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Schedule of the week
– After more than 2 years of coordinated production cuts, OPEC+ has reached the point where it no longer needs to increase production targets and must rethink the future of the 23-member oil group.
– Most analysts expect no or only very modest changes to OPEC+ production guidance from September 2022 – with June data already reaching a massive 320% compliance rate, increasing supply remains the main challenge for members.
– The deteriorating demand outlook will play a role in OPEC+ decision-making as the group seeks to keep oil prices high enough to generate big profits without hampering adequate supply.
– With Russia facing a series of sanctions from 2023 onwards and thus vulnerable to production declines, Saudi Arabia is keen to keep OPEC+ as a coordinating force in the oil market, preferring to avoid sudden market shocks as with Riyadh finally growing to enjoy an extended period of windfall gains.
Engines on the market
– Saudi Aramco (TADAWUL: 2222) has reportedly bought US lubricants maker Valvoline (NYSE: VVV ) as it seeks to expand its position in the downstream business, for a reported $2.65 billion.
– The world’s largest EV battery maker, China’s CATL (SHE:300750) saw its vice chairman Huang Shilin resign this week, with founder and chairman Zeng Yuqun taking on the role of general manager at the same time, sending shares up 5 % on Monday alone.
– One of the world’s largest wind turbine makers, Siemens Gamesa (BME:SGRE) is considering cutting about 10% of its current workforce, or 2,500 jobs, amid another reduction in guidance for 2022.
Tuesday, August 02, 2022
One oil company after another has announced phenomenal quarterly earnings and share buyback programs, with BP, Marathon and Devon Energy joining the list this week. Meanwhile, Brent crude prices have slumped to around $100 a barrel so far this week. If tomorrow’s OPEC+ meeting turns into another campaign of smoke and mirrors, structural weakness in demand coming from weak global production data and Europe’s continued struggle to contain Russia’s energy blackmail could resurface, pushing oil even higher down to double digit territory.
Taxation of US crude oil imports raises questions. President Biden’s $433 billion tax and climate bill, potentially coming up for a Senate vote as early as this week, aims to impose a 16.4 cents per barrel tax on imported crude oil and products, raising concerns that that this will inadvertently increase inflation as USGC refineries rely on heavy crude oil from Latin America and elsewhere.
The US is once again targeting the Iranian oil trade. The US Treasury and State Department have sanctioned six more companies based in Hong Kong, Singapore and the UAE for allegedly facilitating trade in Iranian oil and petrochemicals, the third round of blacklisting in the past two months.
OPEC urges Russia to stay in the oil group. Haitham al-Ghais, OPEC’s new secretary-general, said Russia’s participation in OPEC+ was vital to the deal’s success, adding that the group does not control oil prices but fine-tunes the market in terms of supply and demand.
The Nord Stream blame game never stops. With markets still clueless as to where the ominous Nord Stream 1 turbines are, Russia said it could do little to renew pumping along the pipeline as it continues to deliver just 20% of plate capacity with just one operating turbine.
Iran has signaled readiness for a new round of negotiations. As the European Union still offers new initiatives to bridge the gap between the US and Iran, with Brussels submitting a new draft text to revive the JCPOA, Tehran has said it is ready to start new talks, provided they lead to a “reasonable and stable’ deal.
Australia wants to keep its gas at home. Australia is considering curbing its liquefied natural gas (LNG) exports after a national regulator said more natural gas is needed to meet east coast demand amid sharply declining onshore production, with some restrictions likely will be imposed even in 2023.
Luxembourg freezes Ecuadorian assets. Banks in Luxembourg have been ordered to freeze assets held by Ecuador after the Latin American company defaulted on a $391 million payment to Anglo-French oil company Perenco, resulting from the illegal termination of a production-sharing agreement.
ADNOC discovers offshore gas. UAE national oil company ADNOC, along with block operator ENI (NYSE:E) and PTTEP, discovered a second gas field in offshore Block 2, adding 1-1.5 TCf to a shallower target estimated earlier this year. all this just three years after the acre was awarded in the first ever round of bidding for a block in Abu Dhabi.
Nigeria’s main export grade suspended amid leaks. The Shell ( LON:SHEL )-operated Forcados terminal has been idle since July 17 after a subsea hose leak was discovered, with August cargoes already postponed to September as the 200,000 b/d flow remains marred by force majeure events.
US diesel becomes the new favorite of hedge funds. Hedge funds and other money managers bought the equivalent of 9 million barrels in U.S. diesel futures in the week to July 26, according to CFTC data, a sign that a slow build-up in middle distillate inventories is causing problems for diesel prices going forward.
Copper trembles after the giant Chilean sinkhole. Chilean authorities have launched a formal investigation into a giant 82-foot-diameter hole at Lundin Mining’s ( TSE:LUN ) Alcaparrosa mine, potentially causing problems for copper production in Chile’s northern regions, where almost 30% of the world’s output is produced of copper.
China is a pioneer in offshore shale oil drilling. As China’s upstream segment increasingly focuses on shale fields, state-controlled oil company CNOOC (HKG:0883) has successfully tested production at the Weiye-1 well, the country’s first offshore shale oil well.
Texas is battling the unbearable heat. The Electric Reliability Board of Texas (ERCOT) has issued a warning that power consumption in the Lone Star State will break records again this week, with peak demand expected to come Wednesday at 80,076 MW (the previous all-time record was reached two weeks, at 78,828 MW).
By Tom Cool for Oilprice.com
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