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OPEC announces the biggest cut to oil production since the start of the pandemic

OPEC+ said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

The price of Brent crude oil rose 1.5% to more than $93 a barrel on the news, adding to gains this week ahead of the gathering of oil ministers. US oil was up 1.7% at $88.

The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “shortsighted” and saying that it will hurt low and middle-income countries already struggling with elevated energy prices the most.

The production cuts will start in November, and the Organization of Petroleum Exporting Countries (OPEC) and its allies will meet again in December.

In a statement, the group said the decision to cut production was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

Global oil prices, which soared in the first half of the year, have since dropped sharply on fears that a global recession will depress demand. Brent crude is down 20% since the end of June. The global benchmark hit a peak of $139 a barrel in March after Russia’s invasion of Ukraine.

OPEC and its allies, which control more than 40% of global oil production, are hoping to preempt a drop in demand for their barrels from a sharp economic slowdown in China, the United States and Europe.

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Germany nationalizes its biggest natural gas importer

Germany is nationalizing Uniper, its biggest importer of natural gas, as part of an €8 billion ($7.9 billion) plan to prevent an energy shortage this winter.

Europe has been hit by soaring natural gas and electricity prices as a result of Russia’s invasion of Ukraine and its throttling of gas supplies.

The German government will hold around 99% of Uniper after injecting new capital and buying out its Finnish parent company Fortum (FOJCF), German Economy Minister Robert Habeck told journalists in Berlin on Wednesday.

Uniper provides 40% of the country’s gas supply and is crucial for large companies and private consumers in Europe’s biggest economy.

In July, Chancellor Olaf Scholz announced the government would step in to bail out Uniper with a package worth up to €15 billion ($15.3 billion), after it was brought to its knees by months of Russian supply cuts and soaring spot market prices.

Under the rescue deal, the government committed to provide €7.7 billion ($7.8 billion) to cover potential future losses, while state-run bank KfW agreed to increase its credit facility by €7 billion ($7.1 billion).

But Habeck said the situation had “worsened dramatically” since Russia cut off gas supplies to Europe through the Nord Stream 1 pipeline indefinitely on September 1, citing an oil leak.

Russian gas has had to be substituted with costly alternatives, leading to soaring bills for consumers.

Although gas supplies through Nord Stream 1 are suspended, Germany’s gas reserves are filled at more than 90% capacity, European Storage provider GIE AGSI+ said on its website.

Still, the European energy crisis isn’t going away.

Habeck said that the country could “get through winter well” without Russian gas, but warned of “really empty” supply levels in the period thereafter.

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A third of Brits face poverty with energy bills set to hit $5,000

A third of Brits face poverty with energy bills set to hit $5,000

London (CNN Business)

Nearly one third of households in the United Kingdom will face poverty this winter after paying energy bills that are set to soar again in January, campaigners say.

About 10.5 million households will be in fuel poverty for the first three months of next year, according to estimates from the End Fuel Poverty Coalition (EFPC) published on Tuesday — meaning that their income after paying for energy will fall below the poverty line.
The UK government defines poverty as household income of less than 60% of the UK median, which stood at £31,000 ($37,500) in 2021, according to official statistics.
The predictions are based on new estimates from research firm Cornwall Insight, also published Tuesday, which show that the average household energy bill is expected to hit £3,582 ($4,335) a year from October, and £4,266 ($5,163) from January — equating to about £355 ($430) a month.
January’s forecast represents a 116% increase in energy bills from current levels. As fuel prices surge, estimates are having trouble keeping pace. Just last week, Cornwall Insight predicted January’s prices would rise by 83% from current levels.
The research firm said it had revised its figures because of a jump in wholesale prices and a change in the way the UK regulator calculates its price cap. But there could be relief on the horizon: Cornwall Insight expects bills to start falling in the second half of 2023.
Fuel bills started rising last year as a global natural gas supply crunch pushed wholesale prices up to record levels. Russia’s invasion of Ukraine in late February has only exacerbated the situation.
The average UK household bill has already risen 54% this year, exacerbating a cost-of-living crisis that has forced many Britons to choose between “heating and eating.”

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OPEC agrees to produce slightly more oil as recession fears loom

OPEC agrees to produce slightly more oil as recession fears loom

London (CNN Business)The world’s oil-exporting countries have agreed to a tiny increase in output next month amid fears that a global recession will crimp demand.

