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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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China Could Cause The Next Massive Crash In Oil Prices

December 8, 2021

China Could Cause The Next Massive Crash In Oil Prices

China has been one of the main drivers of the 2000-2014 commodities supercycle
Slower economic growth and a huge debt bubble pose a tremendous risk to oil markets
China’s Evergrande crisis shows the fragility of the Chinese debt market

Given the extreme disconnect between China’s huge economy-driven oil and gas needs and its minimal level of domestic oil and gas reserves, the country’s influence over oil prices has long been profound. As a result of this imbalance, China almost alone created the 2000-2014 commodities ‘supercycle’, characterized by consistently rising price trends for all commodities that are used in a booming manufacturing and infrastructure environment. This was a product largely of the 8 percent-plus annual GDP growth recorded by China over that period, with many spikes well above 10 percent and only a relatively short move down in economic growth at the onset of the Great Financial Crisis. Aside from huge quantities of imported oil and gas, this massive economic growth was fuelled by enormous debt piled up but then hidden away in various financial mechanisms that China believed it could simply pay off eventually through its rapid economic growth. Developments in the last week or so hint that both of these bubbles may be set to burst, taking the big bid in oil out of the market.

“Despite some easing in the energy market, downside risks to growth persist, and we continue to expect GDP growth to ease to 5.2 percent in 2022 from an estimated 8.2 percent growth in 2021,” Eugenia Fabon Victorino, head of Asia Strategy for SEB, in Singapore, told OilPrice.com last week. “Easing in financial conditions will not spare the property sector from further pains, and bond defaults will continue to test investors’ nerves,” she said.

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The Geopolitical Game That Could Transform Gas Markets

December 5, 2021

The Geopolitical Game That Could Transform Gas Markets

An apparent detente between the UAE and Turkey could be one of the most significant geopolitical developments in the region for decades
If Mohammed bin Zayed can succeed in exploiting Turkey’s economic crisis, the East Mediterranean natural gas fields could finally be exploited and sent to market
While this is a win-win situation for the UAE, it is unclear whether Erdogan will be willing to do what is necessary to ensure progress in the region

At a time when media and financial analysts are fully focused on oil futures, natural gas markets are moving again. East Mediterranean gas futures, in particular, seem to be looking up due to some ongoing regional developments. The unexpected but very successful visit of Abu Dhabi’s Crown Prince Mohammed bin Zayed to Turkey and Egypt may well have long-lasting consequences in the region. The multibillion agreements signed between Turkey and the UAE, especially the long-term investment agreements between the Turkish sovereign wealth fund and UAE corporations, such as Abu Dhabi Ports, seem to be an opening to a new era of cooperation in the region.

The overall optimism shown in Turkish and Abu Dhabi-based media sources, however, should be taken with a grain of salt as financial deals may not counter the ongoing power struggle between Turkey’s president Erdogan and Abu Dhabi’s Crown Prince Mohammed bin Zayed. Both nations are supporting political, military, and economic power projects in the East Mediterranean and MENA regions designed to increase their influence. Turkey’s president Erdogan will see the first visit of MBZ in 12 years as a major triumph. His regional power plays are still a bone of contention in Abu Dhabi, Cairo, and Athens. While Turkish media sources are very optimistic about the perceived thaw in relations, other regional players have been watching with anticipation to understand the real outcome of the meetings.

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The Energy Transition Will Be Impossible Without Fossil Fuels

November 29, 2021

The Energy Transition Will Be Impossible Without Fossil Fuels

OPEC members and other participants of ADIPEC2021 are calling on governments and international institutions to be realistic about the global energy transition
While countries like the UAE and Saudi Arabia are ready to embrace the energy transition, they argue that nations need to accept the role of fossil fuels in the global energy mix
African energy nations, in particular, have supported this message, claiming that they will be left behind if funding and development of their fossil fuel industries dries up

A week after COP26 came to an end, the global energy industry is now turning its focus to Abu Dhabi’s annual international oil and gas conference ADIPEC2021. A range of international oil companies, national oil companies, and oilfield service companies are convening to discuss not only the impact of the COP26 agreements but also the other challenges facing the industry.

