"OPEC Is Treading Lightly As Bearish News Mounts" by Irina Slav

[Tom Nolan + 2,443]

• The IEA and OPEC have both revised their oil demand projections, hinting that prices could see a meaningful decline in the coming months.
• China’s latest COVID lockdowns are also adding some bearish pressure to the oil market.
• Depending on how China’s COVID situation develops, and whether the EU decides to fully sanction Russian oil, OPEC could potentially revise its production growth agreement. 

https://oilprice.com/Energy/Energy-General/OPEC-Is-Treading-Lightly-As-Bearish-News-Mounts.html

OPEC Is Treading Lightly As Bearish News Mounts

By Irina Slav - Apr 17, 2022, 6:00 PM CDT

• The IEA and OPEC have both revised their oil demand projections, hinting that prices could see a meaningful decline in the coming months.
• China’s latest COVID lockdowns are also adding some bearish pressure to the oil market.
• Depending on how China’s COVID situation develops, and whether the EU decides to fully sanction Russian oil, OPEC could potentially revise its production growth agreement. 

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This week saw some good news finally for oil consumers. Both OPEC and the International Energy Agency revised down their demand projections, suggesting that prices finally had some meaningful downward potential. But OPEC stands ready to change track. "Severe new lockdown measures amid surging Covid cases in China have led to a downward revision in our expectations for global oil demand in 2Q22 and for the year as a whole," the IEA wrote in its latest Oil Market Report this week.

The agency also noted that OECD members consumed less oil than previously expected, which led the IEA to revise down its demand outlook for the year by 260,000 bpd from last month's OMR to a total 99.4 million bpd.

At the same time, the agency cited stable and significant production additions during the first quarter of the year, noting that it was led by non-OPEC producers. Whenever a production increase is led by non-OPEC producers, it's worth watching OPEC even more closely than usual for its response.

This response has yet to come, but the cartel itself is also revising down its outlook for demand for this year. And it is revising it down by a lot more than the IEA. 

Global oil demand was going to be 480,000 bpd lower than previously expected, OPEC said in the latest edition of its Monthly Oil Market Report. The cartel cited slower economic growth because of the war in Ukraine as one reason for the revision, and Covid-related lockdowns in China as another.

As for supply, the IEA seems to be perfectly calm. After sounding the alarm about the potential loss of 3 million bpd of Russian oil exports because of Western sanctions, the agency now said that the coordinated release of a total 240 million barrels of crude, of which 180 million bpd to be released by the United States, would offset the effect of lost Russian supply.

It seems that the IEA is assuming that the loss of Russian supply will be temporary—just as the effect of the reserve release will only last for as long as the release lasts, if not less. And OPEC may yet serve a nasty surprise to IEA members ready to tap their own strategic reserves to normalize benchmark prices.

Related: Permian Could See Production Surge As New Permits Reach All-Time High

Earlier this month, OPEC met with European Union representatives only to tell them that it would not be stepping in to help if Russian oil exports were completely shut off.

"We could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions. Considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude," said the secretary-general of the cartel, Mohammed Barkindo.

Yet with demand forecasts being revised, OPEC might just decide to revise its production plans as well. With millions of Russian oil out of the (official) picture and a very slim chance of Iranian barrels coming back for the time being, it's up to OPEC and the U.S. to fill the gap. If, that is, they want to.

U.S. producers seem to be warming up to the idea of boosting production, with prices so high their profit margins are fat enough to motivate more drilling. OPEC, meanwhile, boosted its production by just 67,000 bpd last month. That was because some OPEC members saw a decline instead of growth in their oil production, but Saudi Arabia notably undershot its production quota.

At the same time, OPEC revised upward its forecast for U.S. oil production for this year, and history shows that when U.S. oil production grows, OPEC is not one happy cartel and takes steps to counter that growth. Now, with this production growth expectation coupled with expectations of slower demand growth, OPEC's reaction may only be a matter of time.

As for the nature of the potential reaction, it is not difficult to guess it. Right now, OPEC is selling its oil at prices last seen years ago. Buyers have few alternatives amid Western sanctions on Russia and U.S. sanctions on Venezuela and Iran. It's a sellers' market.

Yet news of the resurgence of Covid in China has prompted suspicion that the market is about to flip. After all, China is the world's top importer in terms of absolute volumes, and imports are already down palpably because of the lockdowns. If China needs less oil, less oil should be made available.

Europe seems to be shaping up as a bigger client for OPEC oil right now, but it would be a temporary thing as the EU tries to wean itself off Russian hydrocarbons by replacing them with hydrocarbons from elsewhere.

Europe is not a long-term growth market for OPEC oil and as such, is, to put it bluntly, not an important market for the cartel. That's especially true of the two OPEC producers that have the spare capacity to boost their output considerably.

So, if bearish expectations for oil continue to intensify, depending on how the coronavirus spread develops in China and what EU does about Russian oil, we may well see OPEC revise its production growth agreement with Russia and the rest of its OPEC+ partners before this year's end.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

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https://oilprice.com/Latest-Energy-News/World-News/Biden-Restarts-Oil-Leasing-on-Federal-Lands.html

Biden Restarts Oil Leasing on Federal Lands

By Irina Slav - Apr 18, 2022, 9:30 AM CDT

President Biden has decided to remove a moratorium on oil and gas drilling on federal lands in a U-turn from campaign promises to prioritize a shift away from fossil fuels.

According to a release by the Department of the Interior, this week will see some 144,000 acres put up for leasing, with the department noting this is a much smaller acreage than previously nominated—some 80 percent smaller.

In addition to that, the Department of the Interior will increase royalty rates for new leases to 18.75 percent and said that bidders would be held to stringent environmental standards.

“How we manage our public lands and waters says everything about what we value as a nation. For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries above local communities, the natural environment, the impact on our air and water, the needs of Tribal Nations, and, moreover, other uses of our shared public lands,” said Interior Secretary Deb Haaland.

“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations.”

The move, however, would mean higher costs of developing the oil and gas resources on federal lands opened up to the industry at a time when costs are already climbing and acting as a deterrent despite strong oil prices.

According to Frank Macchiarola, senior VP at the American Petroleum Institute, the new lease terms could “discourage oil and natural gas investment on federal lands.”

“We are concerned that this action adds new barriers to increasing energy production, including removing some of the most significant parcels,” Macchiarola told the Financial Times.

It also goes against Biden’s energy agenda, which focused on curbing oil and gas drilling activity in favor of renewable energy.

Yet very much like the calls on the industry to boost production, the removal of the federal land drilling moratorium could be chalked up to a “Desperate times call for desperate measures” situation in U.S. energy.

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The Odds Of A Nuclear Deal With Iran Are Shrinking Every Day

By Cyril Widdershoven - Apr 17, 2022, 2:00 PM CDT

• The odds of a new nuclear deal with Iran are shrinking.
• The Iranian position on several key issues is preventing a breakthrough.
• Without addressing the future role of Iran in the Middle East, no real nuclear deal can be signed. 

