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The Next Bullish Catalyst For Oil Markets

Despite the devastation caused by Hurricane Ian, oil markets have been relatively unaffected by hurricane season this year. The next real catalyst for oil prices, short of a significant geopolitical development involving Russia over the weekend, will be next week's OPEC meeting, which has the potential to send oil prices climbing again.

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Friday, September 30th, 2022 

It is not unusual to see oil prices spike in late September as hurricanes ravage the US Gulf of Mexico, yet, despite the horrendous damage done to Florida and other south-eastern states, Hurricane Ian has failed to become a notable factor for crude. And whilst some pricing upside came from US stock draws, a new batch of Iranian sanctions, and marginal weakening of the US dollar, the next big catalyst for oil prices will be the OPEC+ meeting taking place on October 5th. With production cuts being discussed as a means of maintaining palatable prices, an upward run towards $100 per barrel might be on the cards for ICE Brent.

OPEC+ Seems to Be Serious About Cuts. According to OPEC+ sources, members of the oil group have started talks about potential oil production cuts in November 2022 as Russia has already suggested a 1 million b/d target reduction for the October 5th meeting.

Russia Calls Nord Stream Leaks State-Backed Terrorism. After four separate leaks in the Nord Stream 1 and 2 pipelines continue to spout methane into the Baltic Sea, Russia’s government called the still unidentified attacks an act of “state-sponsored terrorism”, a thinly veiled allusion to the US.

EU Finalizes Eighth Batch of Russia Sanctions. The European Commission has formally proposed an eighth round of sanctions against Russia, with new measures ranging from individual blacklisting, further restrictions on technology exports as well as a ban on EU citizens sitting on boards of Russian companies.

Australia Strikes Deal with Gas Exporters. Australia’s government will not limit gas exports from its three east coast LNG projects (Queensland Curtis LNG, Australia Pacific LNG, and Gladstone LNG) in return for their pledges to offer an extra 157 petajoules of gas to the domestic market in 2023.

US Slaps Further Sanctions on Iran Oil Trade. The Biden Administration targeted 6 companies in India, Hong Kong, China, and the UAE for allegedly enabling the sale of Iranian crude and products into South and East Asia, as most Iranian exports still sail towards Chinese buyers.

IEA Warns of LNG Tightening in 2023. The head of the International Energy Agency (IEA) Fatih Birol warned that LNG markets in 2023 might be even tighter this year amidst higher demand from China, India, and other parts of Asia, as stronger Asian growth ramps up the need for more gas.

A Caveat Appears in the UK Licensing Drive. The UK oil industry group Offshore Energy UK claimed that projects arising from the upcoming 33rd oil and gas licensing round, to be launched in a week, will not compromise the country’s climate plans and will have to comply with existing emissions reduction targets.

China Hints at Product Export Flexibility. As the Asian markets are widely expecting the release of this year’s fifth batch of Chinese fuel export quotas of up to 15 million tons, sources indicate Beijing might be open to extending the export allowance into 2023 to boost domestic demand.

Europe’s Industry Shut-Ins Now Move to Lead. Commodity giant Glencore (LON:GLEN) is considering shutting its lead operations at its Portovesme plant in Italy after high electricity prices made production commercially unsustainable, potentially seeking to develop an EV battery recycling plant there.

Warren Buffett Really Likes Occidental. Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) bought another 5.99 million shares of Occidental (NYSE:OXY) worth 352 million this week, boosting its stake to 20.9% after the US energy regulator gave Berkshire the permission to buy up to 50% of the firm’s common stock.

Taliban Signs Fuel Deal with Russia. According to the head of Afghanistan’s Industry Ministry, the Taliban have signed a provisional deal with Russia for the supply of 1 million tons each of gasoline and diesel as well as 2 million tons of wheat, to be delivered by road and rail.

Enbridge Sells Pipeline Stakes to Indigenous Groups. The largest pipeline operator in North America Enbridge (TSE:ENB) sold 11.57% minority stakes in seven Alberta oil pipelines to a group of Indigenous communities for some $820 million.

EU Dissatisfied With Its Gas Benchmark. Seeking to supplant TTF as the main spot gas trading benchmark, the European Union is working on a new transaction-based benchmark for LNG that would no longer reflect pipeline gas developments, with Brussels saying the new index is to be used voluntarily.

LME Might Ban Russian Metals. The London Metal Exchange (LME) is considering a consultation with market participants on whether it should continue trading Russian metals such as aluminum, copper, and nickel in 2023 amidst fears that Russian firms might just offload their production into LME warehouses.

By Michael Kern for Oilprice.com

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