Despite a relatively underwhelming rebound in Chinese demand, oil prices were pushed higher at the start of this week by the embargo on Russian oil products and the earthquake in Turkey which took an oil terminal offline.
Chart of the Week
– The G7 price cap coalition agreed on product price caps, setting the maximum price for high-value products (diesel, gasoline, jet) at $100 per barrel and for low-value products (fuel oil, naphtha, and waste oils) at $45 per barrel.
– Vessels carrying Russian products that loaded before 5 February can still unload their cargo before 1 April, provided they are moved inland and are not re-exported afterward.
– Diesel will be the key product to watch as more than a quarter of Europe’s demand was met by Russian imports, although fears of shortage seem to be subsiding as a flotilla of Russian diesel cargoes is headed toward North Africa, most probably to be re-exported into the EU.
– Russia could bypass the price cap by using its own fleet of tankers and insurance, as has been the case with crude flows, but accumulating a clean products fleet of such proportions would be much harder to achieve.
Market Movers
– US investment bank Goldman Sachs (NYSE:GS) plans to invest $1.1 billion into Verdalia Bioenergy, its newly established biomethane venture, starting off the business with the purchase of 5 plants in Spain.
– US oil major Chevron (NYSE:CVX) has started negotiations with Algeria to ramp up its presence in the country, buoyed by the prospect of Algerian gas becoming ever-important to Spain and Italy.
– Spain’s largest oil firm Repsol (BME:REP) bought the tight oil assets of Japanese exploration company Inpex held in the Eagle Ford basin for an undisclosed sum, marking the end of Inpex’s activities in the US.
Tuesday, February 07, 2023
The introduction of a price cap on Russian oil products alongside the EU embargo sent oil prices higher at the start of the week, pushing ICE Brent prices towards $83 per barrel early on Tuesday morning. Despite expectations that Chinese demand will eventually spark a rally in oil prices, actual Chinese imports have so far failed to impress. The horrendous earthquake in Turkey/Syria added to the upward pressure on oil prices as the port damage in Ceyhan, Turkey might limit roughly 1 million b/d of exports.
EU to Quit Energy Charter En Masse. The European Commission informed EU members that it would seek a joint exit from the 1998 Energy Charter Treaty, designed to protect energy firms by allowing them to sue governments for policies affecting their investments (such as shutting fossil fuel plants).
2023 Will be the Year of Solar in the US. Companies across the United States intend to add 54.5 GW of new power generation capacity this year, with solar energy accounting for 29.1 GW – more than doubling its previous annual record, according to the Energy Information Administration.
Earthquake Halts Ceyhan Loadings. A string of powerful earthquakes that rocked Turkey and Syria and led to thousands of deaths has knocked the Ceyhan oil terminal offline, the loading place for Azeri and Kurdish crudes, though pipelines feeding oil into the port seem to be undamaged.
Canada Licenses A Huge Oil Discovery. Canada’s oil regulator labeled Equinor’s (NYSE:EQNR) 385-million-barrel Cappahayden well drilled last year to be a “significant discovery”, the first such license in two years, as drilling in the Newfoundland/Labrador offshore waters picks up steam.
Iran to Start Repairing Venezuela’s Largest Refinery Soon. After Iranian state companies repaired Venezuela’s 140,00 b/d El Palito refinery last year, the two sides will try to resuscitate the 955,000 b/d Paraguana refinery complex, with works starting in several weeks at a total cost of $0.5 billion.
Freeport LNG to Resume Liquefaction This Week. Freeport LNG is restarting one of its liquefaction trains at its idled export plant this week, having received US federal regulators’ approval to start sending gas to Train 3 and having asked for official permission to start loading LNG on ships.
Total Back to Being Pragmatic in Iraq. One of the largest energy deals globally, TotalEnergies’ (NYSE:TTE) $27 billion deal to improve Iraqi energy infrastructure almost collapsed last week after a very chilly meeting between CEO Pouyanne and the Iraqi PM al-Sudani, but the French firm’s staff remained in the country despite vows to quit immediately,
Newmont Preparing Largest Mining Merger Ever. The world’s largest gold mining firm Newmont Corp (NYSE:NEM) stated it had made a $16.9 billion bid for Australia’s Newcrest Mining (ASX:NCM), potentially the largest gold takeover in history, although skeptics say the offer is undervaluing Newcrest.
Russians Double Down on Gold Purchases. Data published by Russia’s Ministry of Finance show that Russians bought an all-time record number of gold bars last year, well above 50 metric tonnes, aided by the government’s scrapping of 20% VAT on gold purchases.
Norway’s Production Woes Continue. Norway’s state oil company Equinor (NYSE:EQNR) stopped production at its largest producing asset, Phase 1 of the 720,000 b/d Johan Sverdrup field, due to a fault in the platform’s cooling system, only days after it managed to solve Phase 2’s power supply.
China Exploits Zinc/Lead Opportunities. As several European zinc and lead smelters remained shut due to high electricity costs, China has become a net exporter of both refined zinc and lead for the first time in 15 years, a testament to shifting trade patterns amidst tight Atlantic Basin markets.
India to Nearly Double refining by 2030. Buoyed by the high refining margins of 2022, India will be seeking to expand its domestic refinery capacity to 9 million b/d, almost double what it is right now at 5 million b/d and well above the additional 2 million b/d of projects currently on the books.
Trinidad Nearing Gas Deal with Venezuela. Less than a month after the US approved the development of the cross-border Dragon gas field between Trinidad and Tobago and Venezuela, Trinidad’s energy minister traveled to Caracas for talks.