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Oil-Prices/Oil-Prices-Rally-Back-To-Pre-Strategic-Petroleum-Release-Levels.html

Oil Prices Rally Back To Pre-Strategic Petroleum Release Levels

By Tsvetana Paraskova - Apr 18, 2022, 9:25 AM CDT

• Brent crude tops $113 per barrel at the start of the week.
• Crude prices have recovered to levels before the March 31st SPR release announcement.
• Libyan outages tipped the mood to slightly bullish early on Monday.

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Crude-Oil/Saudi-Crude-Oil-Exports-Jump-To-Highest-Level-Since-April-2020.html

Saudi Crude Oil Exports Jump To Highest Level Since April 2020

By Tsvetana Paraskova - Apr 18, 2022, 9:00 AM CDT

• Saudi crude oil exports jumped to 7.307 million barrels per day in February.
• Saudi crude oil exports topped the 7-million-bpd mark for the first time since the start of the pandemic.
• JODI: Saudi crude oil and oil products closing stocks in February rose by 316,000 bpd to 235.8 million barrels.

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Crude-Oil/Putin-Saudi-Prince-Vow-To-Continue-OPEC-Cooperation.html

Putin, Saudi Prince Vow To Continue OPEC+ Cooperation

By Tsvetana Paraskova - Apr 18, 2022, 5:00 PM CDT

• Putin, MBS discuss cooperation in OPEC+ oil production pact.
• Since the start of the war in Ukraine, OPEC and the OPEC+ group have not publicly commented on the invasion.
• Despite the turmoil in the global oil and energy markets following Russia’s invasion of Ukraine, OPEC+ publicly presents a unified stance.

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Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman discussed this weekend their countries’ cooperation in the OPEC+ oil production pact in their second telephone call since Russia’s invasion of Ukraine.  

Russia is a key partner to OPEC’s largest producer and de facto leader, Saudi Arabia, in the OPEC+ alliance, which has been working for years to manage oil supply to the market. And it looks like Russia will continue to be such, despite Putin’s invasion of Ukraine.  

Since the start of the war in Ukraine, OPEC and the OPEC+ group have not publicly commented on the invasion, limiting themselves to saying that the market is currently run by “geopolitical events” or “the geopolitical tensions in Eastern Europe,” not by fundamentals. 

The Saudi and Russian leaders “gave a positive assessment” of Saudi Arabia and Russia’s cooperation in the OPEC+ group during the phone call on Saturday, according to a statement from the Kremlin.

The Saudi Press Agency (SPA), for its part, said that the Saudi Crown Prince had received a call from Putin in which “bilateral relations between the two countries and ways of enhancing them in all fields in a way that achieves the interests of the two countries and their friendly peoples were discussed.” 

“For his part, HRH the Crown Prince asserted the support of the Kingdom of Saudi Arabia for efforts that would lead to a political solution to the crisis in Ukraine and achieve security and stability,” the Saudi agency reported.

Despite the turmoil in the global oil and energy markets following Russia’s invasion of Ukraine, OPEC+ publicly presents a unified stance on reiterating that it’s not fundamentals that are currently driving the oil prices higher. And despite calls from many oil-consuming nations to boost production more than planned, the alliance continues to stick to its monthly increases of 400,000 barrels per day (bpd), as agreed upon in the summer of last year. OPEC+ has defied some expectations that since Russia’s invasion of Ukraine, the meetings within the group would be difficult. On the contrary, the alliance has held two of its shortest meetings ever since the end of February and hasn’t mentioned Ukraine in any public statement. 

OPEC, and by extension OPEC+, has steered clear of political statements and references as a matter of policy. OPEC did not break up even when its founding members, Iraq and Iran, for example, were in a state of war in the 1980s. 

The next meeting of the OPEC+ group is scheduled to take place on May 5 to decide production levels for June. While there is concern about an immediate demand slump with the Chinese lockdowns, OPEC+ has not pumped to its quota for many months. OPEC only raised its oil production by just 57,000 bpd in March from February, as African members’ struggles to pump more crude partially offset increases at the core OPEC members of the Middle East. 

Production in the key non-OPEC member of the pact, Russia, has started to show signs of distress as storage capacity fills up, infrastructure and shipping logistics prevent Russia from exporting all the oil unwanted in the West to China and India, and refineries cut run rates as product storage is overflowing. As a result, companies are scaling back crude production. 

OPEC+ struggles to deliver on its production targets, with estimates pointing to the group pumping 1 million bpd below its overall quota. 

But OPEC now expects lower demand growth this year after it slashed last week its oil demand growth estimate for 2022 by nearly 500,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China. 

The reduced demand growth forecast could give reason to OPEC+ to continue sticking to its nominal monthly production increases—even if it never achieves them—and to continue ignoring calls for more production at oil above $100 per barrel. 

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https://www.zerohedge.com/energy/oil-spike-erases-biden-spr-benefits-now-what

Oil Spike Erases Biden-SPR Benefits - Now What?

by Tyler Durden

Monday, Apr 18, 2022 - 09:06 AM

On the heels of lower Russia output (sanctions and snubs of Urals crude, despite record discounts) and Libya's oil production plunging by more than half a million barrels a day amid a wave of political demonstrations engulfs the OPEC member’s energy industry, oil prices have extended their gains this morning, with WTI now erasing all of the lower price benefits from Biden's SPR Release Plan announced in late-January. It also appears Biden's relenting on Ethanol and land leases has done nothing at all (for now).

WTI Crude topped $108 this morning..

This is a major problem for President Biden as 'the largest release' in history has achieved nothing at all in terms of his endgame hope of reducing gas prices at the pump, which are now turning up once again, following crude and wholesales gasoline prices back towards record highs...

As an aside, here's what has actually occurred since President Biden unleashed his cunning plan. The entire term structure for the price of oil (out to 2027) has increased in cost!!!

Now what Joe?

[Tom Nolan + 2,443]

https://www.zerohedge.com/commodities/oil-bidens-emergency-spr-release-heading-europe

Oil From Biden's Emergency SPR Release Is Heading For Europe

by Tyler Durden

Monday, Apr 18, 2022 - 09:45 PM

Joe Biden's decision to release 180 million barrels of oil from the US Strategic Petroleum Reserve - one million barrels per day for 180 days, ending just before the midterm elections which the Democrats will lose in an avalanche - was meant to help lower US gasoline prices "because Putin price hike." Instead, it is heading for Europe.

According to Bloomberg, citing a person familiar with the matter, the Suezmax ship Advantage Spring - sailing for Rotterdam, according to ship-tracking data compiled by Bloomberg - received emergency SPR sweet crude from Energy Transfer’s Nederland oil facility around April 1 for export.

The Suezmax also received SPR crude from Aframax Eagle Hatteras, which loaded at same terminal in first week of April.

The Advantage Spring was chartered by Atlantic Trading, an affiliate of Total, ship fixtures data show.

It appears that somehow the definition of emergency now includes making a profit at the expense of American consumers because sooner or later a real emergency will hit and then it will be too late, while easing the true energy emergency over in Europe.

According to Matt Smith, oil analyst at commodity data firm Kpler, this is the first export of SPR crude since last November. Which means the oil was apportioned from Biden's shock SPR release.

