Destruction of Chinese demand thwarts the risk of a Russian oil ban
While the blockades in China are causing significant demand destruction and adding downward pressure on oil prices, the EU’s threat to ban Russian oil imports has the potential to significantly increase prices.
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Friday 15 April 2022
China’s fall into a near-national COVID blockade triggered the first large-scale demand roadblock of 2022, with around 45 cities accounting for 40% of the country’s economic output under some form of reduced mobility. On the other hand, the European Union continues to mull over the ban on Russian oil imports, pushing the Brent complex even higher than other regional benchmarks. Earlier month ICE Brent futures ended the week slightly above the $ 110 a barrel threshold, but uncertainty around both supply and demand will ensure volatility in the coming days.
Henry Hub jumps to 13-year highs. Driven by an unusually small gas inventory for this time of year and a recent decline in US production nationwide, US Henry Hub futures rose to a 13-year high of $ 7.3 per mmBtu, marking the most strong weekly gain from August 2020 and leading 2022 to date almost 100% increase.
Putin warns of the redirection of the flow of energy. Russian President Vladimir Putin said Moscow will redirect its energy east and build new infrastructure towards Asia, arguing that hostile regimes in the West are driving up prices for themselves despite their reliance on Russian flows.
Chinese refineries cut rates due to declining demand for COVID. Chinese refineries are cutting refinery cycles on a larger scale since the start of the pandemic in early 2020, cutting 900,000 b / d in April (equivalent to 6% of domestic demand) as the country continues to struggle with COVID blocks.
EU ban on Russian coal raises prices. After Brussels agreed on a phased ban on Russian coal, the API2 regional benchmark gained around 15% on a weekly basis and is currently trading around $ 320 / ton, further underpinned by the EU ban on Russian wood which is expected to add a another layer of coal demand in Europe.
Texas oil fields face the worst fire risk in a decade. With nearly 85% of Texas suffering from drought for months, leaving the herbs dried and ready to burn, the US Storm Prediction Center has warned that parts of West Texas are subject to extremely critical fire hazards. This is a risk for the shale fields in the Midland and Odessa basins.
The Italian ENI will increase Egyptian gas production. With another move intended to boost supplies of liquefied natural gas to Europe, the Italian energy giant ENI (NYSE: E)has signed an agreement to increase gas production in Egypt, specifically in the Zohr supergiant field, resulting in an increase in exports of approximately 3 billion cubic meters of LNG this year.
Singapore probe finds source of HSFO contamination. The Singapore Maritime and Port Authority said its preliminary findings found that chlorine-containing contaminated high-sulfur fuel oil that subsequently contaminated the bunker fuel of some 200 ships was supplied by a commercial company. Glencore (LON: GLEN). Related: The World’s Richest Suffered a $ 400 Billion Wealth Cut During Ukraine’s Crisis
New York attorney investigates gasoline prices in the United States. New York Attorney General Letitia James has launched an investigation to see if the oil industry has engaged in a gasoline price devaluation, just a week after US Big Oil representatives testified to Congress that no landline company. the price of gasoline.
Petrobras’ new CEO promises consistency. Jose Mauro Coelho has been formally elected as the new CEO of the state-controlled Brazilian oil major Petrobras (NYSE: PBR)vowing to uphold the company’s pricing policies, contradicting the Bolsonaro administration’s ambition to see lower fuel prices.
Saudi Arabia is not against splitting the controversial gas field. Saudi Arabia and Kuwait called on Tehran to hold negotiations to determine the eastern boundary of the Durra natural gas field that the two Arab Gulf monarchies wanted to jointly develop, less than a month after Iranian officials had outlawed it. Saudi-Kuwaiti agreement.
Germany Mulling Fourth floating LNG terminal. Having secured three FSRU LNG projects through German energy companies RWE (FRA: RWE) And Uniper (ETR: UN01)the German government is now considering leasing a fourth floating unit to diversify its gas supply away from Russia.
Nigeria approves $ 10 billion fuel subsidy. The Nigerian government approved a $ 10 billion gasoline subsidy, increasing the state subsidy tenfold as high global prices and lower domestic production (annual plan downgraded to 1.6 million barrels per day) continue to push domestic fuel prices rose.
Japan wants more investment in LNG. Japanese companies plan to increase their investments in upstream projects for liquefied natural gas to increase withdrawal volumes, with the ramifications of the Russia-Ukraine war intensifying competition for spot LNG cargoes globally, forcing Asian buyers to overtake Europe.
Wind power outperforms coal and nuclear in power generation in the United States. For the first time ever, wind power became the second largest source of electricity generation in the Lower-48 states at the end of March, surpassing both coal and nuclear and reaching a total production rate in excess of 2,000 GWh.
By Tom Kool for Oilparmi
Other key readings from Oilcludes: