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A South African refinery has shut down operations and declared force majeure on the supply of petroleum products due to a delay in the shipment of crude, which highlights the fact that the physical market for crude is tight these days despite a slump in paper-traded oil futures.

Sasol, the biggest fuel producer in South Africa, was forced to declare force majeure on refined product deliveries because of delays in the crude oil supplied to its 108,000 barrels per day (bpd) refinery Natref, a company spokesperson told South Africa-based financial news outlet Fin24 on Saturday.

“These delays have impacted availability of crude oil feedstock for processing at Natref, which necessitates the shutdown of its Natref refinery,” the spokesperson said.

“In the circumstances, Sasol Oil will not be in a position to fully meet its commitments on the supply of all petroleum products from July 2022,” said the company, adding that it hopes the issue would be resolved soon and the refinery could resume production at full capacity by the end of this month.

The stoppage at Sasol’s Natref refinery now means that South Africa’s entire oil refining capacity is currently out of service, according to Bloomberg’s estimates. Other refineries have closed down production since COVID erupted, either because they would be converted to terminals or because of operational issues. Only Sasol’s synthetic fuel output using coal as a feedstock, of which South Africa has huge amounts, remains fully operational.

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Record UK Gasoline Prices See Biggest Daily Surge In 17 Years

June 9, 2022

Record UK Gasoline Prices See Biggest Daily Surge In 17 Years

UK gasoline prices continue to set records, with the daily price jump between Monday and Tuesday at its highest in 17 years, RAC, the UK’s longest-serving motoring organization, says.

“The average price of petrol endured its biggest daily jump in 17 years by going more than 2p (2.23p) a litre on Tuesday (7 June), taking it to nearly 181p a litre (180.73p),” RAC fuel spokesperson Simon Williams said as carried by Auto Express.

Gasoline prices were at a record high of $2.27 (£1.81) per liter, or around $8.60 per U.S. gallon, on Tuesday, according to data from RAC Fuel Watch, which expects prices to continue rising in the near term.

“These are unprecedented times in terms of the accelerating cost of forecourt fuel. Sadly, it seems we are still some way from the peak,” RAC’s Williams said.

A full tank of gasoline for a typical family car has now jumped to $125 (£99.40), up from $120 (£95.16) at the start of last week. The £100 per full tank mark could be reached as soon as on Thursday, analysts say.

“With analysts predicting that oil will average $135 a barrel for the rest of this year drivers need to brace themselves for average fuel prices rocketing to £2 a litre which would mean a fill-up would rise to an unbelievable £110,” RAC said earlier this week.

The new record highs in gasoline prices add to the cost-of-living crisis in the UK where energy bills are set to surge this autumn.

Gasoline prices are soaring in the United States, too. The average gasoline price in America was $4.955 a gallon on June 8, up by a massive $0.30 jump in one week.

Gasoline prices set a new record for the 10th straight day and Americans are now spending over $700 million more per day on gasoline versus a year ago, Patrick De Haan, head of petroleum analysis for fuel-savings app GasBuddy, said on Wednesday.

Turkey Hit By Unprecedented Power Outages As Iran Halts Gas Flows

January 24, 2022

Turkey Hit By Unprecedented Power Outages As Iran Halts Gas Flows

A disruption to natural gas imports from Iran has caused an unprecedented level of power cuts in Turkey.
The power cuts have largely impacted major industrial zones, with some companies forced to halt production as a result.
Iran claims that its natural gas flows have been restored but Turkey has said its supplies and gas pressure remain very low.

Turkey is undergoing massive power cuts to industrial customers this week at an unprecedented level never seen before after the country’s natural gas supplies dipped following a disruption of imports from Iran. Major industrial zones and clusters and major production sites, including those of foreign car manufacturers, are being hit by power outages after Iran said at the end of last week it would halt natural gas exports to Turkey for ten days, due to technical issues.

