Oil prices are on course to post a weekly loss despite OPEC refusing to increase production. A combination of U.S. producers preparing to ramp up production and President Biden’s willingness to tap the SPR to halt the gasoline price rally is set to weigh on oil prices going forward.
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Friday, November 5th, 2021
International oil majors have suggested US shale output might see tangible increases over 2022 as many are seeking to utilize their windfall profits by investing in shale. With producers less likely to hedge their annual production next year, the anticipated ramp-up in US crude production might materialize relatively soon. This, along with the Biden Administration’s alleged readiness to tap into crude SPRs to tame runaway gasoline prices has helped to more than offset OPEC ’s decision to maintain supply discipline.
OPEC Sticks to Agreement with December Output. This month’s OPEC meeting failed to provide any surprise for the oil markets, with the oil group agreeing to keep the 400,000 b/d monthly increments for December 2021 despite oil importers calling for more barrels in the market.
The US and UK Will No Longer Finance Oil & Gas Abroad. The US and the UK, along with another 18 nations, will no longer finance oil, gas and coal projects abroad as part of their COP26 commitments, a resolution tangibly weakened by the complete lack of Asian support for the motion.
Asian LNG Prices Fall for Third Straight Week. An improved gas balance in Europe and the end of maintenance at Chevron’s (NYSE:CVX) Wheatstone LNG project in Australia has pushed spot Asian LNG prices down over this week, trading below $30 per mmBtu.
Continental Buys Pioneer’s Delaware Basin Assets. In a cash transaction worth $3.25 billion, North Dakota-focused Continental Resources (NYSE:CLR) agreed to buy Pioneer’s oil assets in the Delaware Basin, acquiring drilling rights over 92,00 net acres of Permian plays.
Jet Cracks Soar on Economies Opening Up. Whilst global jet fuel demand is still some 20% below per-pandemic levels, outright prices keep on increasing since August (to almost $750 per metric ton in Europe) amidst a gradual lifting of COVID restrictions in international aviation, doubling jet crack spreads in less than three months.
South Africa Gets $8.5 Billion in Coal Shift Funds. In a rare move of solidarity, the governments of Great Britain, France, Germany and the United States agreed to provide South Africa with $8.5 billion to finance its moving away from coal in power generation.
Shell Brings Back Damaged GoM Production. Royal Dutch Shell (NYSE:RDS.A)finished repair works on the Hurricane Ida-damaged Mars and Ursa platforms in the US Gulf of Mexico and brought them in stream this Friday, meaning that the 250,000 b/d medium sour Mars crude stream is back on track two months earlier than previously anticipated.
Tanzania LNG on the Brink of Being Reborn. Norway’s Equinor (NYSE:EQNR)stated it would restart talks with Tanzania’s government on the revival of the Tanzania LNG, despite the NOC having written off the entire book value of the project ($982 million) this January.
Dutch Court Cancels $50 Billion Yukos Ruling. Overturning a 2014 tribunal decision, the Dutch Supreme Court scrapped a $50 billion arbitration award that Russia had to pay for its allegedly deliberate drive to bankrupt Yukos, the then-largest private oil producer in Russia, setting the scene for years of more litigation.
Vestas Is Still Having a Horrible Year. Danish firm Vestas (COP:VWS), the world’s largest maker of wind turbines, lowered its 2021 outlook for the second time this year already and is now expecting an operating profit margin of 4%, far from its long-term target of 10%.
Chinese Inventories Fall to 4-Year Low Amid Weak Buying. With Chinese refiners hitting three consecutive month-on-month declines in overall seaborne crude imports, down at 8.3 million b/d in October, utilization of nationwide inventories have dropped to their lowest since 2018, at 58%.
Aluminum Prices Drop to 4-Month Low amidst Coal Plunge. The Chinese authorities’ drive to bring coal prices back to historical levels depressed aluminum prices, too, as coal availability worries subsided, with December aluminum contracts in Shanghai dropping 8% on the week to an equivalent of $2,900 per metric ton.
Shell to Shut German Refinery in Low-Carbon Drive. Anglo-Dutch major Royal Dutch Shell (NYSE:RDS.A) stated it would close down the 150,000 b/d Wesseling refinery in Germany by 2025, refocusing it towards the production of hydrogen, bio-LNG and sustainable aviation fuels.
Brazil’s Pre-Salt Auction Triggers Oil Majors. The upcoming transfer of rights (TOR) auction on Brazil’s pre-salt Sepia and Atapu fields has attracted bids from most oil majors already active in the play such as ExxonMobil (NYSE:XOM) or Total (NYSE:TTE) – the signing bonus was lowered by some 70% from the previous TOR and set at $1.3 billion and $0.7 billion, respectively.
China Mulls Domestic Coal Price Cap. Market rumors indicate Beijing will implement a cap on domestic coal prices to maintain a fixed profitability level for coal-fueled plants, with an upper pithead price limit of ¥440 per metric ton of 5500kcal/kg.
By Michael Kern for Oilprice.com
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