One wonders what is behind Biden's decision to make US emergency SPR oil available across the Atlantic; one can only hope that it doesn't mean that in the coming midterms mail in ballots will also be made available to Europeans..

[Jay McKinsey + 1,490]

30 minutes ago, Tom Nolan said:

https://www.zerohedge.com/commodities/oil-bidens-emergency-spr-release-heading-europe

Oil From Biden's Emergency SPR Release Is Heading For Europe

by Tyler Durden

Monday, Apr 18, 2022 - 09:45 PM

Joe Biden's decision to release 180 million barrels of oil from the US Strategic Petroleum Reserve - one million barrels per day for 180 days, ending just before the midterm elections which the Democrats will lose in an avalanche - was meant to help lower US gasoline prices "because Putin price hike." Instead, it is heading for Europe.

According to Bloomberg, citing a person familiar with the matter, the Suezmax ship Advantage Spring - sailing for Rotterdam, according to ship-tracking data compiled by Bloomberg - received emergency SPR sweet crude from Energy Transfer’s Nederland oil facility around April 1 for export.

The Suezmax also received SPR crude from Aframax Eagle Hatteras, which loaded at same terminal in first week of April.

The Advantage Spring was chartered by Atlantic Trading, an affiliate of Total, ship fixtures data show.

It appears that somehow the definition of emergency now includes making a profit at the expense of American consumers because sooner or later a real emergency will hit and then it will be too late, while easing the true energy emergency over in Europe.

According to Matt Smith, oil analyst at commodity data firm Kpler, this is the first export of SPR crude since last November. Which means the oil was apportioned from Biden's shock SPR release.

One wonders what is behind Biden's decision to make US emergency SPR oil available across the Atlantic; one can only hope that it doesn't mean that in the coming midterms mail in ballots will also be made available to Europeans..

Oil is an international commodity that the US imports and exports. It does not matter if the specific molecules come directly from the Permian or if they spend a couple years in the petroleum reserve and then are exported. 

[Tom Nolan + 2,443]

10 hours ago, Jay McKinsey said:

Oil is an international commodity that the US imports and exports. It does not matter if the specific molecules come directly from the Permian or if they spend a couple years in the petroleum reserve and then are exported. 

The point of the article is that Biden had promised to lower gasoline prices in the U.S. as a result of the SPR Release.  Instead of using that oil for domestic price de-escalation, Biden is sending it to Europe at the expense of average Americans.

This again underscores my main mantra:  Authoritarians do not care about the welfare of the common person.

[Tom Nolan + 2,443]

Bloomberg Tuesday April 18th  https://finance.yahoo.com/news/white-house-spending-talks-focus-151902442.html

U.S. Shale Producers Could Fill Russia Supply Gap: BNEF Update

(Bloomberg) -- Energy executives, government officials and financiers are converging in New York on Tuesday and Wednesday for the BNEF Summit, one of the premier conferences focused on the energy transition.

The event is happening as Russia’s war in Ukraine disrupts global energy markets and raises critical questions about how the industry will respond. While some are seeking to return to the prewar status quo that’s dominated by fossil fuels, many people see the turmoil as an opportunity to accelerate the shift to clean energy.

Booming cash flows stemming from higher crude prices and capital discipline are leaving U.S. shale producers in a much better position to tap the nation’s oil reserves, according to Anastacia Davies, head of oil supply and U.S. oil at BloombergNEF.

New supplies from the U.S. will be likely needed to help fill up a potential supply gap left by Russia and to meet global energy demand for the decades to come, Davies said during a presentation.

“We do think the days of unchecked U.S. growth are likely behind us, but that doesn’t mean the shale’s role is gone,” Davies said. “There’s maybe a ‘new new normal’ yet to come.”

White House Is in Talks to Boost Energy Security in Spending Bill (11:18 a.m.)

The White House is in talks with members of Congress about a reconciliation spending package that would increase energy security as well as tackle consumers costs, said Ali Zaidi, the administration’s deputy national climate advisor.

“We are having conversations with members on the Hill, a number of them, about a reconciliation package that will help us tackle consumer costs and boost energy security,” Zaidi said. “We are having, I think, good dialogue on this topic.”

Senator Joe Manchin of West Virginia has said he is interested in restarting negotiations on a slimmed-down version of the stalled Build Back Better Act that would focus on climate change, prescription drug prices, and deficit reduction. A key element of the original proposal was $550 billion in energy and climate spending, including more than $300 billion in new and expanded tax credits for wind and solar power, nuclear plants, biofuels and advanced energy manufacturing.

Zaidi also said there’s some “appropriate short-term anxiety” on solar development in the face of potential additional tariffs on imports, though people are still “pretty bullish” about the direction the U.S. is going.

“There’s good reason for that because we know how to take that stuff on,” he said.

Stop ‘Villainizing’ Fossil Fuels: Motiva Executive (10:14 a.m.)

The energy industry has brought tremendous technological advances over the past 50 years, said Keo Lukefahr, head of energy derivatives and renewables trading at Motiva Enterprises LLC.

“Let’s stop villainizing the fossil fuel industry,” she said. We have to move to low-carbon generation but fossil fuels are part of that transition, she said.

Sunrise Project Says Energy Firms ‘Cynically’ Exploiting Europe Crisis (9:59 a.m)

Europe’s immediate push away from Russian natural gas amid the war in Ukraine and a long-term desire to limit gas overall is a “loud and powerful signal to economies around the world,” said Justin Guay, director of global climate strategy for the Sunrise Project.

Guay also said he believes some energy companies are “cynically” taking advantage of the current European energy crisis by planning new liquefied natural gas terminals.

He questioned the long-term value of rushing to build LNG terminals to help the European Union shift away from Russian gas.

“It takes three to five years to build a new LNG terminal” he said. “Europe needs a new gas supply by the end of the year”.

The crisis will moderately increase the energy transition, added Betrand Millot of Caisse de Depot et Placement du Quebec. While higher oil and gas prices amid the crisis magnifies energy-security concerns, he said, there are constraints in supply chains, including for electric vehicles that make that acceleration a moderate one.

Energy Industry Needs Focus on Cybersecurity: Dragos CEO (9:58 a.m.)

Energy companies are investing in cybersecurity for their information and neglecting protection for their physical infrastructure, Dragos Inc. Chief Executive Officer Robert Lee said.

“You’re spending more money on your website than your gas turbines,” Lee said, adding that right now everyone’s talking about infrastructure cybersecurity.

Companies used to “air gap” their industrial operations to protect them from cyberattacks. Those operations are increasingly connected via networks and so the focus needs to shift from preventing attacks to building resilience and the ability to withstand attacks.

Chevron VP Says the ‘Future of Energy Is Lower Carbon’ (9:41 a.m.)

A Chevron Corp. vice president said the company intends to be a leader in the energy transition by investing in new lower-carbon solutions.

“Energy companies of the world need to be at the table,” said Bruce Niemeyer, vice president of strategy and sustainability at Chevron. “We believe the future of energy is lower carbon.”

The challenge is unprecedented: energy demand and populations are growing, but the world is attempting to reduce emissions, Niemeyer said. Because the challenge is bigger than any one country, one industry or one company can solve, there’s a need to collaborate.