On Friday, Iran announced that gas flows were restored, but Turkey said supplies were very low and at low pressure.

“The system is being disrupted due to the low amount and pressure. The compressor stations on the Turkey side are ready, operational, and there are no technical issues on the Turkish side,” a Turkish official told Reuters on Friday.

Gas supply from Iran to Turkey has yet to fully resume, which puts major industries under power cuts this week, according to Turkey’s main electricity distribution company TEIAS, cited by Bloomberg.

As of Monday, Turkey’s industrial production will stop completely for at least three days, Daily Sabah reported on Sunday.

Gas accounts for more than half of the country’s electricity generation, and Iran’s halting of flows comes at a time of surging gas imports for Turkey, which have become much more expensive due to the crumbling Turkish currency, the lira.

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China Set To Release Crude From Strategic Reserve In Early February

January 16, 2022

China Set To Release Crude From Strategic Reserve In Early February

China has agreed with the United States to release crude from its SPR around the Lunar New Year holiday on February 1
The volume of the release may depend on actual crude prices

China has agreed with the United States to release crude from its strategic reserves around the Lunar New Year holiday on February 1, as part of the broader U.S.-led effort for strategic releases to bring oil prices down, sources with knowledge of the talks told Reuters on Friday.

“China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near the $75 level,” one of the sources told Reuters, without offering additional details about the amount to be released.

China will be celebrating the Lunar New Year with an official holiday between January 31 and February 6, and the crude oil release is set to take place around that time, Reuters’ sources said.

U.S. President Joe Biden said at the end of November that the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) in a bid to lower high gasoline prices in a coordinated effort with other major oil-consuming nations. The SPR release from the United States will be carried out in parallel with other major energy-consuming nations, including China, India, Japan, South Korea, and the UK, the White House said at the time.

A day later, China said that the volume of the expected Chinese release of crude from its state reserves would be decided according to the country’s actual needs, and declined to comment if it would be releasing crude in the coordinated effort led by the United States.

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Germany To Become Net Power Importer For The First Time Since 2002

January 15, 2022

Germany To Become Net Power Importer For The First Time Since 2002

Europe’s largest economy, Germany, is expected to become a net importer of electricity in 2023 for the first time since 2002 due to retiring coal plants and the nuclear phase-out, the International Energy Agency (IEA) said on Friday.

Germany plans to switch off all its remaining nuclear power generators by the end of 2022, while it will also retire a large portion of its coal-fired capacity fleet between 2022 and 2024.

Recently, the country has said it would aim to phase out coal by 2030 – eight years ahead of earlier plans. The coal exit for Germany could be more difficult than in other European economies, because the country plans to phase out nuclear power generation by the end of this year.

The new coalition’s agreement in Germany includes, for example, the accelerated phase-out of coal—if possible by 2030—and the faster expansion of renewable energy, the IEA said in its Electricity Market Report – January 2022 published today.

Germany’s remaining nuclear capacity, which provided about 12 percent of total generation in 2021, is due to be phased out by the end of 2022. At the same time, some coal capacity is due to be retired according to the approved coal phase-out plans. Coal capacity is set to decline from 35 GW at the end of 2020 to 30 GW in 2022 and less than 26 GW in 2024, the IEA noted.

The timing of Germany’s nuclear phase-out and accelerated coal phase-out coincides with the ongoing energy crisis in Europe, where natural gas and power prices have jumped to record amid insufficient supply of gas and uneven wind power generation in northwest Europe, including in Germany.

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Gas Prices In Europe Are Soaring Again Amid New Cold Snap

January 7, 2022

Gas Prices In Europe Are Soaring Again Amid New Cold Snap

European benchmark natural gas prices rose on Wednesday for the third day in a row, as gas deliveries from Russia via Ukraine and Poland continue to be low while another cold snap is headed to Europe.

On Wednesday, natural gas prices at the Dutch TTF hub, the benchmark for European gas, rose by 6 percent by mid-day, following a 30-percent jump on Tuesday.

European gas prices reflect growing concerns that Russian natural gas flows to Europe via Ukraine and Poland have been abnormally low in recent days.

Russian gas supply to Europe via Ukraine dropped earlier this week to the lowest daily volume since January 2020. Daily gas transit flows from Russia westward to Europe via Ukraine on Monday were half the amount Russia had booked for that day, Sergiy Makogon, chief executive officer at Ukraine’s transmission system operator Gas TSO wrote on Facebook on Tuesday, adding that the drop in transit gas volumes was expected to continue. This is the lowest transit volume of gas Russia has sent via Ukraine since January 2020, Makogon said.

Ukraine has accused Russia of deliberately withholding gas supplies to Europe during the winter months to try to force an approval of the controversial Gazprom-led gas pipeline project Nord Stream 2.

At the end of December, Ukraine’s transmission system operator sent a letter to the German Ministry of Economy, in which it says, “we firmly believe that Nord Stream 2 endangers the security of the European Union’s gas supply.”

Nord Stream 2 awaits approval in Germany and then a review from the EU, which will likely push the in-service date of the pipeline well beyond the current winter heating season in Europe.

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Russia Puts The Blame On Europe As Energy Crisis Worsens

December 17, 2021

Russia Puts The Blame On Europe As Energy Crisis Worsens

The EU is reconsidering its position on extending long-term natural gas contracts.
Russia has maintained that the contracts are beneficial for Europe and moving away from them would be a mistake.
Russia even went as far as suggesting that Europe’s current energy crisis is its own fault.

The European Union (EU) is reportedly reconsidering its position on extending long-term natural gas contracts beyond 2049 as part of reforms in its natural gas market to meet the net-zero by 2050 goal. Should the European Commission’s proposal be endorsed by EU heads of state and government this week, putting a timeline to the end of long-term gas contracts would open another rift with Russia, which provides one-third of Europe’s gas supply via pipelines under long-term deals.

The measure, if approved by the EU, would run against Russia’s position that long-term deals are beneficial for Europe and moving away from them and increasing reliance on liquefied natural gas (LNG) was and will be a mistake.

Some EU member states are wary of what they perceive as Moscow using gas as a political tool to influence geopolitics.

However, as it stands, especially with the low levels of gas in storage and surging gas and energy prices, supply from Russia and Russia’s willingness to provide additional volumes to Europe on top of its contractual commitments has been and will be a key driver of the gas market and prices at European hubs this winter.

Despite the current crisis, the EU’s executive branch, the European Commission, is reportedly drafting plans to quit long-term gas supply contracts by 2049. At the same time, it plans to enhance the security of its gas supply, Bloomberg reported this week, citing a draft document prepared by the Commission.

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BP: Oil Demand Has Already Topped 100 Million Bpd

November 2, 2021

BP: Oil Demand Has Already Topped 100 Million Bpd

BP: Global oil demand has already exceeded the threshold of 100 million barrels per day
Demand will continue to increase and reach pre-COVID levels at some point in 2022

Global oil demand has already exceeded the threshold of 100 million barrels per day (bpd) last seen before the pandemic, supermajor BP estimates.

Demand will continue to increase and reach pre-COVID levels at some point in 2022, BP’s chief financial officer Murray Auchincloss said on Tuesday at a conference call following the release of the Q3 results.

“Somewhere next year we will be above pre-Covid levels,” Auchincloss said on the call, as carried by Bloomberg.

“OPEC+ is doing a good job managing the balance, so we remain constructive on oil prices,” BP’s CFO added on the call about BP’s third-quarter results, which beat analyst estimates.

Brent Crude prices rose by 7 percent to average $74 per barrel in the third quarter and moved above $80 per barrel in recent weeks, Auchincloss said at the Q3 results presentation.

