China’s Covid Saga Sends Oil Prices Spiking Again

China’s Covid Saga Sends Oil Prices Spiking Again

Better-than-expected US inflation data and China’s long-anticipated easing of Covid rules have helped stave off a significant oil price decline this week, with ICE Brent back at $96-97 per barrel.

Surging coronavirus cases in China, replicating or in some cases surpassing 2020 levels of contagion, have sent ripples across the oil markets, but Beijing’s shifting lockdown stance is partially offsetting those fears.

Markets have been waiting all year for China to bounce back, with the country currently on track to see a year-on-year demand decrease for the first time in two decades. There’s plenty of bearish news still out there, but if China continues to open up then prices are sure to keep climbing.

China Relaxes Covid Rules. The Chinese government has eased its zero-COVID requirements despite surging cases across the country, reducing quarantine periods for inbound travelers as well as their close contacts and scrapping fines for airlines carrying infected passengers, boosting hopes of a China normalization.

Hinting at Deal Hope, Iran Agrees to IAEA Visit. Iran has agreed to a visit by the UN nuclear watchdog to determine the origin of uranium particles found at three sites, potentially alleviating one of the key hurdles in the Iran nuclear talks after years of Tehran demanding the closure of the IAEA investigation.

US Crude Growth Plummets in 2023. Citing inflation and supply chain constraints, the Energy Information Administration lowered its forecast for 2023 US crude production growth by a whopping 21%, expecting next year’s increase to be 480,000 b/d.

Africa Insists on Fossil Fuel Prosperity. The COP27 summit in Sharm el-Sheikh, Egypt, keeps on highlighting the great divide between OECD countries and African countries, with African countries claiming they must be allowed to develop their oil and gas to help their people out of poverty, resisting calls for deep emission cuts.

ExxonMobil Finds Oil in Angola. US oil major ExxonMobil (NYSE:XOM) hit a net oil pay of 30 meters (98 feet) with its Bavuca South-1 exploration well offshore Angola, the first discovery in the deepwater Block 15 in 20 years with a potential to add 40,000 b/d to the block’s overall production.

US Funding Indonesia’s Pivot from Coal. The United States and Japan will offer 15 billion in energy transition funds to Indonesia if it starts retiring its plentiful coal power plants early, helping the government to reach its aim of bringing the share of renewables to 23% by 2025.

Coal Prices Slide as Disruption Risks Subside. After the summer price surge, prices for seaborne thermal coal have started to decline amidst easing fears of a global supply crunch and Russia finding new buyers in China and India – coal for delivery into NW Europe dropped to $180/mt.

US Power Consumption Has Never Been This High. According to the EIA, power consumption in the US will rise to a record high of 4,036 KWh in 2022, up 3% compared to last year, as hotter temperatures and increasing economic activity keep on pushing electricity usage up.

Even These Prices Not Enough for Arctic Drilling. Norway’s Equinor (NYSE:EQNR) and its partners have postponed a final investment decision on the world’s northernmost Wisting offshore oil field, citing soaring costs and supply chain bottlenecks that pushed up the project’s price tag to $10 billion.

EU Regional Help Stalls Energy Transition. The European Court of Auditors found that the 12.5 billion spent in 2014-2020 for seven coal-producing regions across the EU had in fact remarkably limited impact on the energy transition, raising risks that Europe’s coal phaseout will be longer than anticipated.

Chinese Labor Concerns Dent Solar Deliveries. According to media reports, more than 1,000 shipments of solar panels and polysilicon cells worth several hundred million dollars have piled at US ports since June as authorities continue seizures, over concerns about slave labor in Xinjiang.

Cheniere Needs More Time for Fixing. The US’ largest LNG exporter Cheniere Energy (NYSEAMERICAN:LNG) has asked Louisiana regulators for 18 months to upgrade almost half of its turbines as they still exceed new air pollution limits, denting exports of liquefied gas over the winter.

Suriname Seeks to Maintain Drilling Momentum. Wanting to keep up with Guyana’s upstream miracle, its South American neighbor Suriname is set to offer six offshore blocks located some 200km off the coast in its upcoming licensing round with an unrisked resource potential of 41 billion barrels.

Eagle Ford Shale Appeal Wanes. APA Corp (NASDAQ:APA) is reportedly looking to divest some 212,000 net acres of oil and gas-producing land in the Eagle Ford and Austin Chalk basins for some 500 million, as part of its pivoting back to western Texas where it is doubling down on production from the Permian.

Oilprice.com