the UK to the mainland is half that of its regasification capacity. UK pipeline export to the European mainland was near maximum for the duration of May. This has caused a major disintegration of the previously integrated European market for gas, with some hubs now at major discounts to the Dutch TTF benchmark, specifically where LNG arrives in abundance, but has little capacity to transport these volumes onward. Consequently, the UK posted the sharpest monthly decline in imports, falling 37.9% on the month to 1.995 Bcm, while the rest of Europe’s liquid trading hubs posted a lesser decrease.
Some European factories are being forced to shut down due to soaring global energy prices, report says - Some European factories have shut down due to soaring global energy prices and insecurity over Russian gas supplies. The Wall Street Journal reported the news.High energy costs, caused in part by the Russia-Ukraine war, are making it hard for European factories to compete with countries where energy prices are lower. Natural gas is three times more expensive in Europe than in the US, per the WSJ.Insider previously reported that energy prices have reached a 13-year high after rising 50% in 2022.Energy-intensive industries such as steel, chemical, and fertilizer manufacturing are shutting their European factories amid rising costs and concerns that Russia may cut off its supply, per the WSJ.Europe has been preparing to ration gas if Russian supplies are cut off. Finland, Bulgaria, and Poland already had their supply ofRussian gas cut off by state-owned company Gazprom PJSC after the countries refused to pay for gas in rubles. Much of Europe's industry is reliant on cheap Russian oil and natural gas. Russia supplied around 40% of the European Union's natural gas in 2021, according to EU data. Germany, the region's largest economy, is one of the most reliant on Russian gas.Europe is also one of the most prominent buyers for Russia, Insider reported that Europe was responsible for 50% 0f Russia's crude oil exports and 75% of its natural gas exports in 2021. In the first two months of the Ukraine war, the EU accounted for 70% of the country's exports.
Local German politician admits "mistake" on Nord Stream 2 --The premier of Germany's Mecklenburg-Western Pomerania state, where Russia's Nord Stream 2 makes landfall, has admitted that supporting the pipeline was a "mistake" in an interview with German newspaper Zeit on June 8. "We and I thought that a dialogue [with Russia] could change things for the better," Manuela Schweig said. "In this case, unfortunately that was a mistake." She said she was now critical of her long commitment to the project, and the establishment to support the pipeline's completion after it was targeted by US sanctions. "Knowing what I know now, I wouldn't make that decision anymore," Schweig said.
Russia reduces natural gas exports via European pipeline - - Russia's Gazprom announced a reduction in natural gas flows through a key European pipeline for the second day in a row Wednesday, creating further energy turmoil for Europe as it tries to reduce its extensive use of Russian oil and natural gas amid the war in Ukraine. The state-owned energy giant said on Twitter that deliveries through the Nord Stream 1 pipeline to Germany would be cut again Thursday, bringing the overall reduction through the undersea pipeline to 60%. The drop in shipments of gas used to power industry and generate electricity would amount to some 16 billion cubic metres by the end of the year, or around 10% of total European Union gas imports from Russia, according to Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels. The new cut came a day after Gazprom said it would reduce flows by 40% after Canadian sanctions over the war prevented German partner Siemens Energy from delivering overhauled equipment. It blamed the same issue for the additional reduction. But German Vice Chancellor Robert Habeck said Wednesday that Gazprom's initial move appeared to be political rather than a result of technical problems. He said the new developments “clearly show the Russian side's explanation is simply an excuse”.
Nord Stream gas capacity restrained by repair delays, Gazprom says - Russia’s Gazprom said on Tuesday capacity to supply gas to Europe through the Nord Stream 1 pipeline was constrained to 100 million cubic meters per day due to delayed repair works. The pipeline, which runs from Russia to Germany under the Baltic Sea, can usually carry 167 mcm, Gazprom said in a statement on the company’s Telegram channel. The cause of the reduced capacity was the delay in Germany company Siemens returning equipment that had been sent for repair. Gas pipeline flows are currently in focus over disruption concerns in the wake of Moscow’s Ukraine invasion. Germany received more than half of its gas from Russia last year, a number that has since come down slightly.
Germany’s refinery dilemma tests Russian oil ban resolve - Germany is struggling to find a way to wrest control of a Russian-owned refinery that supplies most of Berlin’s fuel, four people close to the matter said, fearing retaliation by Moscow if the site is nationalised and as Western firms hesitate to step in. The PCK refinery in Schwedt, majority-owned by Russian oil giant Rosneft, is testing Germany’s resolve to eliminate imports of oil from Russia by the end of the year under fresh European sanctions to punish Moscow for its invasion of Ukraine. The landlocked refinery is the source of 90% of Berlin’s fuel and has received all its crude from Russia via the Druzhba pipeline since the plant was built in the 1960s. One solution considered by Germany has been to temporarily hand control of the refinery’s day-to-day operations to British oil major Shell, which owns a 37.5% stake in Schwedt, according to government and company sources. Shell, which saw Germany block the sale of its stake in Schwedt to Rosneft last year, is willing to step in as an interim operator, two of the people said, including a company source. But it is neither interested in taking over a larger stake nor being a permanent operator, they said. Officials have also sounded out the idea of handing operations to Polish refinery PKN Orlen which could play a key role in efforts to reroute the refinery’s crude supplies away from Russia. PKN Orlen and Shell declined to comment. Rosneft, PCK and the Polish government did not immediately reply to requests for comment. A spokesperson for Germany’s Economy Ministry, which is in charge of energy, said: “We are working flat out to find a solution. We know the problem and are working on it.” Poland insists that Rosneft must be ousted from Schwedt, Germany’s fourth-largest refinery, before a potential deal including state-controlled PKN, the people said. Rosneft, meantime, has so far refused to engage with Germany to discuss a sale of its 54.17% stake in Schwedt or any other solutions that could resolve the situation, the people said. Italy’s Eni holds the remaining 8.33% and last month confirmed it was in the process of selling it.
In landmark deal signed in Cairo, Israel to export natural gas, via Egypt, to Europe | The Times of Israel -Israel, Egypt and the European Union signed a memorandum of understanding on Wednesday in Cairo that will see Israel export its natural gas to the bloc for the first time.The landmark agreement will increase liquified natural gas sales to EU countries, which are aiming to reduce dependence on supply from Russia in the wake of its invasion of Ukraine.Last year, the EU imported roughly 40 percent of its gas from Russia. It has faced energy difficulties since imposing sweeping sanctions on Moscow.The agreement will see Israel send gas via Egypt, which has facilities to liquify it for export via sea.Energy Minister Karine Elharrar said the signing of the MOU had cemented Israel’s role on the global energy stage.“This is a tremendous moment in which little Israel is becoming a significant player in the global energy market,” Elharrar said.She called the deal “historic,” including in terms of the Israeli-Egyptian cooperation involved.In a joint news conference alongside European Commission chief Ursula von der Leyen and Egyptian Petroleum Minister Tarek el-Molla, Elharrar said the deal came about in the wake of Russia’s invasion of Ukraine. “The memorandum ofunderstanding will allow Israel to export Israeli natural gas to Europe for the first time, and it is even more impressive when one looks at the string of significant agreements we have signed in the past year, positioning Israel and the Israeli energy and water economy as a key player in the world,” she said.
Ukraine Suspends All Gas, Coal & Fuel Oil Exports To Meet Internal Demand - On Monday the Ukrainian government announced implementation of a measure halting all its exports of gas, coal and fuel oil, citing disruptions and a domestic supply emergency due to the Russian invasion.These commodities are now prohibited for export during a time of war, the published government resolution states, which is the result of "the armed aggression of the Russian Federation against Ukraine and the imposition of martial law in Ukraine."Ukraine typically ships small supplies of natural gas across its western frontier for European trading, while also prior to losing its access to Crimea starting in 2014, the International Energy Agency estimated Ukraine had about 9 billion tonnes of oil equivalent in fossil fuel reserves.Previously, national power grid operator Ukrenergy severed the interconnect from Ukraine to Russia in the wake of the Feb.24 invasion. Ukraine was then quickly connected to the European grid on a hastened emergency bases (which was in the works according to a 2017 deal, but before the war changed plans, it had been set for 2023).Still, periodic war-related power losses have affected over four million Ukrainian households - though there's been surprising overall power stability for the rest of the country, given there's an invasion on.Starting last week Ukrainian President Vladimir Zelensky forewarned the public and external trade partners that the energy suspension was imminent. He said on his Telegram channel that his country is suspending all coal and gas exports in preparation for the coming winter, emphasizing that Ukraine must prepare for what looks to be "the most difficult winter during all years of independence."
Russia lowers gas flows to Europe with part stuck in Canada - Russian natural gas deliveries through a key pipeline to Europe will drop by around 40% this year, state-controlled energy giant Gazprom said Tuesday, after Canadian sanctions over the war in Ukraine prevented German partner Siemens Energy from delivering overhauled equipment. Germany's utility network agency said it did not see gas supplies as endangered and that reduced flows through the Nord Stream 1 pipeline under the Baltic Sea aligned with commercial behavior and Russia's previously announced cutoff of gas to Denmark and the Netherlands, the German news agency dpa reported. The Federal Network Agency said it was monitoring the situation. Spot gas prices rose in Europe, a sign of jitters over possible further effects of the war on supplies of Russian gas, which powers industry and generates electricity on the continent. The European Union has outlined plans to reduce dependence on Russian gas by two-thirds by year's end. Economists say a complete cutoff would deal a severe blow to the economy, consumers and gas-intensive industries. High energy prices are already contributing to record inflation of 8.1% in the 19 countries that use the euro. Gas demand has fallen after the end of the winter heating season, but European utilities are racing to refill storage ahead of next winter with prices high and supplies uncertain. “Gas supplies to the Nord Stream gas pipeline can currently be provided in the amount of up to 100 million cubic meters per day (compared to) the planned volume of 167 million cubic meters per day,” Gazprom said in a statement. It did not provide a timeline for the planned drop in gas flows. Siemens Energy said a gas turbine that powers a compressor station on the pipeline had been in service for more than 10 years and had been taken to Montreal for a scheduled overhaul. But because of sanctions imposed by Canada, the company has been unable to return the equipment to the customer, Gazprom. “Against this background we informed the Canadian and German government and are working on a sustainable solution,” Siemens Energy said in a statement.
Russia is cutting 40% of one key pipeline's natural-gas supply to Germany because a piece of equipment is stuck in Canada --Russian energy giant Gazprom said it's cutting natural gas supplies to Germany via a key pipeline by 40% because a piece of equipment is stuck in Canada.In a June 14 tweet, Gazprom wrote that Germany's Siemens Energy has failed to return a gas compressor unit "in due time" after it was sent for repair. As a result, it said it can supply a maximum of 100 million cubic meters of natural gas each day into the Nord Stream pipeline — down from 167 million cubic meters per day.Nord Stream ferries fuel from Russia to Germany and beyond. It has an annual capacity of 55 billion cubic meters."Due to the sanctions imposed by Canada, it is currently impossible for Siemens Energy to deliver overhauled gas turbines to the customer," Siemens Energy told Insider. "Against this background we have informed the Canadian and German government and are working on a viable solution," it added.Germany — Europe's largest economy — is dependent on natural gas piped in from Russia. It currently gets about 35% of its natural gas from Russia and plans to wean itself off the imports by 2024, the country's economy minister said in a March 25 press release.On Tuesday, after Gazprom's first Telegram post about cutting Nord Stream gas supplies, Germany's economy ministry tweeted that the country's natural-gas supply is "guaranteed" and "unchanged."A decline in natural-gas supplies may not hit Germany as badly now as it would have in the winter because consumption for the fuel typically troughs in summer. Demand rises in the winter months due to heating. Europe has also been stockpiling natural gas at a record rate due to fears of supply disruptions, Reuters reported last week.European natural-gas prices surged 20% on Tuesday on the back of the Gazprom news. A liquefied natural gas plant outage in Texasalso contributed to the price gains.Benchmark US natural-gas futures were up 1.53% at $7.30 per metric million British thermal unit at 12.49 a.m. EDT on Wednesday.
