OIL PRICE

 Oil is set to post its strongest week since August as a result of shifting sentiment in crude markets.

Friday, December 10th, 2021 

The oil markets at large heaved a sigh of relief upon hearing that the Omicron variant of COVID-19 might not be that much of a potent demand disruption factor as previously feared. With demand being largely stagnant and global crude inventories still well below the 5-year average, Brent continues to trade slightly above $75 per barrel, with WTI at $72 per barrel. 

This being said, there remain several downside risks for global demand - weaker domestic air traffic activity in China, coupled with potential bankruptcies of property giants Evergrande and Kansa are still looming on the horizon. On the other hand, soaring US inflation is adding to the bullish sentiment, largely counteracting the above-mentioned phenomena. 

Saudi Aramco to Supply Full Volumes in January. Despite its ambitious $0.3-0.8 per barrel across-the-board hike of Asian official selling prices for cargoes loading in January 2022, the Saudi national oil company will reportedly supply full volumes to term customers, indicating its pricing strategy has worked out well for Aramco. 

Biden Administration Not Mulling Oil Export Ban. Despite widespread speculation that the double whammy of low crude inventories and elevated export outflows might compel the US government to enact an oil export ban, the Biden administration stated it is not considering that option for the time being. 

US Strategic Stocks at Their Lowest Since 2003. Whilst the forthcoming SPR release is still yet to take shape (assumed to be in January-April 2022), US strategic crude inventories have fallen to 600 million barrels last week, their lowest since May 2003.  

Royal Dutch Shell Shareholders Back London Move. The shareholders of oil major Royal Dutch Shell (NYSE:RDS) voted overwhelmingly in favor of the firm’s moving its headquarters to London, primarily for reasons of more business-friendly taxation, whilst also rebranding itself as “Shell”. 

ICE to Launch New Midland WTI Futures This January. In a bid to establish a new US light sweet export benchmark and move away from the Cushing linkage of WTI futures (simultaneously avoiding the possibility of negative prices), the Intercontinental Exchange (ICE) is expecting to have the Midland WTI futures go live in late January 2022. 

Canadian Oil Output to Peak in 2032. According to forecasts from Canada’s Energy Regulator, oil production in Canada will peak seven years sooner than previously expected in 2032, reaching 5.8 million b/d, with most of the incremental 1 million b/d of output coming from Albertan oil sands. 

ConocoPhillips Exits Indonesia Amidst Focus Shift. US oil producer ConocoPhillips NYSE:COP) is selling its Indonesian assets – stakes in two oil and seven gas fields, as well as pipelines – for 1.355 billion, at the same time doubling down on Australia’s LNG prospects and paying 1.6 billion for an additional 10% stake in APLNG. 

GM Secures Rare Earths Supply. As US carmakers are seeking to reduce reliance on China in terms of rare earth magnets, General Motors (NYSE:GM) signed two separate deals to source rare earth magnets for its EVs from US-based manufacturers, including MP Material (NYSE:MP) which intends to build a neodymium-iron-boron magnet facility in Texas.

European Carbon Price Skyrocket on Gas Prices. Europe’s benchmark ETS carbon prices hit a fresh record of €90.75 per metric ton CO2 this week ($102/mt) on the back of increased coal utilization in Europe and TTF gas prices trading only inches away from the €100/Mwh threshold ($32/mmBtu). 

South Korean Buying Perks Up Asian LNG Again. Despite slipping LNG freight prices, active purchase activity from South Korea’s energy companies GS (078930.KS) and KOGAS for cargoes loading in January-February 2022 nudged spot Asian LNG prices higher, currently trending around $36 per mmBtu. 

Chevron Moves into Equatorial Guinea. Following last year’s $13 billion acquisition of Noble Energy, US major Chevron (NYSE:CVX) has taken another step to increase its foothold in Equatorial Guinea by landing the offshore Block EG09, with the aim of tapping into the small African country’s 1.5 TCf gas reserves. 

Market Wants to Believe in Iron Ore Price Recovery. The spot price of iron ore delivered to China has seen a robust increase of some 25% over the past three weeks, currently trending at $110 per metric ton, primarily on the back of Chinese customs data indicating breakaway import volumes last month, at 105 million tons the highest level since July 2020. 

Guyana Mulling Refinery Construction Amid Majors’ Interest. The government of Guyana is considering more than 10 proposals to build and operate an oil refinery in the country, currently a net importer of some 15,000 b/d of products, as ExxonMobil (NYSE:XOM) is poised to bring overall production to 800,000 b/d by 2026.  

US Gas Futures Bounce Back on Colder Weather. Rebounding from its biggest daily decline in almost three years, having lost 11% at the start of this week, US natural gas futures rose to almost $4 per mmBtu on Friday on the back of a bigger-than-expected storage withdrawal and expectations of colder weather in the second half of December.

PEMEX Plans to Cut 2022 Exports to Meet Domestic Needs. Mexico’s national oil company PEMEX is said to be planning a drop in its crude oil exports to route more domestic production to its refineries - having run its downstream assets at less than 50% capacity this year, the Mexican NOC wants to increase runs by some 200-300,000 b/d.