| Greetings from London.
Oil markets saw one of the largest single-day declines in history this week, but the realities of supply and demand have since sent prices bouncing higher.
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Friday, July 8th, 2022
Tuesday’s oil price collapse might go down as one of the most memorable moments of the oil market’s tumultuous year of 2022. Despite being the third-largest daily loss since the onset of oil exchanges, declining crude did not trigger any changes along the futures curve, implying that the huge drop was primarily coming from widespread profit-taking as primarily non-physical participants panicked at the prospect of recession hitting the markets sooner than expected. The balances, however, do not lie – we are still living in times of extremely tight supply and even though it might take some time, the physical side of the equation will push prices back soon.
Europe’s Ballooning Gas Prices Might Ease Soon. According to German government sources, Canada has agreed to return the repaired turbines from the Nord Stream 1 pipeline, operated by Russia’s Gazprom, implying that in two weeks’ time throughput might go back to 100% capacity from the current 40%.
Russia Moves to Curb Kazakh Oil Flows. A Russian regional court has ruled that the Caspian Pipeline Consortium (CPC), the main conduit of Kazakh oil flows to the global markets, should be closed down for 30 days after alleged mismanagement of oil spills. Loadings have continued up to now.
US Slaps New Sanctions on Iranian Crude. Following the spectacular breakdown of the Doha talks to revive the JCPOA, the US Treasury introduced a new round of sanctions on a network of Chinese, Emirati, and other firms that allegedly deal with Iranian crude.
VW Kickstarts $20 Billion Battery Cell Plans. German carmaker VW (ETR:VOW3) has started the construction of a groundbreaking battery cell plant in Salzgitter (SalzGiga) as it plans to invest over 20 billion in the battery business, across six factories in Europe and two in North America.
Venture Global LNG Sapped by Red Tape. The US Federal Energy Regulatory Commission (FERC) suspended the environmental review schedule of Venture Global’s LNG CP2 terminal in Louisiana, saying the company’s filings were deficient, potentially delaying the project’s mid-2023 final investment decision.
EU Votes for Nuclear and Gas Being “Green”. The European Parliament approved the so-called green taxonomy, including nuclear and natural gas as environmentally sustainable forms of energy, meaning that investment into both segments would be compatible with future EU commitments.
IEA Warns of World’s Chinese Solar Dependence. With 95% of polysilicon production and over 80% of solar PV output concentrated in China, the International Energy Agency has warned against Chinese dominance in solar energy, calling for other countries to diversify their sourcing if they are to avoid overdependence.
Chevron Wants To Ramp Up Venezuela Production. According to a Bloomberg report, US oil major Chevron has been in talks with the Venezuelan government and state oil company PDVSA to take up a leading role in its producing JVs, seeking to maximize production and ramp up the profitability of marketing operations.
France to Nationalize its Power Sector Champion. Faced with soaring electricity prices, the French government announced it would fully nationalize the country’s largest utility firm and nuclear operator EDF (EPA:EDF), in which it already had an 84% stake, sending its shares flying following the Wednesday announcement.
Frac Sand Keeps on Getting More Expensive. Attesting to the overall surge in shale production costs, the cost of frac sand has more than doubled this year alone to $55 per metric ton, with the overall shortfall amounting to almost 1.3 million tons amidst worsening staff availability.
Trafigura Doubles Down on Lead. In addition to its assets in zinc, international trading major Trafigura bought German lead firm Ecobat Resources Stolberg (ERS), in reconstruction following a devastating 2021 flood, moving in to become a key supplier to Europe’s battery producers.
UK Coal Projects Stuck After Government Fallout. With outgoing British prime minister Boris Johnson sacking Michael Gove, the responsible minister, a day before his own departure, the approval of future coal mines in Cumbria, northwest England, has been postponed until a replacement is found.
US Allows LPG Exports to Venezuela. In another step to ease the grip on Venezuela’s oil industry, the US Treasury authorized transactions involving LPG supplies to Venezuela (primarily used as cooking fuel there) until July 12, 2023, potentially opening up in-kind payments from the state oil company PDVSA.
China Stimulus Resuscitates Copper. Amidst rumors that China is considering a $220 billion package of stimulus measures, copper prices bounced back to $7,860 per metric ton, though despite its biggest daily gain in almost four years copper is still very susceptible to generic recession-triggered downside risks.
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