Shifting to Renewables is ‘Job to be Done’ (9:27 a.m.)

The war in Ukraine has focused a spotlight on the world’s reliance on fossil fuels, said Jon Moore, CEO of BloombergNEF, as he opened the two-day event. The conflict is also pointing to ways to get away from traditional sources of energy.

“When everything is in chaos, it’s good to think about the job to be done,” Moore said.

The planet has already warmed by 1 degree Celsius (1.8 degrees Fahrenheit) he said, getting closer to the 1.5 degree limit that most scientists agree is the upper limit to avoid the most catastrophic impact of climate change. And focusing only on cost, using just the lowest-cost sources of power generation, would put the world on track to warm by a disastrous 3.3 degrees.

“That is not the job to be done,” Moore said.

Earlier Tuesday, National Grid Plc said it plans to eliminate fossil fuel from its gas networks in Massachusetts and New York by relying instead on green hydrogen and so-called renewable gas produced from landfills, farm waste and other sources.

Other utilities including Southern Co. and Southern California Gas Co. have discussed using this approach to limit carbon emissions, though there are questions about cost and availability of both fuels.

“Just as we are investing in renewables like wind and solar to decarbonize the energy running through our electric network, we are committing to decarbonize our gas network,” National Grid CEO John Pettigrew said in a statement.

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Oil-Prices/JPMorgan-Immediate-EU-Ban-On-Russian-Oil-Could-Send-Prices-To-185.html

PMorgan: Immediate EU Ban On Russian Oil Could Send Prices To $185

By Tsvetana Paraskova - Apr 19, 2022, 10:30 AM CDT

• A full immediate ban would cut over 4 million barrels per day (bpd) of Russian supply.
• JPMorgan sees 2.1 million bpd of Russian supply to Europe cut if EU imposes gradual ban.
• France' Finance Minister LeMaire: EU ban on Russian crude is in the works.

Join Our Community

Oil prices could shoot up to a record $185 per barrel if the European Union acts to impose a full immediate ban on imports of Russian oil, JPMorgan says.

The EU has started tentative discussions on potentially imposing an embargo on Russian oil, but the bloc is still split on a ban on Russian energy imports. The biggest European economy—Germany—continues to resist an immediate oil embargo for now, saying an oil ban would plunge Germany, and Europe, into a deep recession. Germany, Hungary, and Austria, as well as some other EU members, continue to resist an immediate outright ban on Russian oil, although Germany signaled earlier this month that it could end its dependence on Russian oil this year. 

If the EU escalates embargoes in the sixth package of sanctions against Russia over its invasion of Ukraine and decides to impose a full immediate embargo on Russian oil, then Brent Crude prices could soar by 65 percent to as much as $185 per barrel, Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, says, as carried by Bloomberg.

A full immediate ban would cut over 4 million barrels per day (bpd) of Russian supply, and China and India wouldn’t be able to absorb all those volumes very soon, Kaneva added.

Still, an immediate EU ban is not JPMorgan’s base-case scenario—the investment bank sees 2.1 million bpd of Russian supply to Europe cut. If the EU imposes a gradual phase-out ban on Russian oil over several months, as it did with the ban on Russian coal imports, adopted in early April but effective only from August, this would not impact oil prices as much, JPMorgan’s Kaneva says.

An EU embargo on Russian oil imports may be in the works, but drafting and preparing for such a ban would likely take “several months,” European officials told AFP last week.

A ban is in the works at the EU level, France’s Finance Minister Bruno Le Maire said today.

“I hope that in the weeks to come we will convince our European partners to stop importing Russian oil,” the minister told Europe 1 radio on Tuesday.

By Tsvetana Paraskova for Oilprice.com

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https://oilprice.com/Energy/Crude-Oil/OPEC-Missed-Its-March-Output-Quota-By-145-Million-Bpd.html

OPEC+ Missed Its March Output Quota By 1.45 Million Bpd

By Tsvetana Paraskova - Apr 19, 2022, 10:00 AM CDT

• The OPEC+ group continues to undershoot its production quota in March.
• OPEC+ compliance rates shot up to 157 percent in March.
• Russia’s crude oil production, in particular, averaged 300,000 bpd below target at 10.018 million bpd.

Join Our Community

The gap between target levels and actual production of the OPEC+ group further widened in March to over 1.4 million barrels per day (bpd) as Russian crude output started to feel the sting of the sanctions and self-sanctioning of buyers and was 300,000 bpd below target, according to an OPEC+ report seen by Reuters.

Last month, the producers in the OPEC+ alliance saw their combined crude oil production lag behind the quota by 1.45 million bpd, with the compliance rate shooting up to a record 157 percent since the start of the 10-million-bpd production cut agreed upon in April 2020.

Russia’s crude oil production, in particular, averaged 300,000 bpd below target at 10.018 million bpd, per secondary sources in the report seen by Reuters.

The OPEC+ crude production in March fell further behind the target levels after February output was more than 1 million bpd below the collective quota and the compliance rate was 136 percent.

In March, Russia began to feel the pinch from the sanctions, according to the latest OPEC+ estimates.

Russia’s oil industry is already showing signs of slowing down as Western buyers shun Russian oil while Moscow struggles to replace lost sales in the West with sales in emerging Asian markets. The war Putin started in Ukraine is hitting home: storage capacity is full, infrastructure and shipping logistics prevent Russian from exporting all the oil unwanted in the West to China and India, refineries are cutting run rates as product storage is overflowing, and as a result, companies are scaling back crude production.

OPEC only raised its oil production by just 57,000 bpd in March from February, as African members’ struggles to pump more crude partially offset increases at the core OPEC members of the Middle East, OPEC’s Monthly Oil Market Report (MOMR) showed last week.

Russian oil supply is expected to fall by 1.5 million bpd in April, with shut-ins projected to accelerate to around 3 million bpd from May, the International Energy Agency (IEA) said in its monthly report last week. The IEA was ditched by OPEC at its latest meeting as a secondary source provider to assess production.

By Tsvetana Paraskova for Oilprice.com

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[Tom Nolan + 2,443]

12 hours ago, Tom Nolan said:

https://www.zerohedge.com/commodities/oil-bidens-emergency-spr-release-heading-europe

Oil From Biden's Emergency SPR Release Is Heading For Europe

by Tyler Durden

Monday, Apr 18, 2022 - 09:45 PM

Joe Biden's decision to release 180 million barrels of oil from the US Strategic Petroleum Reserve - one million barrels per day for 180 days, ending just before the midterm elections which the Democrats will lose in an avalanche - was meant to help lower US gasoline prices "because Putin price hike." Instead, it is heading for Europe.

According to Bloomberg, citing a person familiar with the matter, the Suezmax ship Advantage Spring - sailing for Rotterdam, according to ship-tracking data compiled by Bloomberg - received emergency SPR sweet crude from Energy Transfer’s Nederland oil facility around April 1 for export.

The Suezmax also received SPR crude from Aframax Eagle Hatteras, which loaded at same terminal in first week of April.

The Advantage Spring was chartered by Atlantic Trading, an affiliate of Total, ship fixtures data show.

