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Oil prices are likely to soar past $200 per barrel if G7 manages to cap the price of Russian crude oil, according to chief commodities analyst at Swedish bank SEB Group.

Bjarne Schieldrop, SEB analyst, said on Wednesday in no uncertain terms that the G7’s price capping proposal was a “recipe for disaster” given the current stress that the oil market is under.

The G7 leaders agreed on Tuesday to study ways to cap the price of Russian oil sold internationally and are seeking support among “like-minded” nations. It was one of the critical items to be discussed at this week’s G7 meeting as the group tries to find creative ways to lower energy prices for themselves and maintain adequate crude supplies from Russia—while simultaneously punishing Russia in what many see as an impossible task.

U.S. Treasury Secretary Janet Yellen continued to put pressure on European countries to support a price cap.

According to Schieldrop, the plan seems “neat on paper, but it sounds like a recipe for disaster right now,” given the strong demand for crude oil and low supplies that so far given Russia the upper hand in the market. Russia could, the analyst argued, choose not to sell the oil at a capped price—a decision that could lead to Russia’s production falling by as much as 2 million barrels per day.

Russia’s crude and condensate production rose in June by 5% to 10.7 million bpd, according to Kommersant sources—a figure that includes between 800,000 and 900,000 bpd of condensate, which is not included in the OPEC+ agreement. But Russia’s oil exports have slipped 3.3% in June with the rise of domestic refining demand.

Russian Deputy Prime Minister Alexander Novak said that Russia would raise its production again in July.

The world must brace itself for a further surge in oil prices

June 11, 2022

The world must brace itself for a further surge in oil prices

Outlook for production is bleak with Russian shortfalls hard to replace

With Russia’s sanctions-hit oil output facing an increasingly difficult route to market, there are legitimate fears that supply could fall much further © Andrey Rudakov/Bloomberg Share on twitter (opens new window) Share on facebook (opens new window) Share on linkedin (opens new window) Save David Sheppard, Energy Editor YESTERDAY 130 Print this page Receive free Oil updates We’ll send you a myFT Daily Digest email rounding up the latest Oil news every morning.

JPMorgan’s chief executive Jamie Dimon thinks oil prices could surge to $175 a barrel later this year. Jeremy Weir, the head of commodity trader Trafigura, says oil could go “parabolic”.

Energy Aspects, a consultancy with clients stretching from hedge funds to state energy companies, says we are facing “perhaps the most bullish oil market there ever has been”. Goldman Sachs thinks oil prices will “average” $140 a barrel in the third quarter of this year.

It is tempting to dismiss this mass outbreak of bullishness as book-talking by banks and traders positioned for a short-term rise in crude, which has already reached $120 a barrel.

Those with long memories recall the surge in oil to $147 a barrel on the eve of the financial crisis, when Goldman was among the chief cheerleaders for a rally that quickly reversed as the economy went south. Oil was at $40 a barrel by Christmas 2008, yet some of the bonuses earned by Wall Street energy traders that year went down in market lore.

But while a healthy dash of scepticism is usually warranted with price forecasts, you only need to scratch the surface of the oil market to see that these bullish calls are, this time, well-founded.

…click on the above link to read the rest of the article…

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

May 31, 2022

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

Analysts: Asian buyers are unlikely to be able to absorb all the Russian oil unwanted in the West.
There is a distinct possibility of a sharp drop in Russian oil exports.
BofA: A sharp contraction in Russian oil exports could push Brent well past $150/bbl.

Brent Crude prices could jump to well above $150 per barrel if Russia’s oil exports fall off a cliff in the coming months, according to Bank of America.

“With our $120/bbl Brent target now in sight, we believe that a sharp contraction in Russian oil exports could …. push Brent well past $150/bbl,” analysts at Bank of America (BofA) Global Research wrote in a research note on Friday carried by Reuters.

In a base-case scenario, Bank of America expects Brent Crude prices to average $104.48 a barrel this year and $100 a barrel in 2023.

Early on Friday, Brent Crude was trading at over $117 per barrel, the highest in two months, amid tight fuel supplies globally and bullish prospects of demand with the U.S. driving season beginning with the Memorial Day holiday weekend and Shanghai in China set for gradual reopening from June 1st.

There is a distinct possibility of a sharp drop in Russian oil exports as the EU continues to seek consensus and persuade Hungary to drop its opposition to a Russian oil embargo. Reports have it that some EU member states are inclined to accept a temporary exemption of Russian pipeline supply to central Europe via the Druzhba pipeline from the embargo as a bargaining chip to convince Hungary to agree to a ban on imports of Russian seaborne oil.

…click on the above link to read the rest of the article…

Australian fuel import bill going sky-high

May 26, 2022

Australian fuel import bill going sky-high

In March 2022 Australia’s petroleum product imports have reached almost AU$ 4 bn per month, an increase of 70% compared to December 2019.

Fig 1: Petroleum product imports by volume (black lines) and value (brown line)

Fig 2: Australian dollar to US$ exchange rate

The Australian Dollar was also around 0.7 US$ in December 2019, just like in May 2022 so it was not the exchange rate which drove up the bill in that period. It is the closure of Australian refineries (caused by peak oil of international oil companies), the oil price and the competition for fuels on the Asian market.

The Morrison government’s election-opportunistic cut of fuel excise duty by 50% until Sep 2022 will of course not reduce this import burden on the balance of payments. Fuel imports are now 12% of goods and services imports:

Fig 3: Goods and services debits (imports)
https://www.abs.gov.au/statistics/economy/international-trade/international-trade-goods-and-services-australia/latest-release#goods-and-services-debits-imports-seasonally-adjusted

Fig 4: Diesel imports by volume and value

Fig 5: Diesel imports by country

Australia’s dependency on China and a brand-new Chinese refinery in Brunei in the last years is clearly visible.

Fig 6: Monthly diesel imports

Imports change from month to month depending on the arrival of tankers. Diesel from China has been replaced by Diesel from India.

Fig 7: Petrol imports by value and volume

Fig 8: Petrol imports by country. Singapore now dominates

Fig 9: Jet fuel imports by value and volume

If jet fuel imports go back to their pre-Covid levels of, say, 600 ML/month the jet fuel import bill will double to A$ 700/month.

Conclusion: Australia must reduce its thirst for transport fuels. No new projects should be started which increase fuel consumption.

Australian Oil Stocks Consumption Cover
22 Mar 2022
https://crudeoilpeak.info/australian-oil-stocks-consumption-cover

9/12/2021
Australia crude oil import vulnerabilities Sep 2021 data
http://crudeoilpeak.info/australia-crude-oil-import-vulnerabilities-sep-2021-data

15/2/2021
Exxon-Mobil’s refinery closure in Australia: peak oil context
https://crudeoilpeak.info/exxon-mobils-refinery-closure-in-australia-peak-oil-context

14/11/2020
Australia’s BP Kwinana refinery closure: peak oil context
https://crudeoilpeak.info/australias-bp-kwinana-refinery-closure-peak-oil-context

Running On Empty

May 20, 2022

Running On Empty

Well, we definitely seem to have passed a threshold of sorts. For most of the sixteen years since I started blogging, one of the things I had to point out constantly to my readers was the slow pace of historical change. Whenever I posted an essay on the twilight of industrial society, I could count on fielding at least one comment from a reader who expected the entire modern world to crash and burn in the next few months. I’d have to patiently remind them that Rome wasn’t sacked in a day—that it takes years of breathtakingly moronic decisions motivated by mindless greed, vicious partisan hatred, blind ideological dogmatism, and a total unwillingness to think about the long-term consequences of short-term decisions, to bring a civilization down.

Now of course all through the years while I was telling people this, decisions of the kind I’ve just described, guided by motives of the sort I’ve just characterized, were standard operating procedure throughout the industrial world. Those proceeded to have their usual effect. I still don’t expect modern civilization to crash to ruin in the next few months, but it’s reached the point that I no longer have to tell people that the Long Descent won’t show up as soon as they think. No, at this point it’s my ironic duty to suggest that they make whatever preparations they have in mind sooner rather than later, because the world shows no signs of waiting for them.

