OIL & ENERGY INSIDER

 Oil prices tumbled at the start of this week as fears of a major supply crunch were alleviated somewhat. Upward pressure remains, however, with geopolitical risks mounting and a nuclear deal with Iran now looking uncertain.

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Friday, March 11th, 2022

Oil prices are heading towards their biggest weekly decline since November 2021 as supply concerns have been somewhat alleviated recently. To begin with, the reaching out of US officials to Venezuela added some downward pressure to prices by signaling the Biden administration's intent to secure more oil and opening the potential for Venezuelan heavy barrels to come to the U.S. in the future. In the meantime, the United States’ SPR release is set to ease some immediate tightness in the market, with 30 million barrels released over April and May. There is also an increasing level of confidence that Russian supply to Asian buyers will continue even without LCs, using direct telegraphic transfers, alleviating fears of Asia growing tighter, too. While markets remain undeniably tight, some of the worst-case scenario fears have been alleviated. 

Houthis Attack Saudi Refinery. Yemen’s Houthi militias launched a drone attack on the 120,000 b/d capacity Riyadh refinery along with strikes on Jizan and Abha. Fortunately, the assault caused only a small fire that was swiftly controlled. 

EU Tries to Phase Out Russian Fossil Fuels. The European Union is discussing how to phase out Russian fossil fuels at a two-day summit in Versailles, importing 40% of its gas and 27% of oil from Russia, with member countries split between a quicker 2027 and slower 2030 commitment deadline. 

Iran Nuclear Talks Get Delayed Amidst Late-Minute Haggling. The Vienna talks on revamping the Iranian nuclear deal have been put on pause, with the EU’s foreign policy chief Josep Borrell stating that the delay is due to foreign factors and that the final deal remains on the table, ready to sign. 

White House Links Easing of Venezuela Sanctions to Export Guarantees. With top US diplomats meeting Venezuelan President Maduro for the first time in years to cut a deal that would ease sanctions on PDVSA, Washington attempted to condition the easing of sanctions on direct oil supply to US refiners. 

African Leaders Brush Off Energy Transition. Top oil officials from Western African countries stated developing nations should not have renewable energy targets as ‘they are still in transition from firewood to gas’ and that the pressure to contend with higher fuel costs should take precedence over other objectives. 

South Korea’s Nuclear Ambitions Buoyed by Conservative President. The victory of opposition candidate Yoon Suk-yeol, a former prosecutor-general, in South Korea’s presidential elections will most likely trigger a U-turn in the country’s nuclear phase-out, resuming the construction of stalled reactors.

Exxon Mulls $5 Billion Bakken Sale. Having reportedly met with tangible investor interest, US major ExxonMobil (NYSE:XOM) is reportedly in talks with investment banks to help launch the sale process that could fetch 5 billion, offloading its Bakken acreage amidst stagnating production in the area.

Climate Change Group Pledges to Disrupt Refineries. As soaring outright crude prices and banned Russian products have already made life difficult for UK refiners, Extinction Rebellion vowed to launch a major countrywide campaign to disrupt the operations of refineries in the country, to “create a tipping point moment”.  

China Tells Refiners to Wind Down Fuel Exports. The Chinese government has told domestic refiners to consider suspending exports of gasoline and diesel next month, wary that amidst spring refinery maintenance any tangible export outflows might aggravate fuel shortages at home. 

Europe’s Industry Wants to Suspend Nickel Trading. After the London Metals Exchange suspended nickel trading and canceled trades on Tuesday amidst nickel’s surge to $100,000 per tonne, the European Steel Association said trading should be postponed until ‘price stability can be guaranteed’. 

Canada Wants Higher Pipeline Exports to the US. Canada is looking into increasing pipeline crude flows to the United States, simultaneously eyeing a ramp-up in exports from the USGC into Europe despite pipeline capacity working at almost 100% utilization rates. 

Petrobras Caught Up Between High Prices and Political Pressure. With transportation fuel prices being 30% lower than globally, Brazil’s national oil company Petrobras (NYSE:PBR) defied the Bolsonaro government’s political pressure and announced that it would hike prices from Friday onwards by 20-25%.

Germany Rattled by Looming Diesel Shortages. European oil majors BP (NYSE:BP) and Shell (LON:SHEL) have not offered spot diesel cargoes for sale in Germany, aggravating fears that without Russian gasoil supplies the German market might be in for a tangible supply squeeze, amidst evaporating inventories.

Investors Take Refuge in Gold Amidst War Chaos. Russia’s attack on Ukraine has triggered a tangible bull run in gold prices as investors are seeking a hedge against geopolitical turmoil and inflation, with gold prices getting really close to hitting an all-time high this week, peaking at $2,070 per ounce.