Oil Price Intelligence Report

 In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets. 

We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy. 

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Chart of the Week

Diesel Cracks Have Never Been This Good

 

- Confirming the unprecedented tightness in middle distillates across the globe, low-sulphur diesel continues to trade at a widely steep premium vs Dated Brent, currently at around $38 per barrel.      

- Whilst Asia’s tight stocks might be alleviated in the long run by China’s lockdowns, US diesel inventories continue to plummet despite being at 4-year lows already, leaving only India and the Middle East as potential sources of incremental diesel supply. 

- Whilst Russian diesel exports did drop some 100,000 b/d month-on-month in March, trending around 650,000 b/d, outflows are still largely uninterrupted compared to the expectations. 

- Nevertheless, diesel stocks in NW Europe remain depressed, roughly half of what they were this time of the year in 2021 and might continue declining amidst refinery maintenance in the region.

Market Movers

- US oil major Chevron (NYSE:CVX) increased its foothold in Argentina’s Vaca Murray shale play, signing up for the Trapial Este concession as an operator and exclusive block holder. 

- Chinese offshore oil producer CNOOC (HKG:0883) said it expects to raise 32 billion yuan ($5 billion) in a share listing in Shanghai, only six months after the company was delisted from NYSE over suspected connections to the Chinese military. 

- French energy major TotalEnergies (NYSE:TTE) said it would expand production at the Cameron LNG project in Louisiana operated by Sempra, with the expansion coming in the form of a fourth train with a production capacity of 6.75 mtpa. 

Tuesday, April 12, 2022

After last week’s decline, oil prices have started to pick up again on the back of hopes for Chinese demand rebounding soon and OPEC warnings that it would be impossible to replace 7 million b/d of Russian oil and products exports. Thus, Brent CFDs have moved into contango whilst the ICE Brent futures curve retains its usual backwardated shape, albeit narrower. All this indicates that whilst the IEA SPR release has managed to ease fears of immediate tightness, the structural supply/demand deficit is still on the agenda in oil markets. 

China’s Protracted Lockdowns Hit Demand. Chinese refiners are cutting throughput runs as zero-COVID-driven lockdowns continue to hamper products demand across the country, with Shanghai remaining shut whilst the southern city of Guangzhou expected to go down the same path soon. 

U.S. Warns India on Russian Purchases Again. U.S. President Joe Biden warned India that buying more oil from Russia was not in ‘the country’s interest’, coming on the back of Indian refiners already buying 16 million barrels of Urals since the start of the Russia-Ukraine war. 

Iran Details JCPOA Return Conditions. A group of more than 250 Iranian lawmakers issued a set of pre-conditions for the restoration of the 2015 nuclear deal, including guarantees that the US will not withdraw from the deal, will not restrict Teheran’s freedom to sell its oil and repatriate the revenues. 

US Gas Inventories Drop to Lowest in Three Years. Driven by unprecedentedly high LNG exports out of the United States, US gas inventories ended the winter at just 1,382 billion cubic feet on April 1, the lowest in three years, pushing Henry Hub prices upwards and steepening the backwardation along the futures curve.

Russian Oil Embargo on the Agenda for Next Sanctions Round. According to media reports, the European Commission is drafting proposals for an EU oil embargo on Russia although many governments object to an all-out ban and might rather opt for a dedicated tariff. 

Italy Signs New Algeria Supply Deal. Italy signed an agreement with the government of Algeria to increase imports of natural gas by 40%, with the country’s oil major ENI (NYSE:ENI) seeing gradually higher flows via the Transmed pipeline, reaching 9 bcm per year of extra gas by 2023-2024. 

Ford Clinches First Public Lithium Deal. US carmaker Ford Motor (NYSE:F) signed a preliminary deal to buy lithium from Sydney-based Lake Resources’ (ASX:LKE) direct extraction Kachi project in Argentina, the first the company has publicly announced where it would source its electric vehicle battery metal.  

OPEC Cuts 2022 Oil Demand Forecast. OPEC curbed its forecast for oil demand growth this year citing the impact of Russia’s invasion of Ukraine, expecting the 2022 increment at 3.67 million b/d, down almost 500,000 b/d compared to the previous forecast. 

Zinc Market Storm Picks Up Pace. Europe is increasingly facing a zinc shortage as exorbitant power prices are limiting regional smelting output, with the LME contract trading at $4,300 per metric ton amidst supertight inventories, as only 25 tons are available to the market in LME warehouses. 

Nigeria Power Grid Collapses Again. Nigeria’s national electricity grid has collapsed for the second time in a month, stoking fears that soaring diesel prices are having an impact on the provision of power across the country that is used to outages but not complete blackouts. 

Indian Refiner Runs into Financing Woes. Several Indian and foreign banks have stopped offering trade credit for oil imports to Nayara Energy, a refiner operating the 400,000 b/d Vadinar refinery and co-owned by Russia’s Rosneft (MCX:ROSN), compelling it to sell more products domestically. 

European Wheat Prices Hit New Record. With no end in sight for the Russia-Ukraine war so far, European wheat prices have hit another all-time high as supply from the Black Sea remains constrained, with the Dec ’22 futures contract surpassing the mark of €350 per metric ton. 

NYMEX Suspends Trading of Russian Platinum and Palladium. The New York Mercantile Exchange indicated it would halt trades of platinum and palladium produced by Russia’s two refineries, following a similar move by the London markets, pushing palladium 5% up on the week.