Eni Says Gazprom Cuts Gas Flows to Italy by About 15 Percent - Gazprom PJSC has cut gas supplies to Italy, state-controlled oil giant Eni SpA said Wednesday, citing a communication from the Russian company. The reduction amounts to about 15% of total flows from Russia to Italy, an Eni spokesperson said. Gazprom didn’t provide any reason for the decision. Moscow-based Gazprom said Tuesday it’s reducing flows through Nord Stream, a key pipeline for Russian gas exports to Europe, by 40% amid technical issues at its Baltic station, further aggravating supply concerns on the continent. Eni is spearheading efforts by Prime Minister Mario Draghi’s government to lower Italy’s dependence on Russian gas, partly through its longstanding ties with African producer countries.
Rising gas cost could spell more coal use as spread narrows - Europe – EBR - Over the past several months the spread of so-called “clean-dark” and “clean-spark” prices have narrowed but still heavily favour coal usage for power plants, and the recent jump in gas prices threaten to once again widen the spread.The “clean-dark” price is the one paid for coal usage when accounting for both fuel costs and the cost of carbon permits, while the “clean-spark” price covers the cost of gas utilisation and subsequent emissions.The gas cost has begun to jump again over the past two days as Russian gas flows to Europe via the Nord Stream 1 pipeline fell further and Moscow said more delays in repairs could lead to it suspending all flows.While the global coal market has also remained very tight, resulting in higher coal prices, the market still expects coal to be the cheaper source next year, indicating that coal utilisation would remain high, Rystad Energy analyst Fabian Ronnigen said.The European Union is set to ban Russian coal imports in mid-August, which will put more strain on supply and force consumers to look elsewhere, further tightening the market.The EU Commission has estimated that coal purchases from Russia amounts to around €8 billion a year.Data from Rystad Energy also showed that coal power could remain the more competitive fuel source through 2025.However, the recent failed proposal to change the EU emissions trading system (ETS) is expected to benefit gas usage, as a tighter carbon market would result in higher emissions prices.As coal is more carbon intensive, rising emissions costs make gas more competitive, since operators would have to hold less permits to utilize gas production than coal.The gas-to-coal spread indicator has narrowed its gap to the carbon emissions prices (EUA) significantly lately but still remains more than 50% above carbon allowances, ICIS analyst Florian Rothenberg said.The indicator expresses how high EUA prices would need to be to incentivize gas power generation rather than coal power generation.This means that gas-fired power plants are set to remain switched off in all hours where enough coal-fired capacity is available to replace it, he added.For the coming fall and winter months, temperatures could also draw gas away from the power sector and toward residential heating demand.“Only in the case of a very warm winter combined with renewed bullishness on the carbon permits would we expect the spread to narrow and some efficient gas-fired plants replacing older coal units in the mix,” Rothenberg said.
More than 10 bcm of natural gas accumulated in Ukrainian underground storage facilities - More than 10 billion cubic meters has already been accumulated in Ukrainian underground gas storage facilities, and these volumes are growing. The relevant statement was made by Ukrainian Prime Minister Denys Shmyhal on Telegram, an Ukrinform correspondent reports. According to Shmyhal, preparations for a very challenging heating season are underway. Thus, the Ukrainian government considers all possible scenarios. “We are preparing for all possible scenarios. At a meeting of the Government, we endorsed a document stipulating that, at the beginning of the heating season in October, our underground gas storage facilities must contain enough natural gas reserves to ensure an uninterrupted heating season under any circumstances. These are the guarantees that our country will have heat supply, and we will be able to pass through the next winter season smoothly,” Shmyhal noted. A reminder that Ukraine is preparing to pass through a new heating season without any Russian energy resources.
Russia's biggest natural gas field is ablaze - Flames goes hundreds of meters into the sky as a fire hits the Urengoy field in Russia's North. The fire erupted after a pipeline burst near one of the production units. The accident happened during night and emergency personnel were on site early morning 16th of June, Telegram channel Gaz-Batyushka informs.The Urengoy is Russia’s biggest natural gas field with reserves up to 10 trillion cubic meters. It is operated by Gazprom Dobycha Urengoy, a regional subsidiary unit of national energy company Gazprom.Production started in the early 1980s and now amounts to about 230 billion cubic meters per year.Like most of Russia’s natural gas fields, the Urengoy is connected with pipelines leading westwards. When another fire hit the Urengoy in 2021 it affected exports to the EU and resulted in a hike in natural gas prices.The lion’s share of the Urengoy gas is exported to Europe, but the field is also linked with pipelines that could bring the gas to the far east, as well as China.The Arctic is Gazprom’s key production area and a lion’s share of its fields are located in the Yamal Nenets Okrug. According to regional authorities, Gazprom and its subsidiaries now annually produce more than 400 billion m3 of natural gas in the region. That includes gas from the Urengoy.
Triple whammy for European gas supplies sends prices soaring – CNN -Europe's natural gas supply has suffered its third blow in 48 hours, sending prices rocketing 42% higher from where they were at the start of the week.Italian energy giant ENI said Wednesday that Gazprom, Russia's state gas producer, would cut its supplies by 15%. It did not know the reason, an ENI spokesperson told CNN Business.The news comes the same day Gazprom said it would cut flows through its Nord Stream 1pipeline — a major artery linking Russia's gas to Germany — for the second time in two days, and a major liquefied natural gas (LNG) producer in the United States said it would remain offline until September.On Tuesday, Gazprom said it would reduce gas deliveries via Nord Stream 1 by 40% because Siemens Energy had delayed the return of turbines required to conduct repairs on the pipeline. Then, on Wednesday, Gazprom said it would cut supplies by another third to 67 million cubic meters starting Thursday. Siemens had taken the turbines to one of its Canadian factories for maintenance. It said in a statement on Tuesday that it was "impossible" to return the equipment to Russia because of sanctions Canada had imposed on the country over its invasion of Ukraine. ENI confirmed to CNN Business that it does not receive any gas through the Nord Stream 1 pipeline. European gas futures prices spiked by more than 20% Wednesday afternoon to hit €120 ($125) per megawatt hour (MWh), according to data from the Intercontinental Exchange, although prices have since fallen back slightly to trade around €113 ($117) per MWh. Robert Habeck, Germany's economy minister, said Gazprom's decision was "political" and not "technically justifiable." “How this will affect the European and German gas market, we will have to wait and see," he said at a Wednesday press conference.Habeck said in a statement that Gazprom is purposefully upsetting the apple cart."The current reports clearly show that the justification given by the Russian side is simply a pretext," he said. "It is obviously a strategy to unsettle and drive up prices." Europe has tried to wind down its imports of Russia's natural gas since Russia invaded Ukraine in late February. It has set a target to reduce consumption of Russian gas by two-thirds by the end of the year, and has rapidly increased its imports of LNG as a replacement. But major producer Freeport LNG said Tuesday that it would shut its facility in Texas for 90 days after a fire broke out last week, and would be only partially operational until late this year. It had previously said the plant would close for at least three weeks.Freeport has produced about one fifth of US LNG exports so far this year, according to analytics firm Vortexa.
‘Our product, our rules’: Russia sends alarm bells ringing over Europe’s winter gas supplies— An ominous warning from Russia's state-backed energy giant Gazprom has stoked fears of another turbulent winter for European gas supplies. As a pre-summer heatwave hits Western Europe this week, policymakers in the region are scrambling to fill underground storage with natural gas supplies to provide households with enough fuel to keep the lights on and homes warm before the cold returns. Fears of a severe winter gas shortage are driven by the risk of a full supply disruption to the EU — which receives roughly 40% of its gas via Russian pipelines. The bloc is trying to rapidly reduce its reliance on Russian hydrocarbons in response to the Kremlin's nearly four-month-long onslaught in Ukraine. The worry for many is just how dependable Russian gas flows are to Europe as the conflict continues and as economic sanctions bite. Indeed, Moscow has already cut gas supplies to Finland, Poland, Bulgaria, Denmark's Orsted, Dutch firm GasTerra and energy giant Shell for its German contracts, all over a gas-for-rubles payment dispute. Gazprom's Miller says he sees no solution to an ongoing equipment issue at part of the Nord Stream 1 pipeline. More recently, Russia's Gazprom opted to further limit supplies via the Nord Stream 1 pipeline that runs from Russia to Germany under the Baltic Sea, and reduced flows to Italy. Gazprom on Wednesday cited a technical problem for the supply cut, saying the issue stemmed from the delayed return of equipment serviced by Germany's Siemens Energy in Canada. Austria and Slovakia have also reported supply reductions from Russia. What's more, in fiery comments likely to have sent alarm bells ringing throughout the bloc, Gazprom CEO Alexei Miller said Thursday that Russia will play by its own rules after the firm halved supplies to Germany. "Our product, our rules. We don't play by rules we didn't create," Miller said during a panel session at the St. Petersburg International Economic Forum, according to The Moscow Times. Miller reportedly said the return of equipment at the Portovaya compressor station — part of the Nord Stream 1 pipeline that carries Russian gas to Germany — had been hampered by an unprecedented barrage of economic sanctions. He added that he saw no solution to the problem.German Economy Minister Robert Habeck has rejected the claim that Western sanctions were to blame and slammed Russia's supply curbs as a "political decision" designed to unsettle the region and ramp up gas prices. Wholesale Dutch gas prices, a European benchmark for natural gas trading, jumped as much as 9% during Friday morning deals, before paring gains. The latest dispute appears to reaffirm the risk for European countries highly dependent on Russian gas, especially amid growing fears that Moscow could implement a broader squeeze on supplies in the coming months. Underlining the seriousness of these concerns, IEA Executive Director Fatih Birol warned last week that EU countries may be at risk of winter energy rationing if member states do not take more steps to improve energy efficiency.
Russia earns $98 billion from fuel exports in 100 days of Ukraine war- Russia earned 93 billion euros ($98 billion) from fossil fuel exports during the first 100 days of its war in Ukraine, with most sent to the European Union, according to research published Monday. The report from the independent, Finland-based Centre for Research on Energy and Clean Air (CREA) comes as Kyiv urges the West to sever all trade with Russia in the hopes of cutting off the Kremlin's financial lifeline. Earlier this month, the EU agreed to halt most Russian oil imports, on which the continent is heavily dependent. Though the bloc aims to reduce gas shipments by two-thirds this year, an embargo is not in the cards at present. According to the report, the EU took 61 percent of Russia's fossil fuel exports during the war's first 100 days, worth about 57 billion euros ($60 billion). The top importers were China at 12.6 billion euros, Germany (12.1 billion) and Italy (7.8 billion). Russia's fossil fuel revenues come first from the sale of crude oil (46 billion), followed by pipeline gas, oil products, liquefied natural gas (LNG) and coal. Even as Russia's exports plummeted in May, with countries and companies shunning its supplies over the Ukraine invasion, the global rise in fossil fuel prices continued to fill the Kremlin's coffers, with export revenues reaching record highs. Russia's average export prices were about 60 percent higher than last year, according to CREA. Some countries have upped their purchases from Moscow, including China, India, the United Arab Emirates and France, the report added. "As the EU is considering stricter sanctions against Russia, France has increased its imports to become the largest buyer of LNG in the world," said CREA analyst Lauri Myllyvirta. Since most of these are spot purchases rather than long-term contracts, France is consciously deciding to use Russian energy in the wake of Moscow's invasion of Ukraine, Myllyvirta added.