As I write this, the most obvious set of problems has to do with the economies of the United States and its client states. Those of my readers who follow financial media already know that signs of economic trouble are elbowing one another out of the way to get to the front pages…

…click on the above link to read the rest of the article…

Just a hint from the mainstream that limits precipitate rising oil prices

May 16, 2022

Just a hint from the mainstream that limits precipitate rising oil prices

Last week a Bloomberg writer at the very end of an article explained that the “only solution” to high gasoline and diesel prices is recession. While I would not accuse the writer of advocating degrowth—this would be too radical for a mainstream business publication—his analysis points to a key and obvious cause of today’s high prices for oil and other commodities: There isn’t enough of them to go around.

There’s an old saying in the oil industry that the solution to high prices is high prices. The logic is that high prices will do two things: 1) Reduce demand as those who cannot afford oil products at high prices will cut back and 2) incentivize more exploration and production as companies seek to increase production to take advantage of high prices.

The big question today is whether the second mechanism can actually ramp up oil production enough to bring down prices. In a recent survey a large number of oil executives said their production plans do not depend on current prices. Many cited the desire of investors in publicly traded companies to receive larger dividends and benefit from the corporate buyback of shares (which tends to increase the stock prices as fewer shares are available for trading).

It’s instructive that 9 percent of those responding to the survey cited an oil price of $120 per barrel as the level at which they would consider raising production. And keep in mind that they are NOT talking about $120 per barrel for a few months, but as an average price over many years—since it can take many years to bring large projects into production and those projects can produce for many years after production begins…

…click on the above link to read the rest of the article…

Has Gasoline Price Shock Triggered Demand Destruction Yet? And Where Will Gasoline Prices Go from Here?

April 20, 2022

Has Gasoline Price Shock Triggered Demand Destruction Yet? And Where Will Gasoline Prices Go from Here?

There’s some demand destruction. But oil bounced again, gasoline might be next. My guess is a long-drawn-out zigzag higher.

Following the dizzying spike in gasoline prices, the question arises when demand destruction will set in, where people start driving less, start taking it easier to conserve gas when they do drive, or start prioritizing the most economical vehicle in their garage. If enough people do it, demand begins to decline, and gas stations have to compete for dwindling business. Demand destruction is what would cause the price to come down again. Are we there yet?

The Energy Department’s EIA measures consumption of gasoline in terms of barrels supplied to the market by refiners, blenders, etc., and not by retail sales at gas stations. The volume of gasoline supplied has fallen for the third week in a row. This is unusual this time of the year, when gasoline consumption normally rises through the summer.

The EIA reported on Thursday that gasoline consumption fell to 8.61 million barrels per day in the week ended April 8 on the basis of a four-week moving average (red line), the lowest since March 4, down 2.3% from the same period in 2021 (black line) and down 8.1% from the same period in 2019 (gray line).

Consumers began to react in January.

Note how the past 11 months (red line) tracked the pre-Covid period three years earlier very closely (gray line) until they began to diverge sharply, not just in March, but already in mid-January, and have been solidly below the 2019 level ever since.

Gasoline prices started shooting higher from collapsed levels in April 2020. By May 2021, the average price of gasoline, all grades combined, breached $3.00 a gallon, a multi-year high, and kept going…

…click on the above link to read the rest of the article…

Putin Driving Up Oil Prices Is An “Outrageous Lie”: USF Geology Professor Dr. Marc Defant

April 4, 2022

Putin Driving Up Oil Prices Is An “Outrageous Lie”: USF Geology Professor Dr. Marc Defant

“I read a lot of the literature on global warming and for AOC to come out and say 2 or 3 years ago that the world was going to end in 12 years – that’s just hysterical craziness.”

