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Oil Prices Bounce Back As Omicron Fears Fade

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·5-min read
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  • HG=F
  • NG=F
  • RB=F
  • CL=F
  • PBR-A
  • RDS-B

A flood of bullish factors have sent oil prices higher at the start of the week, with fears about Omicron fading on the back of some promising reports.

Chart of the Week

- The purported aim of the US government’s decision to release 50 million barrels of crude in January-April 2022 – to bring gasoline prices – seems to be slowly materializing.

- The OPEC+ decision to maintain their agreed-upon 400,000 b/d production additions helped more in outright terms, dragging WTI prices down to $70 per barrel, as crude prices heavily influence gasoline prices.

- Seasonally lower demand for gasoline could have decreased its price anyway, buttressed by the reintroduction of travel restrictions on the back of Omicron cases spreading.

- NYMEX RBOB gasoline futures for the front month in January 2022 dropped below the $2 per gallon threshold in early December, only to bounce back to their current level of $2.1 per gallon.

Market Movers

- Following a presidential order coming from Russia's President Putin, the state oil company Rosneft (MCX:ROSN) is now likely to be allowed to export 10 bcm of gas abroad under an agent agreement with Gazprom, which had previously maintained a pipeline export monopoly.

- Under increasing pressure to demonstrate its emission-curbing ambition, the US major ExxonMobil (NYSE:XOM) stated it would aim to achieve net-zero greenhouse gas emissions from its assets in the Permian Basin by 2030.

- Mexican oil company PEMEX will receive $3.5 billion in government support to stay afloat and issue new “money securities” that are likely to further worsen its financial standing, with financial debt already totaling $113 billion at the end of Q3 2021.

Tuesday, December 07, 2021

After last week’s oil price crash, the oil market is now recovering on the back of growing bullish sentiment. Omicron concerns are fading on the back of medical reports that show milder-than-anticipated symptoms, leading to demand fears subsiding at the start of this week. That bullish outlook has been corroborated by Saudi Arabia’s aggressive pricing policy for Asia-bound cargoes for January 2022. With Iran nuclear talks showing no real progress, crude oil prices have settled comfortably into the mid-70s, with ICE Brent trading above $75 per barrel and WTI edging up to $72.5 per barrel as of Tuesday morning.

Chinese Crude Imports Bounce Back in November. According to data from China’s General Administration of Customs, crude imports averaged 10.17 million b/d last month, up 14% from October levels, as independents ramped up their purchases on the back of new import quota allowances issued in October.

Brazil Introduces A Crude Export Tax. In a long-standing fight between Brazil’s government and its national oil company Petrobras (NYSE:PBR), the country’s Senate has approved a draft bill that would introduce an oil export tax on crude outflows, simultaneously establishing a fuel price stabilization fund.

India Signs Crude Supply Deal with Russia. India’s state-owned oil refiner Indian Oil Corp (NSE:IOC) signed a supply deal with Russia’s Rosneft (MCX:ROSN) to the amount of 2 million tons per year, in a bid to diversify Indian crude imports from excessive dependence on Middle Eastern flows.

Climbing Chinese Imports Spark Metals Bonanza. China’s iron ore imports rose to their highest since July 2020 (up 15% month-on-month) and copper imports also hit a six-month high, and even though it was mostly triggered by expedited customs clearance procedures, the news bolstered global metals stocks.

Aramco to Cash In on Pipeline Lend/Lease Deals. The Saudi national oil company Saudi Aramco (TADAWUL:2222) signed a $15.5 billion deal with its own subsidiary (Aramco Gas Pipelines, a JV between Aramco and a BlackRock/Hassana consortium) leasing the usage rights in its own gas pipe network and leasing them back to Aramco over a period of 20 years.

Foreign Bidders Bid Up US SPR Sale. According to Bloomberg reports, foreign refiners have been actively bidding in the forthcoming US SPR swap release as domestic refiners subject to year-end crude inventory taxes were somewhat disincentivized from the auction.

Petrobras to Start Drilling Next Oil Frontier in 2022. Brazil’s state-owned oil company Petrobras (NYSE:PBR) is readying to drill the first of 14 planned wells at South America’s new deepwater frontier, the Equatorial Margin located in the country’s northern offshore zone.

ThyssenKrupp Seeks Ways to Decarbonize Lithium Production. Germany’s ThyssenKrupp (ETR:TKA) teamed up with Australian metals producer Infinity Lithium (INF) to develop scalable technologies of using green hydrogen to produce lithium, an essential component of electric vehicles.

Shell Wins South Africa Court Case Against Environmentalists. A High Court in South Africa allowed Royal Dutch Shell (NYSE:RDS.A) to proceed with its exploration work in the country’s offshore waters, finding claims of irreparable harm to marine life, as presented by Greenpeace, to be speculative.

Record US Heat Sends Gas Prices Plummeting. With meteorological forecasts expecting this December to be third warmest going back to 1950, US natural gas futures for January 2022 delivery continued their downwards movement to $3.65 per mmBtu, down 40% since October.

Canada’s Trans Mountain Pipeline Online Again. The 300,000 b/d Trans Mountain oil pipeline, the only conduit connecting British Columbia to the oil-rich province of Alberta, restarted this week after a three-week shutdown caused by flooding, easing pressure on Canadian crude differentials.

Metals Prices Bolstered by China’s Central Bank. Metals prices were bolstered by China’s central bank mandating it would cut the amount of cash that banks must hold as reserves, in a bid to boost economic growth, with copper prices moving beyond $9,500 per metric tonne.

Trinidad Offers 17 Deepwater Oil Blocks in New Auction. The government of Trinidad and Tobago launched its 2021 competitive bid round for 17 deepwater blocks off the country’s northern and eastern coasts just as the country has seen a new light oil discovery with the Royston-1 well.

By Tom Kool for

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