“This reflects the strong rebound in oil demand as the impact of COVID eases as well as the measured increases in OPEC+ supply. As a result, inventories have reduced back toward pre-pandemic levels. As we look ahead to the end of the year, we expect oil prices to be supported by continued inventory draw-down, with the potential for additional demand from gas to oil switching,” BP’s executive added.

BP’s view about global oil demand is generally in line with most analyst and industry estimates pointing to consumption returning to pre-pandemic levels as soon as this quarter or early next year.

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Oil Prices Will Remain High For Years To Come

October 26, 2021

Oil Prices Will Remain High For Years To Come

A growing number of major investment banks are turning bullish on oil in the medium to long term.
A lack of investment is leading to supply deficits as demand rebounds to pre-COVID levels.
Rebounding consumption and tight supply could push oil prices even higher.

Six years after former BP chief executive Bob Dudley said that “the industry needs to prepare for lower for longer,” a growing number of major investment banks now expect “higher for longer” oil prices.

Rebounding global oil consumption amid tight supply—contrary to some forecasts last year that indicate demand may have peaked or was close to its peak—as well as years of underinvestment in new supply following the 2015 crash, have prompted Wall Street banks to raise significantly their projections for oil prices in the short and medium term.

Oil prices have hit multi-year highs in recent days, with WTI Crude at its highest since 2014 and Brent Crude at the highest level since October 2018.

Even after the latest rally, prices still have headroom to rise further, many major investment banks believe.

Goldman Sachs, for example, sees Brent hitting $90 per barrel at the end of this year, up from $80 expected earlier. The key driver of Goldman’s higher forecast is global oil demand recovery amid still a weaker supply response from non-OPEC+ oil producers.

The investment bank also sees sustained higher oil prices in the coming years.

Fundamentals warrant higher oil prices, and the bank’s forecast for the next several years is $85 a barrel, Damien Courvalin, Head of Energy Research & Senior Commodity Strategist at Goldman Sachs, told CNBC earlier this month.

Oil demand will set record highs next year and the year after that, and we need to see a ramp-up in investment, he said.

“We’re facing potential multi-year deficits and the risk of significantly higher prices,” Courvalin told CNBC.

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Forget $100, Options Traders Now Betting On Oil Prices Hitting $200

October 24, 2021

Forget $100, Options Traders Now Betting On Oil Prices Hitting $200

$100 Oil is no longer an ‘outrageous’ bet in the call-options market
Some speculative traders are now betting on $200 oil in December 2022
For those betting on $100 oil, the leader of the OPEC+ alliance, Saudi Arabia, has a message: look beyond the end of this year; an oversupply is coming next year

As oil prices hit multi-year highs, some speculative traders are betting on the options market that oil could exceed $100 a barrel by the end of this year and even reach a record $200 per barrel by the end of 2022.

Call options give traders the right—but not the obligation—to buy assets at a certain price, the so-called strike price, by a certain date.

The amounts of call options at triple-digit strikes have soared in recent weeks, suggesting that more speculative traders are attracted by potential quick profits from options trades, which are relatively low-cost ways to speculate on the direction of an asset.

Some “wild” bets such as call options at a $100 per barrel WTI Crude strike by December 2021 or $200 per barrel Brent Crude by December 2022 have been placed in recent weeks, The Wall Street Journal reports, citing data from provider QuikStrike.

For example, at the end of September, call options at Brent at $200 a barrel for December 2022 traded 1,300 times in one day, amid a worsening energy crunch in Europe and Asia ahead of the winter heating season in the northern hemisphere.

In WTI, the number of outstanding call options with $100 per barrel strike price with different expiry dates has surged five times since early February 2021 to more than 141,000 contracts as of the middle of October, according to data from CME quoted by the Journal.

Other popular call options for WTI included strikes at $95 or $180, QuikStrike data reported by the Journal showed.

