Sentiments shift in oil markets as demand fears fade

By Tom Kool

markets look increasingly bullish as analysts argue that Omicron’s impact on global oil demand will be limited.

Rigs by basin for December 31, 2021
Rigs by basin for December 31, 2021
Total number of rigs in the United States

Graph of the week

Debt contracted by the energy companies of Gult
Debt contracted by the energy companies of Gult
  • Persian Gulf energy companies borrowed $ 30.5 billion in 2021, according to Bloomberg, the highest level in at least 25 years as regional NOCs seek foreign investment to fund their ambitious plans.
  • Qatar Energy was the leader among all NOCs, selling $ 12.5 billion in bonds in July 2021 (the biggest bid in emerging markets last year) as part of the funding for its LNG capacity expansion .
  • Dominating the borrowing lists of previous years, Saudi Aramco (SE 🙂 is only ranked third in 2021 behind QE and ADNOC, having “only” raised $ 6.5 billion, a third of what it did in 2020.
  • The global energy transition is softening the traditionally self-sufficient position of Middle Eastern producers as they sell and share more, while seeking to maximize the gains from their vast hydrocarbon reserves.

Market movers

  • American oil major Exxon Mobil (NYSE 🙂 said it expects fourth-quarter 2021 profit to be $ 1.9 billion quarter-on-quarter, supported by a $ 1 billion quarterly windfall resulting from higher prices. price.
  • American LNG developer NextDecade Corp (NASDAQ 🙂 said a final investment decision on its $ 15.7 billion Rio Grande LNG project would be delayed again, for the second time already, as relatively low gas prices hamper closing. long-term supply contracts.
  • Norwegian oil major Equinor (NYSE 🙂 could see its production plans jeopardized after the European Court of Human Rights intervened to assess whether drilling in the Arctic seas could violate fundamental freedoms.

Tuesday, January 4, 2022

There has been a noticeable change in sentiment in the oil market, with a growing number of forecasts indicating that the destruction of demand from the Omicron variant will not be as bad as previous variants due to the lack of bottlenecks. generalized. Indeed, cases were increasing in key areas, but governments were reluctant to repeat the 2020/2021 policies.

Oil demand remained strong in December, evolving essentially at the same level as November levels, while global manufacturing activity strengthened globally amid easing bottlenecks in the economy. Supply Chain. So the bullish case for more OPEC + crude is by no means paradoxical, especially considering all of the supply disruptions in Libya and elsewhere.

As a result, ICE traded above the $ 80 per barrel threshold this week, while the US benchmark WTI hovered around $ 77.5 per barrel.

OPEC + to another production increase in February. The oil producer group comprising OPEC and non-member participants including Russia has agreed to extend monthly supply increases of 400,000 bpd until February 2022, arguing that Omicron’s exaggerated fears will not have a significant impact on global demand in the future.

New OPEC Secretary General pledged to keep the OPEC + Pact alive. Kuwaiti oil industry veteran Haitham al-Ghais, the newly elected OPEC Secretary General who will replace Nigerian Mohammad Barkindo from August 1, 2022, has pledged to keep the expanded OPEC + alive beyond his phase-out planned for the end of 2022.

Libya has fallen further into the abyss of chaos. The Libyan national oil company has announced that the country’s oil production will be cut by 200,000 bpd as a leaking pipeline will undergo maintenance work, which will essentially cut the North African country’s production in half to 700,000. b / d in a context of persistent blockades in its western regions.

EU accused of trying to bury New Year’s taxonomy project. Environmental groups have unleashed an avalanche of criticism of the European Commission’s “sustainable finance taxonomy” stating that gas and nuclear are compatible with green targets, arguing that Brussels tried to bury it by releasing it in the evening New Year’s Eve.

Russian gas always flows backwards. Gas flows through the Yamal-Europe pipeline have been in reverse mode (i.e. moving from Germany to Poland) for the 15th day in a row, dumbfounding market watchers as Gazprom (MCX 🙂 was apparently reluctant to increase pipeline gas exports to Europe.

McDermott wins expansion contract with Qatar LNG. American engineering company Mcdermott won a major construction contract (13 tops of wellhead platforms and surrounding infrastructure) for Qatar’s liquefaction facilities which would see its production capacity reach 126 million tonnes per year.

ADNOC will soon complete the storage of oil in the caves. The UAE’s national oil company ADNOC will soon order a major expansion of its crude oil storage capacity at the country’s largest port, Fujairah, located in underground caverns with storage space totaling 42 million barrels of oil.

Despite the internal struggles, Algeria wants to return to Libya. Algeria’s national oil company Sonatrach has announced that it will resume temporarily suspended oil projects in Libya, although these have plunged into a whirlwind of internal strife following the failed presidential elections.

Hot weather helps the pressurized gas market in Europe. Temperatures well above historic averages eased pressure on tight gas inventories in Europe and brought TTF gas spot prices below € 70 per MWh ($ 24 per mmBtu), to rebound today on the news of Russian supplies still tight.

The ban on the export of coal to Indonesia is shaking up the market. The Indonesian government, the world’s largest exporter of thermal products, has banned all coal exports over fears the Southeast Asian country could not meet its own demand for electricity, pushing up coal prices as natural gas prices are falling.

PA and ENI take center stage in the licensing cycle in Egypt. British energy company PA (NYSE 🙂 and the Italian oil major ENI (NYSE 🙂 were among the most active in Egypt’s most recent upstream licensing cycle, with a total of 8 blocks allocated against an investment commitment of $ 250 million.

Chinese malaise weakens prospects for iron ore. After quadrupling in 2019 and tripling in 2020, prices registered their first annual decline in three years, falling 12% year-on-year on weaker-than-previous Chinese demand, Dalian iron ore futures contracts currently trading around 680 per metric ton ($ 105 / mt).

Germany is only one step away from completely phasing out nuclear power. By disconnecting the nuclear reactors at Brokdorf, Grohnde and Gundremmingen on New Year’s Eve, Germany has only three power plants left and will experience a complete nuclear phase-out by the end of 2022, just as the EU has acknowledged. nuclear as a sustainable energy. The source.

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