The conference, considered one of the most important events of the year for the sector, will have to deal with a wave of criticism and negative attention from the media, Western governments, and activist shareholders. At the same time, the call for realism and transparency regarding the energy transition and climate change actions is growing. During the opening speech of ADIPEC2021, ADNOC’s CEO Sultan Al Jaber frankly addressed critical points that will be on the table over the next decade. Al Jaber highlighted the issues faced by the industry in his opening statement: “we meet at a historic moment. The global community has just concluded COP26… and, on balance, it was a success. Yet, current energy dynamics have revealed a basic dilemma. While the world has agreed to accelerate the energy transition… it is still heavily reliant on oil and gas“.

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Brits Google ‘Energy Bill Help’ As Energy Suppliers Go Bankrupt

November 23, 2021

Brits Google ‘Energy Bill Help’ As Energy Suppliers Go Bankrupt

Extreme gas price volatility has led to a string of bankruptcies among British energy suppliers
UK Household gas bills have risen by 28.1 percent and electricity bills 18.8 percent in the year to October
Germany’s recent decision to halt approval of the Nord Stream 2 pipeline has added to UK energy woes

Google searches for ‘energy bill help’ exploded over three thousand percent in the UK on November 17, the same day two more energy suppliers collapsed.

Neon Energy and Social Energy Supply both ceased trading earlier this week, leaving 35,000 more customers in need of rescue from market regulator Ofgem.

Recent analysis of Google data from energy experts Boiler Central showed a massive spike in people looking for help with their energy bills.

This included a whopping 212 percent increase in searches for cheaper heating alternatives including ‘portable heater’ on November 17 as well.

Since the start of September, 21 energy companies have ceased trading due to soaring wholesale costs, while half of the country’s dual-suppliers have crashed out of the market in the past 12 months.

Household gas bills have risen by 28.1 percent and electricity bills 18.8 percent in the year to October, according to the ONS.

Germany’s recent decision to halt approval of a gas pipeline from Russia has also caused wholesale gas prices to jump 17 percent in the UK and EU.

Meanwhile, Ofgem is set to examine and potentially increase the energy price cap from its current £1,277 average use limit next year.

A spokesperson for Boiler Central said: “The rise in searches for help with energy bills in the UK, as well as an increase in searches for portable heaters, exposes how much recent soaring energy bills are affecting people.”

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

Biden Asks The World For Help Easing The Global Energy Crisis

November 22, 2021

Biden Asks The World For Help Easing The Global Energy Crisis

Oil prices have fallen below a key psychological barrier on news that Biden is trying to persuade a number of countries to release crude from their Strategic Petroleum Reserves.
Biden’s highly unusual move comes just months after he made another request to OPEC+ to boost production so as to tame the oil price rally, and was once again denied.
U.S. gas prices have surged 60% since the beginning of the year, with prices in California hitting all-time highs, pitting Democrats against the administration.

Oil prices have dipped to their lowest levels in six weeks, with both Brent and WTI dropping below the psychologically important $80 per barrel mark for the first time in weeks. Brent was quoted at $79.67/barrel in Friday’s intraday session, with WTI trading at $77.65 as talk of several countries releasing crude from their strategic reserves continued to gain momentum. According to Reuters, the Biden administration has reached out to several countries, including China, India, South Korea, and Japan, urging them to synchronize the release of crude from their Strategic Petroleum Reserves (SPRs) in a bid to lower global energy prices.

On the opposite side of the spectrum, European gas prices have recovered from their intra-week lows as indications of Russian supply flows remained disappointingly low.

According to the Financial Times, whereas Gazprom (OTCPK:OGZPY) started adding some gas to its largest storage sites in Germany and Austria last weekend, Russia has failed to book additional pipeline capacity, suggesting that any storage fill would come from existing flows.

“Russia has done what it said it was going to do, but in a very narrow way. What would get a bigger reaction from the market would be if Gazprom went back to auctioning short-term gas supplies, as they have done in previous years,” Laurent Ruseckas at IHS Markit tells FT.

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The End Of Venezuela’s Oil Era

