Mission Impossible: Predict the Oil Market

It’s been another busy week for oil and gas markets, as Putin threatened European gas imports, a storm brought down a major oil pipeline and a Saudi oil terminal came under missile attack. Brent is back above $120/bbl as bullish sentiment remains dominant but plenty of bearish factors still ahead.

Oil price alert. Bullish factors in oil markets are piling up, from attacks on Saudi oil infrastructure to a possible end to Russian oil exports to Europe. As these fundamental and geopolitical factors combine, our analysts are working hard to maintain GEA members ahead of the news and ahead of the markets.

Friday, March 25, 2022

The beauty of the oil market lies in how unpredictable it is. This week’s big news, storms damaging export facilities of Kazakhstan’s flagship 1.2m b/d CPC grade, was expected to drag oil prices lower on Friday when loadings restarted. Just when it looked like Brent might move lower from $120 a barrel, the specter of Saudi supply disruption resurfaced when an oil storage facility was hit by a missile in Jeddah, presumably from Yemen’s Houthi militias. . Coupled with the dormant Iranian nuclear deal and incessant European bickering over the right way to sanction Russia (not even a coal embargo could be agreed upon), predicting the oil market’s movement is becoming increasingly difficult.

The United States closes a new LNG supply agreement with Europe. US producers will seek to supply 15 billion cubic meters of LNG to the European Union in 2022 as a way to wean the continent away from reliance on Russian gas.

Disruption of the Caspian terminal increases differential heat. Europe’s largest light sweet crude oil flow, the 1.2 million b/d CPC incorporating most of Kazakhstan’s output, saw its outputs braking dramatically this week after a storm damaged two of the three berths at CPC’s export terminal.

Related: Big Oil No Longer “Unbankable”

OPEC expresses its concern about the threat of a European embargo against Russia. According to media reports, OPEC officials have informed the European Union that a possible EU ban on Russian oil would harm consumers and advised against it, indicating that Riyadh and Abu Dhabi want to keep the OPEC+ group alive.

Putin’s threat of payment in rubles triggers gas markets. Russian President Vladimir Putin demanded the conversion of Gazprom’s (MCX:GAZP) long-term gas contracts in rubles, sending shock waves among European gas importers who could see another record rise in gas prices if the threat materializes.

Floating mines will make shipping through the Black Sea high risk. Shipping insurance companies have urged customers operating in the northwestern part of the Black Sea to beware of floating mines reportedly drifting south after they broke loose from their moorings at ports in Ukraine.

ICE increases trade margins as default risks proliferate. The Intercontinental Exchange (ICE) increased margins on Brent crude futures by 19%, the third margin update this year already, with wild volatility swings forcing it to increase collateral required from market participants to cover default risk.

Shell signs contract for LNG terminal in Germany. UK oil major Shell (LON:SHEL) has engaged to reserve a substantial part of the Brunsbuttel LNG import terminal that is supposed to be built in northern Germany by 2026, marking a strong first step for the 8 bcm capacity plant.

India takes advantage of Russian oil deals. Indian buyers, namely the private company Nayara Energy and the state-owned company IOC (NSE:IOC), have I buy another 5 million barrels of medium-acidity Russian benchmark Urals crude this week, and Urals is still trading at a discount of about $30 a barrel to date.

Dutch ING will stop financing oil and gas projects. dutch bank ING Group (NYSE: ING) Announced It would no longer finance oil and gas projects, the largest bank to do so so far, adding that it would simultaneously target a 50% increase in lending for renewable energy projects by 2025.

The United States begins to buy fuel oil from the Middle East. American refiners have started absorbing fuel oil cargoes from the Middle East as a way to supplant sanctioned Russian HSFO flows, with 4 million barrels from Saudi Arabia, Kuwait and Iraq due to reach the US Gulf Coast next month, a third of the 2021 total.

Indigenous Australians are suing a $3.6 billion LNG project in South Korea. A group of indigenous Australians I take the Santos-led US$3.6 billion Barossa gas project (STO) off the coast of Australia to a South Korean court, asking the project’s South Korean lenders to block loans due to the field’s adverse environmental impact on wildlife .

Germany bets on helicopter money to deal with energy inflation. the german government finalized a deal that would see a one-time energy allowance of €300 ($330) for each taxpayer, subsidized public transportation, and a temporary reduction in federal gasoline taxes as a political response to rising energy costs.

The mining favorite of billionaires starts drilling in Greenland. KoBold Metals, the mineral exploration company backed by Jeff Bezos and Bill Gates, set would start drilling in Greenland, targeting nickel, cobalt and platinum group metals to relieve feedstock pressure on electric vehicles.

Red tape triggers another Newfoundland/Labrador auction delay. The Canadian government once again postponed bids for exploration blocks off the coast of Newfoundland and Labrador, said to contain 11 billion barrels of potential oil resources, raising fears Ottawa could stymie their development.

By Josh Owens for Oilprice.com

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