About two weeks ago, I published an interview with Dr. Marc Defant about why he thought President Biden’s oil policies were “bat-shit crazy” and creating more turmoil than they were helping alleviate problems in markets.

This past weekend, I was happy to welcome him onto my podcast for a discussion about the current state of energy in the U.S., including pros and cons of natural gas, fracking, shutting down pipeline projects in the U.S. and the cost benefit analysis of extreme activist environmentalists.

Why We are Alone in the Galaxy | Marc Defant | TEDxUSF - YouTube

Dr. Marc J. Defant is a professor of geology/geochemistry at the University of South Florida. He worked for Schlumberger Well Services and Shell Oil for three years, with two years at Shell working as an exploration geologist.

He has been funded by the National Science Foundation, National Geographic, the American Chemical Society, and the National Academy of Sciences, and has published in many internationally renowned scientific journals including Nature. He has written a book entitled Voyage of Discovery: From the Big Bang to the Ice Age and published several articles for general readership magazines such as Skeptic and Popular Science and appeared on the Joe Rogan Experience podcast. You can reach him via this contact form.

First, we talked about how the price of oil got so high to begin with.

Dr. Defant told me: “Gas was up 40% and oil was up 80% before the Ukrainian war started. What got me a little incensed was that Biden is going around saying the price of gasoline is due to to Putin.”

…click on the above link to read the rest of the article…

Crude Oil WTI Futures Go Bananas, Briefly Spike to $130: And this Is What’s Happening at my Gas Station

March 8, 2022

Crude Oil WTI Futures Go Bananas, Briefly Spike to $130: And this Is What’s Happening at my Gas Station

Speculators are reacting to other speculators who are reacting to whatever.

Sunday night, crude oil WTI futures, as soon as trading started, spiked to $130.50 a barrel, the highest since July 2008. Maybe it was just one contract someone traded to get it over with and nail that number. But this came after discussions in Washington whether or not the US should ban the imports of Russian crude oil. After the crazy open, the price of WTI futures fell, eventually to $123 a barrel, still the highest since July 2008. And then they started rising again. Currently, WTI trades for around $126, also the highest since July 2008.

The reason the price spiked isn’t because the US is suddenly running out of crude oil or anything, but because traders and algos smelled an opportunity and jumped on it, and drove up the price of those futures, and it’s pure speculation, but that’s what futures trading always is.

The US doesn’t import much Russian crude and could do just fine without Russian crude – and that’s why the import ban is even proposed. And if some buyers in the US actually buy Russian crude, it’s simply another trade, like a gazillion others, but Russian crude is a big part of the gigantic complex global oil trade.

For example, California is cut off from other US producing regions because there’s no pipeline across the Rockies. It produces some of its own crude oil and imports some crude oil from Alaska, and imports crude from the rest of the world. The local refineries, such as those in the Bay Area, buy this imported crude and refine it and export large quantities of gasoline, diesel, and jet fuel to Latin America, which is a huge profitable business.

…click on the above link to read the rest of the article…

Two Oil Price Scenarios: One Bad, And One Catastrophic

March 3, 2022

Two Oil Price Scenarios: One Bad, And One Catastrophic

Another day, another record discount for Russian Urals crude, which was offered at a price more than $22 below spot by oil trader Trafigura and still could find no giant…

… confirmed what we previously observed, namely that the commodity world is splitting in two: a bidless market for Russian oil, and (increasingly) offerless for non-Russian.

This is the key point that JPMorgan’s commodity strategist Natasha Kaneva makes in a research note earlier today, in which she notes that while the US and its allies have so far stopped short of imposing penalties directly on Russian oil and gas, on Tuesday it became increasingly clear that Russian oil is being ostracized. The preliminary Russian crude oil loadings for March revealed a 1 mbd drop in the loadings from the Black Sea ports, 1 mbd drop from the Baltics and 0.5 mbd drop in the Far East.

In addition, there is now also an estimated 2.5 mbd loss in oil products loadings from the Black Sea, for a total loss of 4.5 mbd of Russian crude loands, a stunning amount in a market that was already precariously balanced before the Ukraine war.