It appears that somehow the definition of emergency now includes making a profit at the expense of American consumers because sooner or later a real emergency will hit and then it will be too late, while easing the true energy emergency over in Europe.

According to Matt Smith, oil analyst at commodity data firm Kpler, this is the first export of SPR crude since last November. Which means the oil was apportioned from Biden's shock SPR release.

One wonders what is behind Biden's decision to make US emergency SPR oil available across the Atlantic; one can only hope that it doesn't mean that in the coming midterms mail in ballots will also be made available to Europeans..

https://oilprice.com/Energy/Energy-General/US-Exports-Oil-From-SPR-Release-Report.html

U.S. Exports Oil From SPR Release: Report

By Charles Kennedy - Apr 19, 2022, 8:30 AM CDT

• U.S. Fed. Govt. may be exporting crude oil from its SPR to lower prices at home.
• Tanker tracking data showed that at least one tanker filled with SPR crude is en-route to Europe.
• WTI recouped losses since U.S. President Biden announced the SPR release on March 31st.

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The United States may be exporting crude oil released from the strategic petroleum reserve in a bid by the federal government to lower prices at the pump.

This is according to a report by ZeroHedge, citing information from Bloomberg that the author of this article could not locate on Bloomberg’s website.

According to the information, tanker tracking data showed that at least one tanker, the Advantage Spring Suezmax, received light, sweet U.S. crude from the SPR at the start of April and is currently en route to Rotterdam, the Netherlands.

If the information is confirmed, it would not be the first instance of the U.S. exporting oil supposedly released to alleviate tight supply on the local market. A Bloomberg report from November last year noted that in the previous month, exports of SPR crude released to tame prices had hit a record high of some 1.6 million barrels.

“Given the ongoing pace of the current SPR release -- 12 million barrels in the last two months and the biggest weekly release so far last week at 3.1 million barrels -- it’s fair to assume more SPR barrels are going to leave U.S. shores in the weeks ahead,” said Matt Smith, an oil analyst from Kpler.

If the new information is confirmed, the Biden administration’s decision to release a record 180 million barrels from the strategic reserve over six months might well blow up in its face.

The White House announced the release plan at the beginning of the month, and oil prices reacted accordingly, with WTI slipping below $100. However, the drop was only temporary, and by this week, WTI had recouped its losses.

Meanwhile, the national average price per gallon of regular gasoline remains above $4. The national average is slightly lower than the $4.274 price per gallon of regular a month ago but significantly higher than the $2.87 per gallon that drivers paid on average a year ago.

By Charles Kennedy for Oilprice.com

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[Tom Nolan + 2,443]

https://oilprice.com/Latest-Energy-News/World-News/US-Summer-Gasoline-Price-Set-To-Be-Highest-Since-2014.html

U.S. Summer Gasoline Price Set To Be Highest Since 2014

By Tsvetana Paraskova - Apr 19, 2022, 10:30 AM CDT

The U.S. national average retail gasoline and diesel prices are expected to be the highest since 2014 during this year’s summer driving season, with gasoline prices expected to average $3.84 per gallon from April through September, the Energy Information Administration (EIA) said on Tuesday.

Higher crude oil prices due to the Russian war in Ukraine are expected to keep American gasoline prices high this summer, with the average retail regular gasoline up to $3.84 per gallon from last summer’s average price of $3.06/gal, the EIA said.  

Brent Crude prices are forecast by the EIA to average $106 per barrel this summer, which would be $35 a barrel higher than in the summer of 2021.

The ongoing effects of the pandemic will have a smaller effect on gasoline and diesel consumption in the United States this summer season compared with the past two summers, while overall, U.S. gasoline and diesel demand continues to remain below the respective 2019 averages, the administration noted.

Gasoline prices in the U.S. hit a fresh multi-year high in March at over $4.30 per gallon after the Russian invasion of Ukraine roiled the global oil market and led to wild swings and prices surging above $100 a barrel for the first time since 2014.

As of April 19, the national average price of a gallon of regular gasoline is $4.101 a gallon, slightly up from April 18 and from a week ago, but down from $4.262/gal a month ago, according to AAA data.

“The slide in gas prices slowed to a crawl over concerns about increased global oil prices and the return of seasonal domestic gas demands,” AAA said on Monday.

“As the days get longer, the weather gets warmer, and pump prices dip from their record highs, consumers feel more confident about hitting the road,” AAA spokesperson Andrew Gross said.

“But these lower pump prices could be temporary if the global price of oil increases due to constrained supply,” Gross added.

By Tsvetana Paraskova for Oilprice.com

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https://oilprice.com/Energy/Oil-Prices/Oil-Dips-As-IMF-Slashes-Economic-Growth-Forecasts.html

Oil Dips As IMF Slashes Economic Growth Forecasts

By Charles Kennedy - Apr 19, 2022, 1:00 PM CDT

• Brent crude was trading $107, down over 5% on Tuesday.
• The IMF cut its global economic growth forecast by almost 1%.
• The IMF cut China’s GDP growth estimate for 2022 to 4.4%

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Energy-General/Demand-Destruction-Fears-Drag-Oil-And-Gas-Prices-Lower.html

Demand Destruction Fears Drag Oil And Gas Prices Lower

By Josh Owens - Apr 19, 2022, 2:00 PM CDT

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Reader Update: Whether you are new to the oil and gas industry or an energy market veteran, you will regret not signing up for Global Energy Alert. Oilprice.com's premium newsletter provides everything from geopolitical analysis to trading analysis, and all for less than a cup of coffee per week.

Chart of the Week

- US cash natural gas prices for next-day deliveries have soared this week, with many locations trading above $7 per mmBtu for the first time since the Big Freeze in February 2021.

- The Henry Hub May ‘22 contract has been on the rise recently, settling at $7.82 per mmBtu on Monday, though a downwards correction on Tuesday brought trading closer to $7 per mmBtu.

- The peculiarity of the gas price spike is that demand is expected to be easing over the next seven days and production remains stagnant at 93.4 BCf per day. 

- With domestic coal supplies remaining tight, disallowing any large-scale fuel switching, the longevity of the bull run will largely depend on LNG outflows from the US. 

Market Movers

- UK industry holding Rolls-Royce (LON:RR) will likely receive regulatory approval for its small modular reactors by mid-2024, meaning that by the end of the decade pilot SMR projects could be producing energy already.

- A month after rejecting Carl Icahn’s purchase offer as inadequate, US utility firm Southwest Gas Holdings (NYSE:SWX) said it would evaluate selling itself after an unnamed buyer reportedly offered a price well in excess of Icahn’s $82.50 per share offer.

- The Iraqi government might reportedly reactivate a deal with Halliburton (NYSE:HAL)to drill wells in the idled Akkas gas field, potentially paving the way for a subsequent entry of either Chevron (NYSE:CVX) or Saudi Aramco.

Tuesday, April 19, 2022

The IMF cutting the global economy’s 2022 outlook by 0.8% compared to its previous forecast is the main talking point in markets today - after seeing strong demand across all commodities in Q1, we are now facing the reality of protracted demand loss going forwards. The Russia-Ukraine war has sent shockwaves across the metal and agriculture markets, potentially having an even larger impact on global markets than a Russian oil embargo would. Against this background, not even Libya’s descent into another period of chaos could hold oil prices above the $110 per barrel mark. 

