Gasoline Prices Are Set To Spike This Week

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Chart of the Week



- The executive director of the IEA, Fatih Birol, warned that given the current supply/demand situation, there is only one thing that can stop prices from surging higher and that is Chinese demand remaining weak over the upcoming months. 

- According to Platts estimates, China’s April demand plummeted to 13.35 million b/d, down 11.5% year-on-year, though recovering transportation demand will push May figures back above 14 million b/d. 

- At the peak of lockdown mandates, gasoline and diesel demand in coastal regions dropped by as much as 40%, with a grand total of 45 cities with some form of movement restrictions. 

- The market anticipates strong stimulus measures from Beijing that would increase China’s oil demand by 4% year-on-year, adding 600,000 b/d on the year in the second half of 2022, though this might still be subject to downward revision if the zero-COVID policy remains in place. 

Market Movers

- Jair Bolsonaro, the president of Brazil, fired the CEO of a Petrobras (NYSE:PBR) - the second in two months - after he warned of an impending diesel crisis in the country.  

- Ahead of ExxonMobil’s (NYSE:XOM) annual general meeting this Wednesday, UK proxy adviser PIRC urged shareholders to oust Darren Woods as company CEO, saying his continued serving in the role represents a dangerous concentration of power.  

- Italy’s ENI (NYSE:E) and France’s TotalEnergies (NYSE:TTE) started the exploratory drilling of a natural gas well in Block 06 offshore Cyprus, almost four years after the 8 TCf Calypso discovery. 

Tuesday, May 24, 2022

The combination of physical tightness and robust demand is keeping oil prices near the $110 mark. This week, gasoline prices are likely to garner plenty of attention as inventories continue to drop and US drivers gear up for Memorial Day weekend travel. This is all coming at a time when RBOB futures are seeing record-high levels of backwardation. The prospect of Chinese demand gradually bouncing back and the EU finally agreeing to sanctions on Russian oil is only adding to the upside risk for oil prices.

EU Signals Potential Sanctions Breakthrough Soon. The prime ministers of Germany and the Netherlands have announced that the sixth package of EU sanctions on Russia, sanctions that should contain an oil ban, could be reached within a few days, hinting at a potential settlement with Hungary. 

White House Might Release Diesel SPR Stocks. The Biden Administration is mulling an emergency release of diesel inventories held in the Northeast Home Heating Oil Reserve, roughly 1 million barrels, to tame soaring fuel prices as the national average price of diesel reached $5.56 a gallon.

Weakening European Demand Puts Asia in LNG Driving Seat Again. With European purchases of liquefied natural gas ebbing on the back of stable inventories and warm weather, intensifying pre-summer buying of Asian consumers like China and Japan has been gradually pushing spot prices to $23 per mmBtu, though still some $3/mmBtu below European TTF figures. 

China Opens Up to Australia. Two years after China’s discontent with Australia led to Beijing banning its coal exports, Chinese prime minister Li Keqiang indicated a willingness to work with the newly-elected government of Labor leader Anthony Albanese, the first senior communication between the countries in two years. 

Russia Wants Joint Refineries with BRICS Countries. Russia’s industry minister Denis Manturov flaunted the idea of establishing joint oil and gas refining facilities with other BRICS nations (Brazil, India, China, and South Africa) to ease their dependence on “unreliable partners”. 

Norway Just Cannot Restart Arctic LNG Project. Following a fire incident in September 2020, Norwegian oil major Equinor (NYSE:EQNR) has been struggling to bring its Hammerfest LNG plant back, postponing its restart once again to May 27 after a compressor failure. 

Iran Revives Oman Subsea Gas Project. Iran’s oil ministry is seeking to revive a long-stalled $60 billion project to lay a subsea pipeline that would carry Iranian gas to Oman, delayed by pricing disagreements and the US’ reimposition of sanctions against Teheran in 2018.  

Petrobras Mulls Upstream Expansion. Brazil’s state-controlled oil firm Petrobras (NYSE:PBR) will reportedly invest $16 billion over the next five years to stall natural declines at post-salt fields in the Campos Basin, despite increasing pressure from President Bolsonaro to tame runaway fuel prices. 

Chile Wants Lithium State Firm by Year-End. Chile’s government pledged to establish a state lithium firm by the end of this year, potentially squeezing the market share of Albemarle (NYSE:ALB) and SQM (NYSE:SQM), though recent utterances have hinted at potential private participation in the new company. 

Argentina Output Soars to 10-Year Maximum. Argentina’s crude production rose to the highest level since 2011, averaging 578,000 b/d in April with the share of Vaca Muerta shale output rising to more than 40% of the national total. 

Germany Wants to Keep Idled Coal Plants on Standby. Wary of potential power crunches, the German government is planning to keep some 8.5 GW of coal-fired generation capacity that is due to be idled in 2022-2023 in standby mode, with operators compensated from public funds for holding feedstock ready. 

Trinidad Wants its Refinery Back. The government of Trinidad and Tobago picked an unnamed bidder to restart and operate its 165,000 b/d Guaracara refinery, shuttered since November 2018, saying that it would seek to process crude from neighboring Guyana. 

UK Mulls Windfall Tax on Oil & Gas. With UK power prices spinning out of control and the price cap set to reach £2,800 ($3,500) in October, the government in London is considering imposing a windfall tax on oil and gas companies that fail to make ‘significant investment’ into renewables.