Following the OPEC+ decision to maintain its production increases at 400,000 bpd per month, very few bearish factors remain in oil markets to keep prices from charging higher.
- China is set for a tumultuous winter as a nationwide power crunch is eating into Chinese demand for commodities, compelling analysts to revisit their forecasts for its 2021 economic performance.
- Two-thirds of the nationwide total, 19 provinces have introduced power rationing over September, mandating industry participants in refining and other segments to decrease production.
- The ongoing global gas shortage, having already pushed spot Asian LNG prices to some 35 per mmBtu, and simultaneously surging coal prices, have been the prime suspects behind this, although the Communist Party's ban on electricity generators to increase bills for consumers also played a large part.
- Chinese authorities seem to be open to relaxing safety rules in the country's manifold coal mines so as to alleviate the energy crunch before the official winter heating season starts 15 November.
Energy Market Movers
The October OPEC+ Ministerial Meeting brought no surprising announcements as all participating states agreed that sticking to the pre-charted course would be in the collective interest of the group. As a consequence, crude prices rose to their highest in 3 years (with WTI moving in close to a 7-year peak) as the December ICE Brent contract was already trading above $82 per barrel. Whilst there remain downside risks that could throw cold water on the price rally, most notably China's power crunch that could bite into October refining rates, it will take several days if not weeks until the market starts noticing those signs.
Saudi Aramco (TADAWUL:2222) expects to hit 13 million b/d production capacity by 2027, up 1mbpd from current levels of sustained output, largely by means of ramping up offshore production from the Marjan, Berri and Zuluf fields.
Russia's national oil company Rosneft (MCX:ROSN) has reportedly signed a new long-term supply deal with trading firm Vitol, stipulating supplies of 9 million tons per year, the first such deal since their 2013 contract.
As Qatar Petroleum is getting closer to picking its partners in the 30 billion North Field Expansion development plan, US major ExxonMobil (NYSE:XOM) has been expressing its certainty that it would land that deal.
Related: Rapid Demand Recovery Hints At Even Higher Oil Prices
The government of Andres Manuel Lopez Obrador put forward a constitutional change proposal that would return Mexico to market conditions before 2014, i.e. providing the state utility company CFE with a 54% market share and preferential treatment.
Russian gas giant Gazprom (MCX:GAZP) has started filling up one of the Nord Stream 2 pipes for tests as Germany has reportedly asked the gas conduit's operator company to provide assurances that it would duly operate the pipeline, in a sign that the regulatory approval might not be that far away.
Committed to ramp up its renewables-focused investments, US major Chevron (NYSE:CVX) has bought the entire base oil business of Finnish refiner Neste Oil (HE:NESTE), taking over all current operations along with a Bahraini subsidiary without specifying the price.
Canada formally invoked a 1977 pipelines treaty with the US to trigger political talks over the fate of Line 5, a 540kbpd crude pipeline operated by Enbridge (TSE:ENB) that runs from Wisconsin to Ontario, as the state of Michigan intends to shut down the pipeline over fears of potential leakage.
Brazil's national oil company Petrobras (NYSE:PBR) stated it had paid $853 million to the US Department of Justice on the back of a protracted corruption probe started off by the Car Wash investigation, closing the probe for good.
Australian miner BHP (NYSE:BHP) will supply nickel sulfate from Australia to a battery-producing joint venture of Japanese firms Toyota (TYO:7203) and Panasonic (TYO:6752), its second strategic deal following a similar nickel supply deal with Tesla signed this summer.
Following weeks of speculation about a potential sale or even closure of the Hurricane Ida-damaged Alliance Refinery in Louisiana, US refiner Phillips 66 (NYSE:PSX) has reportedly decided to repair and restart the 255,000 bpd capacity refinery.
Rotterdam coal futures, the European pricing benchmark, have risen to an all-time high this week as the 2022 API2 coal futures contract moved into $180 per metric ton as gas prices continue to increase.
Ironically enough, shares of UK-based oil services firm Petrofac (LON:PFC) surged this week following a London court ruling that ordered it to pay a $95 million penalty for making payments to agents in Iraq, Saudi Arabia, and the UAE to land prospective deals.
Libya's unity government and the National Oil Corporation have come forward with a joint declaration of intent on building a $600 million new refinery in Sebha, in the south of the country, reviving a project that was started in the 1980s only to come off the agenda afterward.
By Josh Owens for Oilprice.com
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Josh Owens is the Content Director at Oilprice.com. An International Relations and Politics graduate from the University of Edinburgh, Josh specialized in Middle East and… More