Oil Markets On Edge Over OPEC And Debt Ceiling Uncertainty

With the next OPEC+ meeting taking place this Sunday and the U.S. debt ceiling saga set to draw a conclusion around the same time, oil markets are sure to be on edge all week.

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– The price of liquefied natural gas in Asia has dipped below fuel oil in mmBtu, prompting many developing nations to start purchasing LNG as Asian spot prices continue their decline, currently standing at $9 per mmBtu. 

– Having the ability to choose between fuel oil and natural gas, Vietnam has just bought its first LNG cargo ever whilst Thailand’s PTT intends to do the same as we head into the heat of summer months. 

– Europe’s TTF spot benchmark has declined in intraday trading earlier today to $24 per MWh (equivalent to $8.2/mmBtu) as higher gas inventories and robust renewables generation is cooling down fears of another squeeze.  

– Natural gas globally has recorded its longest streak of weekly declines since 2007, falling for eight consecutive weeks even as new entrants are coming into the LNG markets. 

Market Movers

– Indonesia is pushing UK-based oil major Shell (LON:SHEL) to expedite the sale of its 35% participating interest in the Masela project, trying to find a buyer for 4 years, threatening to nationalize it if the company fails to sell it by next year.

– US oil major ExxonMobil (NYSE:XOM) has reportedly received four bids – including one from BlackRock (NYSE:BLK) – for its majority stake in a liquefied natural gas terminal offshore Italy, estimated to fetch $900 million.  

– The world’s largest producer of solar silicon wafers, China’s Longi Green (SHA:601012) seems to have started a price war in the solar market by cutting its wafer prices by 31% earlier this week. 

Tuesday, May 23, 2023

News of the tentative McCarthy-Biden deal had provided some comfort for oil prices but not enough them from falling on Tuesday morning. Mostly, the decline was due to re-emerging skepticism that the debt ceiling deal might still be derailed during congressional hearings. The bipartisan deal to raise the $31.4 trillion debt ceiling will face its first test in Congress today and votes will likely continue through the week. With OPEC+ sending mixed signals before its meeting this Sunday, oil markets continue to be on edge.

Alberta Production Rises on Easing Wildfire Risk. With public attention fixed on the outcome of Alberta elections, oil companies have been restarting operations amidst slowing wildfires in Canada’s most oil-prolific province, with at least 90,000 boepd of the 400,000 boepd of previously shut-in production now back. 

India to Build Smaller Refineries. Aiming to raise refining capacity to 9 million b/d. India’s oil minister Hardeep Singh Puri said the country’s refiners would seek to build smaller refineries as difficulties of acquiring land are making it increasingly difficult to build large-scale projects.

Southeast Asia Struggles as Heat Batter Hydro Generation. Vietnam could face power blackouts this summer as intense heat led to a notable drop in hydropower generation, with 11 out of 47 dams reaching dead water levels, prompting the country’s electricity providers to increasingly rely on coal. 

Everyone Wants to Own Some Oil Sands. US oil firm ConocoPhillips (NYSE:COP) exercised its pre-emption rights to acquire the 50% stake that France’s TotalEnergies (NYSE:TTE) agreed to sell to Suncor Energy, paying $3 billion to take full ownership over its operated Surmont oil sands project. 

Hedge Funds Turn Against Copper. Investment fund positioning in copper on the London Metal Exchange turned into a net short for the first time since June 2020 last week, with short interest being the highest on record at almost 40,000 lots, driven by weak Chinese demand and high inventories.  

Venezuela’s Army to Build Gas Pipeline. Venezuela’s national oil company PDVSA has teamed up with the Latin American country’s army to build an 82-mile natural gas pipeline to the Amuay refinery, hoping to ramp up production of petrochemicals and fertilizers there for exports into Colombia.  

Exodus of Majors Almost Complete in Chad. Malaysia’s Petronas sold its all assets in Chad to the African nation’s state-owned SHT entity for an unreported sum after a planned purchase to Savannah Energy was pre-empted and the government nationalized the assets in question.  

Trinidad and Tobago to -Disclose Bid Results. According to media reports, the government of Trinidad and Tobago will announce the result of its latest auctioning round in the upcoming days with six out of eight blocks getting final bids, although the licensing did not elicit any interest from oil majors. 

Chile’s Mining Reform Sets Stage for SQL-Codelco JV. After the government of Gabriel Boric pushed through its reform of Chile’s lithium industry, the battered giant SQM (NYSE:SQM) began talks with the country’s leading copper miner Codelco to set up a public-private partnership to extract lithium in the Atacama salt flat.  

UK’s Largest Oil Project Might Never Materialize. Should the UK Labour Party, currently in opposition, win the next election, the country’s largest future project – the $10 billion Rosebank operated by Equinor (NYSE:EQNR) – might never produce as its leader promised not to approve any new oil fields in the North Sea. 

Budget Spat Complicates Resumption of Kurdish Exports. The re-election of Turkish President Erdogan was expected to bring an end to the ongoing halt in Kurdish exports, but Iraq’s recent changes to the 2023-2025 budget triggered an outcry in Kurdistan, accusing Baghdad of stymieing a prospective deal. 

Mountain Valley Pipeline Gets into Debt Deal. According to media reports, Democratic Senator Joe Manchin managed to include a federal green light for the 303-mile Mountain Valley Pipeline into the draft deal on the US debt ceiling, putting an end to years of litigation with environmentalists. 

Ninian Closure Jeopardizes Brent Production. The windfall tax-triggered closure of the Ninian field this March, the second largest source of the Brent blend, has forced other UK North Sea producers to find new means of transportation as previously they were reliant on Ninian’s web of pipelines.

source: https://oilprice.com/