The Organization of the Oil Exporting Countries and its allies — which includes Russia — also known as OPEC+, said on Wednesday that it would produce an additional 100,000 barrels a day in September.
This was the first OPEC meeting since US President Joe Biden visited Saudi Arabia last month. Biden urged the country — which is the group’s biggest oil producer — to start pumping more.
For months, prices have climbed as Western embargoes on Russian oil have limited global supply. Those prices have helped the world’s biggest oil companies reap record profits, even as millions face surging fuel bills.
A gallon of regular gasoline in the United States surpassed $5 for the first time in June, though prices have fallen back significantly since then.
The price of Brent crude, the global benchmark, also hit a high of $139 a barrel in March in the days after Russia invaded Ukraine, but Brent is now trading at around $100 as traders fear a global recession will hurt demand.
Brent crude and West Texas Intermediate crude — the North American benchmark — both rose initially on Wednesday after OPEC’s announcement, as oil investors expected a bigger increase in production. But prices fell about 2% by midday.
“As a production rise it is a very small percentage of overall production, and much smaller than previous months increases, and thus makes little difference to the overall supply picture,” Hazel Seftor, senior research analyst for global oil supply at Wood Mackenzie, told CNN Business.

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Brace yourselves for an economic ‘hurricane,’ Jamie Dimon says

Jamie Dimon is no meteorologist, but the JPMorgan Chase CEO is predicting an economic “hurricane” caused by the war in Ukraine, rising inflation pressures and interest rate hikes from the Federal Reserve.

“Right now it’s kind of sunny, things are doing fine. Everyone thinks the Fed can handle this,” Dimon said at a Bernstein conference. “That hurricane is right out there down the road coming our way.”

“We just don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself,” Dimon said, adding that JPMorgan Chase (JPM) is preparing for a “non-benign environment” and “bad outcomes.”

Dimon said that the economy is “distorted” by inflation. He’s also worried that the Fed is starting to unwind its bond portfolio, a process known as quantitative tightening, at the same time it is raising interest rates. That’s something that the market is not prepared for, Dimon said, adding that people will be “writing about [this] in history books for 50 years,”

But the Fed is in a bind. Dimon said the central bank must raise rates because of surging housing prices and other inflation pressures. He stressed that he still thinks the US banking system is in “great shape” and can withstand these challenges.

Dimon also said that JPMorgan Chase is going to do all it can to attract talent to stay on top of the financial world. The CEO said the bank will be “religious” about paying well to keep its best workers.

Dimon’s more cautious outlook comes just a few days after he sounded a little more upbeat about what’s next for the markets and the economy.

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OPEC and Russia will pump more oil in January despite price plunge

OPEC and Russia will pump more oil in January despite price plunge

Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, attends the COP26 climate summit in Glasgow in November.

London (CNN Business)Saudi Arabia, Russia and other leading oil producers have decided to stick with plans to increase supply in January despite a recent plunge in prices driven by fears of a new glut.

The agreement was reached Thursday at a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and key allies, known as OPEC+. Global oil prices have fallen more than 20% since late October.
Brent crude futures, the global benchmark, had soared about 70% since the beginning of the year, but began falling in November when the United States and other major oil consuming nations agreed to release millions of barrels from their strategic reserves to try to cool gasoline prices and prevent a further boost to inflation.
The losses accelerated as Covid-19 cases surged in Europe and the Omicron variant emerged as a potential new threat to economic activity.
In its statement, OPEC+ said it would continue to take stock of the pandemic, monitor the oil market closely, and stood ready to make “immediate adjustments if required.” It has scheduled its next meeting for January 4.
Analysts had been expecting OPEC+ to pause an output increase of 400,000 barrels per day scheduled for January given the recent price fall and uncertainty over the trajectory of the pandemic and its impact on oil demand. Brent crude and US oil futures, which were trading higher earlier Thursday, turned negative on the announcement before recovering to trade about 1% higher at around $69 and $66 a barrel respectively…

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Here to stay or gone in 30 years? Inside the fight over the future of the oil industry

Here to stay or gone in 30 years? Inside the fight over the future of the oil industry

The people who made their fortunes in the oil capital of Europe need a new plan.

