The oil markets are poised to end 2021 on a relatively high note, as concerns of Omicron impacting global demand in the same way that Delta did turned out to be overblown.
Chart of the Week
- Global tanker markets are expected to see an upswing from the past two years’ volatile rise as demand stabilizes, however shippers profitability will be far from ideal.
- Despite container freight indexes quintupling this year, tanker freights has been essentially stagnant for the past 18 months, pressured by high bunker prices and surplus tankers.
- Analysts anticipate that 2022 tanker demand will increase some 5% year-on-year, helping push spot earnings into profitable territory ($21,800 in Q1 2022 vs -$600 in Q3 2021 for a VLCC).
- This being said, slow vessel demolition rates and the anticipation of another 70-80 tankers hitting the market will inevitably bring about tonnage overcapacity, putting a lid on potential gains.
Market Movers
- US major ExxonMobil (NYSE:XOM) has received the longest loan terms available on its 4.8 million barrel SPR withdrawal, having to return the crude only in 2024.
- US oil firm Apache Corp (NYSE:APA) signed a $3.5 billion agreement to develop oil concessions in Egypt’s Western Desert, allowing it to recover almost 900 million in previous backlogged investments.
- Shares in Chinese construction giant Evergrande (HKG:3333), a bellwether of the country’s construction drive, have soared this week as the developer said it had made progress in resuming construction work.
Tuesday, December 28, 2021
The oil markets are poised to end 2021 on a relatively high note, as concerns of Omicron impacting global demand in the same way that Delta did turn out to be overblown. The rise in outright prices was aided by supply disruptions across different continents - Libya still has at least 300,000 b/d withheld from the market as a result of renewed political infighting and skirmishes, Ecuador is yet to repair its flood-damaged pipeline system, whilst Nigeria is struggling with another force majeure at the Forcados Terminal. Combined with rumors of another week-on-week decline in US crude inventories, the Brent complex moved up to $79.5 per barrel, whilst WTI has last traded around $76.5 per barrel.
Iran Talks Now Focus on Crude Export Guarantees. Iran should be able to sell its crude oil and repatriate revenues freely, stated the Iranian foreign minister Hossein Amir-Abdollahian, as the eighth round of nuclear talks moved on to non-nuclear topics amid ‘visible’ progress.
PEMEX Slashes Crude Export Outlook. Mexico’s state oil company PEMEX has cut its crude export estimate for 2022 to a mere 435,000 b/d, half of this year’s 1 million b/d average, as the country seeks to refine more of its crude domestically.
China Starts Up Supergiant Coal Plant. Defying calls for a less carbon-intensive energy mix, China has started up the first 1GW unit (there will be four in total) of the Shanghaimiao plant in Ordos, Inner Mongolia, the largest thermal power project in all of China.
Japanese SPR Sale Fails to Impress. Japan will release roughly 630,000 barrels of crude from its strategic petroleum reserves, to be released March 20 or later, a fraction of the US’ commitment to sell 18 million barrels in a coordinated drive to cool outright prices.
Indian Refinery Runs Average 100% in November. Hitting their highest level in 10 months, Indian crude intake rose to 4.5 million b/d last month amid total utilization, indicating that the robust demand growth will make India one of growth engine’s of further
Yamal-Europe Gas Flows Reserved for Seven Straight Days. Exasperating an already desperate European gas market, Russian gas exporter Gazprom (MCX:GAZP) has been using reverse flow in its Yamal-Europe pipeline and not supplying any gas to Germany for seven straight days.
South Africa Halts Shell Seismic Survey. Less than a month after a South African high court found that Shell (NYSE:RDS.A) could proceed with its seismic surveying of South Africa’s assuredly gas-rich eastern coastline, this week saw another high court adjudicating the exact opposite, paving the way for a protracted legal battle.
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US LNG Influx Drops European Gas Prices. At least 20 US LNG tankers are currentlyon their way to Europe as record high spot prices incentivized European trade, pushing Europe’s TTF hub prices down for the fourth straight trading session, with the Jan 2022 contract currently trading at €104/MWh.
China Expects Crude Demand to Peak by 2030. China expects its oil demand to peak by 2030 at about 780 million tonnes per year, with diesel fuel and gasoline consumption forecast to peak by 2025, meaning that petrochemical demand will be the most important long-term driver of crude intake.
South Korea Pioneers ‘Greenwashing’ Court Case. South Korea’s largest gas provider SK E&S (KS:03473K) is facing legal action from a climate activist group, the first of its kind in Asia, alleging that it falsely advertised the Santos-led (ASX:STO) Barossa LNG project that it participates in as being “CO2-free”.
Beijing Delays Teapots’ Quota Allocation. China is unlikely to issue the first batch of product export quotas for 2022 by the end of this year, debilitating independents’ selling options amid a protracted government crackdown, given that 2021 allocations cannot be rolled over into the next year.
Rio Tinto Pauses $2.4 Billion European Lithium Project. The Anglo-Australian mining firm Rio Tinto (NYSE:RIO) has reportedly halted Europe’s largest lithium project in Serbia’s Jadar region after a municipality backtracked on its vows to allocate land for the mine amidst popular protests.
Philippines Lifts Open-Pit Mining Ban. The government of the Philippines has lifted a four-year ban on open-pit mining for gold, silver, copper and complex ores as Manila tries to revitalize its mining industry and leave behind its anti-mining policies.
By Tom Kool for Oilprice.com
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