Would A Price Cap On Russian Oil Help Curb Its Revenue? - The U.S. is discussing with its European allies a price cap on Russian oil. The goal is to keep Russian oil flowing into international markets but curb budget revenues from it to discourage Russia from continuing the war in Ukraine. Theoretically. The situation is not dissimilar to wanting to eat your cake and have it, too. On the one hand, both the U.S. and Europe, suffering the most severe consequences of sanction action so far, are aware that banning Russian oil from international markets would hurt them even more.On the other hand, paying for Russian oil at market prices is not a palatable option because oil—and gas—export revenues make up a solid portion of Russia’s budget, and that budget includes defense spending, and much of that defense spending is going into what Russia calls its special military operation in Ukraine, which the West calls an unprovoked war.U.S. Treasury Secretary Janet Yellen put it rather bluntly earlier this week: “I think what we want to do is keep Russian oil flowing into the market to hold down global prices and try to avoid a spike that causes a worldwide recession and drives up oil prices,” she said as quoted by the Wall Street Journal. “But absolutely the objective is to limit the revenue going to Russia.”One might wonder where the concept of the free market went, but in truth, the concept of the free market has been quite dead for a while now. The question is whether the idea that the U.S. and the EU have about an oil price cap could work. In other words, would Russia accept such a move?According to common sense, it would hardly welcome the idea of having a price ceiling imposed on its export oil cargos. According to the former chief economist of the European Bank for Reconstruction and Development, Sergei Guriev, “Yes, Putin could refuse to sell oil at this price. But, given that he is already desperate enough to sell to China and India at steep discounts, and today’s energy prices far exceed production costs, this seems unlikely.”Indeed, Russian oil is trading at a discount of some $30 or more to Brent crude. Whether there is desperation in the Russian oil equation is difficult to say, if we put emotions and wishes aside. It is clear Russia knew it would have to redirect flows to Asia from Europe should the latter try to punish it for its actions in Ukraine—and it was prepared to do so.It is also clear, or at least it should be, that Russia cannot just redirect all the oil and fuel flows that currently go into Europe to India and China, at least not fast. What this suggests is that Russia may well be prepared to suffer some revenue pain while the redirection proceeds.Also, Russia tends to budget on the basis of quite low oil prices. For last year, for instance, it budgeted for $45 per barrel of Brent crude. Its actual oil revenues last year exceeded initial expectations by more than 51 percent. For 2022, Moscow budgeted for Brent at $44.20 per barrel. So, as Guriev notes, even with a price ceiling of $70 per barrel, Russia would be making a lot more from the sales of its oil than it budgeted for. China and India would only be too happy to pay even less for Russian oil. Yet the question remains whether Russia would be on board with the idea of having its opponents in this war tell it at what price to sell its crude.
India And China Take In Russian Oil Unwanted In The West -- Attracted by cheap prices, India and China continue to increase their imports of Russian crude, which is now mostly banned in the West.India, which wasn’t a big buyer of Russian oil until March this year, has now imported five times the amount of all the Russian crude it bought in the whole of 2021, according to estimates from commodity data firm Kpler cited by The Associated Press. So far this year, India has imported 60 million barrels of crude from Russia, compared to 12 million in Russian oil imports for the entire 2021, per Kpler data.China has also increased its intake of Russian oil, although not as dramatically in percentage hikes as India.China, however, overtook Germany as the largest importer of Russian crude oil anywhere in the world, Finland-based Centre for Research on Energy and Clean Air (CREA) said earlier this month, analyzing Russia’s fossil fuel exports and revenues in the first 100 days since the Russian invasion of Ukraine.“India became a significant importer of Russian crude oil, buying 18% of the country’s exports. A significant share of the crude is re-exported as refined oil products, including to the U.S. and Europe, an important loophole to close,” CREA said.India is even said to be looking to negotiate six-month supply deals with Russia’s oil giant Rosneft at a time when Western buyers avoid dealing with Moscow’s crude.Other price-sensitive buyers in Asia could also import more Russian crude. Sri Lanka’s Prime Minister Ranil Wickremesinghe told AP the country would first look into other sources, but is open to importing Russian crude as it is desperate to ease a major economic and fuel crisis. In total, Russia earned $97 billion (93 billion euro) in revenue from fossil fuel exports in the first 100 days of the war (February 24 to June 3), with EU importing 61% of this, CREA said.Russia is likely getting more revenues from oil and gas now than before the war in Ukraine, U.S. energy security envoy Amos Hochstein said at a Senate subcommittee hearing last week.
China and India now account for about 50% of Russia's seaborne oil exports, as Asian demand props up Moscow's energy revenues - Half of the Russian oil transported by ship is now heading for Asia — mainly to China and India, according to a Bloomberg analysis published on Monday.Russia shipped 3.55 million barrels of oil a day in the week ending June 10. About 50% of those shipments, or 1.878 million barrels of oil, was heading to Asia, Bloomberg reported, citing commercial vessel tracking data. That's up from under 40% of the exports in the weeks leading up to Russia's invasion of Ukraine on February 24.While China's imports from Russia have remained constant, India's buying has ramped up significantly, according to the Centre for Research on Energy and Clean Air (CREA), an independent research organization. In the first 100 days after Russia invaded Ukraine, India's purchases of Russian crude rose from 1% to 18% of the exports by value, the CREA wrote in a report published on Monday.In May, Russia became India's second-largest supplier of oil behind Iraq, overtaking Saudi Arabia, Reuters reported, citing trade sources. Indian refiners imported about 819,000 barrels of Russian oil each day in May — a record amount, and about three times more than the 227,000 barrels a day it received in April, according to Reuters.Russian crude oil is priced at a record discount to other grades on the spot market due to sanctions and boycotts, but energy prices have surged this year, propping up sales for the country. Sales of Russian oil and gas are expected to rise to $285 billion in 2022 — 20% higher than the country's $235.6 billion takings from oil and gas in 2021, according to a Bloomberg Economics report earlier this month.Chinese and Indian purchases of Russian oil amid the war have drawn scrutiny from the international community and stand in contrast to sanctions and boycotts from a number of Western countries. The US banned Russian energy imports in March, and the European Union has agreed to slash 90% of its Russian oil imports by the end of this year. Amos Hochstein, the US special envoy for energy affairs, told senators on Thursday that he had urged India to refrain from buying too much Russian oil. Neither India nor China has condemned Russia's invasion of Ukraine.
Russia Overtakes Saudi Arabia As India's Second-Largest Oil Supplier - Russia overtook Saudi Arabia to become India’s second-largest supplier of crude oil last month, Reuters reported, citing unnamed trade sources.The average daily rate of Russian oil exports to India stood at 819,000 barrels, according to the data that these sources shared, which compared with a meager 277,000 barrels daily in April.According to a report by a Finnish environmental agency, Indian buyers now account for 18 percent of Russian crude oil exports. What is more interesting, however, is that some of the fuel Indian refiners produce using Russian crude is then exported, with some of it eventually ending up in the United States.“We can see crude oil shipments going into refineries that take Russian oil, and then we can see where the stuff goes that they produce,” said Lauri Myllyvirta, lead analyst at the Helsinki-based Centre for Research on Energy and Clean Air, which authored the report.Russian crude has been trading at a steep discount reaching $30 to Brent since the start of the war in Ukraine, which has made it especially attractive for large importers such as India and China.Both countries have substantially increased their intake of Russian oil over the last three months, with Kpler reporting that so far this year, India has imported five times the amount of all the Russian crude it bought in the whole of 2021. Imports of Russian oil since the start of 2022 have totaled 60 million barrels versus 12 million barrels for the entirety of 2021.Reportedly, the subcontinent is currently looking to secure six-month supply contracts with Rosneft right now, despite warnings from the United States to stop buying so much Russian oil. India relies on imports to satisfy more than 80 percent of its crude oil demand, which makes it particularly vulnerable to international price rallies and a natural fan of bargains such as Russian crude.
Russia seaborne oil exports at 3-year highs despite sanctions shake-up | S&P Global Commodity Insights - Russian seaborne crude exports remained at post-pandemic highs in the first half of June as India and China continued to snap up discounted supplies despite tightening Western sanctions on Moscow.Compared to pre-war levels in January and February, Russia's shipped crude exports from June 1-15 rose by 576,000 b/d to average about 3.88 million b/d, according to preliminary data from shipping analytics provider Kpler. The latest export flows, which are up from 3.81 million b/d in May, put Russia's seaborne crude exports at the highest since May 2019.China and India continue to make up the biggest growth market for Russian oil as EU member states retreat from oil trade with Moscow ahead of the trade bloc's Q1-2023 deadline to end imports of Russian crude and products. The two Asian oil importers have now grown their share of Russian shipped crude to almost 30% and 20% respectively, a combined growth of more than 1 million b/d on pre-war levels. Russian crude export to Turkey have also doubled to 260,000 b/d and Bulgaria imports have also more than trebled to over 200,000 b/d compared to January and February, the data shows.At the same time, EU imports of shipped Russian crude remained at around 1.3 million b/d in the first half of June, little changed from May but down from 1.75 million b/d in January and February. To make up the shortfall, the EU has seen its imports of US crude jump by around 400,000 b/d, or 50%, since the start of the year and bought more Norwegian and Egyptian crude, the figures show, as it cuts its dependence on Moscow's oil.Russia's key export grade Urals has been trading at significant discounts to other crudes since the country invaded Ukraine on Feb 24. Platts assessed Urals at 92.145/b and Dated Brent at $132.06/b May 30, data from S&P Global Commodity Insights showed. Urals was assessed at $90.72/b and Dated Brent at $100.48/b the day before Russia invaded Ukraine.But with higher crude oil and product prices globally, Russia's oil export revenues are estimated to have increased by $1.7 billion in May to about $20 billion, according to the International Energy Agency, unchanged from February. Russia's oil export resilience to Western boycotts and sanctions so far has surprised most market watchers. After plunging 930,000 b/d in April, Russian total oil production in May actually rose by 130,000 b/d to 10.55 million b/d, the IEA said in its June 15 monthly oil market report."[Russia's] crude oil exports to world markets were reallocated from traditional buyers adhering to new sanctions or shunning barrels voluntarily in solidarity with Ukraine," the IEA noted. "Even with a large swathe of Russian oil output hit by sanctions and embargoes, the country will easily retain its rank as the world's third-largest oil producer behind the US and Saudi Arabia."Although the EU's ban excludes exports of Russian crude via the Druzhba pipeline to central Europe, the EU was importing about 2.3 million b/d of Russian crude and 1.2 million b/d of its oil products before the war, according to S&P Global Commodity Insights. Russian crude and oil product flows to the EU, its former key export market, are still expected to see a sharper drop in the coming months after the bloc agreed to ban 90% of its imports of Russian crude and products, phased out over the next six to eight months.
EU's sanction on Russian oil boomerangs, boosts global prices to Moscow's benefit - The EU sanctions on Russia's oil exports, which were intended to cripple the Russian economy, have instead boosted oil prices by raising supply pressure on the market, bolstering the country's oil profits as Europe struggles to source their imports from alternative energy suppliers. Earlier this month, EU leaders agreed on the 6th sanctions package which calls for a 90 percent reduction in Russian oil imports by the end of 2022. The plan also includes phasing out Russian crude oil supplies in six months and the supply of refined products by the end of the year. The EU states agreed to ban seaborne oil transport, partially exempting pipeline oil as some member countries including Hungary opposed particularly to the oil import ban via the Druzhba pipeline which transports Russian oil to the refineries in Poland, Germany, Hungary, Slovakia and the Czech Republic. Although the EU which imports around 25% of its oil from Russia aimed to crash the Russian economy using the oil embargoes, the recent data shows that the bloc has so far failed to achieve it. According to the International Energy Agency (IEA), Russia's oil revenue has increased by 50% since the beginning of the year to $20 billion a month, with the EU accounting for the lion's share of its exports. Despite the sanctions currently in place, the IEA said overall Russian oil exports increased by 620,000 bpd in April, rebounding to the January-February average of 8.1 million bpd. Amos Hochstein, the US energy security envoy, told the Senate Subcommittee on Europe and Regional Security Cooperation that Russia may be getting more revenue from its fossil fuels now than it did shortly before its invasion of Ukraine, as global oil price increases offset the impact of Western efforts to restrict Russian sales.
Russia to raise oil output to pre-war levels by next month: Novak -- Russian oil production is close to top pre-war levels and plans to increase it further by July, international media outlets cited Russian deputy prime minister as saying on Thursday. 'We are close to the output levels in February when we had been producing 10.2 million barrels per day (bpd),' Alexander Novak said, adding that Russia plans to expand its output further in July depending on companies’ plans. Earlier this month, EU leaders agreed on the 6th sanctions package which calls for a 90 percent reduction in Russian oil imports by the end of 2022. The plan also includes phasing out Russian crude oil supplies in six months and the supply of refined products by the end of the year. The EU states agreed to ban seaborne oil transport, partially exempting pipeline oil as some member countries including Hungary opposed particularly to the oil import ban via the Druzhba pipeline which transports Russian oil to the refineries in Poland, Germany, Hungary, Slovakia and the Czech Republic. Russia, as one of the world’s largest oil exporters, meets about 8% of global demand, with the EU the largest recipient. According to the International Energy Agency (IEA), Russia exported an average of 7.5 million bpd of oil and oil products last year, out of which approximately 3.4 million bpd was destined for the EU, including 2.2 million bpd of crude oil and 1.2 million bpd of petroleum products. This constitutes approximately 45% of Russia's total oil and petroleum products exports and 25% of the EU's total oil imports.
Russia Was India’s Second Biggest Oil Exporter in May - Russia rose to become India’s second biggest supplier of oil in May, pushing Saudi Arabia into third place but still behind Iraq which remains number 1, data from trade sources showed. In May Indian refiners received about 819,000 barrels per day (bpd) of Russian oil, the highest thus far in any month, compared to about 277,00 in April, the data showed. Western sanctions against Russia for its invasion of Ukraine prompted many oil importers to shun trade with Moscow, pushing spot prices for Russian crude to record discounts against other grades. That provided Indian refiners, which rarely used to buy Russian oil due to high freight costs, an opportunity to snap up low-priced crude. Russian grades accounted for about 16.5% of India’s overall oil imports in May, and helped raise the share of oil from the CIS countries to about 20.5%, while that from the Middle East declined to about 59.5% %, the data showed. The share of African oil in India’s crude imports last month surged to 11.5% from 5.9% in April, the data showed. “Diesel is calling the tune … if you want to boost production of diesel and jet fuel then you need Nigerian and Angolan grades. China has cut imports of Angolan grades because of COVID-related shutdowns so some of these barrels are going to Europe and some to India,” said Ehsan Ul Haq, analyst with Refinitiv. He said apart from availability of cheaper Russian barrels, higher official selling prices of Middle Eastern oil also pushed Indian refiners to buy Nigerian crude. India’s oil imports in May totalled 4.98 million bpd, the highest since December 2020, as state refiners raised output to meet growing local demand while private refiners turned focus to gain from exports, the data showed. India’s oil imports in May were about 5.6% up from the previous month and about 19% from a year earlier, the data obtained from sources showed. India has defended its purchase of “cheap” Russian oil saying imports from Moscow made only a fraction of the country’s overall needs and a sudden stop would drive up costs for its consumers. Higher oil imports from Russia, curbed OPEC’s share in India’s overall imports to 65% in April.
Türkiye's production target just 2 years after gas discovery 'impressive' -Given the challenging ultra-deep water terrain of Türkiye's Sakarya gas field and the fact that the project is a greenfield, producing gas within two years of discovery seems impressive, said Rami Khrais, an oil and gas analyst at the data analytics and consulting company GlobalData. Khrais told Anadolu Agency that Türkiye's largest offshore discovery could be transformational for the country in supporting its growing gas demand. "The fast development of Sakarya’s reservoir reflects Türkiye’s desperate need to diversify its energy sources specially after the global energy crisis resulting from the Ukraine war," he said. He said that the current under-construction gas processing plant in Filyos can only handle 350 million cubic feet per day. "Additional onshore gas processing plants are therefore required to handle the output increases during the second phase of the project," he added. Khrais said that Türkiye imports almost its entire gas needs from abroad, with Russia meeting 40% of the country’s total gas demand. "The startup of Sakarya Phase-2, which is expected to produce 1.4 billion cubic feet per day around the end of the current decade, is set to help Turkey mitigate its extreme reliance on external suppliers for natural gas. It will also help alleviate the mounting pressure on the local customers suffering from increasing inflation," he explained. Khrais underlined that the discovery of Sakarya in the Black Sea might pave the way for new finds in Türkiye’s deep waters. "The exploration campaign in the area has resulted on June 2021 the discovery of a northern extension of Sakarya, known as 'Sakarya North', with estimated reserves of 4.8 trillion cubic feet," he added.
Oman’s LNG output surges to a record 10.6 million tonnes in 2021 Oman’s liquefied natural gas (LNG) production surged 4 per cent to a record 10.6 million tonnes in 2021 and is expected to reach 11 million tonnes a year after the completion of projects to increase output, the Oman News Agency reported on Sunday. The LNG sector provided the sultanate's government with revenue of about $2.87 billion during the past year, the report said. LNG production is expected to grow as state-backed Oman LNG previously revealed plans to expand capacity to 11.4 million tonnes a year in 2022 by reducing bottlenecks at its liquefaction plant in Qalhat, south of the capital, Muscat. “During 2021, the Oman LNG Company continued its progress in implementing several strategic projects that are nearing completion to enhance productivity, such as the plant renewal project … and the modern energy project that uses gas engine technology to raise efficiency,” ONA said. Global trade in LNG rose 6 per cent to 380 million tonnes in 2021 on the back of higher demand as economies recovered from the coronavirus-induced slowdown and countries focused on cutting emissions, according to Shell's latest LNG outlook report. China, the world's second-largest economy, and South Korea led the growth in LNG demand last year. Demand is expected to increase this year as European countries look for alternative LNG supplies after the ban on most of the energy imports from Russia because of Moscow's conflict with Ukraine.
Shell challenging court’s jurisdiction in oil spill compensation suit- Counsel --The Shell Petroleum Development Company (SPDC) has challenged the jurisdiction of a Federal High Court in Yenagoa to hear a N700 billion oil spill compensation suit filed by members of Aghoro I Community in Bayelsa. The people of Aghoro I in Ekeremor Local Government Area (LGA) in Bayelsa dragged the SPDC to Federal High Court Yenagoa over a May 17, 2018 oil leak from the oil firm’s Trans Ramos Pipeline. When the suit came up for hearing, Counsel to SPDC, Mr Michael Amadi told the court that the oil firm is challenging the jurisdiction to hear the case and appeal at the Court of Appeal. He further urged the court to hand off the case pending the determination of the interlocutory appeal as demanded by the hierarchy of courts since the Court of Appeal was already adjudicating into SPDC’s appeal. Justice Isa Dashen noted that although the records as claimed by the defendant’s counsel was before the court, he is yet to go through them. He said that he was entitled to go through the court processes and records of the Court of Appeal before staying proceedings on the matter. He adjourned until Oct. 19 to enable and go through the processes filed before the court, adding that he would await the decision of the appellate court as the rules demand. The plaintiffs are Mr Victor Akamu, Pastor Erebimienkumor Goddey, Mrs Jane Alex, Miss Edith George, Mr Israel Tomonye and FASF Associates Ltd on behalf of Aghoro I community at Ekeremor LGA, Bayelsa. They are seeking redress for the damages caused by the oil spill and are claiming that the N33.49 million offered by SPDC was a far cry from the N700 billion claim based on impacted area damage assessment. Listed as defendants in the suit are, Shell Petroleum Development Company, Shell International Exploration and Production BV, Attorney-General and Minister of Justice and Nigerian National Petroleum Corporation.
Libyan oil supply outages intensify as political crisis deepens - Libya’s oil sector has been hit by more supply disruptions due to closures of the 200,000 b/d Sarir field and the 250,000 b/d Es Sider terminal as protestors blockaded those sites, industry sources told S&P Global Commodity Insights June 10. More than half of Libya’s oil production is now offline as tensions between the two rival governments have escalated in recent weeks, with both jostling for power and oil revenues. The Es Sider terminal was closed as of the morning of June 10 after protests began the previous day, sources said. The 200,000 b/d Sarir field, which is connected to the 250,000 b/d Marsa el-Hariga terminal, was also confirmed closed. Sources expected protestors to target the Marsa el-Hariga terminal next. The self-styled Libyan National Army, which supports the east-based Government of National Stability, has backed these protests. The LNA, led by Khalifa Haftar, controls most of Libya’s oil and gas infrastructure but does not control sales and distribution of revenue. These protests have also spread to the 200,000 b/d Ras Lanuf Port, sources added. “Protesters entered Es Sider and Ras Lanuf, issuing threats to restrict operations. A tanker at Ras Lanuf tanker was allowed to load and leave. Es Sider is now confirmed closed,” a source told S&P Global Commodity Insights. “Protesters seem to identify as ‘oil crescent’ locals, which underlines LNA involvement.” A spokesperson at state-owned National Oil Corporation was unavailable for comment. Operations at Libya’s largest oil field Sharara are being hampered by technical and security issues, industry sources said June 8.
Nigeria, six others' crude oil production dropped in May: OPEC - The Organisation of the Petroleum Exporting Countries (OPEC) has released a new report on crude oil production of its member countries, indicating that six countries increased their crude oil output while seven countries declined in production. The information is contained in the OPEC Monthly Oil Market Report (MOMR) for May 2022. The report showed that crude oil output increased in Saudi Arabia, the United Arab Emirates, Kuwait, Angola, Algeria, and Congo. At the same time, production in Libya, Nigeria, Iraq, Gabon, Venezuela, Iran and Equatorial Guinea declined. It showed that total OPEC-13 crude oil production averaged 28.47 million barrels per day in May 2022, lower by 239,000 barrels per day month-on-month. The report saw Saudi Arabia increasing output from 10,366 tb/d in April to 10,417 tb/d in May, UAE increased from 3,015 tb/d to 3,042 tb/d, while Kuwait jumped from 2,662 tb/d to 2687tb/d. It further showed that Angola increased its crude oil output from 1,168 tb/d in April to 1,176tb/d in May, Algeria improved from 1,003 tb/d to 1,007tb/d, while Congo slightly moved up from 262tb/d to 268tb/d. However, production in Libya declined from 914 tb/d in April to 725 tb/d in May, Nigeria’s output fell from 1,322 tb/d to 1,258 tb/d, while Iraq declined from 4,420 tb/d to 4,374tb/d. Also, Gabon declined from 200tb/d to 169tb/d, Venezuela went down from 712tb/d to 711tb/d, while Iran and Equatorial Guinea dropped from 2,564tb/d to 2,538tb/d and 96tb/d to 94tb/d respectively. On the world oil supply, the report said preliminary data indicated that global liquids production in May decreased by 0.22 mb/d to an average of 98.71 mb/d compared with April. Non-OPEC liquids production (including OPEC Natural Gas Liquids) is estimated to have increased in May by a minor 23 tb/d m-o-m to average 70.2 mb/d, but this was higher by 1.7 mb/d year-on-year. “Preliminary estimated decreases in production during May were mainly driven by Canada and the UK by 0.4 mb/d, while Eurasia and Latin America are expected to have seen growth in liquids output of 0.4 mb/d”. The share of OPEC crude oil in total global production decreased by 0.2 pp to 28.8 per cent in May compared with the previous month. Estimates are based on preliminary data from direct communication for non-OPEC supply, OPEC and non-conventional oil, while estimates for OPEC crude production are based on secondary sources.
UN appeals to public for $20m to stop feared catastrophic oil spill from tanker -- A rare UN appeal to the public to raise $20m is to be launched on Tuesday in an attempt to prevent an environmental catastrophe caused by the potential break-up of an oil tanker off the coast of Yemen. The money is needed to offload more than 1.14m barrels of oil that have been sitting in the decrepit cargo ship, Safer, for more than six years because of an impasse between Houthi groups and the Saudi-backed government over ownership and responsibility.The UN is in a race against time because the oil transfer needs to be completed by the winter when the currents and winds increase, raising the risk of the vessel breaking up and pouring the oil into the Red Sea.The UN’s resident coordinator for Yemen, David Gressly, admitted the resort to an appeal to the general public was unusual, but said the UN needed the money by the end of the month, saying: “It was do-able but it is going to take a push; $20m is not a lot if you consider the estimated $20bn cost of a clean-up alone.”He admitted legal and budgetary constraints have made it difficult for some countries to contribute: “It is far easier to raise funds to respond to a catastrophe than to prevent a catastrophe.”Gressly warned: “We are taking a chance this ship will break up every day we delay. We are running out of time. We are rolling the dice every day.” He said it was a certainty that the ship would break up soon, and the Safer’s captain had told him it was only a miracle that had prevented the disaster last winter.Any delay into July means the four-month operation would not be complete by the time the winds and currents strengthen dangerously from November onwards.The appeal to the public underlines how reluctant cash-strapped countries are to give money at present.The UN has so far only raised $60m from member states as part of a complex operation to remove the oil and then sell it on the open market. The estimated total cost of all the stages of the clean-up is put at $144m, but countries have so far failed to stump up the cash.Disputes between the Houthi rebel forces and the UN-recognised government in Yemen over the proceeds of the oil’s sale, and the need for a replacement vessel, have prevented the UN from acting, but officials now say these political and security issues have either been resolved or deferred, meaning the hold-up is only being caused by a lack of resources to fund the rescue.A special UN appeal conference in May took the funding to $40m, but then the US and Saudi Arabia each contributed a further $10m, leaving the UN $20m short of the money it needs to complete the first stage of preparing the ageing vessel for the oil transfer. Gressly said any spillage would have a catastrophic environmental impact on the Red Sea, including 20,000 fishery livelihoods, the ability to access ports that deliver commercial and humanitarian food to Yemen, and Red Sea shipping channels. He warned fishing stocks would be damaged for 25 years.
