After an initially subdued reaction to yet another crude oil build in the U.S. on Thursday, oil prices fell on Friday morning as bearish sentiment built. Speculation of further Russian production cuts and a rebound in Chinese demand had held oil prices higher, but inflation fears and continued inventory builds eventually sent prices lower.
Friday, February 24th, 2023
Yet another build in U.S. crude inventories added to downward pressure on oil prices on Friday morning. The EIA’s report weighed particularly heavily on WTI, opening an arbitrage window into both Europe and Asia. The market reaction to another 7.6-million-barrel build was originally subdued by speculation of a further production cut from Russia and rumors of Chinese demand returning. Ultimately, inflation fears and continued inventory builds pushed oil prices lower, with ICE Brent trending around the $81 per barrel mark.
A Flotilla of US Oil Is Set to Sail to China. The relative weakness of WTI has prompted a revival in Chinese buying of US barrels as China’s state-owned Sinopec (SHA:600028) and Petrochina (SHA:601857) have fixed at least 10 VLCC tankers for March-loading cargoes out of the US Gulf Coast.
ADNOC Gas IPO Goes According to Plan. As ADNOC Gas started off the 2023 season of Middle Eastern IPOs, the $2 billion public offering exceeded expectations as all available shares were snapped up within hours of opening, with each of the shares offered at $0.66, bringing the company valuation to $50.8 billion in total.
Chesapeake Cuts Drilling Amid Gas Price Woes. US natural gas-focused producer Chesapeake Energy (NASDAQ:CHK) said it would drop three rigs in the Haynesville and Marcellus basins and aim for a lower amount of completed wells in 2023 as plunging natural gas prices make drilling uneconomic.
Russia Fixes Crude Discounts on Exports. Russia’s President Vladimir Putin signed a law that capped the maximum possible discounts on Urals crude as part of an ongoing oil taxation overhaul, with the maximum discount set at $34 per barrel in April and gradually declining to $25 per barrel in July.
Iraq to Drop US Dollar in China Exports. The Iraqi central bank announced this week that it had allowed trade from China to be settled directly in yuan rather than US dollar, a relief for the country’s energy sector as since 2022 the US Treasury has enforced stricter controls on transactions by Iraqi banks.
China Re-Buys Stake in Global Oil Trader. China’s state-backed fund CNIC Corp. has bought a 5% stake in Swiss-based energy trader Mercuria, assumed to be worth at least $220 million, only months after another Chinese company ChemChina sold back a 12% stake in the same company.
Tight Diesel Stocks Remain Inflation Risk. With middle distillate stocks below the 10-year average in each of the main trading regions and a whopping 40 million barrels lower in Europe, any swift uptick in manufacturing and industrial activity is poised to send diesel prices back into an upward spiral.
Panama Copper Mine Dispute Escalate Further. One of the most impactful mining contract disputes in recent years pitting Canada’s First Quantum Minerals (TSE:FM) against Panama’s government has seen another twist as the operator suspended copper processing operations at the giant Cobre Panama mine and demobilized part of its staff.
Iraq Finalizes 2018 Licensing Round Contracts. The Iraqi government signed six new oil and gas contracts with Chinese, Hong Kong, and UAE-based investors with the aim of producing an additional 250,000 b/d of crude and up to 1 Bcm per year of natural gas from untapped plays.
Molybdenum Becomes Hottest Metal on the Market. Molybdenum, a relatively obscure metal used to boost the performance of alloys in pipelines, engines, and turbines, has become the best-performing metal of late, seeing its price surge 122% in the past 12 months to 800 per metric tonne amidst supply disruptions.
US to Hold First-Ever Wind Auction in Gulf of Mexico. The US Interior Department proposed its first sale of wind farm development rights in the Gulf of Mexico across a 102,480-acre area off of Lake Charles, LA, and two areas totaling 179,266 acres off of Galveston, TX.
Eskom CEO Firing Raises Questions over South Africa’s Power. As South Africa is struggling with rolling blackouts of up to 10 hours a day, the dismissal of Eskom CEO Andre de Ruyter after he claimed the ruling party was corrupt might create a leadership vacuum at the state-owned electricity company.
Cheniere Expedites Sabine Pass Development. Buoyed by exceptional profits as Q4 net income soared to $3.94 billion (almost triple analysts’ estimates), US LNG exporter Cheniere Energy (NYSEAMERICAN:LNG) has started developing its 20 mtpa Sabine Pass stage 5 expansion project.
China Locks In Another US LNG Term Deal. China Gas Holdings (HKG:0384), one of the largest independent gas distributors in China, signed two separate 20-year LNG deals with US exporter Venture Global for a total of 2 million tons LNG per year, adding to a flurry of similar deals recently.