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Putin: $100 Oil Is “Quite Possible”

October 14, 2021

Putin: $100 Oil Is “Quite Possible”

It is “quite possible” that the WTI Crude oil prices reach $100 per barrel in light of growing global demand for energy commodities, Russian President Vladimir Putin said on Wednesday
Putin: Russia and its allies in the OPEC+ oil producer group want a stable oil market without any shock spikes in prices

It is “quite possible” that the WTI Crude oil prices reach $100 per barrel in light of growing global demand for energy commodities, Russian President Vladimir Putin said on a CNBC panel at the Russian Energy Week on Wednesday.

Asked by CNBC’s Hadley Gamble whether the U.S. benchmark could hit $100 a barrel, Putin replied “That is quite possible.”

However, Russia and its allies in the OPEC+ oil producer group want a stable oil market without any shock spikes in prices, Putin said.

“Russia and our partners and OPEC + group, I would say we are doing everything possible to make sure the oil market stabilizes,” Putin said, according to a translation.

“We are trying not to allow any shock peaks in prices. We certainly do not want to have that — it is not in our interests,” the Russian president added.

The OPEC+ group decided last week to stick to their planned 400,000 barrels per day (bpd) increase in collective production in November, despite calls from oil importing nations to add more supply and despite an expected additional demand from a gas-to-oil switch due to record high natural gas prices in Europe and Asia.

Oil prices could hit $100 in case of a colder winter, some analysts and investment banks have said in recent weeks. Record-high natural gas prices are forcing some utilities to switch to oil derivatives instead, boosting demand for crude.

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The Energy Transition Will Take Decades Not Years

October 9, 2021

The Energy Transition Will Take Decades Not Years

With natural gas, coal, and oil prices all soaring this summer, it is clear that a successful energy transition will take decades not years
Some energy transition proponents may have confused Covid energy demand destruction with a change in consumer behavior
The truth is that an energy transition can only occur when clean energy can be provided both cheaply and reliably

This year’s global demand for all three fossil fuels has sent a message to overly enthusiastic proponents of the energy transition – hold your horses.

Those who predicted last year the demise of oil, gas, and coal after the pandemic and those who said that peak oil demand was already behind us because lasting changes in consumer behavior would reduce the use of crude are now facing reality.

Global oil demand is just a few months away from reaching pre-pandemic levels, while natural gas and coal demand have already exceeded the 2019 volumes.

Sure, international airline travel is still struggling because of COVID-related travel restrictions in place in many countries. But economies are bouncing back, industries are growing, and the world needs a lot of energy, once again.

Fossil Fuels Support Economic Growth

And fossil fuels continue to supply most of that energy and will do so for years to come. Last year’s slump in fossil fuel consumption is being erased, and those who expected oil, gas, and coal demand to never return to pre-COVID levels now know they were wrong.

Also wrong were all those who hoped the ‘build back greener’ policies that governments pledged last year would suddenly lead to solar, wind, biofuels, sustainable aviation fuels, and hydrogen displacing fossil fuel-generated energy overnight.

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Skyrocketing Energy Prices Could Cripple Europe’s Economy

September 20, 2021

Skyrocketing Energy Prices Could Cripple Europe’s Economy

Surging energy prices in Europe are hurting more than just consumers. The price spikes have started to hit industrial activities, threatening to deal a blow to the post-COVID recovery in European economies with a triple whammy of reduced consumer purchasing power, lower industrial production, and higher operating costs.

Giant European firms, from chemicals and mining to the food sector, say sky-high gas and electricity prices are hitting their profit margins and forcing some of them to curtail operations.

Some factories have shut down because of record natural gas prices. More idling of industrial activity across Europe is likely in the coming weeks, analysts say.

Meanwhile, the record European natural gas prices are sending Asian spot prices of liquefied natural gas (LNG) to record levels for this time of the year—between peak summer demand and ahead of the winter heating season.

Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices on the continent and power prices in the largest economies to record highs. Almost daily, gas and power prices in Europe surge to fresh records, putting pressure on governments as consumers protest against soaring power bills.

