"Demand Destruction Is Delaying An Oil Supply Crisis" by Josh Owens of OIlPrice.com

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Energy-General/Demand-Destruction-Is-Delaying-An-Oil-Supply-Crisis.html

Demand Destruction Is Delaying An Oil Supply Crisis

By Josh Owens - Apr 29, 2022, 2:00 PM CDT

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Oil prices are on course for a fifth straight monthly increase despite significant demand destruction in China, a trend that highlights just how big the current supply problem is.

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Friday, April 29, 2022 

As we are getting closer to next week’s OPEC+ meeting, the market has been increasingly questioning the necessity of yet another formal rubber-stamping of monthly production quotas. With Russia’s production down by almost 1 million b/d compared to February levels and Libya constantly battling supply disruptions, the oil group’s compliance rate is only going to increase. Despite a significant drop in demand from China, oil is set for a fifth straight monthly gain, with ICE Brent settling in at around $110 per barrel. 

Russia Cuts Poland and Bulgaria Gas Supply. Russia halted gas supplies to Poland and Bulgaria after the countries refused to open new bank accounts and pay for Gazprom (MCX:GAZP) deliveries in roubles, a decision that the European Commission denounced as blackmail. 

OPEC+ Expected to Ram Through Another Agreement. Already in their second year of supply discipline, OPEC+ countries are expected to greenlight another 432,000 b/d monthly increase for June at their monthly 05 June meeting, even as Kazakhstan and Russia have been going down in terms of oil production. 

Russia’s Sakhalin-1 Goes into Force Majeure. The Sakhalin-1 project in the Russian Far East, producing some 270,000 b/d of crude, saw its operator ExxonMobil (NYSE:XOM) declare force majeure as it became increasingly difficult to ship crude from there. 

US Congress Vows to Go After Oil Companies. US Democrats in Congress have accused domestic oil companies of gouging and profiteering off high gasoline prices, seeking to introduce legislation that would allow the US Federal Trade Commission to go after them and double the penalty to $2 million per day. 

ExxonMobil Makes Three New Stabroek Discoveries. US oil major ExxonMobil (NYSE:XOM) made three new discoveries in offshore Guyana, namely Patwa, Barreleye, and Lukanani, taking the total recoverable resource of the Stabroek Block to 11 billion barrels. 

No One Knows How To Pay for Russian Gas. Amidst the continent-wide confusion as to whether using Gazprombank accounts to pay for Russian gas breaches EU sanctions, Germany’s economy ministry stated that if the companies declare that contracts have been fulfilled with the euro payment, it should not contradict the sanctions regime. 

China to Cut Coal Import Tariffs to Zero. As domestic coal production reached an all-time high of 395 million tons in March, China scrapped import tariffs altogether from May 01 amidst unprecedentedly high global prices, potentially freeing up the way for more discounted Russian coal into the country.  

Chevron Signs Up for Suriname Block. Suriname’s state oil company Staatsolie and US oil major Chevron (NYSE:CVX) signed a production sharing agreement for exploration and production for the offshore block 07 in the west of the shallow offshore area, with the latter taking an 80% stake in the project.

Glencore Cuts Guidance on Metals Production. Citing operational challenges and COVID-related drawbacks, UK-listed trading major Glencore (LON:GLEN) lowered its 2022 production guidance on cobalt, copper, and zinc by some 5-10%, with the latter two seeing a 15% q-o-q decline in Q1 2022.

Shell Tightens Russia Restrictions on Crude Buying. UK energy major Shell (LON:SHEL) revised its restrictions on buying Russian oil, stating that it would no longer accept products with any Russian content after rumors of an emerging ‘Latvian Blend’ stoked fears of tacit blending. 

Germany Wants to Take Over Rosneft Refinery. Germany is preparing to take over the Schwedt refinery operated by Russia’s state-owned oil company Rosneft (MCX:ROSN), the only refinery remaining in the country that is running predominantly on Russian oil, in a drive to bring total imports to zero. 

No Quick COVID Rebound Looming for China. Despite a five-day Labour Day coming up, China's crude demand is set to stay depressed as some 180 million residents remain under some form of lockdown, with gasoline and demand still more than 25% below year-ago levels and jet fuel demand down more than 50% year-on-year. 

