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Weekly Highlights - "Supply Disruptions Drive Bullish Sentiment In Oil Markets" by Tom Kool

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Supply Disruptions Drive Bullish Sentiment In Oil Markets

By Tom Kool - Jul 01, 2022, 2:00 PM CDT

Bullish sentiment is once again building in oil markets as supply disruptions mount and global oil demand growth continues unabated.









Friday, July 1st, 2022 

As uncertainty builds around the supply capacity of OPEC+ and oil demand rages on despite expectations of demand destruction, bullish sentiment is building in oil markets. Now, to add to that bullish sentiment, another form of supply disruption is springing up around the world: strikes. Operations at France’s Fos Refinery were halted by strikes and Norway’s offshore production was heavily impacted by them as well. It seems the oil market is under siege from all sides, from fundamental tightness to underinvestment, disruptions related to the war in Ukraine, and now strikes. 

OPEC+ Summit Fails to Impress. OPEC+ agreed to maintain a 648,000 b/d increase in its production target for August, keeping its commitment unchanged despite increasing evidence that spare capacity within the oil group has thinned to its lowest level in years.

US Supreme Court Limits Federal Emission-Setting Powers. In a blow to US President Biden, the US Supreme Court ruled that the Environmental Protection Agency does not have authority to regulate greenhouse gas emissions from existing coal- and gas-fired power plants. 

Iran Nuclear Deal Negotiations Fall Apart. According to US officials, as reported by Reuters, the odds of reviving the Iranian nuclear deal are even lower after the Doha talks held this week than before, describing the negotiations as “treading water”. 

Freeport LNG Restart Ban Sends US Natgas Prices Plummeting. US natural gas prices dropped by a whopping 15% on Thursday after US regulators barred Freeport LNG from restarting until risks to public safety, property, or the environment are fully cleared, potentially delaying its startup even beyond Q4 2022.

Government Bailout In Sight for Germany’s Gas Giant. Germany’s largest gas buyer and power generator Uniper (ETR:UN01) is reportedly in talks with the government regarding a potential bail out of the firm as soaring gas prices and curbed Russian exports have cast a long shadow over its liquidity pool. 

Fossil Fuels Make Roaring EU Comeback. With Europe’s statistics for 2021 published by Eurostat, fossil fuels have once again become the largest source of power generation in the European Union, driven largely by a 4% year-on-year increase in gas utilization despite its soaring price. 

ExxonMobil Gets Out of Canada’s Shale Gas. US oil major ExxonMobil (NYSE:XOM) sold its Canadian shale gas assets, jointly owned with its subsidiary Imperial Oil (TSE:IMO) across 600,000 acres, to Whitecap Resources (TSE:WCP) in an all-cash transaction for $1.5 billion.  

Algeria Wants to Tinker with European Gas Pricing. With its gas pricing traditionally linked to oil prices, Algeria’s national oil and gas company Sonatrach wants to revisit its pricing to EU buyers to include a partial link to spot price gas, with TTF trading several times higher than crude on a per barrel basis.

Switzerland Wants to Look into Commodity Traders. Switzerland is set to step up the regulatory scrutiny of Swiss-based commodity traders, with the state having no official data on the sector as commodity trading is not listed as a separate activity in the country and firms do not report the goods they trade. 

Gazprom Refuses to Pay Dividends For the First Time Since 1998. Russia’s pipeline gas export monopoly Gazprom (MCX:GAZP) announced this week that it would not pay dividends on its 2021 results, for the first time since 1998, despite the company’s board suggesting the largest-ever payout.

Mexico’s Refinery Launched Despite Being Incomplete. Mexico will move ahead with the inauguration of the 340,000 b/d Olmeca refinery in Dos Bocas this week, even though it is still months if not a year from starting commercial production amidst cost overruns ($12 billion instead of $8bn) and delays.

Russia Takes Over Halted Sakhalin-2 Project. Russia has created a new firm that would take over the rights and obligations of Sakhalin-2, Russia’s only LNG project in the Far East, effectively granting itself the power to decide which foreign partner could stay, jeopardizing the stakes of Shell (LON:SHEL) as well as Mitsubishi and Mitsui. 

Ecuador Reaches Deal with Indigenous Protestors. Ecuador’s government and protesting indigenous leaders have reached an agreement to end the country’s debilitating wave of protests ending a two-week standoff that saw the Latin American country’s production more than halve to 230,000 b/d.

Libya Declares Force Majeure at Key Oil Ports. After the calls of Libya’s National Oil Company were largely ignored, it declared force majeure at the Es Sider and Ras Lanuf ports due to ongoing protests, curbing potential export capacity to a mere 400,000 b/d, a third of the country’s exports in February.

By Tom Kool for

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