Libya Supply Disruption Puts Europe on Alert. Libya’s national oil company has seen a ‘painful wave of closures’ and declared force majeure on exports from the Zueitina, Mellitah, and Sarir terminals amidst skirmishes, having been forced to shut down production at the country’s largest field, Sharara.

OPEC+ Gap Widens as Russia Starts Decline. Internal OPEC+ documentation showed that the oil group underperformed its March production target by a whopping 1.45 million b/d, bringing total compliance to 157%, with this month expected to see even wider discrepancies between output targets and actual production.  Related: U.S. Natural Gas Prices To Spike As Exports Boom

Biden Administration Resumes Oil Drilling on Public Land. According to media reports, the US Bureau of Land Management plans to resume selling drilling rights on federal lands in the western part of the country starting this week, curbing available leasing zones and hiking royalty rates. 

US NatGas Falls Back After Hitting 2008 Levels. Natural gas prices hit levels not seen since 2008 due to counter-seasonally cold weather across the mid-continent and still-strong LNG send-outs. On Tuesday morning, however, natural gas pulled back as traders took profits.

US DUCs Drops to Lowest Level Ever. According to the EIA Drilling Productivity Report, the number of drilled but uncompleted wells in the US dropped to the lowest level on record as of March 2022, at 4,273, indicating that drillers continue to prefer depleting DUCs instead of drilling new wells. 

Glencore Declares Cobalt Force Majeure. Energy major Glencore (LON:GLEN)reportedly declared force majeure on its cobalt deliveries out of the Democratic Republic of Congo after severe flooding debilitated logistics operations in South Africa, from where cobalt was usually exported.  

PEMEX Refinery Blaze to Trigger Higher Imports. The 330,000 b/d Salina Cruz refinery operated by Mexico’s national oil company PEMEX remains shut after a fire broke out over the weekend, most likely triggering higher imports of road fuels into the country over the upcoming weeks. 

UK Energy Firms Warn on ‘Horrific’ Power Hikes. With power and gas prices rising 54% from April onwards, leading power generation companies have called for a shift in government policy as some 30-40% of British households are expected to run into difficulties when paying electricity bills by the end of this year. 

India Starts Buying Discounted Russian Coal. Confirming market expectations, Indian buyers started taking in Russian deliveries of thermal coal at prices of $160-165 per metric ton CFR India (some $40/mt lower than ICE Newcastle) on the back of nationwide coal inventories reaching a mere eight days of consumption. 

Romania to Amend Upstream Terms to Lure Investors. Little less than a year after ExxonMobil (NYSE:XOM) decided to quit Romania’s offshore, the country’s government agreed to amend the country’s offshore law and reduce the progression taxation brackets. 

China Undercuts Iron Ore Prices. Iron ore futures in both Dalian and Singapore fell following NDRC comments that it expects 2022 steel production to be lower than last year (at 1.035 billion tons) so that China can be in line with its carbon emission commitments. 

Indonesia Hikes Coal Royalty Rates. Confronted with the long-term challenge of keeping domestically produced coal at home, the Indonesian government hiked royalty rates for coal miners from a single tariff of 13.5% to a range of 14-28%, with the maximum rate applying when prices surpass $100 per metric ton, i.e. now.  

Mexico’s Controversial Power Bill Voted Down. The AMLO-championed power bill that would have prioritized Mexico’s state-owned utility firm CFE over private operators failed to garner the two-thirds majority required for constitutional amendments, providing a mood upswing for the country’s business climate in general. 

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[Tom Nolan + 2,443]

https://oilprice.com/Latest-Energy-News/World-News/Russian-Crude-Shipments-Have-Fallen-25-In-A-Week.html

Russian Crude Shipments Have Fallen 25% In A Week

By Julianne Geiger - Apr 19, 2022, 5:00 PM CDT

The past seven days have seen shipments of Russian crude drop by 25%, as the Kremlin announces plans for building new export outlets to balance out the impact of sanctions. 

From April 8 to April 15, Russia has seen crude oil shipments decline by one-quarter, with Bloomberg data showing that only 30 Russian tankers carried under 22 million barrels of oil to ports on the Black Sea, the Baltic Sea and the Arctic Ocean. 

Those reduced shipments cut an estimated $60 million out of Russia’ war chest for the week.

Despite the war, sanctions and trader “self-sanctioning”, Russia is expected to earn over $320 billion from energy exports in 2022, according to Bloomberg. Even in a time of war that has isolated Russia from the West, energy export revenues will be one-third higher than they were in 2021. 

On Tuesday, Russia unveiled plans to construct new export facilities, along with oil storage facilities, to counteract the effect of sanctions, Reuters reports.

Without major oil storage capabilities, there is little room for Russia to maneuver, but Reuters cited Russian Deputy Energy Minister Pavel Sorokin as saying that “some companies have been engaged in such projects and have been implementing it”. 

On Monday, Russian President Vladmir Putin stated publicly that Western sanctions against his country were failing. 

China and India have continued to prop up Russian oil, and the European Union has not been able to agree on a ban on Russian oil and gas. 

Russia’s April energy sales were expected to be around $9.6 billion above the Kremlin’s original target thanks to multi-year-high oil prices. That projection, however, came in prior to Bloomberg data showing the 25% weekly decline in Russian crude oil exports from April 8 to April 15. 

Those projections also came before oil prices fell around 5% this week on downsized IMF economic growth forecasts and China’s COVID lockdowns that leave the demand picture in a state of uncertainty. 

By Julianne Geiger for Oilprice.com 

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https://oilprice.com/Latest-Energy-News/World-News/Unexpected-Crude-Draw-Fails-To-Move-Oil-Prices.html

Unexpected Crude Draw Fails To Move Oil Prices

By Julianne Geiger - Apr 19, 2022, 3:54 PM CDT

The American Petroleum Institute (API) reported a surprise draw this week for crude oil of 4.496 million barrels, compared to analyst predictions of a 2.533 million barrel build.

U.S. crude inventories have shed some 76 million barrels since the start of 2021 and about 19 million barrels since the start of 2020.

In the week prior, the API reported a build in crude oil inventories of 7.757 million barrels after analysts had predicted a much smaller build of 1.367 million barrels.

 

Oil prices were trading down on Tuesday as Shanghai prepared to reopen factories from its strict lockdown, and the IMF slashed its global economic growth forecast. The IMF also cut China's GDP growth estimate for this year, referring to a "worsening" economic slowdown.

WTI was trading down 5.40% at $102.40 per barrel on the day at 3:31 p.m. ET—but up roughly $2 per barrel on the week. Brent crude was trading down 5.33% on the day at $107.10 per barrel on the day—but up $2.50 per barrel on the week.

U.S. crude oil production stayed at 11.8 million bpd for the week ending April 08. Crude production in the United States is still down 1.3 million barrels per day from pre-pandemic times.

This week, the API reported a build in gasoline inventories at 2.933 million barrels for the week ending April 15—after the previous week's 5.053-million-barrel draw.

Distillate stocks saw a decrease in inventory of 1.652 million barrels for the week on top of last week's 4.961-million-barrel decrease.

