Demand Fears Fail To Keep Oil Prices Under $90
08.24.2022 By Ricardo Perez - NEWS

August 24, 2022 [] – Bearish sentiment has taken hold of oil markets recently as fears of demand destruction and rumors of a new nuclear deal pushed prices down. Strong inventory draws in the U.S. have since sent prices back up, but downward pressure persists.

Oil prices had a nightmarish start to the week, plunging no weak Chinese economic data and rumors that an Iranian nuclear deal could come to fruition. Fortunately for oil bulls, hefty US stock draws across the oil and products spectrum have eased concerns that demand destruction is wreaking havoc on domestic demand. Both WTI and Brent have bounced back on the news.

OPEC Blames Politics for Lack of Spare Capacity. OPEC’s new Secretary General Haitham al Ghais said it is policymakers and insufficient oil and gas sector investments that are to blame for the current streak of high prices, and not OPEC which has not been impacted by domestic pressures to stop oil projects.

Asian LNG Prices Try to Catch Up with Europe. With LNG supply remaining relatively constrained this year, Asia and Europe continue to vie for swing liquefied volumes and despite Asian spot prices reaching an all-time high of $57/mmBtu, they still remain some $20/mmBtu below European prices.

Russians Lure the Japanese into Sakhalin-2. Having forcefully domesticated the operating company of the Sakhalin-2 LNG project in Russia’s Far East, the new management has pledged to maintain production and fulfill all existing obligations, in a bid to keep Japanese trading firms Mitsui (TYO:8031) and Mitsubishi (TYO:8058) in the project.

Drought Cuts into European Refining. Extremely low water levels along the River Rhine (vessels are touching the riverbed even if empty) have forced UK energy major Shell (LON:SHEL) to curb refinery runs at its 350,000 b/d Rhineland refinery, citing difficulties in transporting goods via the river.

ExxonMobil Moves into Indian Deepwater. US oil major ExxonMobil (NYSE:XOM) has teamed up with India’s ONGC (NSE:ONGC) to focus on deep-water exploration in the South Asian country’s East and West coasts, lured by India’s drive to decrease its import dependence amidst rapidly decreasing domestic output.

EU Coal Sanctions Inadvertently Ban Fuel Oil. The EU ban on Russian coal that came into force last week could bring an early halt to fuel oil supplies, too, as heavy distillates with an aromatics content greater than 50% fall under the same customs code as coal.

California Buckles Up for Extreme Heat. Californians are urged to ration electricity usage as a wave of extreme heat is expected to stretch the state’s power grid to its utmost, with demand set to surpass 45 GW, a level last seen in September 2020.

Force Majeures Cripple Nigeria’s Production. There being no Brass River cargo sailing from Nigeria for more than a month, Italian oil firm ENI (NYSE:E) admitted that the stream has been under force majeure since June as the illegal tapping of oil keeps the stream at a fraction of its previous volume.

Russia Expects Almost $100 Billion Revenue Boost. According to Russia’s Economy Ministry, government revenue from energy exports will rise 38% year-on-year to $337.5 billion this year, buoyed by soaring natural gas prices and higher oil export volumes.

Biden Decision to Pause Oil Leases Gets Entangled. A US circuit court of appeals has vacated the Louisiana district court decision to block the Biden Administration’s pause on new oil and gas leases announced in January 2021, slimming the prospects of any swift changes in licensing anytime soon.

Nigeria Sees Nationwide Blackout Amidst Strikes. The Transmission Company of Nigeria launched a strike this week over unfair conditions of service and pay, triggering nationwide blackouts, but the move was suspended for two weeks a day later after authorities promised to engage in talks.

Santos Puts Neck on the Line for Alaska Oil. Australian oil firm Santos (ASX:STO) surprised industry watchers as it decided to go ahead with its 2.6 billion Pikka project in Alaska’s North Slope basin after failing to find buyers for the asset, now expected to start producing by 2026.

Venezuela Helps Cuba Rebuild Destroyed Port. Following a devastating lightning-triggered explosion that destroyed Cuba’s supertanker Matanzas terminal, the Latin American country’s key storage hub for crude and products, Venezuela pledged its support in rebuilding it.

US Refiners Brush Aside Recession Fears, For Now. Arguing there is little sign of demand destruction and that inventories are still below their optimal state, US refiners are expected to maximize refinery runs over the upcoming weeks, with analysts expecting a nationwide average of 94%, in line with Q2.


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