November 20, 2021

The End Of Venezuela’s Oil Era

Venezuela, once Latin America’s largest oil producer and a founding member of OPEC, has seen its economically vital oil industry collapse triggering one of the worst economic and humanitarian crises of the century. The pain is far from over for Venezuela’s people and the country’s failing economy. Before 1920, Venezuela was a poor agricultural country facing many of the developmental issues plaguing Latin America. The country’s journey to becoming a crude oil superpower, leading petroleum state, and founding OPEC member began in 1914 with the drilling of the Zumaque well in the Mene Grande field on the eastern shores of Lake Maracaibo. This was Venezuela’s first commercial oil well and it launched a monumental oil boom that transformed the country and by 1950 saw it become the world’s fourth wealthiest nation per capita. Venezuela was not only heralded as Latin America’s richest nation but also its most developed. By the 1970s, the country, which is now a socialist dictatorship, was lauded as Latin America’s most stable democracy at a time when most nations in the region were ruled by military dictatorships. By the 1980s, Venezuela’s democracy was unraveling because of a global recession and sharply weaker oil prices. These events weighed heavily on the economy, and government spending, causing the country to spiral into debt. By the late-1980s Caracas had turned to the International Monetary Fund for help. The IMF recommended market-oriented neoliberal economic reforms including savage budget cuts, primarily impacting social programs such as public health and education. When these reforms were implemented by Caracas, they triggered considerable civil unrest. The reforms also sparked runaway inflation which only worsened the suffering of every-day Venezuelans. Those events illustrated the substantial dependence of Venezuela’s economy on oil and the country’s vulnerability to weaker prices…

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Why U.S. Shale Won’t Go To War With OPEC+

November 10, 2021

Why U.S. Shale Won’t Go To War With OPEC+

OPEC+ will be very happy with where oil prices currently are and is unlikely to change its course anytime soon
The U.S. does have the ability to increase production, but U.S. shale does not have support from either the government or shareholders to boost production significantly
The two bearish variables that could drag prices down in the near term are a strong dollar and the continuation of inventory builds

For years, the Kingdom of Saudi Arabia’s economy has suffered from low oil prices. Since 2014 when it increased supplies to try and break American shale producers, Saudi Arabia has had to struggle with a flooded market. Its cash reserves have been drawn down by hundreds of billions and it had to sell a small percentage of its prize asset, Saudi Aramco. At the same time, Saudi Arabia’s Vision 2030 plan fell behind in its lofty goals of diversifying its economy. I discussed this at some length in a prior Oilprice article. Now with the price of Brent – the benchmark against which Saudi Arabia prices its production – finally back above the $80 mark, the Kingdom is beginning to refill its coffers. So it was no great surprise when the Saudis and the Russians, the two principal members of the OPEC+ cartel, roundly rejected a demand from President Biden to increase production to ease the world’s energy crisis.

Up to this point, there had been some lingering concern on the part of OPEC+ that too high a price would reinvigorate the shale industry that had finally come to heel in early 2020. Restraint on the part of shale drillers since then has encouraged them that a new “war” for market share won’t be the result…

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Conflict In North Africa Threatens Gas Supply To Europe

November 8, 2021

Conflict In North Africa Threatens Gas Supply To Europe

A diplomatic crisis between Morocco and Algeria threatens gas supply to Spain
Spain considers importing more (expensive) LNG
Algeria faces a number of problems in expanding its gas market share in Europe

European natural gas supplies are not only waning because of lower Russian supply. Brussels, Berlin and even the Hague are keeping a keen eye on the statements made by Russian President Vladimir Putin and market reports about reduced flows through the Yamal pipeline and Ukraine. At the same time, it seems that Fort Europe is being besieged from all sides. The market is also being confronted by the negative implications of a political crisis between Morocco and Algeria, negatively impacting the latter’s gas supplies to the Iberian Peninsula.

For a few weeks a full-out political, economic and possibly security crisis has been building up between Algeria and Morocco, mainly caused by the still continuing Western Sahara-Mauritania conflict. For decades, Morocco has exerted control over the Western Sahara, fighting a military conflict with rebel movement Polisario, which is backed by Algiers. Until now, Morocco has controlled most of the Western Sahara territory, considering it to be Moroccan. And since August 2021, when Algeria severed its diplomatic relations with Morocco, the conflict has spread to gas pipeline politics too.

Algeria is facing a struggling economy, which has been hit hard by COVID-19, endemic corruption, mismanagement and internal political strive. Algeria’s leaders are also increasingly worried about Morocco’s growing political influence in the region, and even its improving relations with Israel. Internal instability, especially after the death of its former leader Bouteflika, has caused economic mayhem, and has led its oil and gas sector, the major source of income, to decline.

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The Oil Omen: First Large U.S. Shale Driller To Pledge Flat Output In 2022

November 3, 2021

The Oil Omen: First Large U.S. Shale Driller To Pledge Flat Output In 2022

Diamondback said it planned to pump some 221,000 to 225,000 barrels of crude daily. For full 2021, Diamondback said production would come in at between 222,000 to 223,000 bpd
Most large shale drillers are adopting the same approach in order to keep their shareholders happy after years of burning cash to boost production to a maximum

Diamondback Energy has said it will not increase its crude oil production next year despite the surge in prices.

