While the IEA believes Omicron will dent global oil demand, OPEC remains confident that demand will continue to bounce back strongly from its pandemic lows.
Chart of the Week
- Despite fears of Omicron playing a large role in markets and the media, OPEC raised its global oil demand forecast for Q1 2022 this week, arguing that Omicron would only have a mild and brief impact.
- In its monthly report, OPEC expects world oil demand to average 99.1 million b/d over January-March 2022, more than 1 million b/d higher than its forecast a month ago.
- Having hiked next year’s annual average, too, OPEC forecasts global crude intake to average 100.8 million b/d in 2022, roughly on par with the pre-pandemic year of 2019.
- Simultaneously, the December report shows that Saudi Arabia and Iraq continue to lead OPEC in terms of month-on-month production increases, on the back of Nigeria failing to overcome its supply outages.
Market Movers
- Norwegian energy group Equinor (NYSE:EQNR) intends to sell a 19% stake in the 115,000 b/d Martin Lange oil field commissioned last June and is rumored to be selling 8% of the Ekofisk field, too.
- Oil major Royal Dutch Shell (NYSE:RDS.A) said it would buy US-based solar energy and storage firm Savion from Macquarie’s Green Investment Group, in yet another deal to reach its 2050 net-zero ambition.
- Emirati oil company ADNOC announced the discovery of a 1-billion barrel light oil play in the onshore Block 04 operated by Japan’s INPEX (TYO:1605), the second-largest crude find of 2021.
Tuesday, December 14, 2021
There seems to be a divergence of perceptions when it comes to the Omicron variant - with OPEC repeating that global oil demand is bouncing back while the IEA warns that Omicron is set to temporarily dent the global economic recovery. Despite the warning, the impact that the IEA foresees is still somewhat limited - it had cut its oil demand forecast for 2021 and 2022 by 100,000 b/d each, primarily because travel restrictions curbed jet fuel utilization. Against this background, Brent prices have marginally slid to $73.5 per barrel, whilst US benchmark WTI traded around $70 per barrel.
Saudi Arabia Warns of Oil Underinvestment. The Saudi energy minister Abdulaziz bin Salman stated that should the current period of reduced investments into E&P operations continue, global crude production would drop by 30 million b/d by 2030, only fortifying OPEC’s role as the prime oil supplier.
Related: Jittery Oil Market Could Trigger Consolidation In The Permian
EIA Lowers 2022 Crude Output Forecast. With shale drillers still slow to splash the cash on new wells, the US Energy Information Administration lowered its 2022 US crude production outlook to average 11.85 million b/d next year, up a little less than 700,000 b/d from the 2021 annual average of 11.18 million b/d.
EU Proposes Joint Gas Buying to Cool Runaway Energy Prices. The European Commission will soon propose a voluntary system for EU countries to jointly buy natural gas from strategic reserves akin to those seen with crude, just as low inventories and high demand continue to push gas prices higher.
ExxonMobil Lands First US SPR Loan Deal. The first installment of the much-discussed 32 MMbbls US SPR release will see US oil major ExxonMobil (NYSE:XOM) receive 4.8 million barrels from three SPR facilities in Texas and Louisiana, to be returned at some point in 2022-2023.
China to Ease Countrywide Energy Curbs. According to documents issued after the annual Central Economic Work Conference, China will loosen restrictions on energy consumption and exempt newly added renewable capacities and “feedstock energy” from any limitations, without explaining the latter.
Saudi Arabia and Kuwait Agree to Ramp Up Production. Saudi Arabia and Kuwait agreed to increase output from the Al-Khafji and Wafra fields in the so-called Neutral Zone jointly managed by the two countries, currently averaging around 200,000 b/d (i.e. some 40% of its nameplate production capacity).
China Slams ‘Illegal’ Teapot Refiners. Chinese authorities stated they had uncoveredmillions of tons worth of crude processing capacity in Shandong province, claiming at least 60 million tons of annual refining capacity (1.2 million b/d, roughly half of Chinese independents’ refining capacity) was built without government approval.
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Biden Administration to Stop Financing for Carbon-Intensive Projects. The Biden Administration ordered US government agencies to stop financing for any new carbon-intensive fossil fuel projects abroad, i.e. anything whose GHG intensity is above 250 grams of CO2 per KWh.
Argentina Mulls Building LNG Export Terminal. The Argentinian national oil company YPF is looking into the feasibility of building an LNG export plant as shale production from the Vaca Muerta play keeps on increasing, despite the country’s default risks making it rather difficult to access international capital.
ENI Wants to Streamline Giant African Discovery. The Italian oil major ENI (NYSE:E)seeks to streamline the Baleine prospect, presumably this year’s largest oil discovery holding reserves of over 2 billion barrels of oil offshore Ivory Coast, with the aim of seeing first oil by 2023 already.
Ecuador Declares Force Majeure on Oil Exports. Ecuador’s government declaredforce majeure over its oil exports and production contracts after ongoing erosion in the Amazon province of Napo threatened the country’s two main pipelines, concurrently forcing oil producers to halve production to a mere 250,000 b/d.
US Greenlights Calcasieu Pass 2 LNG Plant. Just a month after the first block of Calcasieu Pass LNG saw its approval from the US FERC, the energy regulator also approved the request of Venture Global, the operator of the project, to commission Block 2 liquefaction modules with the aim of a 2022 commissioning.
Debt Write-Offs Paves the Way for Copper Bonanza. Anglo-Australian miner Rio Tinto (ASX:RIO) has written off a $2.3 billion loan it provided to the Mongolian government in order to kickstart the commissioning of the Oyu Tolgoi gold and copper mine, one of the largest untapped metals mines globally, following several years of ballooning costs and regulatory delays.
By Josh Owens for Oilprice.com
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