Oil Falls as Markets Fear More US Fed Action

Crude oil fell significantly earlier in the week despite strong US economic data, coupled with strong labor data and a positive industrial PMI.

Chart of the Week

Delayed and Lax, Oil Price Range Fails to Impress Markets

– Oil prices have been in free fall this week as markets remain unmoved by the G7 oil price cap, which has not led to an expected supply shortage, as WTI returns to trade just above $75 a barrel.

– Both the EU and the United States have agreed to a 45-day transition period during which the parties can still legally buy crude oil until January 19, 2023.

– In addition, physical traders, who usually wait weeks until they know the final price, increased their reservations, saying that the price cap made them take unnecessary risks without any effect on Brent or WTI quotes.

– Most oil cargoes on the planet are priced on a forward and floating basis, which means that if G7 buyers want to be sure they meet the price cap, they have to buy at a fixed price, which is rare in markets.

Market bearers

– US oil major Chevron (NYSE:CVX) this week will take over the Petropiar joint venture with Venezuela’s national oil company PDVSA, with production expected to potentially rise to 200,000 barrels per day within a year.

– Private equity company The Carlyle Group Austria is reportedly negotiating a multibillion-dollar contract with an oil and gas company OMV (VIE:OMV) that would see the latter take over most of its above assets.

– US oil producer EQT (NYSE:EQT) said it received an inquiry from the Federal Trade Commission over its $5.2 billion acquisition of THQ Appalachia, which the antitrust regulator is looking into for market concentration.

Tuesday, December 06, 2022

News of economic prowess rarely sparks massive declines in oil prices, but this week’s healthy US economic data, with both labor and industrial PMIs well above expectations, helped reverse that. Along with the Russian oil price ceiling, Chinese demand and others, the prospect of the US keeping interest rates higher for longer is slowly becoming the main idea as inflationary pressures weigh on medium to long-term market sentiment. Related: Arctic Blasts Face European Stress Test as Energy Demand Rises

Saudi Arabia is getting closer to China. Saudi Crown Prince Mohammed bin Salman will host Chinese President Xi Jinping this week, a sign that Riyadh is ready to diversify its key partnerships at a historic low point in Saudi-US relations and sees Beijing as an important economic partner in moving away from oil and gas.

The oil price ceiling is becoming a reality. The new measure came into effect this week amid repeated Russian pledges not to sell any oil to countries involved in price caps, after the Group of Seven agreed to a price ceiling of $60 a barrel last Friday.

The White House has asked oil companies to help Ukraine. The Biden administration will meet with oil and gas executives this week to discuss how the U.S. can support rebuilding Ukraine’s energy infrastructure as winter approaches.

A flotilla of tankers anchored outside the strait. The Turkish government has begun requiring protection and indemnity (P&I) insurance documents from every tanker passing through the Turkish Straits, and at least 21 tankers have been detained in anchorage zones in the Black Sea.

US Refiners Court Chevron. After Chevron was re-authorized to operate and expand production in Venezuela, U.S. refiners such as Valero (NYSE:VLO) or PBF Energy (NYSE:PBF) have expressed interest in gaining access to new Venezuelan production of the oil base.

Libya Ready for Upstream Investment. Libya’s Tripoli-based GNU government has lifted the force majeure for oil and gas operations in the country, inviting all international oil companies with valid contracts with LNOC to resume drilling at their projects. Related: Arctic Blasts Face European Stress Test as Energy Demand Rises

Venezuela Production Is High. Venezuela exported 620,000 barrels of oil last month, up 16% from October, thanks to increased output from two restarted crude refineries that PDVSA is working with CNPC and the Chevron deal is paving the way for further increases.

Shell is suing to sell its stake. Nigeria’s Supreme Court has allowed UK-based energy major Shell (NYSE:SHEL) to appeal a ruling that forced it to pay a $1.8 billion fine over an oil spill. Nigeria’s onshore assets.

US gas prices are lower than a year ago. U.S. gasoline prices are now falling again, ending a month-long rally, with every state posting a drop last week and the national average falling 16 cents from a week ago to $3.4 a gallon.

UN Fights Global Plastics Deal. A round of UN-brokered talks on a global plastics treaty confirmed political interest for such a move, but, as usual, countries disagreed on whether the targets should be global and mandatory or voluntary and country-specific, with the latter group represented. by the United States and Saudi Arabia.

Investors exit futures ahead of price. For a third straight week, investors sold oil futures and options contracts as the latest readings showed they were out by 42 million barrels equivalent, almost all of which was cleared from the Brent contract (-39 million barrels).

Trading Major Now Supplies Gas to Germany. Trafigura, the second-biggest commodities trading company, signed a four-year, $3 billion loan to supply gas to Germany’s ailing gas trader Sefe, formerly known as Gazprom Germania, with the loan syndicated by more than 25 banks.

US and EU discuss tariffs on Chinese metals. The United States and the European Union are imposing new tariffs on Chinese steel and aluminum, which account for 60% and 57% of global production respectively, arguing that China’s overcapacity increases climate risk.

By Tom Kool for Oilprice.com

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