Weaker dollar fuels oil rally

The weaker US Dollar has helped oil prices this week, keeping first-month WTI prices at $86 a barrel despite the flurry of bad macro news. As business activity contracts in the US, UK and Eurozone (in the latter, it was the worst industrial performance report in the entire post-pandemic era), market bulls Oil tankers still face an uphill battle, indicating short-term supply shortages will trump longer-term demand concerns. So far it was a draw.

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Chart of the week

European inflation hits double digits

– With commodity markets buzzing about the Federal Reserve’s upcoming rate hikes, the European Central Bank is expected to follow suit and cut the deposit rate to 1.5% this week.

– This would be the second consecutive increase of 75 basis points, with hikes of at least 100 basis points expected until the deposit rate hits a supposed peak of 2.5% in March 2023.

– The ECB still expects eurozone GDP growth to reach 3.1% this year, having raised its June 2022 outlook by 0.3% despite inflation hitting 10% in September, which means that layers of European bureaucracy still fail to grasp the gravity of the crisis.

– Starting interest rate hikes much later than the Fed, the ECB is still undecided on quantitative tightening – unloading the $5 trillion of bonds it has accumulated in the post-pandemic period – this which means that EU growth rates could be growing slower in the long run.

market movers

– Third-quarter net profit numbers for major oil service companies beat market expectations, with market leader Schlumberger (NYSE: SLB) announces its best quarterly profit since 2015.

– The Brazilian iron ore giant Vale (NYSE:VALE) is considering a near-term spin-off of its base metals business and a possible IPO of the future unit primarily covering copper and nickel production.

– American bank Goldman Sachs (NYSE:GS) launched a joint venture with Chinese logistics company Sunjade in an effort to boost investment in Chinese logistics and infrastructure real estate assets.

Tuesday, October 25, 2022

Saudi Arabia warns against using emergency stocks. Saudi Energy Minister Prince Abdulaziz bin Salman has warned against using SPR stocks as a market manipulation mechanism, saying losing stocks could be “painful” in the coming months.

Free cash flow from oil surges in the United States. According to Deloitte, the free cash flow of U.S. oil producers is expected to rise 68% this year to $1.4 trillion amid soaring oil and petroleum product prices, in contrast to crude production from the United States. country, which is only expected to increase by $4.5 trillion. % from year to year.

The White House will not appeal the oil spill tax decision. After a Texas district court ruled that the Senate’s recently passed federal oil spill cleanup tax of 9¢/barrel violated the export clause of the US Constitution, the Biden administration announced that it would not appeal the decision despite his objections.

Investor pessimism is taking over. Hedge funds and other managers suddenly reversed course and sold the equivalent of 50 million barrels in major oil futures in the week to October 18, leaving diesel as the only contract expected to rise. in a context of worsening demand prospects.

Chinese refining is finally bouncing back. In a sign that easing lockdowns are actually making a difference, China’s crude oil refining throughput recorded its first year-on-year increase in 2022 and hit a nine-month high in September, at 13.82 million bpd, up 10% on August figures.

US producers reject Biden’s SPR pledge. Senior US shale company officials have questioned the Biden administration’s vow to start filling the strategic oil reserve when oil prices hit $67-72 a barrel, saying it is unlikely oil prices are also dropping low anytime soon. Related: Tanker market in disarray as EU ban on Russian crude nears

Nord Stream Blast leaves insurance companies perplexed. With evidence mounting that Nord Stream 1 leaks were caused by powerful explosions; underwriters of the $7.6 billion pipeline network are bracing for a massive damages claim, with all major European reinsurance companies apparently exposed.

The end of the Israeli-Lebanese maritime agreement. Israel’s Supreme Court has dismissed petitions against the US-brokered maritime demarcation agreement between Israel and Lebanon, paving the way for a formal signing on Thursday in a bid to jointly explore for oil and gas .

Natural gas prices in Texas fall below zero. As U.S. natural gas futures continue their upward move, prices in the Waha part of the Permian Basin were trading below zero as surging production imposed an excessive burden on the transport capacity of pipelines.

China discovers a huge deposit of shale gas. Chinese oil giant Sinopec (SHA:600028) has discovered a massive shale gas field in the Sichuan Basin, with the Jinshi-103 appraisal well reportedly tapping 13.7 TCF (387.8 BCm) of natural gas, well that its recovery prospects remain to be clarified.

Russia continues to hit Ukraine Power. According to Ukraine’s Energy Ministry, Russian airstrikes have hit at least half of the country’s thermal generation capacity since October 10, leading to widespread outages and the halting of Ukraine’s electricity exports to Ukraine. its neighboring states.

The Sino-Saudi energy partnership is progressing. China’s biggest maritime oil supplier Saudi Arabia has agreed to boost energy ties with the Chinese government as both sides stressed the importance of long-term stable supplies, with Riyadh rumored to be in the process of think about payments in yuan.

Russian coal exports to China are hampered. So far, Russian rail coal exports to China have risen by a third in 2022, totaling 27.6 million tonnes in January-August, but further increases have been capped by a lack of rail infrastructure and increasing congestion along the way.

By Tom Kool for Oilprice.com

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