Oil markets are set for a bull run

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After weeks of losses, oil markets appear poised for a rally as several bullish catalysts come together. The expected reduction in OPEC+ production targets will then be followed by the end of the publication of the American SPR before the entry into force of new sanctions on Russian oil and then on fuel.

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– As noted by Bloomberg, the main principle of European gas policy in the run-up to the 2022/2023 winter season – lower consumption – has not yet materialized.

– The last week of September saw the first round of below average temperatures in Europe and German consumers increased their gas consumption to 14% above the 5 year average.

– EU member states have agreed to cut gas demand by 15% this winter, starting in August, meaning that despite high gas stocks, demand loss is lagging significantly behind.

– Peaking in late August, benchmark TTF spot prices in Europe have recently fallen to €170 per MWh, around 30% lower month-on-month, but still triple what they were one year ago.

market movers

– American oil major Chevron (NYSE: CVX) reportedly bought the PEL 90 permit offshore Namibia, next to what is likely to become the biggest oil discovery of 2022, the multi-billion dollar Venus.

– German electricity producer RWE (RWE) agreed to buy an American energy company ConEdison’s (NYSE:ED) Clean Energy Businesses for $6.8 billion, making it the fourth largest renewable energy player in the US market.

– National Oil Company of Brazil Petrobras (NYSE:PBR) climbed 10% on Monday as earlier-than-expected presidential elections will most likely force Lula closer to the center.

Tuesday, October 04, 2022

After several weeks of macroeconomic weakness, this week has finally brought something more tangible to oil markets. Namely, substantial intervention in the OPEC+ market. Reports put the potential reduction in OPEC+ production targets at around 1 million bpd. This potential OPEC+ production cut will combine with the entry into force of Russian sanctions and the publication of the pending US SPR to add real upward pressure on oil prices.

OPEC+ is serious about a huge cut. Meeting in person for the first time since March 2020, the OPEC+ meeting in Vienna this week is expected to see the biggest coordinated downward revision in years, as the oil group is reportedly considering a cut of 1 million bpd for November 2022.

An Israeli-Lebanese maritime deal could really happen. After years of shuttle diplomacy, US envoy Amos Hochstein presented Israel and Lebanon with a draft agreement on how to divide a disputed 330-square-mile area in the eastern Mediterranean, approaching a resolution to the long-running dispute .

The White House is reigniting the blame game on fuel prices. The Biden administration has once again stirred up emotions in the oil industry after Energy Secretary Jennifer Granholm blamed the majors for their failure to maintain sufficient fuel inventories, raising the chances of a regulatory cap on exports fuel outside the United States.

The IEA predicts a huge drop in gas demand. The International Energy Agency has predicted a 10% drop in European gas demand, the largest year-on-year drop on record, followed by a further 4% drop in 2023, the most of the losses coming from the continent’s beleaguered industry.

Nord Stream Rupture, the largest release of methane on record. The UN’s International Methane Emissions Observatory said the ruptures on the Nord Stream 1 and 2 pipelines are quite possibly the largest release of methane in history, leaking at a rate of 22,920 kg per hour.

California Mulls Windfall Profit Tax. Seeking to react to a sudden increase in gasoline prices, California Governor Gavin Newsom is considering introducing a windfall tax on oil companies in the form of a higher tax rate on income for the given year, the first state to do so across the country. .

Prepare for a huge spike in Chinese exports. Beijing finally issued a massive 15 million tonne export quota for refiners, the largest single allocation in 2022, paving the way for a surge in Chinese demand for crude and refineries.

Things are turning hot again in Libya. The decision of the Libyan government in Tripoli to sign a preliminary agreement on energy exploration with Turkey has been met with unprecedented fury as the governments of Greece and Egypt, as well as the competing Libyan government in Benghazi, have protested against the drilling in disputed waters.

The prisoner exchange eases US-Venezuelan tensions. A high-profile prisoner swap that saw five Citgo employees freed in exchange for two Venezuelans (nephews of Venezuela’s First Lady Cilia Flores) marked another step toward normalizing relations between the United States and Venezuela.

Iron ore remains surprisingly stable. While other commodities have been caught up in the turmoil of recession fears, iron ore has been surprisingly stable over the past two months, with 62% of iron ore trading slightly below $100/mt , with the good and bad news from China seeming to compensate. another.

Chinese radiation begins in London. Just a month after rumors emerged that Chinese companies were pulling out of Western stock exchanges, the Asian country’s biggest refiner CNPC (SHA: 600028) indicated that it would withdraw its American Depositary Shares (ADS) from the London Stock Exchange.

Australian profits soar on the back of the fossil fuel boom. Any ramifications of the Russian-Ukrainian war in 2022 have so far boosted Australia’s economic outlook, as thermal coal revenues are set to jump 35% year-on-year (to $62 billion). Australian dollars) while the value of LNG exports is expected to increase. increase by 30%.

Saudi Arabia again talks about spare capacity. Reminding the oil industry of the fundamentals of supply, Saudi Arabia (TADAWUL:2222) CEO Amin Nasser argued that the remaining unused production capacity had been reduced to 1.5% of global demand.

By Tom Kool for Oilprice.com

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