For decades, Aberdeen, a port city on Scotland’s northeast coast, has served as the commercial gateway to the North Sea, where powerful companies have navigated deep and dangerous waters to extract tens of billions of barrels of crude.
But the basin isn’t what it used to be, even with oil back above $80 per barrel. Production has been on the decline since the turn of the century. Downturns caused by twin price shocks — one in 2015 and one triggered by the Covid-19 pandemic — are harrowing reminders of what happens when a boom turns bust.
Then there’s the COP26 climate summit in the Scottish city of Glasgow, which kicks off Sunday. The United Nations and partner scientists have delivered a clear message: The world needs to “immediately and steeply” cut back on fossil fuel production to maintain a livable planet.
Attention is focused on huge energy producers like Saudi Arabia, Russia and the United States and top consumers like China and India. But the United Kingdom’s North Sea is in focus, too — in part due to its proximity to Glasgow, but also because of huge efforts to dramatically overhaul the region’s business model.
Dock cranes pictured at the port in Aberdeen, Scotland.

Dock cranes pictured at the port in Aberdeen, Scotland.
There’s a growing movement in Aberdeen for the region to lead the transition from Big Oil to Big Energy, using its deep-sea expertise to construct floating wind farms alongside offshore rigs.
“I think 2015 was the wake-up call that Aberdeen actually needed to say, ‘This ain’t going to be around forever,'” said Russell Borthwick, the local chamber of commerce’s chief executive…

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Gas prices skyrocket as the global energy crisis worsens

Gas prices skyrocket as the global energy crisis worsens

New York (CNN Business)The cost of energy was dirt cheap in the spring of 2020 as roads and airports sat nearly empty during the height of the Covid-19 pandemic.

Energy demand is back today as the world economy reopens — but supply simply hasn’t kept up. That’s why US oil prices have skyrocketed $120 since crashing to negative $40 a barrel in April 2020. US oil prices finished above $80 a barrel on Monday for the first time in nearly seven years.
Crude gained 1.5% to end the day at $80.52. The last time oil closed above $80 was October 31, 2014.
All of this is leading to sticker shock for many Americans filling up at the pump — at a time of the year when gas prices typically cool off. The national average price for gasoline hit a fresh seven-year high of $3.27 a gallon on Monday, up by 7 cents in the past week alone, according to AAA. Gas has nearly doubled since bottoming at $1.77 in April 2020.
High gas prices will only exacerbate elevated inflation, squeeze the budgets of American families and hurt President Joe Biden’s political fortunes.
Unfortunately, prices at the pump may get lifted even higher by the global energy crisis.
Natural gas prices have skyrocketed so much, especially in Europe and Asia, that power plants and factories may increasingly turn to a relatively cheaper fuel source for electricity: crude oil.
“It’s a case of just trying to keep the lights on,” said Matt Smith, Kpler’s lead oil analyst for the Americas. “This is essentially creating demand that typically isn’t there,”

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Shell says its oil production has peaked and will fall every year

Shell says its oil production has peaked and will fall every year

Royal Dutch Shell (RDSA) said its oil production and carbon emissions have peaked as it detailed plans to gradually wean itself off fossil fuels. Climate activists said it hadn’t gone far enough.

The Anglo-Dutch company said in a statement on Thursday that it expects its oil production to decline by between 1% and 2% each year after peaking in 2019. Its total carbon emissions likely peaked in 2018, it added.
Shell unveiled plans in September to become a net zero emissions business by 2050 (including from its own products and those that it sells), joining European rivals BP (BP) and Total (TOT) in making a shift towards clean energy.
The oil giants have written off billions of dollars of assets, spurred on by forecasts that global oil demand may never recover to levels reached before the pandemic, amid permanent changes to how people work and travel and growing concerns about the climate crisis.
Now Shell is setting out how it hopes to achieve its goals. It wants to sell more clean energy, while investing in carbon capture and forestation projects to offset emissions. It will also expand its biofuels production and distribution business.
“Whether our customers are motorists, households or businesses, we will use our global scale and trusted brand to grow in markets where demand for cleaner products and services is strongest, delivering more predictable cash flows and generating higher returns,” said CEO Ben van Beurden.
While European oil companies try to reinvent themselves, America’s ExxonMobil (XOM) and Chevron (CVX) have so far resisted major changes to their businesses. But shareholders are agitating for a shift in direction and there are signs that the pressure may be starting to have an impact.

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