The downside risk of tomorrow’s OPEC+ meeting
Readers’ Update: Whether you’re new to the oil and gas industry or a veteran of the energy market, you’ll regret not signing up for Global Energy Alert. Oilprice.com’s premium newsletter provides everything from geopolitical analysis to business analysis, all for less than a cup of coffee a week.
Chart of the week
– After more than 2 years of coordinated production cuts, OPEC+ has reached the point where it no longer needs to raise production targets and must rethink the future of the 23-member oil group.
– Most analysts expect no or very moderate changes to the September 2022 OPEC+ production forecast – with June figures already hitting a high compliance rate of 320%, additional supply remains the main challenge for members.
– The deteriorating demand outlook will play a role in OPEC+ decision-making, as the group wants to keep oil prices high enough to generate windfall profits without hampering adequate market supply.
– With Russia facing a series of sanctions from 2023 and therefore susceptible to production slumps, Saudi Arabia seeks to maintain OPEC+ as the coordinating force in the oil market, preferring to avoid sudden market shocks as Riyadh has finally grown to enjoy a long period of windfall.
– Saudi Arabia (TADAWUL:2222) would have bought an American producer of lubricants Valvoline (NYSE: Office of Tourism) as it seeks to expand its presence in the downstream sector, for a reported sum of $2.65 billion.
– The world’s largest EV battery manufacturer, Chinese CATL (SHE: 300750) saw its vice chairman Huang Shilin step down this week, with founder and chairman Zeng Yuqun taking on the concurrent role of chief executive, pushing the stock up 5% on Monday alone.
– One of the largest wind turbine producers in the world, Siemens Gamesa (BME:SGRE) plans to cut around 10% of its current workforce or 2,500 jobs, following a further drop in forecasts for 2022.
Tuesday 02 August 2022
One major oil company after another is announcing phenomenal quarterly profits and accelerated share buyback programs, with companies like BP, Marathon and Devon Energy joining the list this week. Meanwhile, Brent prices have stuck around $100 a barrel so far this week. Should tomorrow’s OPEC+ meeting turn into yet another campaign of smoke and mirrors, with structural demand weakness stemming from weak global manufacturing data and Europe’s continued struggle to contain energy blackmail from Russia could reemerge, pushing oil further into double-digit territory.
The taxation of US crude imports raises questions. President Biden’s $433 billion tax and climate bill, which could already be voted on in the Senate this week, seeks to impose a 16.4 cents a barrel tax on crude and imported products, raising fears that this could inadvertently boost inflation as USGC refiners depend on heavy crudes from Latin America and elsewhere.
The United States again targets the Iranian oil trade. The US Treasury and State Department imposed sanctions on six other companies, based in Hong Kong, Singapore and the United Arab Emirates, for allegedly facilitating trade in Iranian oil and petrochemicals, the third set of listings black in the past two months.
OPEC seduces Russia to stay in the oil group. Haitham al-Ghais, the new secretary general of OPEC, said Russia’s participation in OPEC+ is vital for the success of the deal, adding that the group does not control oil prices but refines the market in terms of supply and demand.
Nord Stream Blame Game never stops. With markets still having no idea where the ominous Nord Stream 1 turbines are, Russia has said there is little it can do to reorganize pumping along the pipeline as it continues to supply only 20% of rated capacity with one turbine in operation.
Iran signals that it is ready for a new round of talks. While the European Union is still proposing new initiatives to bridge the gap between the United States and Iran, with Brussels submitting a new draft text on reviving the JCPOA, Tehran has said it is ready to start new ones. discussions provided they lead to a “reasonable and stable” agreement. .
Australia wants to keep its gas at home. Australia is considering limiting exports of its LNG after a national watchdog said more natural gas was needed to meet needs on its east coast amid a dramatic drop in onshore production, some restrictions may even be considered until 2023.
Luxembourg is preparing to freeze the assets of Ecuador. Luxembourg banks have been ordered to freeze assets held by Ecuador after Latin America failed to honor a $391 million payment to Anglo-French oil firm Perenco, following the termination illegality of a production sharing agreement.
ADNOC finds gas offshore. The UAE national oil company ADNOC, as well as the operator of the block ENI (NYSE:E) and PTTEP, have discovered a second gas play in Block 2 offshore, adding 1 to 1.5 Tcf to a shallower target assessed earlier this year, all three years after the area was awarded in the very first call Abu Dhabi bulk bids.
Nigeria’s main export grade stopped due to leaks. The Shell (LON:SHEL)-The operated Forcados terminal has been out of service since July 17 after a leak in an underwater pipe was detected, with August cargoes already postponed to September, with the 200,000 bpd flow still marred by events force majeure.
US Diesel becomes the new favorite of hedge funds. According to CFTC figures, hedge funds and other money managers bought the equivalent of 9 million barrels of US diesel futures in the week to July 26, a sign that the slow build of middle distillate inventories is causing problems for future diesel prices.
Copper in jitters after a giant Chilean sinkhole. Chilean authorities have opened an official investigation into a giant sinkhole at the Alcaparrosa mine operated by Lundin Mining (TSE:LUN)82 feet in diameter, which could create problems for copper production in the northern regions of Chile, which are home to nearly 30% of the world’s copper production.
China is a pioneer in offshore shale oil drilling. As China’s upstream segment increasingly focuses on shale deposits, the state-controlled oil company CNOOC (HKG:0883) successfully tested production from the Weiye-1 well, the country’s first-ever offshore shale oil well.
Texas is battling unbearable heat. The Electric Reliability Council 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 Wednesday at 80,076 MW (the previous all-time high was reached two weeks ago). , at 78,828MW).
By Tom Kool for Oilprice.com
More reading on Oilprice.com: