Oil Bears Burst Back Onto The Scene

Oil and gas

The adoption of the EU oil sanctions appears to have led to Russia retaliating by holding back its natural gas exports.

Russian gas flows to Europe have seen hefty drops over the course of this week, with Italy, Germany, and France all receiving less than half of their usual volumes.

Russia’s Gazprom blames sanctions that hindered maintenance, whilst European countries see the unexpected declines as a sign that the Kremlin is trying to retaliate for all the past sanctions by limiting gas supply.

So now, it is not just oil and oil products that trade way above historical averages, natural gas is way above the norm, too. Meanwhile, oil prices plunged on Friday morning as recession fears soared.

White House Considers Export Caps to Tame Fuel Prices. According to Bloomberg, the Biden Administration is looking into capping fuel exports out of the US, with gasoline outflows already rising to 750,000 b/d this year, a topic that is most probably going to be raised at Energy Secretary Granholm’s meeting with oil refiners next week.

Nord Stream 1 Goes Down with Throughput Issues. Russia’s gas giant Gazprom (MCX:GAZP) declared it had to cut throughput in the Nord Stream 1 pipeline to Europe, saying delays in Siemens equipment repairs force it to run at just 40% capacity, a claim disputed by the German government as spot prices soar.

OPEC+ Admits Huge Underproduction, Again. As reported by Reuters, OPEC+ produced 2.695 million b/d below its production target in May, bringing total levels of deal compliance to 256%, with several African producers stuck in force majeure events and Russia seeing sanctions-driven production declines.

US Pressures Iran By Sanctioning Chinese Firms. For the second time in less than a month, the US Treasury has imposed sanctions on Chinese and Emirati companies that helped export Iran’s petrochemicals, stepping up the pressure on Tehran but also squeezing buying possibilities for Asian buyers.

Freeport LNG Aims for Full Return by Year-End. The largest US LNG liquefaction facility, Freeport LNG, said that it would remain fully offline until September following a pipeline blaze last week, with only partial operation expected through year-end.

Chinese Refining Sees Steepest Fall in a Decade. Chinese refinery runs fell 11% year-on-year, the steepest such change in more than a decade, to average 12.7 million b/d as continuous COVID-19 lockdowns depressed domestic demand and despite weak refining led to inventory builds across the country.

ExxonMobil Wants to Drill More in Guyana. US oil major ExxonMobil (NYSE:XOM) sent a development plan to Guyana’s environmental authorities that covers a 12-well drilling campaign in the Canje and Kaieteur blocks, both adjacent to the discovery-prolific Stabroek, despite having found no commercial oil there previously.

Houston Refinery Fire Underscores US Refinery Fragility. A blaze that took out the coking unit of LyondellBasell’s 270,000 b/d Houston refinery as become a timely reminder of the capacity losses that US refining has seen over the past decades, with the fire potentially bringing forward the refinery’s end-2023 shutdown.

South Africa Wants to Join Russia Buying Spree. Inspired by India’s soaring purchases of Russian crude, South Africa’s energy minister said the country’s refineries should start buying Russian oil to curb rising fuel prices and alleviate the pressure on state coffers as the government ramped up energy subsidies.

Australia’s Power Crunch Gets Worse. Australia’s power market operator suspended all spot market trading this week amidst widespread outages and coal-fueled power plants, aggravated by several generating companies curbing output as the government-mandated price cap of A$300 per MWh did not cover their production costs.

Saudi Aramco Wants to Take Trading Arm to IPO. Saudi Aramco is planning to merge its two trading units, Aramco Trading and Motiva Trading, before reportedly carrying out an initial public offering of the trading group which mostly trades third-party volumes that are not covered by Aramco.

Argentina Signs Pipeline Deal to Move Gas from Key Shale Play. Argentina’s state firm Energia Argentina signed a deal with pipeline company Tenaris (BIT:TEN) to build a 350-mile gas pipeline that would increase by 25% the capacity of gas currently moved from Vaca Muerta towards key consumption hubs in Buenos Aires.

Germany Mandates States to Allocate Wind Farm Sites. The German government approved a bill that requires its 16 states to allocate a set minimum of land to onshore wind farms, with the target of hitting at least 2% of land allocated for wind farms by 2032.

Saudi Aramco Develops a Liking for Solar. Saudi Arabia’s oil firm Saudi Aramco (TADAWUL:2222) plans to invest in 12 GW of solar and wind capacity, it vowed in its first-ever sustainability report, whilst also pledging to reduce upstream carbon intensity by 15% by 2035 and investing heavily into blue ammonia.

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