Putting that number in context, prior to last week Russia was exporting about 6.5 mbd of oil and oil products, with two-thirds clearing through the now-frozen seaborne market. Out of that, Europe and the US accounted for 4.3 mbd, with Asia and Belarus rounding to 2.2 mbd.

Then echoing what we said yesterday, JPM notes that “as the Russian invasion entered its seventh day on Wednesday, Russian cargoes have become toxic for the majority of the Western trading houses, refineries, utilities, shippers, banks, ports and insurers. As of today, almost 70% of Russian oil is struggling to find buyers.”

…click on the above link to read the rest of the article…

Falling oil inventories is what matters, not geopolitics: Eric Nuttall

February 16, 2022

Falling oil inventories is what matters, not geopolitics: Eric Nuttall

Video: https://www.bnnbloomberg.ca/video/falling-oil-inventories-is-what-matters-not-geopolitics-eric-nuttall~2382581?fbclid=IwAR35n9dgxwTWlZkX2bEYyy72SOGJR0eQM3MkFzRENmj9S8oDz0xkI9XfP8o

Oil prices are retreating as tensions between Russia and Ukraine ease and investors grow more concerned about an Iran nuclear deal, so what does it all mean for the oil market long-term? Eric Nuttall, partner and senior portfolio manager of Ninepoint Partners, joins BNN Bloomberg for his outlook.

“I’ve Never Seen A Market Like This”: Goldman Sees Shortages Of Everything, “You Name It, We’re Out Of It”

February 7, 2022

“I’ve Never Seen A Market Like This”: Goldman Sees Shortages Of Everything, “You Name It, We’re Out Of It”

It’s probably not the endorsement Biden’s flailing administration wanted.

In a time when social networks have been swamped with photos of empty shelves from across the nation, Goldman’s head commodity strategist and one of the closest-followed analysts on Wall Street, said he’s never seen commodity markets pricing in the shortages they are right now.

“I’ve been doing this 30 years and I’ve never seen markets like this,” Currie told Bloomberg TV in an interview on Monday. “This is a molecule crisis. We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it we’re out of it.”

In a reversal of the event from April 2020, when WTI oil briefly hit a negative $40 per barrell as speculators paid others to take deliverable oil contracts off their hands as they had no storage for it, futures curves in several key markets are trading in super-backwardation – a structure that indicates traders are paying bumper premiums for immediate supply. The downward sloping shape in prices is generally taken to mean commodities are severely undersupplied.

The shortage of, well, everything has translated into record price of virtually all commodities: the Bloomberg Commodity Spot Index, which tracks 23 energy, metals and crop futures, has touched a record this year. That has been driven in part by surging oil prices, which have hit their highest level since 2014 and earlier today Brent rose as high as $94, assuring even more pain at the pump.

Separately, assuring even more pain for logistics, Bloomberg notes that diesel futures are in their strongest backwardation since 2008, excluding expiry days.

Additionally, all six of the main industrial metals traded on the London Metal Exchange moved into backwardation late last year, in a rare synchronized bout of tightness last seen in 2007.

…click on the above link to read the rest of the article…

Oil Spikes On White House Report Russia Planning False Flag Against Ukraine Using ‘Graphic Video’, Crisis Actors

February 3, 2022

Oil Spikes On White House Report Russia Planning False Flag Against Ukraine Using ‘Graphic Video’, Crisis Actors

The Washington Post is reporting Thursday bizarre and sensational claims by US intelligence saying that Russia planned to stage a false flag to justify a massive invasion of Ukraine. Specifically Russian intelligence is being accused of producing a fake video showing a Ukrainian Bayraktar TB-2 drone attacking pro-Russian separatists in Ukraine’s eastern regions, which was to “fabricate a pretext for an invasion.”

Oil surged as the bombshell claims against Moscow quickly grabbed world headlines, emerging as the NY Times and CNN top story by early afternoon.