US Sues Leading Metals Producer. The US Securities and Exchange Commission sued Brazilian miner Vale SA (NYSE:VALE) over ‘false and misleading’ dam claims following the 2019 Brumadinho dam disaster that killed 270 people, saying that the firm knew about the dam not meeting international standards. 

Shell Doubles Down on Indian Renewables. UK oil firm Shell (LON:SHEL) agreed to buy India’s renewable energy-focused company Spring Energy for $1.55 billion, boosting 2.9 gigawatts-peak of solar and wind projects, becoming the third energy major to do so after BP (NYSE:BP) and TotalEnergies (NYSE:TTE). 

By Josh Owens for Oilprice.com 

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• EU In Talks With Alternative Suppliers As It Considers A Russian Oil Ban
• Libya May Reach Full Oil Production Within Days
• Can Lebanon Repair Its Failing Energy Sector?

[Tom Nolan + 2,443]

https://www.zerohedge.com/commodities/allianz-halt-insurance-oil-gas-projects-2023-amid-worsening-supply-outlook

Allianz To Halt Insurance For Oil, Gas Projects In 2023 Amid Worsening Supply Outlook

by Tyler Durden

Friday, Apr 29, 2022 - 01:15 PM

The Allianz Group, one of the world's largest insurers and asset managers, published a statement Friday detailing how it will no longer insure and invest in new oil and gas fields starting in 2023. This comes at the worst possible time for extremely tight oil markets as Russian production drops due to hard-hitting Western sanctions, igniting fuel shortages in Europe, the US East Coast, and other parts of the world. 

Allianz said it won't offer new single-site and stand-alone property insurance and casualty insurance coverages (and renew existing contracts after July 1, 2023) and will halt new funding for exploration and development of new oil and new gas fields (upstream), construction of new midstream infrastructure related to oil, construction of new oil power plants, and projects in the Arctic. 

The new guidelines come as the company is "accelerating the deployment of its climate strategy and has announced new ambitious commitments in both its core business and operations ... limit the greenhouse gas emissions (GHG) deriving from Allianz's sites and activities in over 70 markets to net-zero by 2030, instead of 2050 as originally planned." 

The timing of such an accelerated climate strategy will undoubtedly mean a reduction in capacity for new oil projects globally because it will be harder or perhaps more expensive for oil and gas companies to insure projects. This is a sure way to collapse supply even more, when the US is acting as a barrel of last resort to a tight global energy market hungry for supplies as Russia's production sinks. 

Allianz said it was "committed to actively driving the transition towards renewable energy sources, supported by significant underwriting and investment capacity and appetite for renewable risks." 

The world is about to experience a second energy shock, and Allianz's move to abandon insuring and funding fossil fuel projects may lead to continued disorderly decarbonization of the economy. In other words, elevated energy prices are here to stay. 

Here's Allianz's full press release.  [SEE ARTICLE]

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Energy-General/The-Rig-Count-Climbs-As-Markets-Clamor-For-More-Oil.html

The Rig Count Climbs As Markets Clamor For More Oil

By Julianne Geiger - Apr 29, 2022, 12:32 PM CDT

• The rig count has increased once again, hitting levels not seen since April 2020.
• Russia's invasion of Ukraine has only added to the demand for drilling, with the rig count climbing by 48 in nine weeks.
• Oil rigs climbed by three this week while gas rigs remained the same.

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The number of total active drilling rigs in the United States rose by 3 this week, after an increase of 2 rigs in the week prior, according to new data from Baker Hughes published on Friday.

The total rig count increased to 698 this week—258 rigs higher than the rig count this time in 2021 and the highest count since April 2020. Drilling has picked up substantially since the Russia invasion, adding 48 rigs over the last nine weeks.

Oil rigs in the United States rose this week by 3 rigs to 552, while gas rigs stayed the same at 144. Miscellaneous rigs also stayed the same, at 2.

The rig count in the Permian Basin added a single rig this week, bringing the total to 335, while rigs in the Eagle Ford stayed the same.  

U.S. crude oil production stayed at 11.9 million bpd during the week ending April 22, according to the latest Energy Information Administration—a 300,000 bpd rise since the Russian invasion of Ukraine. Costs for drillers have risen in the U.S. shale patch—just one of many factors preventing U.S. drillers from ramping up production quickly.

In the Permian, the most prolific basin in the United States, supply chain issues and an acute worker shortage have been plaguing the industry, along with unpredictable long-term demand, oil price volatility, and an uncertain regulatory environment.