In the release of its third-quarter results, Diamondback said it planned to pump some 221,000 to 225,000 barrels of crude daily. For full 2021, Diamondback said production would come in at between 222,000 to 223,000 bpd.

“As we move into 2022, we are still seeing excess oil supply and varying demand recovery profiles across the globe. As such, we remain committed to capital discipline and our plan to return excess Free Cash Flow to our stockholders,” said the company’s chief executive, Travis Stice, echoing a widely shared attitude in the shale oil and gas industry.

“Therefore, we are committing to maintaining our fourth quarter 2021 Permian oil volumes throughout next year and we believe this can be accomplished by spending the amount of capital implied by our fourth quarter 2021 guidance run-rate,” Stice also said, noting this approach would allow the company to return more cash to shareholders, pay down more debt, and maximize free cash flow.

Most large shale drillers are adopting the same approach in order to keep their shareholders happy after years of burning cash to boost production to a maximum. While this new approach of restraint is welcomed by shareholders, the general public—and drivers specifically—have no reason for joy.

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

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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Global Food Prices Set To Soar As The Oil And Gas Crunch Continues

October 27, 2021

Global Food Prices Set To Soar As The Oil And Gas Crunch Continues

Oil and gas prices have risen dramatically this year as a result of underinvestment and recovering demand.
Higher fuel prices are weighing on global food supply chains, with transportation and farming costs continuing to climb.
The hardest hit will, once again, be those living in developing economies that are still struggling to recover from the impact of the pandemic.

The potential for a knock-on effect of rising fuel prices to be felt by other industries is becoming more likely, as oil and gas prices continue to rise to an all-time high, companies are finding it hard to maintain their costs and may have to shift this burden to the consumer any day now.

Petrol prices have risen higher and higher this year, as oil makes a comeback in 2021 following a difficult year of pandemic restrictions and low demand. This has, of course, been aided by the OPEC+ curbs on production that restricted oil output across member states for the first half of 2021. And while production levels are slowly rising, some countries are finding it difficult to reach new OPEC targets as they revive their oil and gas industries, meaning the global shortage continues.

Looking at the price of gasoline over the last 20 years, you can see that the global average has doubled, from $0.60 a litre in 2001 to $1.20 a litre today. This year, in particular, the increase in demand as economies open back up following over a year of restrictions, added to a supply shortage across much of the world, means prices are nearing an all-time-high.

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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.

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

Putin Lays Cards Down: Approve Nord Stream 2 To Get More Gas

October 26, 2021

Putin Lays Cards Down: Approve Nord Stream 2 To Get More Gas

Russia could immediately increase natural gas deliveries to Europe as soon as German authorities approve the Nord Stream 2 pipeline, the Financial Times reports, citing President Vladimir Putin as saying gas can be delivered “the day after tomorrow” if approval is granted “tomorrow”.

Putin said Russia could deliver an additional 17.5 billion cu m of gas if the new pipeline gets the green light. This amount, according to the FT, is equal to a tenth of Russian gas deliveries to Europe and Turkey last year and would come not a moment too soon as Europe continues to struggle to fill up its reserves ahead of winter.

However, the Russian president’s statement is also likely to spark anger in Europe since it confirms suspicions that Russia wants to withhold additional supplies for Europe until Nord Stream 2 is approved. Moscow officials have said that Gazprom was prioritizing domestic energy security, and the company itself has repeatedly stated that it had fulfilled its delivery obligations under long-term contracts with European buyers.

Earlier this week, sources from Moscow also hinted that there would be more gas for Europe if Nord Stream 2 is approved, Bloomberg reported. But, separately, speaking to Bloomberg, a Russian MP said, “We cannot ride to the rescue just to compensate for mistakes that we didn’t commit.”

Meanwhile, top Russian officials, including Deputy Prime Minister and former Energy Minister Alexander Novak, have argued that Europe’s gas crisis was not the result of insufficient supply but a consequence of lower than usual inventories and bad decisions on the part of politicians.

At the same time, some in Brussels are accusing Gazprom of market manipulation to make prices rise. More than 40 members of the European Parliament from all political groups have reportedly urged the European Commission to launch an investigation into Gazprom over alleged market manipulation that could have contributed to the record-high natural gas prices in Europe.

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.

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

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