Here are the details an unnamed senior Biden admin official told CNN:

A senior administration official told CNN that the US has intelligence suggesting that the Russian government, with the help of Russia’s intelligence services, has been planning to produce a propaganda video depicting graphic scenes of a “staged false explosion with corpses, actors depicting mourners, and images of destroyed locations and military equipment,” the official said. The US believes Russia has already recruited actors to be involved in the fake attack.

“This video, if released, could provide Putin the spark he needs to initiate and justify military operations against Ukraine,” the official added. It follows claims last month that Russia could be plotting false flag attacks against its own proxies in Donbas.

Interestingly, The Washington Post – which was the first to report the story – alongside other like CNN has introduced some level of doubt within their own reporting…

…click on the above link to read the rest of the article…

Oil Rally Fueled By OPEC Production Shortfall

January 29, 2022

Oil Rally Fueled By OPEC Production Shortfall

In December, OPEC+ added 253,000 barrels daily to its combined production falling well short of its 400,000-bpd target
OPEC’s underproduction fuels speculation about the cartel’s ability to ramp up production
Morgan Stanley: global spare oil production capacity will shrink from 6.5 million bpd at the moment to just 2 million barrels daily by the middle of the year

That OPEC’s spare oil production capacity was a problem that was only going to get worse with time became clear last year when the first reports began to emerge that the cartel and its partners led by Russia are not adding as much oil to their monthly output as agreed. Now, the gap between commitment and output has deepened, adding fuel to an already strong price rally.

In December, OPEC+ added 253,000 barrels daily to its combined production falling well short of its 400,000-bpd target for yet another month in a growing row. Naturally, this fueled concern about the security of global supply amid forecasts from the International Energy Agency that oil demand is going to exceed pre-pandemic levels later this year.

This latest forecast could be confusing to many who follow the agency’s output. In December, the IEA said that oil demand growth was going to slow down this year. It also forecasted a possible oversupply on the oil market for the current quarter, citing the effect of the Omicron variant on fuel consumption and rising non-OPEC production.

To be fair, the agency noted the oversupply would materialize if several things happen, among them, Saudi Arabia and Russia pumping at record rates as “remaining OPEC+ cuts are fully unwound.” Yet it appears to have greatly underestimated the resilience and strength of demand. No wonder a lot of other forecasters are talking about oil reaching and topping $100 per barrel.

…click on the above link to read the rest of the article…

Morgan Stanley Jumps On The $100 Oil Bandwagon

January 22, 2022

Morgan Stanley Jumps On The $100 Oil Bandwagon

Morgan Stanley expects oil prices to hit $100 per barrel in the second half of the year, becoming the latest major Wall Street bank to expect triple-digit oil prices by the end of 2022.

The oil market is headed to a “triple deficit” of low inventories, low spare production capacity, and low investment, Morgan Stanley said in a note carried by Reuters.

The bank now expects oil at $100 in the third and fourth quarters of this year, lifting its previous Q3 and Q4 forecasts from $90 and $87.50 a barrel, respectively.

“The key oil products markets (gasoline, jet fuel, and gasoil/diesel) all show strong crack spreads, steep backwardation, and inventories that have fallen to low levels. None of this signals weakness,” Morgan Stanley analysts wrote in the note.

The bank is the latest investment institution to predict that oil is headed to triple-digit territory as soon as this year, amid resilient demand, falling inventories, and declining spare capacity at OPEC+ as the group ramps up production.

Triple-digit oil “is in the works” for the second quarter this year, Francisco Blanch, head of global commodities at Bank of America, told Bloomberg last week. Demand is recovering meaningfully, while OPEC+ supply will start leveling off within the next two months, Blanch said, noting that it will be only Saudi Arabia and the UAE that can produce incremental barrels to add to the market.

Oil prices could hit $100 this year and rise to $105 per barrel in 2023, on the back of a “surprisingly large deficit” due to the milder and potentially briefer impact of Omicron on oil demand, Goldman Sachs said this week…

…click on the above link to read the rest of the article…

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