Cushing saw a 93,000-barrel build this week. Cushing inventories rose to 26.337 million barrels as of April 8, according to EIA data—down from 59.2 million barrels at the start of 2021, and down from 37.3 million barrels at the end of 2021.

At 4:43 pm, ET, WTI was trading at $102.60 (-5.18%), with Brent trading at $107.20 (-5.26%).

By Julianne Geiger for Oilprice.com

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[Tom Nolan + 2,443]

Will the price of oil hinge on the French election?

[Tom Nolan + 2,443]

1 minute ago, Tom Nolan said:

Will the price of oil hinge on the French election?

ZERO HEDGE QUOTE:  Why wait until after the election to launch the embargo? Simple: Europe's bureaucrats are correctly terrified that the coming oil price spike to push the vote in Le Pen's favor, which is why Europe will wait until after the election (when Macron will supposedly be the next president of France, as Belgium hopes) to announce it publicly.

[Tom Nolan + 2,443]

https://www.zerohedge.com/markets/full-embargo-russian-oil-would-send-brent-185bbl-jpmorgan

EU To Impose Full Embargo On Russian Oil Next Week, Will Send Price Above $185 According To JPMorgan

by Tyler Durden

Tuesday, Apr 19, 2022 - 12:13 PM

Update (13:15 ET): What was largely a theoretical modeling exercise until moments ago, is set to go live because Reuters reports that the EU is set to declare a full embargo on Russian oil after this weekend's French election:

• EU GAS PRICE TO SHOOT UP AS EU TO DECLARE EMBARGO ON RUSSIAN OIL AFTER FRENCH ELECTION NEXT WEEK - SOURCE

Why wait until after the election to launch the embargo? Simple: Europe's bureaucrats are correctly terrified that the coming oil price spike to push the vote in Le Pen's favor, which is why Europe will wait until after the election (when Macron will supposedly be the next president of France, as Belgium hopes) to announce it publicly.

More below (and in the full JPM report available to pro subs).

* * *

Despite the clear intentions of western government to cripple Russian energy production, loadings of Russian oil have so far been surprisingly resilient, so much so that Russia's current account balance is at all time highs.

According to JPMorgan, shipments in the seven days to April 16 hit 7.3 mbd, only 330 kbd below the 7.58 mbd averaged in
February before the start of the war. Remarkably, JPM calculates that Russian crude exports are averaging 360 kbd above pre-invasion volumes, while exports of oil products like fuel oil, naphtha, and VGO have declined by 700 kbd (full report available to pro subscribers in the usual place).

As previously observed, the decline in product exports combined with a 200 kbd drop in Russian domestic oil demand has resulted in Russian refineries cutting runs. The volume of refining cuts in April has risen to 1.3 mbd, almost 0.6 mbd above usual April maintenance. By late March, a sharp reduction in domestic refining throughput triggered production shut-ins.

With that in mind, JPM now estimates that Russian production shut-ins will amount to 1.5 mbd in April, vs its initial forecast of 2 mbd (the forecast of a 1 mbd loss of Russian exports for the rest of the year remains unchanged for now). 

Underlying JPM's projection is the assumption that European buyers will cut their purchases of Russian oil by about 2.0-2.5 mbd by the end of the year and that Russia will be able to re-route only about 1 mbd out of that.

The three ways JPM gets to its 2.0-2.5 mbd estimate are:

1. Russian crude spot contracts account for about 1.8 mbd of total exports, while about 0.3 mbd of products are sold on spot terms, giving us a likely disruption of 2.1 mbd,
2. As of today, nine European countries plus the US, Canada and the UK have committed to cut their imports of Russian oil by ~2.1 mbd,
3. 26 major European refiners and trading companies have suspended spot purchases or intend to phase out 2.1 mbd of Russian imports.

Of course, it will come as no surprise to anyone that aggressive purchases of Russian oil by China and India - who have both ramped up purchases of Russian oil in the past two months, and Turkey has also increased volumes to pre-COVID levels - have offset some of the loss. Given time, JPM estimates that together these three countries can likely import an additional 1 mbd beyond what they are importing today.

Which brings us to the big question: if Europe follows through on its warning to expand sanctions to all Russian oil, what happens to the price? Well, according to JPMorgan, nothing good.

As JPM's commodity strategist Natasha Kaneva writes, she has reviewed various scenarios should Europe expand its sanctions to include Russian oil, and warns that "any immediate embargo measure taken by the European Commission will have a severe impact on the global oil market with risks to price entirely to the upside in the short-term."

The bank has examined three potential tools the EU could use to sanction Russian oil, from the most aggressive, a full embargo on imports from Russia, to the more conservative, taxes or price caps on Russia oil imports. In any scenario, to avoid the extreme price spikes, the market needs time to adjust.

A look at the various scenarios, starting with the most draconian:

• A full and immediate embargo is likely to hurt European consumers more than Russian producers in the near term. More importantly, a full, immediate ban would likely drive Brent crude oil prices to $185/bbl as more than 4 mbd of Russian oil supplies would be displaced with neither room nor time to re-route them to China, India, or other potential substitute buyers.

Some more details on the "full embargo" scenario:

Though India has already increased its imports of Russian oil to three times 2021 levels, its ability to continue to act as a sink for displaced Russian oil supply remains in question as the US warns India not to increase imports further.

• However, if Europe implements an embargo more slowly, e.g. over a period of months, similar to the European ban on Russian coal imports where a wind-down period of four months is in place, prices are unlikely to rise much higher than current levels.
• In a slower phase out, Russia would have more time to adjust its oil flows toward friendlier buyers and global ex-OPEC+ supply growth would have time to grow sufficiently to fill at least some of the Russia-sized hole in global oil supply.

The EU is also entertaining less drastic alternatives to a full embargo which would allow Europe to continue to receive Russian oil supply while still applying financial pressure on Moscow. These alternatives include introducing i) special taxes and ii) price caps on European imports of Russian oil.

• Because the operational breakevens for Russian oil are less than $10/bbl and Russia’s Energy Minister has said the country will sell to “friendly countries” at “any price range,” Russian producers could likely still afford to continue to deliver oil to European consumers, even under tariffs of 90% or a price cap of $20/bbl. Either of these options may provide a politically-acceptable middle ground, allowing the EU to make a show of force while maintaining its Russian energy lifeline
• Additionally, under a price cap, the EU is considering establishing an escrow account into which oil buyers would deposit the difference between the market price of oil and the level of the price cap. These funds would either be entirely dedicated to rebuilding Ukraine after hostilities cease or be provided to Russian producers at a later date net of costs to rebuild Ukraine. Sending additional funds to Russian operators, even at a later date, likely carries with it political risk, but the promise of more revenue in the future would go further to guarantee continued supply from Russia.

In any of these scenarios, it is obvious that Russia will turn to friendlier buyers for its exports of crude oil and oil products. China and India have both already ramped up purchases of Russian oil in the past two months and Turkey has also continued to ramp up purchases of Russian oil toward pre-COVID levels in spite of the conflict in Ukraine.