UN resorts to public crowdfunding to avert oil spill off Yemen - The United Nations is turning to public crowdfunding to prevent a decaying tanker from causing an oil spill off the coast of Yemen that could have disastrous implications for the greater region. A U.N. donor conference last month failed to raise the amount needed for the rescue of the stricken FSO Safer tanker, which experts say could break apart or explode at any moment. The organization earlier warned that it would cost $20 billion to clean up the spill.. According to the U.N., around $80 million is needed to start the salvage operation. Three-quarters of the sum has now been collected. U.N. emergency relief coordinator for Yemen, David Gressly, hopes the new crowdfunding campaign can raise $5 million from private individuals. The Safer has been used as a floating oil storage tank since the 1980s and is carrying 1.1 million barrels of crude oil. The ship is now considered structurally unsound as it has not been maintained since war broke out in Yemen in 2015. In the event of a leak, an explosion in the tanks or a rupture, four times as much oil could escape as in the 1989 disaster involving the tanker Exxon Valdez off Alaska. Any operation to move it would take several months and would have to be completed before the weather off the coast of Yemen worsens starting in September. Strong winds and unsteady currents starting in October would then make the operation more difficult and increase the risk of the rusting tanker breaking apart. In addition to the devastating damage to people and the environment in the region, shipping in the Bab al-Mandab strait and the Suez Canal would also be severely affected.
Saudi offers $10 million to prevent Red Sea oil spill disaster off Yemen -Saudi Arabia on Sunday pledged $10 million to help prevent an ageing Yemeni oil tanker from unleashing a potentially catastrophic spill in the Red Sea bordering its waters. The decaying 45-year-old oil tanker known as the FSO Safer, long used as a floating storage platform and now abandoned off the rebel-held Yemeni port of Hodeida, has not been serviced since Yemen was plunged into civil war. A Saudi-led military coalition intervened in Yemen in 2015 after Houthi rebels seized the capital Sanaa the previous year. The tanker, which lies some 150 kilometres (100 miles) south of the border with Saudi Arabia, is in "imminent" danger of breaking up, the United Nations warned last month. The Safer contains four times the amount of oil that was spilled by the 1989 Exxon Valdez disaster, one of the world's worst ecological catastrophes, according to the UN. Last week environmental campaign group Greenpeace urged the Arab League to drum up funds for an operation that would transfer its 1.1 million barrels of oil to a different vessel. A UN pledging conference last month fell far short of its $80 million target, bringing in just $33 million. Environmentalists warn the cost of the operation is a pittance compared to the estimated $20 billion it would cost to clean up a spill.
USA Pledges Millions to Address Supertanker Threat --U.S. Secretary of State Antony J. Blinken has announced that the Department of State is working with Congress to provide $10 million in support of the UN plan to address the “imminent threat” to the Red Sea ecosystem from the FSO Safer in Yemen. “An oil spill or leak would cost the world billions to clean up, devastate Red Sea marine life, impede global commerce in a major international waterway, destroy the livelihoods of those that depend on fisheries, and worsen an already critical humanitarian situation in Yemen,” Blinken said in a government statement. “We must work to prevent this,” he added in the statement. Blinken outlined that the UN needs $80 million for an initial emergency operation to transfer the Safer’s oil to a more secure vessel. “We thank donors that have already come forward … [The] U.S. pledge gets us closer to our goal. We call on the private sector and other governments that have a stake in this vital waterway to come forward now and deliver urgently needed funding,” Blinken stated. Last month, International Maritime Organization (IMO) Secretary-General Kitack Lim urged further financial support for the UN-coordinated operational plan to address the threat of an oil spill from the FSO Safer. “In the face of an impending environmental disaster, we must do all we can to prevent it. We must act now,” Lim said in an organization statement. “The time is now. The risks are high. We must act to avert disaster,” he added in the statement. Back in May, a joint statement from representatives of the U.S. and Netherlands governments warned that the “rapidly decaying” Safer supertanker could explode at any time. In April, the UN unveiled plans to address the threat posed by the FSO Safer, which it described as a time bomb sitting off Yemen’s Red Sea coast. The plan has received the backing of the Yemeni Government, based in Aden, while a memorandum of understanding has been signed with the de facto authorities in the capital, Sana’a, who control the area where the FSO Safer is located, the UN noted back in April. The plan involves installing a long-term replacement for the tanker within an 18-month period and an emergency operation to transfer the oil to a safe temporary vessel over four months, the UN has outlined. Both the FSO Safer and the temporary vessel would remain in place until all the oil is transferred to the permanent replacement vessel, the UN has pointed out. The FSO Safer would then be towed to a yard and sold for salvage, according to the organization.
Crude oil falls on China lockdown fears, higher-than-expected US inflation - Crude oil futures were lower in midmorning Asian trade June 13, as pandemic-related concerns in China, coupled with a higher-than-expected US inflation report weighed on sentiment. At 10:53 am Singapore time (0253 GMT), the ICE August Brent futures contract was down $1.84/b (1.51%) from the previous close at $120.17/b, while the NYMEX July light sweet crude contract fell $1.83/b (1.52%) at $118.84/b. COVID-19 worries in Beijing dampened the anticipated demand recovery in China and these concerns were further aggravated by Shanghai's temporary lockdown measures on June 11 for coronavirus mass testing. On June 12, Chinese authorities announced mass testing in Chaoyang, Beijing until June 15, as the country doubles down on the 'dynamic zero-COVID policy'. "China remains the significant near-term downside risk, but most view the gradual normalization of Chinese demand as a powerful positive for oil despite the potential for lockdown noise in the coming weeks as current demand is far from reflecting normal conditions," In the US, consumer price index rose at an 8.6% annual rate in May, hitting a four-decade high, the government data showed. "This crushed the notion that inflation may have peaked the prior month and markets are now expecting an even more aggressive tightening stance from the US Federal Reserve on the back of Friday's inflation data," OCBC treasury research analysts said in a note June 13. Sustained rise in inflation rate is likely to keep the pressure on the US Federal Reserve to sharpen its pace of interest rate hikes. "Oil traded lower as Fed tightening expectations hit fresh highs driving recession fears to multi-storey levels," Dubai crude swaps and intermonth spreads were lower in midmorning trade in Asia June 13 from the previous close. The August Dubai swap was pegged at $108.12/b at 10 am Singapore time (0200 GMT), down $3.41/b (3.06%) from the June 10 Asian market close.
Oil prices fall by more than $2/bbl on fresh COVID-19 outbreak in China -(ICIS)–Oil prices fell by more than $2/bbl on Monday on worries that fresh COVID-19 outbreaks in China could lead to further lockdowns, which will weigh on fuel demand. China’s financial hub Shanghai has re-imposed a dine-in ban, while Beijing has delayed re-opening for most schools planned for this week as COVID-19 infections rates in both cities ticked higher. Both Shanghai and Beijing have also resumed mass COVID-19 testing. Beijing authorities on 11 June said that all 61 new cases uncovered in the city the previous day had either visited a bar or had links to it. “The recent outbreak is strongly explosive in nature and widespread in scope,” Xu Hejian, spokesperson of the Beijing municipal government, had said in a news briefing. Beijing’s most populous district, Chaoyang, on 12 June announced three rounds of mass testing between 13-16 June, but the city has not announced any fresh lockdowns. In Shanghai, officials over the weekend announced three new confirmed local cases detected outside quarantined areas on 11 June, as all residents in 15 of its 16 districts underwent a fresh round of COVID-19 testing. The city lifted a strict two-month COVID-19 lockdown on 1 June. Mainland China reported 220 new coronavirus cases for 12 June, of which 89 were symptomatic and 131 were asymptomatic, the country’s National Health Commission said on Monday. That compared with 275 new cases a day earlier. Meanwhile, concerns about further interest rate hikes following a sharp rise in US inflation data on 10 June are also weighing on global financial markets. Both Brent and WTI had risen last week on data showing robust oil demand in the US – the world’s top consumer – despite inflation concerns, and on hopes that consumption in China could rebound after COVID-19 curbs were lifted from 1 June.
Oil Spikes On Reports Libya Shuts Down Nearly All Its Oil Fields - Libya is losing oil production at the rate of 1.1 million barrels daily, the country’s oil minister Mohammed Aoun has said, adding that almost all of the country’s oil fields were shut down.Libya’s largest field, El Sharara, was shut down last month along with El Feel, with reports saying that it was groups affiliated with the eastern parliament that shut down oil production, among them the Libyan National Army of Halifa Khaftar.[ZH: The Bloomberg headline appears to have sparked a bid in crude, sending WTI prices surging back into the green...]According to Aoun, however, “it appears that the closure instructions were issued by an official body, the Petroleum Facilities Guard in the closure areas.”Libya is currently in the throes of yet another flare-up of violence as two politicians vie for the post of Prime Minister: interim PM Abdul Hamid Dbeibah and eastern-affiliated Fathi Bashaga. According to reports, the groups shutting down fields and export terminals are affiliated with the Bashaga camp.Bashaga has been sworn in as the new prime minister of the country, but Dbeibah has refused to step down.According to the oil minister, the only functioning fields right now in Libya are Hamada and the Mellitah complex, with the Wafa field producing from time to time.This means that Libya is producing almost no oil, putting further strain on an already undersupplied oil market. The North African country was already producing about 600,000 bpd in May due to the large field and export terminal closures, and now, based on Aoun’s comments, its output rate is close to about 100,000 bpd.The impact of such outages on international prices could have been significant were it not for the fact that outages in Libya are frequent and the latest news from China, which is mass-testing citizens in a Beijing district after an outbreak of Covid. The latter sparked concern about China’s demand prospect in case it decides to impose more lockdowns to stem the spread of the virus.
Products Drop as Traders Eye Demand Loss, Slowing Economy - Oil futures settled a volatile session on Monday mixed, with RBOB plunging 3.3% and ULSD 1.9% in response to concerns over expected lost demand growth this summer as the U.S. Federal Reserve is poised to raise interest rates aggressively at their meetings this week and in July to fight "unacceptable" levels of inflation. U.S. economic growth is estimated to have slowed to 0.9% in the second quarter, according to the Federal Reserve Bank of Atlanta's GDPNow forecast, down from 2.5% seen just four weeks ago. As the growth outlook decelerates, odds for a recession are climbing rapidly, with Morgan Stanley CEO James Gorman seeing a 50-50 chance of an economic crisis in the months ahead. That's up from his earlier 30% recession-risk estimate, said Gorman, while adding "we're unlikely at this stage to go into a deep or long recession." Faced with heightened risk for an economic contraction, investors on Wall Street broadly unloaded risk and snapped up safer assets. The Dow Jones Industrial Average fell 2.8% or 876.05 points, while the tech-heavy Nasdaq Composite declined 4.7%. The S&P 500 slumped 3.9%, with most company stocks included in the index down on the day. The decline puts the S&P 500 500 into bear market territory for the first time since 2020. Meanwhile, the yield on the benchmark 10-year U.S. Treasury note rose to 3.35% Monday from 3.156% on Friday. Climbing inflation in the United States, which accelerated in May to a 40-year high 8.6% on an annual basis, has also spurred a rally in the U.S. dollar index ahead of this week's Federal Open Market Committee's two-day meeting on expectations central bank officials would need to tighten monetary policy more aggressively. . Offsetting the bearish drivers, Libyan oil production was nearly fully halted on Monday as political strife led to more shutdowns of export ports and oil fields. Production is now down by over 1 million barrels per day (bpd), said Libya's Oil Minister Mohamed Oun. The OPEC member's daily output -- which averaged 1.2 million bpd last year -- is down by about 1.1 million bpd, suggesting Libya is now pumping only about 100,000 bpd. The fall in supply will further tighten a global market that has seen crude prices jump more than 50% this year to more than $120 bbl. At settlement, July West Texas Intermediate futures were up $0.26 to $120.93 per barrel (bbl) and ICE August Brent futures were up $0.26 to $122.27 bbl. For oil products, July ULSD futures were down 8.33 cents at $4.2834 gallon, and July RBOB futures were 13.69 cents lower at $4.0353 after losing 10.4 cents in Friday's session.
Oil Prices Spike As OPEC Reveals Production Loss For May -Not only did OPEC not lift its production as agreed for the month of May, its production actually decreased, according to OPEC’s latest Monthly Oil Market Report released on Tuesday.Meanwhile, the group stressed that oil demand could be stymied by Russia’s invasion of Ukraine. That point, however, did little to assuage the market’s fear that OPEC’s spare capacity has been overstated, with Saudi Arabia and the UAE the only members that have any room to increase production. That extra production from The Kingdom and the Emirates, however, has been offset by an even greater decline in production from Iraq, Libya, and Nigeria.OPEC produced a total of 28.508 million bpd in May—down 176,000 bpd from April 2022. The reason for the decline are decreases in production in Equatorial Guinea (-2,000 bpd), Venezuela (-2,000 bpd), Iran (-20,000 bpd), Iraq (-21,000 bpd), Gabon (-32,000 bpd), Nigeria (-45,000), and most notably—Libya (-186,000 bpd), according to OPEC’s secondary sources.Saudi Arabia’s directly reported production was 10.538 million bpd.These losses were partially—but not completely—offset by gains in Saudi Arabia, which increased production by 60,000 bpd, reaching an average of 10.424 million bpd; the UAE, which saw an increase of 31,000 bpd, and Kuwait, which saw a 27,000 bpd increase.For the 10 OPEC members that had assigned quotas for May 2022 totaling 25.589 (which exclude Iran, Venezuela, and Libya), May’s actual OPEC member production was 24.541—a 1.048 million bpd shortfall from OPEC’s stated allowances.The market reacted to the data with a rebound in oil prices. At 9:14 am ET, WTI had risen 1.27% to $122.50, while Brent crude had risen 1.33% to $123.90 per barrel.
Oil prices rise as tight supply counters China Covid, recession worries - Oil prices rose on Tuesday as tight global supply outweighed worries that fuel demand would be hit by a possible recession and fresh COVID-19 curbs in China. Brent crude futures rose 88 cents, or 0.7%, to $123.15 a barrel at 0824 GMT, while U.S. West Texas Intermediate (WTI) crude rose 88 cents, or 0.7% to $121.81 a barrel. Tight supply has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports. Other OPEC+ producers are struggling to meet their production quotas and Russia faces bans on its oil over the war in Ukraine. "The continuing squeeze on refined products globally, as well as a lack of investment to bring online more supplies from OPEC members, or other sources, means lost Russian production is nowhere near being covered by global markets," UBS raised its Brent price forecast to $130 a barrel for end-September and to $125 for the subsequent three quarters, up from $115 previously. "Low oil inventories, dwindling spare capacity, and the risk of supply growth lagging demand growth over the coming months have prompted us to raise our oil price forecast," the bank said. The market will be awaiting weekly U.S. inventory data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday for a view of how tight crude and fuel supply remain. Six analysts polled by Reuters expect U.S. crude inventories to have fallen by 1.2 million barrels in the week to June 3 with gasoline stockpiles up by about 800,000 barrels and distillate inventories, which include diesel and heating oil, unchanged. On the demand side, China's latest COVID outbreak traced to a bar in Beijing has raised fears of a new phase of lockdowns just as restrictions in the country were being eased and fuel demand was expected to firm. The Chinese capital's most populous district, Chaoyang, kicked off a three-day mass testing campaign among its roughly 3.5 million residents on Monday. About 10,000 close contacts of the bar's patrons have been identified, and their residential buildings put under lockdown.] Looking ahead, oil prices may face pressure if the U.S. Federal Reserve surprises markets with a higher-than-expected interest rate hike to tame inflation when it meets on June 14-15.
Oil and Gas Prices To Rise Across The Board, Fitch Ratings Says - American credit rating agency Fitch Ratings has increased its short- and medium-term oil price assumptions, reflecting the increasing number of buyers boycotting imports from Russia. Fitch has increased its Brent and WTI price assumptions for 2022-2024 by $5 per barrel (bbl) with the Brent price for 2022 rising to $105 per bbl, while the prices for 2023 and 2024 rose to $85 and $65 respectively. Prices for 2025 and the long term remain flat at $53 per bbl. The $5 boost to price assumptions lifts WTI for 2022 up to $100 per barrel while 2023 and 2024 prices rise to $81 and $62, respectively. WTI prices, like Brent, will for now remain flat for 2025 and the long term. Global oil prices will be underpinned by the need to redirect trading flows as a growing number of countries ban Russian oil, including the most recent agreement by the EU to embargo Russian seaborne exports of oil and oil products. Oil delivered from Russia into the EU by pipeline is temporarily exempted from the ban to allow landlocked countries such as Hungary, Slovakia, and the Czech Republic extra time to substitute Russian imports with oil and products from other sources. The agreement, part of the sixth package of EU sanctions against Russia, bans purchases of Russian seaborne oil and oil products or about 4 MMbpd – two-thirds of Russian imports into the EU. Germany and Poland pledged to end Russian pipeline imports by the end of 2022 with the agreement ultimately covering 90 percent of all Russian oil and products imports into the bloc. This ban will have a significant impact on global oil trade flows, with about 30 percent of EU’s imports needing replacement from other regions, including the Middle East, Africa, and the US. However, Fitch believes that redirecting all Russian oil and product volumes may not be possible due to infrastructural limitations, buyers’ self-restrictions, and logistical complications. As a result, the company believes that about 2 MMbpd to 3 MMbpd of Russia’s oil exports, or about a quarter of the country’s oil production, may disappear from the global market by the end of 2022.Fitch stated that oil demand could exceed 100 MMbdp in 2H22, provided the pandemic remains mostly under control, and improve further in 2023, exceeding the prepandemic oil consumption recorded in 2019. This means that demand will increase by about 2MMbpd in both 2022 and 2023.
Oil Falls on Signs of More Energy Legislation -Oil’s rally evaporated amid signals that Democrats are considering more energy legislation as they and the White House face increasing pressure to curb US energy costs and inflation. West Texas Intermediate erased all of its gains late in the session to settle below $119 a barrel. US President Biden has not ruled out an excess profit tax for oil companies, Bharat Ramamurti, deputy director of the National Economic Council, said in a Bloomberg Television interview. Democratic Senator Ron Wyden is planning to propose a surtax that would mean companies face as much as 42% federal taxes depending on their profit margin, according to people briefed on the proposal. “Energy traders are bracing for some type of action to come from the Biden administration to help Americans at the pump, even if it will have little long-term effect,” said Ed Moya, senior market analyst at Oanda. The news comes after Biden announced he will travel to Saudi Arabia next month and will discuss energy production, according to US National Security Counsel Coordinator John Kirby. The diplomacy efforts will come at a time of heightened risk to the global economy from decades-high inflation and record energy costs. Wall Street started the week on the back foot as traders price in steep increases in Federal Reserve interest rates. Biden’s visit to Saudi Arabia comes after the US has repeatedly asked OPEC to pump more crude to help tame rising gasoline prices and the hottest inflation in decades. US retail gasoline recently hit a national average of $5 a gallon. Meanwhile, Russia’s war in Ukraine has made the crude and fuels markets even tighter, with the WTI benchmark soaring more than 60% this year. Several Wall Street banks are expecting further gains in the coming months. WTI for July delivery fell $2.00 to settle at $118.93 a barrel in New York. Brent for August settlement fell $1.10 to settle at $121.17 a barrel. Some Asian buyers have been snapping up Middle Eastern oil earlier than usual in the physical market, in a sign of robust demand. The spot buying activity, which normally picks up pace after the release of official selling prices, started even before Iraq, Kuwait and Iran had made their announcements. Yet demand risks still persist in the market as producer group OPEC said it sees oil demand growth halving next year. While crude has experienced a strong rebound, it could be derailed by inflationary pressures, virus outbreaks and the economic fallout from Russia’s war in Ukraine.
Oil Falls After IEA Forecasts Balanced Market This Year -- Oil futures eroded further in early morning trade Wednesday after the International Energy Agency (IEA) forecasted the global oil market is likely to rebalance in the second half of the year driven by slowing demand growth and accelerated gains in non-OPEC oil supplies that should partially offset the loss of Russian barrels. Oil's move lower also comes ahead of perhaps the most consequential Federal Reserve rate decision in more than a decade set for 1 p.m. CDT, followed by a press-conference by the Fed's Chairman Jerome Powell 30 minutes later. Investors are quickly re-pricing a more aggressive increase to federal funds rates Wednesday and on July 27 as the central bank struggles to control the hottest inflation in over four decades. Near 6:30 a.m. CDT, July West Texas Intermediate futures dropped $0.63 to $118.36 barrel (bbl) and ICE August Brent futures were $0.40 lower at $120.69 bbl. For oil products, July ULSD futures slipped 0.30 cents to $4.3928 gallon, and July RBOB futures declined by 3.68 cents to $3.9570 gallon. U.S. dollar retreated from a 20-year high 105.342 settlement on Tuesday, trading 0.64% lower against the basket of foreign currencies. U.S. equity futures edged higher in overnight trade, following on from a session which consolidated a bear market for the S&P 500. In its monthly oil market outlook, IEA maintained its global demand projections this year at 99.4 million barrels per day (bpd), slightly below the pre-pandemic level of 99.7 million bpd. Within quarters, the agency boosted estimates for the thirst three months of the year to 99.3 million bpd, while shaving 400,000 bpd in the third and fourth quarters combined for the average growth of 100.1 million bpd. "Higher oil prices and a weaker economic outlook continue to temper our oil demand growth expectations." said IEA. Next year, however, a resurgent China is expected to boost non-OECD demand growth, offsetting a slowdown across industrialized countries. Global oil demand is forecasted to expand by 2.2 million bpd to 101.6 million bpd in 2023, which exceeds pre-pandemic levels. As demand rebounds, global oil production may struggle to keep pace with consumption next year, as tighter sanctions force Russia to shut in more wells and a number of producers bump up against capacity constraints. Meanwhile, global oil inventories increased in April for the first time in two years, increasing by 77 million bbl, with preliminary data for May showing another build of 6 million bbl. OECD industry stocks also rose, by 42.5 million bbl, translating into 1.42 million bpd increase, helped by government stock releases of nearly 1 million bpd. OECD industry stocks were nevertheless 290.3 million bbl below the 2017-2021 average. Also on Wednesday, oil traders positioned ahead of the release of U.S. inventory data from the Energy Information Administration on tap for 9:30 a.m. CDT release. Preliminary data from the American Petroleum Institute reported commercial crude oil stocks gained 736,000 bbl last week versus calls for a draw of 1.4 million bbl. Stocks at the Cushing, Oklahoma, hub, the New York Mercantile Exchange delivery point for the West Texas Intermediate futures contract, dropped 1.067 million bbl. The data show gasoline stocks dropped 2.159 million bbl through June 10 versus an expected increase of 100,000 bbl. Distillate inventories added 234,000 bbl, below calls for an 800,000 bbl build.
WTI extended its losses after the EIA reported an unexpected crude inventory build and a slowing of gasoline demand Slows - Oil pries are modestly lower this morning, extending on yesterday's losses as traders weigh the impact of Fed tightening and Biden's letter to 'Big Oil' against China's solid overnight data."It appears that market participants got cold feet ahead of today's Fed decision, as a stronger tightening of monetary policy could have negative effects on oil demand," For now, while markets are calmly sitting on their hands ahead of the major event risk today at 1400ET, all algo's eyes will be on the inventory/demand data.API:
- Crude +763k (-1.2mm exp)
- Cushing -1.067mm
- Gasoline -2.159mm
- Distillates +234k
- Crude +1.96mm (-1.2mm exp)
- Cushing -826k
- Gasoline -710k (+100k exp)
- Distillates +725k (+800k exp)
US Crude stocks rose for the second straight week (a surprise vs expectations a draw) and distillates inventories also built again. Gasoline stocks fell very modestly...US crude production rose last week to 12mm b/d for the first time since May 2020...