It’s not only consumers that struggle with the record energy prices. Industries are starting to feel the heat, too.

CF Industries, a manufacturer of hydrogen and nitrogen products, said this week it was halting operations at both its Billingham and Ince manufacturing complexes in the UK due to high natural gas prices.

“The Company does not have an estimate for when production will resume at the facilities,” CF Industries said.

Norway-based Yara, one of the world’s top ammonia producers, is curtailing production due to the record-high gas prices.

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Why Norway Won’t Give Up On Oil & Gas

August 1, 2021

Why Norway Won’t Give Up On Oil & Gas

Norway doesn’t have any second thoughts about oil exploration and investment in light of the International Energy Agency’s (IEA) report suggesting that no new fossil fuel exploration would be needed for a net-zero world.

Western Europe’s biggest oil and gas producer is doubling down on oil development and continues to consider oil exploration and production a critical part of its economy and income for the state.

Norway, the country with the highest electric vehicle (EVs) share of new car sales anywhere in the world, is not giving up on one of its core industries. The oil and gas sector is a major employer and the key contributor to the so-called oil fund, the world’s largest sovereign wealth fund with US$1.3 trillion in assets and holdings of 1.4 percent of all of the world’s listed companies.

The Norwegian government believes that the industry could reduce emissions and reach net-zero operations on the Norwegian continental shelf, at the same time ensuring new oil developments to support the local supply chain and employment. Norway is also betting big on offshore wind and carbon capture technology, including with strong financial support from the government, but it believes that oil and gas can continue to create value in the long term.

Norway is betting on offshore wind, hydrogen, and electrification to meet its commitment under the Paris Agreement, but its oil and gas sector will continue to play a major role in long-term job creation, economic growth prospects, and value for the country, the government said in a White Paper last month.

“The main goal of the government’s petroleum policy – to facilitate profitable production in the oil and gas industry in a long term perspective – is firmly in place,” Norway’s Minister of Petroleum and Energy, Tina Bru, said.

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European Bank For Reconstruction And Development Ends All Upstream Oil Financing

July 6, 2021

European Bank For Reconstruction And Development Ends All Upstream Oil Financing

The European Bank for Reconstruction and Development (EBRD) will no longer invest in oil and gas exploration and production, the bank’s Managing Director Harry Boyd-Carpenter told Reuters as the institution pledged to align all its activities to the Paris Agreement goals from the end of next year.

“We will no longer invest in upstream oil and gas projects,” Boyd-Carpenter told Reuters on Thursday.

On the same day, the bank announced that its Board of Governors decided at the Annual Meeting 2021 to accelerate decarbonization across the regions it operates, supporting them to reach net-zero emissions by 2050.

The EBRD invests in projects in central and eastern Europe, Central Asia, and the Southern and Eastern Mediterranean.

The EBRD, however, will continue to invest in selected oil and gas projects in the downstream and midstream that are aligned to or contribute to the Paris Agreement goals, EBRD’s Boyd-Carpenter told Reuters.

“The low carbon transition requires the world economy to move in less than 30 years from a more than 80 per cent reliance on fossil fuels to a net-zero model. This is a challenge that is unprecedented in economic history. Similarly, the associated opportunity is enormous,” the EBRD’s First Vice-President Jürgen Rigterink said in a statement.

The EBRD is the latest bank to announce it would halt financing for one or other form of oil and gas.

Last year, Deutsche Bank ended financing for new oil and gas projects in the oil sands and the Arctic region effective immediately.

In the United States, Goldman Sachs said in December 2019 that it would decline to finance new Arctic oil exploration and production and new thermal coal mine development or strip mining. Wells Fargo and JPMorgan have also said they would stop financing new oil and gas projects in the Arctic.

Earlier this year, UN Secretary-General António Guterres’ said that banks should finance low-carbon climate-resilient projects, not big fossil fuel infrastructure that is not even cost-effective anymore.

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