Together, these three countries can likely import an additional 1 mbd beyond what they are importing today, with China replacing other East Asia buyers of oil from Eastern Russia like Japan and Korea and Turkey and India picking up cargoes of Russian oil from the Black Sea and Baltic ports opportunistically.

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Crude-Oil/Its-Getting-Increasingly-Expensive-To-Boost-US-Oil-Production.html

It's Getting Increasingly Expensive To Boost U.S. Oil Production

By Tsvetana Paraskova - Apr 20, 2022, 5:00 PM CDT

• U.S. shale producers have exercised astonishing capital discipline in recent years.
• Despite calls on U.S. oil firms to ramp up production, many producers are being plagued by rising costs and supply chain bottlenecks.
• "Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans," Pioneer CEO Scott Sheffield noted.

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U.S. shale producers could take more time to bring higher volumes of crude oil to the market than previously expected as most public companies continue to keep capital discipline and go through their backlog of drilled but uncompleted wells (DUCs). The drilling of new wells needs more capital expenditure and hiring rig crews and services providers that are currently in short supply amid bottlenecks in the shale patch.      As a result, U.S. tight oil production is not rising as fast as in previous upcycles, and surely not as quick as the Biden Administration wants as it looks to lower the highest gasoline prices in America in eight years. All forecasts point to U.S. oil production rising this year compared to 2021, but growth will likely happen at a slower pace than expected a few months ago. 

Since the COVID-inflicted slump in the industry, many producers have relied on their DUC inventory to take advantage of the highest international crude oil prices since 2014.

So, the number of DUCs fell to 4,273 in March 2022, the Energy Information Administration (EIA) said in its latest monthly Drilling Productivity Report this week. The number of DUCs in the seven key shale regions is now down by 42 percent since the beginning of 2021. In the Permian alone, the number of DUCs dropped by 71 from February to stand at 1,309 in March—that's the lowest figure since early 2017. 

Related: U.S. Exports Oil From SPR Release: Report

The lowest number of DUCs in the Permian in half a decade suggests that now U.S. producers will have to spend more money on drilling new wells from the very start compared to the lower-cost DUC inventory where the well is already drilled. 

That's easier said than done.  

Private producers have boosted production and drilling, but they—as well as the entire shale patch—face supply chain bottlenecks and cost inflation in everything from labor, frac sand, steel prices, and services provider rates. Even those who want to grow production more than the others will have to contend with the economics of finding and paying a skilled workforce or procure frac sand at high prices, for example. 

The EIA tempered its shale growth expectations in the Drilling Productivity Report. April production is now seen at 8.517 million barrels per day (bpd), down from 8.708 million bpd production for April expected in last month's report. In March, the EIA expected oil output in the Permian to grow to 5.208 million bpd in April. But in the latest report this month, the estimate is now revised down to 5.055 million bpd, with May output expected to rise by 82,000 bpd to 5.137 million bpd. 

All in all, the U.S. oil industry seeks a longer-term commitment to the sector from the Administration and says that despite all pleas and calls, it simply cannot raise production too fast, too soon. Capex discipline from the largest shale firms and supply chain bottlenecks will cap U.S. oil production growth, industry executives say.

Even if ConocoPhillips decided to pump more oil today, the first drop of new oil would come within eight to 12 months, CEO Ryan Lance told CNBC last month. 

Occidental Petroleum CEO Vicki Hollub said at the CERAWeek conference in early March: "We've never faced a scenario where we need to grow production, when actually supply chains not only in our industry but every industry in the world [are] being impacted by the pandemic."

Not even $200 oil would incentivize shale giant Pioneer Natural Resources to drill beyond what it has planned for, according to chief executive Scott Sheffield. 

"Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans," Sheffield told Bloomberg Television in an interview just before Russia invaded Ukraine. "If the president wants us to grow, I just don't think the industry can grow anyway," Sheffield added.

At public shale firms, capital budgets for 2022 are now up by an average of 23 percent over 2021, RBN Energy says. 

"That increase seems substantial, but about two-thirds (15%) results from oilfield service inflation," the commodity analysts said.  

"There is less than meets the eye in producers' planned 23% capex increase and 8% boost in production," RBN Energy noted earlier this month. 

Producers' "plans do not represent a strategic shift from the maintenance-level investments they've been making the past few years."  

By Tsvetana Paraskova for Oilprice.com

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[Tom Nolan + 2,443]

https://oilprice.com/Latest-Energy-News/World-News/US-Crude-Futures-Are-Growing-Increasingly-Bullish.html

U.S. Crude Futures Are Growing Increasingly Bullish

By Alex Kimani - Apr 20, 2022, 3:30 PM CDT

In yet another bullish indicator for U.S. oil markets, the price of  WTI crude oil futures for June settlement have notched $0.14 higher to settle at $102.19.

The May contract, set to go off the market today, also gained slightly to settle at $102.75, good for a 0.19% increase.

Once again, the crude markets recorded choppy trading despite bullish sentiment prevailing.

Weekly inventory data by the American Petroleum Institute (API) showed a much higher-than-expected drawdown of -8.02 million barrels against expectations for a 2.471 million barrel increase. 

API reported gasoline inventories rose 2.9mb, relative to the DOE expectation for a draw of 1.0mb on the week. API also reported diesel inventories fell 1.7mb, relative to the DOE expectation for a draw of 0.8mb on the week. In total, API showed a draw of 3.3mb in oil and oil products on the week, relative to the DOE expectation for a build of 0.7mb.

Despite the sharp drawdown, the price of crude oil sold off with WTI price back below its 50% retracement of the move up from the April 12 low (at $101.07), and the 200-hour moving average currently at $100.97.

The price also cracked below the $100 level but abruptly stopped at the $99.88 level before rebounding into the settlement.

The WTI June contract currently trades near the middle of the 100-hour moving average at $104.66, while the rising 200-hour moving average is below at $100.97 (which is near the 50% midpoint at $101.07). The good news for the bulls is that the price decline has failed to sustain momentum below the 50% and 200-hour moving average.

China is beginning to ease lockdowns in Shanghai, a city of 25 million people, with factories preparing to reopen, adding more bullishness to oil demand, while Russian production has seen a 7.5% decline from end-March to the first half of this month. Additionally, continued discussion of European bans on Russian oil, including Germany’s announcement Wednesday that it would ban all Russian oil by the end of the year could continue to drive prices higher, alongside force majeure on Libya’s largest oilfields and closures of key export terminals. 

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

• Large Crude Draw Sends Oil Prices Higher
• JPMorgan: Immediate EU Ban On Russian Oil Could Send Prices To $185
• EU In Talks With Alternative Suppliers As It Considers A Russian Oil Ban

[nsdp + 449]

Having sat through too many budget meetings in 5 years at Amoco, the MB A's who say what is the point in drilling new wells when you have x number of wells you have that are drilled and only need to be completed to produce.  We don't know how long these prices will last ;we need to get every dollar we can  out of the ground BEFORE we start a new drilling campaign.  Time value of money and you can complete two wells with the same dollars as drilling a new hole and complete those two wells in 60 days instead of 6 months before you get revenue from a new hole. . Casing, packers , sand and fracking fluid are limited. You need to get in the front of the line and get the income stream started.