Weak Chinese Demand Weighs On Oil Prices

Chinese President Xi Jinping

Just as it seemed COVID-19 was disappearing from the energy agenda, the reimposition of lockdown restrictions in Shanghai and Beijing reminded the oil markets that pandemic-related demand losses were still a threat.

It is China’s failure to bounce back from Covid that has provided the main downward force on oil prices in recent months. In anticipation of economic activity returning to normal over June, China loaded up on oil and oil products in May, which may now lead to slower imports.

China’s continuous demand blues are now weighing on oil prices, cooling down the gains made earlier this week, with ICE Brent falling back towards $120 per barrel on Friday.

White House Steps Up Anti-Oil Rhetoric. Representatives of the Biden Administration have lambasted oil and gas companies for failing to quell soaring fuel prices, with Bharat Ramamurti claiming that the windfall tax is an option on the table, as US firms are expected to generate $834 billion in free cash flow this year.

Explosion Rocks Freeport LNG, Sending Henry Hub Down. An explosion has disrupted operations at the 15 mtpa Freeport LNG liquefaction terminal in Texas, sending front-month Henry Hub US gas futures back below $9 per mmBtu as all liquefaction trains are expected to be out for three weeks.

The Oil Majors Backing Qatar’s Giant LNG Expansion. Five leading oil majors – ExxonMobil (NYSE:XOM)TotalEnergies (NYSE:TTE)Shell (LON:SHEL)ConocoPhillips (NYSE:COP) and ENI (NYSE:E) – were handpicked by Qatar to participate in the $30 billion expansion in the North Field, a 50mtpa ramp-up in Qatari production capacity across six new liquefaction trains.

Space Scientists Spot PEMEX Massive Methane Leak. Scientists from the European Space Agency detected a massive methane leak coming from PEMEX’s offshore Zaap platform, stating that in December 2021 a 17-day ultra-emission event emitted 3% of Mexico’s total emissions last year.

Russia Claims It Has No Extra Oil For New Indian Deals. As India has become the main buyer of Russia’s key export grade Urals, the largest Russian oil producer Rosneft (MCX:ROSN) has started to hold back on new term crude deals, saying to two Indian refiners that it does not have sufficient volumes.

Venezuela Demands Prepayment As Pool Of Buyers Narrows. Venezuela’s state-owned oil company PDVSA began to switch its oil sales to prepayment after several recent defaults of its Chinese buyers, with three cargoes departing the country’s Jose terminal without buyers paying for the cargoes.

Platts To Include WTI Midland In Brent Basket. Price reporting agency S&P Global Platts will include WTI Midland into its Brent price assessment starting from June 2023, arguing the inclusion bolsters physical volumes underpinning the benchmark even though the FOB equivalent of WTI will be derived from a CIF price.

Europe’s Carbon Market Reform Fails. In a major upset for Europe’s ambitious carbon plans, the European Parliament rejected this week a proposal to upgrade the EU carbon market, with lawmakers voicing concerns about hurting business with new stringent rules now, in a time of soaring energy costs and inflation.

Spain Gas Supply Threatened By Spat With Algeria. Europe’s gas supply crisis is one escalation away from worsening after Algeria suspended all trade cooperation with Spain except gas trade. This move was due to Spain backing a Moroccan plan to offer autonomy to Western Sahara, potentially jeopardizing the ongoing talks to extend their pipeline deal.

Devon Energy Consolidates Williston Acreage with RimRock Purchase. US oil producer Devon Energy (NYSE:DVN) announced it would buy the leasehold interest and related assets of RimRock, a portfolio company managed by US equity firm Warburg Pincus for $865 million, adding 38,000 net acres across the Williston Basin.

Congo Upstream Auction Poses Global Climate Risk. The government of the Democratic Republic of Congo will be holding an oil block auction on July 28-29, with some of the blocks overlapping with the world’s largest tropical peatlands, a huge carbon sink storing some 30 billion tons of carbon.

EU Wants Pipeline Deal With Egypt And Israel. The European Commission proposed the signing of a trilateral agreement that would lay the foundations of potential natural gas exports from Egypt and Israel into Europe, with a memorandum of understanding expected to be clinched this summer.

Court Battles Start Regarding Seized Iranian Cargo. A Greek appeals court overturned an earlier ruling that allowed the confiscation of an Iranian-flagged oil tanker off the Greek coast by US authorities, most probably setting off a prolonged legal battle over the lawfulness of the seizure.

Libyan Supply Disruptions Continue. Whilst Libya’s largest oil field El Sharara is still producing well below capacity after its alleged restart earlier this week, protesters have started to shut down the 200,000 b/d Sarir field in the eastern part of the country, with several ports rumored to be blocked.

Oilprice.com