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Chart of the Week
- According to Bloomberg, the ESG industry is facing an increasing amount of criticism despite its incredible growth. While the industry is worth as much as $40 trillion, a large portion of that value is reportedly due to greenwashing.
- The investment head of the $660 billion Dimensional Fund blasted the ESG segment for ‘struggling both in terms of real-world impact and returns’, finding that activist investors have generally failed to bring about structural changes in firms.
- The theory that sustainable investors will ultimately change the cost of capital for companies has failed to materialize, with a recent Goldman Sachs report finding that the ongoing focus on decarbonization is in fact doing the exact opposite.
- After ESG funds performed marginally better than conventional products from 2019 to 2021, this year has seen continuous declines, with European ESG stocks dropping 14% so far to date, whilst oil stocks soared.
Market Movers
- Buoyed by high prices, Canadian oil firm Cenovus Energy (NYSE:CVE) decided to restart its West White Rose Project offshore Newfoundland, hoping to reach peak output of 80,000 b/d by 2029.
- Even though Colombia’s presidential standoff sees two anti-establishment populists going into a second-round runoff, the country’s NOC Ecopetrol (NYSE:EC) aims to boost its structurally declining oil and gas production by 40% by 2030.
- Brazil’s president Jair Bolsonaro lambasted the national oil company Petrobras (NYSE:PBR) for wanting to hike fuel prices, saying that such moves could ‘break’ Brazil, with the country’s Energy Ministry simultaneously calming fears that it is running out of diesel.
Tuesday, May 31, 2022
Oil prices are climbing once again on the news that the EU has agreed to a partial ban on Russian oil imports. Whilst Russia will almost inevitably see its production decline as a result of the ban, the general anticipation is that Asia, and especially China, will ramp up its purchases. The sanctions deal steepened backwardation in the markets, with the ICE Brent six-month spread shooting up $15 per barrel again - not a good time to be hoarding inventories.
The EU Creates Pipeline Exemption for Russia Sanctions. The European Union finally reached an agreement on Russian oil sanctions, aiming for a six-month phase-in period, giving a temporary waiver for crude oil delivered by pipeline, without specifying their wind-down period.
US Gasoline Prices Rise on Memorial Day Demand. US gasoline prices have strengthened during the long Memorial Day holiday weekend, with nationwide prices trending at $4.62 per US gallon, boosted by strong driving demand and low availability of high-octane components across the Americas.
Iran Retaliates By Seizing Two Greek Tankers. Merely a couple of days after the US seizure of two vessels allegedly carrying Iranian crude, Teheran has seized two Greek-flagged vessels that it claims were smuggling fuel, making the likelihood of a nuclear pact even thinner.
India’s Coal Shortages Show No Signs of Abating. According to an internal power ministry presentation reported by Reuters, India is expected to face an even worse coal shortage over the next quarter ending September, assuming that coal supply will fall 42.5 million tons short of demand over that period.
Mexico’s Refining Readies for Hurricane Agatha. According to US and Mexican forecasts, Mexico’s largest refinery, the 320,000 b/d Salina Cruz, that only very recently restarted operations after an explosion, is inside Hurricane Agatha’s area of impact on the country’s Pacific west coast.
Russia Wants to Restrict Foreign Access to Its Subsoil. In another wave of Russia becoming ever-more reliant on itself amidst sweeping sanctions, the Moscow government is considering amendments to the country’s subsoil law that would make it illegal for foreign companies to access its oil and gas reserves.
Gazprom Expected to Cut of Danish and Dutch Buyers. With the May 31 payment deadline looming today, Gazprom (MCX:GAZP) has cut gas supplies to Denmark’s Ørsted (CPH:ORSTED) and the Netherlands’ Gasterra, with both companies refusing to pay the Russian company in rubles.
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Iran Oil Revenue Up 60% on Higher Prices. The Iranian Oil Ministry stated that over the past months its oil, condensate, and gas export revenues rose 60% year-on-year, as triple-digit prices were boosted by crude exports moving up to some 900,000 b/d.
Venezuela Allows Diesel Sales in US Dollars. Venezuela’s state oil company PDVSA has ordered petrol stations across the country to sell diesel in dollars, scrapping a subsidy that allowed many poor citizens to buy the fuel almost for free, with the new retail price set at $0.50 per liter.
China Wants More of Algerian Hydrocarbons. China's state-controlled oil company Sinopec (SHA:600028) signed a new PSA with Algeria's NOC Sonatrach to further develop the Zarzaitine oil field, extending its foothold in the North African country by boosting gas production and adding 12 new production wells.
UK Wants to Keep Coal-Fired Power Plants for the Winter. Having scared the populace with past statements saying that up to 6 million people could experience power rationing in the winter, the UK government subsequently announced that it would keep coal-fired plants open throughout the winter.
Recession Qualms Keep Investors from Taking Larger Positions. The hedge fund community sold the equivalent of 5 million barrels in the six key futures contracts last week and despite the still-strong bullishness (long-to-short ratio at 6:1) the combined long positions are still ‘only’ 599 million barrels.
Russian Crude Production Rises Despite Sanctions Pressure. Media reports are suggesting that Russian oil production increased by 1% month-on-month and rose to 10.17 million b/d this month so far, implying that the 10 million b/d through last month might be the low point of output.
By Michael Kern for Oilprice.com
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