Supply disruptions boost bullish sentiment in oil markets

Bullish sentiment is building again in oil markets as supply disruptions intensify and global oil demand growth continues unabated.

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Friday, July 1, 2022

As uncertainty builds around OPEC+’s supply capacity and oil demand rages despite expectations of demand destruction, bullish sentiment is building in oil markets. Now, to add to this bullish sentiment, another form of supply disruption is popping up around the world: strikes. Operations at France’s Fos refinery were interrupted by strikes and Norwegian offshore production was also heavily affected. It looks like the oil market is under siege from all sides, from fundamental tightness to underinvestment, disruptions related to the war in Ukraine, and now strikes.

OPEC+ summit fails to impress. OPEC+ has agreed to maintain a 648,000 bpd increase in its output target for August, keeping its commitment unchanged despite mounting evidence that spare capacity within the oil group has shrunk to its lowest level in years .

The US Supreme Court limits federal powers to set emissions. In a blow to US President Biden, the US Supreme Court has ruled that the Environmental Protection Agency does not have the power to regulate greenhouse gas emissions from coal-fired power plants and existing gas.

Iran nuclear deal negotiations fail. According to US officials, as reported by Reuters, the chances of reviving the Iran nuclear deal are even lower after the Doha talks held this week than before, calling the talks “standstill”.

Restart ban on Freeport LNG drives US natural gas prices down. U.S. natural gas prices fell 15% on Thursday after U.S. regulators barred Freeport LNG from restarting until risks to public safety, property or the environment were fully eliminated, delaying potentially its start even beyond the fourth quarter of 2022.

Government bailout in sight for German gas giant. Germany’s largest gas buyer and electricity producer Uniper (ETR:UN01) is reportedly in talks with the government over a possible bailout of the company, as soaring gas prices and Russian export curbs have cast a shadow over its cash pool.

Fossil fuels are making a comeback in the EU. With European statistics for 2021 released by Eurostat, fossil fuels have once again become the largest source of electricity generation in the European Union, largely thanks to a 4% year-on-year increase in electricity. use of gas despite soaring prices.

ExxonMobil exits Canadian shale gas. American oil major ExxonMobil (NYSE:XOM) sold its Canadian shale gas assets, held jointly with its subsidiary Imperial Oil (TSE:IMO) on 600,000 acres, for Whitecap Resources (TSE: WCP) in an all-cash transaction for $1.5 billion.

Algeria wants to tinker with European gas pricing. With its gas prices traditionally linked to oil prices, Algeria’s national oil and gas company Sonatrach wants to revise its prices to EU buyers to include a partial link to the spot price of gas, with the TTF trading several times higher than crude per barrel.

Switzerland wants to look into commodity traders. Switzerland is set to tighten regulatory oversight of Swiss-based commodity traders as the state has no official data on the sector as commodity trading is not listed as a separate activity in the countries and companies do not declare the goods they trade.

Gazprom refuses to pay dividends for the first time since 1998. Russia’s pipeline gas export monopoly Gazprom (MCX:GAZP) announced this week that it will not pay dividends on its 2021 results, for the first time since 1998, despite the company’s board suggesting the largest payout ever.

The Mexican refinery was launched despite being incomplete. Mexico will move forward with the inauguration of the 340,000 bpd Olmeca refinery in Dos Bocas this week, although there are still months or even a year to go from the start of commercial production in the middle cost overruns ($12 billion instead of $8 billion) and delays.

Russia takes over the interrupted Sakhalin-2 project. Russia has created a new company that would take over the rights and obligations of Sakhalin-2, the only Russian LNG project in the Far East, effectively giving itself the power to decide which foreign partner could stay, jeopardizing the stakes of Shell (LON:SHEL) as well as Mitsubishi and Mitsui.

Ecuador strikes a deal with indigenous protesters. Ecuador’s government and protesting indigenous leaders have reached an agreement to end the country’s debilitating wave of protests, ending a two-week standoff that has seen the Latin American country’s output more than halve to 230,000 b/d.

Libya declares a case of force majeure in the main oil ports. After calls from the Libyan National Oil Company were largely ignored, it declared force majeure at the ports of Es Sider and Ras Lanuf due to ongoing protests, limiting potential export capacity to just 400 000 b/d, i.e. a third of the country’s exports in February.

By Tom Kool for Oilprice.com

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