Oil should end the year on a bullish note
The oil markets are set to end 2021 on a relatively high note, as concerns about Omicron’s impact on global demand in the same way that Delta has proven to be overblown.
Graph of the week
– Global oil tanker markets are expected to recover from the volatile rise of the past two years as demand stabilizes, but shipper profitability will be less than ideal.
– Despite the quintupling of containerized freight indices this year, oil freight has essentially stagnated over the past 18 months, under pressure from high bunker prices and excess tankers.
– Analysts predict demand for oil tankers in 2022 will grow by around 5% year-on-year, helping push cash profits into profitable territory ($ 21,800 in Q1 2022 vs. $ -600 in Q3 2021 for a VLCC).
– That being said, the slowness of ship demolitions and the anticipation of the arrival of 70 to 80 additional tankers on the market will inevitably lead to tonnage overcapacity, hampering potential gains.
– American major ExxonMobil (NYSE: XOM) received the longest loan terms available on its 4.8 million barrels of SPR withdrawal, not due to return crude until 2024.
– American oil company Apache Corp (NYSE: APA) signed a $ 3.5 billion deal to develop oil concessions in the Egyptian Western Desert, allowing it to recover nearly 900 million overdue investments.
– Shares in the Chinese construction giant Evergrande (HKG: 3333), an indicator of the country’s construction campaign, soared this week as the developer said it made progress in resuming construction work.
Tuesday, December 28, 2021
Oil markets are set to end 2021 on a relatively high note, as fears that Omicron will affect global demand in the same way that Delta has proven to be overblown. The outright rise in prices has been aided by supply disruptions to various continents – Libya still has at least 300,000 b / d withheld in the market due to renewed internal political struggles and skirmishes, l Ecuador has yet to repair its flood-damaged pipeline system, while Nigeria grapples with another force majeure event at the Forcados terminal. Combined with rumors of another weekly drop in US crude inventories, the Brent complex fell to $ 79.5 per barrel, while WTI last traded around $ 76.5 per barrel.
Iran talks now focus on crude export guarantees. Iran should be able to sell its crude oil and repatriate its revenues freely, Iranian Foreign Minister Hossein Amir-Abdollahian said, as eighth round of nuclear talks shifted to non-nuclear topics amid progress “Visible”.
PEMEX Reduces Crude Export Prospects. Mexican state-owned oil company PEMEX has cut its estimate of crude exports for 2022 to just 435,000 b / d, half of this year’s 1 million b / d average, as the country seeks further refinement of its gross at the national level.
China starts a supergiant coal plant. Defying calls for a less carbon-intensive energy mix, China has started the first 1 GW unit (there will be four in total) at the Shanghaimiao power plant in Ordos, Inner Mongolia, the largest thermal energy project in all of China.
The Japanese SPR sale does not impress. Japan will release about 630,000 barrels of crude from its strategic oil reserves, which will be released on March 20 or later, a fraction of the U.S. pledge to sell 18 million barrels as part of a coordinated campaign. to cool down the prices outright.
The Indian refinery is operating at 100% on average in November. Hitting their highest level in 10 months, Indian crude consumption reached 4.5 million barrels per day last month amid total use, indicating that robust growth in demand will make India the one more growth engine
Yamal-Europe gas flows reserved for seven consecutive days. Exasperating an already desperate European gas market, Russian gas exporter Gazprom (MCX: GAZP) uses reverse flow in its Yamal-Europe pipeline and has not supplied gas to Germany for seven consecutive days.
South Africa interrupts Shell’s seismic survey. Less than a month after a South African high court found that Shell (NYSE: RDS.A) could conduct its seismic survey of the arguably gas-rich South African east coast, this week another high court ruled exactly the opposite, paving the way for a protracted legal battle.
The influx of American LNG is driving down European gas prices. At least 20 U.S. LNG carriers are currently en route to Europe as record spot prices have spurred European trade, pushing Europe’s TTF hub prices down for the fourth consecutive trading session, the contract for January 2022 currently trading at 104 € / MWh.
China expects demand for crude to peak by 2030. China expects its oil demand to peak by 2030 at around 780 million tonnes per year, with diesel and gasoline consumption expected to peak by 2025, meaning petrochemical demand will be the main long-term driver of crude consumption.
South Korean pioneers’ greenwashing affair. South Korea’s largest gas supplier SK E&S (KS: 03473K) faces legal action from a climate activist group, the first of its kind in Asia, alleging it falsely announced the Santos-LED (ASX: STO) Barossa LNG project in which it participates as being “CO2-free”.
Beijing is delaying the allocation of quotas for teapots. China is unlikely to issue the first batch of commodity export quotas for 2022 by the end of this year, weakening independent put options amid protracted government repression, as allocations by 2021 cannot be postponed until next year.
Rio Tinto suspends $ 2.4 billion European lithium project. The Anglo-Australian mining firm Rio Tinto (NYSE: RIO) reportedly halted Europe’s largest lithium project in Serbia’s Jadar region after a municipality backed down on pledges to allocate land to the mine amid popular protests.
Philippines lifts surface mining ban. Philippine government lifted four-year ban on surface mining for gold, silver, copper and complex minerals as Manila tries to revitalize its mining industry and abandon anti-mine policies .
By Tom Kool for Oil Octobers
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