Oil Prices Fall On Biggest Fed Rate Hike Since 1994 - In its largest hike since 1994, the Federal Reserve raised rates by three-quarters of a percentage point, or 75 basis points, with oil prices responding by drawing down just under 1%. Wall Street had largely anticipated a 75-basis point hike, and oil prices were down 1% on Wednesday, ahead of the Fed meeting, regaining some ground by the time of the rate hike announcement. At 2:13 p.m. EST, just minutes after the Fed release, Brent was trading down 0.62% on the day, at $120.42. WTI was trading at $118.10, down 0.70%.The Fed also signaled that more rate hikes were to come, with another potential three-quarters of a percentage point hike in July. A half percentage point hike ispossible for September. In a Wednesday press release the Federal Open Market Committee (FOMC), said “overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures”.“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks,” the FOMC statement read. The rate hike follows a half-percentage point hike in May. Oil prices also settled lower on Tuesday in anticipation of an interest rate hike of 75 basis points. Earlier expectations were for a 50-basis-point hike. The shift in sentiment came after a strong consumer price index report for May raised expectations of a much higher rate hike.
Oil Prices Fall Over 2% as Fed Hikes Interest Rates (Reuters) -Oil prices fell more than $3 on Wednesday as markets worried about a fall in demand after the Federal Reserve hiked interest rate by three-quarters of a percentage point. Brent crude futures for August settled down $2.7, or 2.2%, at $118.51 a barrel, having fallen as low as $117.75. U.S. West Texas Intermediate crude for July fell $3.62, or 3.04%, to $115.31 a barrel, after dropping to a low of $114.60. The biggest hike by the U.S. central bank since 1994 also sent dollar higher with the dollar index rising to its highest since 2002. A stronger greenback makes U.S. dollar-priced oil more expensive for holders of other currencies, curtailing demand. Meanwhile, U.S. crude production, which has been largely stagnant over the last few months, edged up 100,000 barrels per day last week to 12 million bpd, its highest level since April 2020, data from the Energy Information Administration showed. The data also showed a build in U.S. crude stocks and distillate inventories, while gasoline posted a surprise drawdown on the back of the summer driving season. Drivers around the world were tolerating record-high prices for road fuels, data showed. The European Central Bank promised fresh support and a new tool on Wednesday to temper a market rout that has fanned fears of a new debt crisis on the euro area's southern rim but appears to have disappointed investors looking for bolder steps. Adding to demand woes, China's latest COVID outbreak has raised fears of a new phase of lockdowns. Higher oil prices and weakening economic forecasts are dimming futures demand prospects, the International Energy Agency said. But persistent concerns about tight supply meant oil prices were still holding near $120 a barrel. The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are struggling to reach their monthly crude production quotas, recently hit by a political crisis that has reduced Libya's output. "Because OPEC production is still falling noticeably short of the announced level, this would result in a supply deficit of around 1.5 million barrels per day on the oil market in the second half of the year,"
Oil Nosedives on Fed Inflation Actions -Oil fell the most in three months as Federal Reserve Chair Jerome Powell doubled down on his determination to curb the hottest inflation in decades with more aggressive rate hikes. West Texas Intermediate dropped to $109.56, shedding 6.8%, the biggest daily drop since March. Powell this week openly endorsed for the first time raising interest rates well into restrictive territory, a strategy that’s often resulted in an economic downturn and could blunt energy consumption. On Friday he reiterated that the Fed is focused on returning inflation to its 2% target. “All the headlines seem to have turned bearish for oil and that could see further technical selling target the psychological $100 a barrel level,” said Edward Moya, senior market analyst at Oanda. “Once this move lower is complete, oil should stabilize and trade comfortably above the $100 a barrel level as potential disruptions from either further sanctions on Russia oil or hurricane season will keep supplies at dangerously low levels,” he said. Fears that rising interest rates and a slowdown in economic growth will lead to demand destruction have gripped the market but in the long run, supplies still look tight, market participants said. “I don’t think the selloff will continue as we have major supply shortfalls such as in non-OPEC non-US production and OPEC spare capacity; fundamentals for energy remain bullish and we recommend buying the dips,” Christyan Malek JPMorgan Global Head of Energy Strategy. Russia’s invasion of Ukraine has compounded global price increases and helped to drive up the cost of everything from food to fuels. US retail gasoline prices have repeatedly broken records and the national average recently topped $5 a gallon. The White House is weighing limits on fuel exports to try to alleviate the pain at the pump. Crude is still up more than 50% this year as rebounding demand combined with upended trade flows following Russia’s invasion of Ukraine to squeeze the market. All commodity price moves have become more extreme as market liquidity has slumped and if crude comes under Western secondary sanctions oil could spike sharply higher, JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a report. WTI for July delivery fell $8.03 to end the session at $109.56 a barrel. Brent for August settlement lost $6.69 to settle at $113.12 a barrel. As the war in Ukraine continues, the focus remains on the extent to which Russian oil flows will be altered. On Friday, the country’s Deputy Prime Minister Alexander Novak said throughput at the nation’s refineries could fall 10% this year.
Oil prices fall after rate hikes, but tight supply limited losses Oil prices erased early gains to fall to two-week lows on Thursday on the back of inflation concerns highlighted by interest rate hikes in the United States, Britain and Switzerland, though tight oil supply limited losses. Brent crude futures were down $1.02, or 0.9%, to $117.49 a barrel by 1330 GMT, while US West Texas Intermediate (WTI) crude futures fell $1.17 to $114.14, off 1%. Prices slipped more than 2% overnight after the Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994. On Thursday, European stocks tumbled after a surprise rate hike from Swiss National Bank. This was followed by a rate hike by the Bank of England. "Concerns about global inflation are growing. As a result, the dollar is stronger and European equities are falling, bringing oil down with them," PVM analyst Tamas Varga said. "This is why oil buyers are currently on the back foot but since supply issues are still very much present, I believe that the move lower, which started on Tuesday, will not be a prolonged one." Libyan oil output has collapsed to 100,000-150,000 barrels per day (bpd), a fraction of the 1.2 million bpd seen last year. That is hitting already-tight supply, while the International Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million bpd. Optimism that China's oil demand will rebound as it eases COVID-19 restrictions is also supporting the price outlook. "Looking into next year, there is a clear deficit in supply. While a recession could yet come along to change this, the current set-up remains bullish for the oil price and oil stocks," Bernstein analysts said in a note. US crude stocks and distillate inventories rose while gasoline inventories fell in the week through June 10, the Energy Information Administration said. Still, Bernstein estimated global inventory levels at 48 days of demand cover, below the long-term average of 55 days.
WTI Advances as USD Retreats Amid EU Monetary Tightening -- Oil futures nearest delivery reversed higher in afternoon trade Thursday, lifting the U.S. crude benchmark above $117 barrel (bbl) helped by a sharp drop in the U.S. Dollar Index after a number of European central banks raised interest rates Thursday in an attempt to control inflation that is forecast to climb higher as European Union sanctions on Russian oil and product exports come into full effect later this year. Eurozone inflation in May hit its highest level since the creation of the euro currency in 1999, stoked by a record run-up in energy and food prices in the aftermath of Russia's invasion of Ukraine. Fueled initially by soaring energy prices, inflation has broadened out to key consumer items such as shelter and services with double-digit readings in parts of the continent. For comparison, consumer prices in Estonia surged 19% year-on-year in May, in Czech Republic by 14.2%, and Bulgaria by 14.4%. It's worth noting that these countries are highly dependent of Russian oil and gas imports. Forecasts are not looking great either as energy prices across the 19-nation economic bloc are unlikely to moderate anytime soon amid unprecedented sanctions against Russian exports of oil and petroleum products. The EU embargo on Russian oil shipments is yet to come into full effect, doing so on Dec. 5, with a ban on petroleum product imports taking full effect on Feb. 5, 2023. While addressing the question over how high oil can go this year, Russian Deputy Prime Minister Alexander Novak said he wouldn't rule out $150 bbl oil by the end of the year. Faced with these headwinds to the collective economy, the European Commission lowered its growth forecast to 2.7% this year from the 4% estimated this winter. Hours after the U.S. Federal Reserve lifted interest rates by 75 basis points, the most in almost three decades, the Swiss National Bank and the National Bank of Hungary jacked up their lending rates by a higher-than-expected margin, sending shockwaves through the market. The Bank of Switzerland raised rates to -0.25% from -0.75%, while Bank of Hungary lifted its one-week deposit rate by 50 basis points to 7.25% also to tame stubbornly rising inflation now running in double digits. In the physical market, Russian crude output is seen rising in July to pre-war levels, according to Novak. "Actually, we are very close to restoring the levels of February." He noted, however, that Russia's crude exports will slip slightly this month as domestic refining activity rises. Russia's oil dropped by almost 1 million barrels per day (bpd) in April as a result of reduced export demand since its invasion of Ukraine in February. Fed officials also markedly cut their outlook for 2022 economic growth, now anticipating a 1.7% expansion in U.S. gross domestic product compared with its 2.8% outlook in March. That outlook might be too rosy, with Atlanta's Federal Reserve Bank's GDPNow tracker now showing expectations for no growth in the second quarter, down from 0.9% expected growth on June 8, while following a 1.5% contraction for the first quarter. At settlement, NYMEX July West Texas Intermediate futures advanced $2.28 to $117.59 bbl and ICE August Brent crude gained $1.30 to $119.81 bbl. NYMEX July RBOB futures rallied 6.16 cents to $3.9558 gallon and July ULSD futures added 2.43 cents to $4.5713 gallon.
Oil slumps 6%, snaps seven week winning streak Oil prices tumbled about 6% to a four-week low on Friday on worries that interest rate hikes by major central banks could slow the global economy and cut demand for energy. Also pressuring prices, the U.S. dollar this week rose to its highest level since December 2002 against a basket of currencies, making oil more expensive for buyers using other currencies. Brent futures fell $6.69, or 5.6%, to settle at $113.12 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $8.03, or 6.8%, to settle at $109.56. That was the lowest close for Brent since May 20 and the lowest for WTI since May 12. It was also the biggest daily percentage decline for Brent since early May and the biggest for WTI since late March. For the week, Brent futures declined for the first time in five weeks, while WTI dropped for the first time in eight weeks. There will be no U.S. trading on Monday, the Juneteenth holiday. "Crude prices tumbled as the dollar rallied, Russia signaled oil exports should increase, and as global recession fears grow," Global central bankers who quickly loosened monetary policy during the pandemic to avoid a recession, are now tightening to fight inflation. The Federal Reserve this week hiked U.S. rates by the most in more than a quarter of a century. "With the central banks making pretty substantial moves to limit growth via interest rate hikes and monetary tightening is showing up here in the petroleum complex," With the Fed expected to keep raising interest rates, open interest in WTI futures on the New York Mercantile Exchange fell on Thursday to its lowest level since May 2016 as investors cut back on risky assets. U.S. gasoline and diesel futures also slid over 4% on worries high pump prices will reduce demand. Automobile group AAA said the price of diesel at the pump hit a record high $5.798 per gallon on Friday, while the price of gasoline hit a record high of $5.016 earlier in the week. U.S. energy firms this week added just four oil rigs as President Joe Biden slammed producers for profiting from sky-high prices instead of doing more to boost output. Even as his administration wants Saudi Arabia to produce more oil, Biden said he was not going to have a bilateral meeting with Saudi Arabia's de facto leader Mohammed bin Salman during his trip to the region next month, and that he was only seeing the Saudi crown prince as part of a broader "international meeting." Russia, meanwhile, expects its oil exports to increase in 2022 despite Western sanctions and a European embargo, the Russian deputy energy minister said on Friday, according to Tass news agency. The market's turbulence has certainly increased since Russia invaded Ukraine on Feb. 24. Russian gas flows to Europe fell short of demand on Friday as an early heat wave in the south boosted demand for air conditioning. The European Union's executive body recommended that Ukraine and Moldova become candidates for membership in the world's largest trading bloc. An oil tanker chartered by Italy's Eni SpA will soon depart Venezuela with first cargo in two years to Europe.