Nevertheless, Permian rigs have made substantial gains since the sharp dropoff in 2020 following the Covid-19 lockdowns and subsequent demand destruction, recovering to xxx percent from the low of 117 rigs in August 2020 to xxx rigs now. The data shows that oil companies are indeed drilling new oil and gas wells—but there is a natural and unavoidable lag between drilling new wells and actual production.

At 11:56 a.m. ET, oil prices were trending up on the day as oil supply fears outweighed China's covid lockdowns that are threatening to diminish demand. WTI was trading at $106.60—up $1.27 per barrel (+1.21%) on the day and up more than $4 on the week. The Brent benchmark traded at $109.70 per barrel, up $2.10 (+1.95%) on the day and $3 on the week.

At 1:10pm ET, WTI had risen to $106.80, while Brent was trading at $109.70.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

• German Energy Giant To Pay For Russian Gas In Rubles
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• Has Oil Lost Its Upside Momentum?

[Tom Nolan + 2,443]

https://community.oilprice.com/topic/28672-opec-is-treading-lightly-as-bearish-news-mounts-by-irina-slav/

 

[Boat + 1,323]

Another demand killer is gasoline cars sold per year. The days of 15 million is gone. The last couples of years it’s down to 13 million. 
 

https://www.eia.gov/outlooks/aeo/narrative/consumption/sub-topic-01.php

Edited April 30, 2022 by Boat

[nsdp + 449]

On 4/29/2022 at 3:53 PM, Tom Nolan said:

https://oilprice.com/Energy/Energy-General/The-Rig-Count-Climbs-As-Markets-Clamor-For-More-Oil.html

The Rig Count Climbs As Markets Clamor For More Oil

By Julianne Geiger - Apr 29, 2022, 12:32 PM CDT

• The rig count has increased once again, hitting levels not seen since April 2020.
• Russia's invasion of Ukraine has only added to the demand for drilling, with the rig count climbing by 48 in nine weeks.
• Oil rigs climbed by three this week while gas rigs remained the same.

Join Our Community

The number of total active drilling rigs in the United States rose by 3 this week, after an increase of 2 rigs in the week prior, according to new data from Baker Hughes published on Friday.

The total rig count increased to 698 this week—258 rigs higher than the rig count this time in 2021 and the highest count since April 2020. Drilling has picked up substantially since the Russia invasion, adding 48 rigs over the last nine weeks.

Oil rigs in the United States rose this week by 3 rigs to 552, while gas rigs stayed the same at 144. Miscellaneous rigs also stayed the same, at 2.

The rig count in the Permian Basin added a single rig this week, bringing the total to 335, while rigs in the Eagle Ford stayed the same.  

U.S. crude oil production stayed at 11.9 million bpd during the week ending April 22, according to the latest Energy Information Administration—a 300,000 bpd rise since the Russian invasion of Ukraine. Costs for drillers have risen in the U.S. shale patch—just one of many factors preventing U.S. drillers from ramping up production quickly.

In the Permian, the most prolific basin in the United States, supply chain issues and an acute worker shortage have been plaguing the industry, along with unpredictable long-term demand, oil price volatility, and an uncertain regulatory environment.

Nevertheless, Permian rigs have made substantial gains since the sharp dropoff in 2020 following the Covid-19 lockdowns and subsequent demand destruction, recovering to xxx percent from the low of 117 rigs in August 2020 to xxx rigs now. The data shows that oil companies are indeed drilling new oil and gas wells—but there is a natural and unavoidable lag between drilling new wells and actual production.

At 11:56 a.m. ET, oil prices were trending up on the day as oil supply fears outweighed China's covid lockdowns that are threatening to diminish demand. WTI was trading at $106.60—up $1.27 per barrel (+1.21%) on the day and up more than $4 on the week. The Brent benchmark traded at $109.70 per barrel, up $2.10 (+1.95%) on the day and $3 on the week.

At 1:10pm ET, WTI had risen to $106.80, while Brent was trading at $109.70.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

• German Energy Giant To Pay For Russian Gas In Rubles
• American Oil Refiners Set For A Blowout Year
• Has Oil Lost Its Upside Momentum?

Trivial and nothing to get excited bout. . It was 4521 rigs in December 1981 and Aramco was producing 12 million barrels a day.