Mobility levels in California have seen only meager growth in recent weeks despite a seasonal uptick taking place across the country, indicating that a prolonged period of high fuel prices would temper seasonality patterns.
– Gasoline retail prices have averaged $5.70 per gallon over the latest reporting week in California, some $1.50 per barrel above the national average, with current daily prices already at $5.92 per gallon.
– Against this background, weekend mobility data in California has decoupled itself from the nationwide pattern of growth, lingering at levels seen in early 2022.
– Oil demand loss coming from elevated fuel prices in the US might amount to a whopping 300,000 b/d and would be translated primarily into declines in discretionary (primarily weekend) driving.
Market Movers
– The French government is reportedly in talks with the country’s energy major TotalEnergies (NYSE:TTE) to build a floating LNG terminal in the northern port of Le Havre, set to become the fifth LNG plant in the country.
– A wildcat drilled by an international consortium led by ExxonMobil (NYSE:XOM) in Brazil’s offshore waters turned out to be dry, marking the first wildcat in the Sergipe-Alagoas Basin, assumed to be one of the most promising frontiers in Brazil.
– New research from Australia’s GCI claims that BP’s (NYSE:BP) 2030 net-zero plans will not deliver a reduction in the company’s absolute emissions as refined and physically traded products and crude oil are exempted. If these claims are true BP will likely face further backlash from environmentalists.
Tuesday, March 29, 2022
An apparent breakthrough in peace talks between Russia and Ukraine has provided oil markets with some much-needed bearish news. Just after European countries had walked back threats of sanctioning Russian oil, Russia promised to scale down military operations in the north of Ukraine. The promise from Russia has sparked hope that the war in Ukraine may finally begin to deescalate. Meanwhile, China’s zero-COVID strategy has led to more lockdowns, lockdowns that are likely to reduce demand for the Asian giant. WTI is threatening to fall back below $100 on the news, although oil markets still remain tight.
OPEC Warns Against the Politicization of Supply. In a thinly veiled riposte to the IEA, OPEC heavyweights Saudi Arabia and UAE warned against politicizing oil supply issues, arguing that squeezing any member out of out of the alliance would only increase prices and hit customers even harder.
Chinese Independents Hit by Double Whammy. Already under stress from increasing government interference, China’s COVID lockdowns, including but not limited to the closure of Shanghai, are forcing teapot refiners to sell off their April-delivery cargoes, with selling limited to state-owned refiners due to destination restrictions.
Rouble Gas Payment Battle Looms on the Horizon. G7 nations have rejected demands from Russia’s President Vladimir Putin that ‘unfriendly’ countries pay for Russian gas with roubles, setting the stage for a seemingly prolonged battle as Putin has given an end-March deadline to his government on changing the pricing terms.
Chevron Cuts Kazakh Production on Port Issues. US oil major Chevron (NYSE:CVX) reduced production rates at the largest oil field in Kazakhstan, Tengiz, after only one out of three single point moorings of the CPC terminal remains operable, the other two will provisionally take 3-4 weeks to repair.
US to Slap Tariffs on Southeast Asian Solar Imports. US trade officials said they will launch an investigation into solar imports from Malaysia, Thailand, Vietnam, and Cambodia as Chinese producers have shifted production to these countries to avoid paying US duties.
Iran Strike a Warning Sign to Kurdish Gas Plans. According to media reports, Iran attacked Iraq’s Kurdistan region earlier this month in order to warn Kurdish officials that started talks with Israeli and US energy officials to ship Kurdish natural gas to Turkey via a new gas pipeline.
Bolsonaro Replaces Petrobras CEO. Brazilian President Jair Bolsonaro decided to fire Joaquim Silva e Luna, CEO of state-controlled oil company Petrobras (NYSE:PBR), on the back of surging transportation fuel prices in the country, tapping market-oriented academic Adriano Pires for the role.
India Wants Russian Coking Coal. With India becoming by far the largest buyer of spot Russian crude cargoes, Delhi now wants to double down on imports of coking coal from Russia in a departure from pre-2022 developments. Indian steel producers had previously relied overwhelmingly on Australian supplies.
Spain and Portugal Receive Waiver to Cap Prices. The European Commission clearedSpain and Portugal to cap their power prices in a departure from classic non-interventionist EU policy, limiting the wholesale price at €180 per MWh, apparently due to the two countries’ high share of renewables in power generation.
Colombia Greenlights Fracking Pilot. The Colombian government approved the environmental permit for the Kale fracking pilot project in the Middle Magdalena Basin, led by Ecopetrol (NYSE:EC), amidst increasing pressure from environmental groups as they want the country’s high court to ban the practice.
Orsted Sells 50% Stake in World’s Biggest Offshore Wind Farm. Danish renewables company Orsted (CPH:ORSTED) agreed to sell half of the 1.3 GW Hornsea 2 offshore wind project in the United Kingdom to a French consortium comprising insurer AXA and banking giant Credit Agricole (25% each).
Ukraine Peace Promise Pushes Aluminium Back. The apparent progress in Russia-Ukraine peace talks took the steam out of aluminum’s month-long spike, dropping more than 5% on Tuesday alone with LME three-month prices dropping to $3,400 per metric tonne.
Gasoil Storage Has Never Been This Cheap. In a desperate attempt to incentivize oil companies to ramp up Gasoil stocks, storage companies in the ARA region dropped storage fees to a historical low of €1.5-2.0 per cubic meter, yet even with this Europe remains counter seasonally tight and undersupplied.
By Tom Kool for Oilprice.com