Crudes Notch 9% Weekly Loss as Russian Oil Output Rebounds -- Oil futures plummeted in afternoon trade Friday, with all petroleum contracts posting their first weekly loss since late April amid signs of a tentative rebound in Russian oil production supported by strong demand from Asian and European buyers, while ongoing concerns over demand destruction in the United States linked to surging energy prices and aggressive monetary tightening from the Federal Open Market Committee this week further weighted on the oil complex. Investors navigated a host of downside risks to the oil market this week, including a historic rate hike from the U.S. Federal Reserve that sharply raised risk of a recession, signs of slowing demand across Organization for Economic Cooperation and Development countries in Europe, and a surprise recovery in Russian oil production that is reportedly climbing to its pre-invasion level despite Western sanctions. Russia's crude production rose 600,000 barrels per day (bpd) so far this month, according to the country's Deputy Prime Minister Alexander Novak, which lifted daily output close to 11 million bpd. "There are reasons to believe that we will continue raising production in July," added Novak. One reason behind the resiliency is increased crude exports to Asian buyers, including India and China that now take more than half of all Russian oil exports, with a steady stream of tankers heading around Europe and through the Suez Canal from the Baltic and Arctic seas, according to Bloomberg estimates. India has moved from being an insignificant buyer of Russian crude to the second-biggest destination for its shipments, behind only China. Almost 860,000 bpd of crude were loaded onto tankers at Russia's western export terminals in the week to June 10 before heading to destinations in Asia. And the figure will almost certainly be revised higher once destinations become apparent for almost 210,000 bpd that are on vessels yet to show a final discharge point. Nonetheless, Russian oil output is set to decline by 18% -- from 11.3 million bpd in the first quarter to 9.3 million bpd in the final quarter of 2023 as a result of an EU embargo on both crude oil and refined product imports, the U.S. Energy Information Administration said last week. The European Union has agreed to ban Russian seaborne oil imports, but this won't take full effect until December. In the meantime, European refiners, shippers, and traders continue dealing with Russian oil, limiting the impact on the overall level of shipments. U.S. retail data for May showed consumer spending is already softening, declining for the first time in five months as purchases for autos and electronics plunged, suggesting aggregate demand is finally moderating. As price pressures become more entrenched in the economy, spending will likely ebb as they outpace earnings, with higher prices compounded by climbing interest rates. At settlement, NYMEX July West Texas Intermediate futures declined $8.03 to $109.56 per barrel (bbl), and ICE August Brent crude fell $6.69 to $113.12 bbl. NYMEX July RBOB futures fell 16.28 cents to $3.7930 gallon, and July ULSD futures erased 23.15 cents in value with a $4.3398 gallon settlement.
Somalia pushed closer to famine by US/NATO sanctions on Russia, international speculation and drought -Last week, UN Humanitarian Coordinator for Somalia Adam Abdel Mawla warned that Somalia was “on the brink of a deadly famine that could kill hundreds of thousands.” He said that 213,000 people face starvation by next September as global food prices hover near record highs and drought worsens. The price of imported foodstuffs in Somalia has reached record levels, jumping by up to 160 percent. The price of a kilo of rice has more than doubled, rising from $0.75 to $2, while three litres of cooking oil has gone from $4.50 to $9.50, making it impossible for people in one of the world’s poorest countries—its GDP is just $7 billion, and more than 70 percent of the population live on less than $1.90 a day—to feed themselves and their families. Mawla said that some 7.1 million of the country’s 16 million population face catastrophic levels of food insecurity and disease. Nearly one third of the country’s population are hungry. About 1.5 million children under five are suffering from acute malnutrition. At least 448 children have died since January. Many more are malnourished, with scaly skin and hair that has lost its natural colour, while others are sick with illnesses such as measles and cholera. These appalling numbers are nearly three times the levels expected just two months ago, according to a joint statement issued by the various UN humanitarian agencies: the World Food Programme (WFP), the Food and Agriculture Organization (FAO), the United Nations Children’s Fund (UNICEF), and the Office for the Coordination of Humanitarian Affairs (OCHA). This latest disaster to affect the war-torn country comes 11 years after the famine of 2011 fuelled by soaring food prices in 2008 that killed around 250,000 people in Somalia, half of whom were children under the age of six. Now once again, the Somali people are the collateral damage of the crisis of the global economic system. Skyrocketing food, fertiliser and fuel prices have been driven by the billions of dollars poured into the world’s stock markets, the failure of governments around the world to pursue a coronavirus elimination policy and thereby prolonging the pandemic and disrupting food supply chains, and the US/NATO sanctions on Russia that have included banning the country from the SWIFT money transfer system.
Iran Says Nuclear Deal Remains "Possible" As Latest Technical Advances Still "Reversible" -- Within a mere months ago there were high hopes that Iran and global signatories to the 2015 JCPOA were wrapping up a restored nuclear deal. There was even talk that a finalized agreement was 'imminent' - but now just weeks after some of these optimistic headlines at a moment Washington scrambles to tap more global oil supply amid efforts to punish Russia with Europe's partial oil embargo, a 'fatal blow' may have been struck.At the moment, Iran and the West appear more distrustful of each other than ever, and the Vienna process is already appearing like a distant memory, with Iran's foreign ministry now affirming that the Islamic Republic has significantly furthered measures in breach of its commitments under the 2015 nuclear deal.Last week Iran removed at least 27 monitoring cameras at nuclear facilities, according to recent statements by IAEA chief Rafael Grossi. The UN nuclear watchdog chief warned this could deliver a "fatal blow" to efforts at reviving the JCPOA. Additionally Iran announced plans to add more centrifuges at the Natanz nuclear facility, south of Tehran.There's consensus among Iran watchers in the West that the country currently has enriched enough uranium of to 60% purity to be able to shortly bring it up to weapons-grade levels of 90% if Tehran chose to do so. 90% purity must be attained to produce a nuclear weapon. Experts say Iran likely is close enough to produce one bomb in a short time frame if it set out.Despite these developments, Iran says it has not given up, with a fresh Monday statement from its foreign ministry emphasizing all measures it's thus far taken to roll back commitments based on the original deal are "reversible"."If the agreement is finalized in Vienna tomorrow, all the measures carried out by Iran are technically reversible," foreign ministry spokesman Saeed Khatibzadeh said as cited in AFP.It appears Tehran is attempting to push back against the IAEA's rhetoric of a "fatal blow" in shutting off the cameras. The argument of Iranian officials, however, remains that the cameras in question were never part of its original commitments:Iran "is fully honoring its co mmitments under the safeguards agreement," Khatibzadeh said, adding that the country has only "stopped some of the voluntary measures."Some 40 IAEA monitoring cameras are reported still in place across various sensitive facilities.
With No Nuclear Deal In Sight, U.S. Slaps Extra Sanctions On Iran - With no nuclear deal with Iran in sight, the United States Treasury has slapped additional sanctions on companies based in Iran, China and the UAE for enabling the export of Iran’s petrochemicals. On Thursday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) implemented new sanctions on what it called “a network of Iranian petrochemical producers” and “front companies” in China and the UAE that support Iranian petrochemical exports abroad. “This network helps effectuate international transactions and evade sanctions, supporting the sale of Iranian petrochemical products to customers in the PRC and the rest of East Asia,” according to a statement from the Treasury Department. Specifically, the Treasury Department said that the network was facilitating the sale of “hundreds of millions of dollars” in petrochemicals from the National Iranian Oil Company (NIOC) to foreign customers, including in China. The Iran-based companies sanctioned in this latest round include Marun Petrochemical Company, Kharg Petrochemical Company Limited, and Fanavaran Petrochemical Company. “Front companies” listed include Hong Kong-based Keen Well International Limited and Teamford Enterprises Limited. The list also includes UAE-based GX Shipping FZE, which is accused of concealing the source of Iranian petrochemicals, along with Future Gate Fuel and Petrochemical Trading LLC, Sky Zone Trading FZE, and Youchem General Trading FZE. The sanctions come as talks to return to the nuclear deal, which U.S. President Donald Trump revoked in 2018, have stalled. “The United States is pursuing the path of meaningful diplomacy to achieve a mutual return to compliance with the Joint Comprehensive Plan of Action. Absent a deal, we will continue to use our sanctions authorities to limit exports of petroleum, petroleum products, and petrochemical products from Iran,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said. “The United States will continue to expose the networks Iran uses to conceal sanctions evasion activities.”
Israel makes dramatic upgrades to military plans to attack Iran - The Jerusalem Post -In face of Iran’s continued development of a nuclear capability, the Israeli Air Force has developed a new capability to be able to fly its F-35 stealth fighter jets from Israel to the Islamic Republic without requiring mid-air refueling. The development is a boost to IAF capabilities and comes as the Israeli military has upped its preparations for a future strike against Iran’s nuclear capabilities. In addition, the IAF recently integrated a new one-ton bomb into the arsenal of weapons used by the F-35s (known in the IAF as the “Adir”) that can be carried inside the plane’s internal weapons compartment without jeopardizing its stealth radar signature.The bomb – made by Rafael Advanced Weapons Systems - is said to be autonomous and protected against jamming and electronic warfare systems. The bomb was recently used in a series of IAF tests, the results of which were presented to Defense Minister Benny Gantz. The IAF has held four large-scale drills simulating attacks against Iran over the last month. The first drill included confronting Iranian radar and detection systems, like those which protect its nuclear installations. The second included simulating long-range combat flights – in this case to destinations in Europe. The other drills included defensive measures against cyber weapons and electronic warfare systems, means that could be used by Iran to undermine an Israeli military operation. News of the progress in military preparedness came just a day after Prime Minister Naftali Bennett told the Knesset Foreign Affairs and Defense Committee that Israel’s Iran strategy has changed in the last year, and it is “acting against the head... and not just its arms, as we had in recent years.”
Israel Urges All Citizens To Evacuate Istanbul Immediately, Citing Iranian 'Revenge' Plot -- Israel has issued an abrupt and highly unusual alert to its citizens traveling or working in Turkey, warning all Israelis to evacuate the capital Istanbul immediately. Officials have said intelligence reports suggest a possible Iranian kidnap or murder plot of its nationals potentially in progress."Israel’s Counter-Terrorism Bureau has raised its alert level for Istanbul to the highest possible level, calling on any Israelis in the city to leave immediately or risk their lives," The Times of Israel writes of the Monday warning. Israelis are further being advised to avoid travel in other parts of Turkey as well.The heightened alert message came hours following Foreign Minister Yair Lapid informing a meeting of government ministers that there is a "real and immediate" threat to Israelis in Istanbul in particular, and Turkey in general.A written statement from Israel's National Security Council (NSC) said "Two weeks ago a travel warning to Turkey was raised, after defense officials raised fears of Iranian attempts to harm Israeli targets around the world, especially in Turkey."The latest raising of the alert level to a "4" means Israel has designated its "danger" level for Turkey as on par with Afghanistan, Iran, Burkina Faso, or other official 'enemy' states or war-torn regions.The NSC statement further said that "given the continued threat and Iranian intentions to hurt Israelis in Turkey, especially Istanbul, cranking up a notch" - to explain the heightened state of alert. The new alert is being widely viewed as in relation to last month's assassination of Revolutionary Guard colonel Sayad Khodai, which Tehran has blamed on Israeli intelligence and its agents inside Iran. The slain IRGC officer was reportedly a commander in the elite Quds Force, which is the foreign intelligence wing of the IRGC. Israeli media is claiming that he had "planned attacks on Jews and Israelis worldwide."
Pakistan hikes fuel prices by 29% to secure IMF funding - Pakistan’s government has hiked fuel prices by up to 29%, removing fuel subsidies in an attempt to trim the fiscal deficit and secure critical support from the IMF for the cash-strapped economy. This is the third cut in fuel subsidies by the government headed by PM Shehbaz Sharif in about 20 days. The new prices came into effect from Wednesday midnight and showed a massive hike of Rs 24 per litre in petrol prices and Rs 59. 16 per litre of high-speed diesel (HSD) – the two products used by everyone directly or indirectly, finance minister Miftah Ismail said. The latest rise came on top of an already Rs 60 increase in the prices of petroleum since May 25. The new petrol price has been fixed at Rs 233. 89 per litre, HSD at Rs 263. 31 per litre and kerosene oil at Rs 211. 47 per litre. He said the prices of all products had now been brought to their purchase price and the element of subsidy or price differential claim had been eliminated. “There is no more government loss on the sale of petroleum products,” he said, hoping to conclude an agreement with the IMF for reviving loan support. PM Sharif on Thursday defended the unpopular moves, saying that the government was “left with no choice” because of “those who struck the worst ever deal” with the IMF. The finance minister also blamed the previous Imran Khan government for making a faulty agreement with the IMF that had tied the hands of the incumbent and forced it to increase oil prices to put the economy on the right track. “If we don't increase oil prices, the country could face a default,” he said, admitting that the middle class would suffer from the petrol price hike.