Rumors Of A Coordinated Oil Reserve Release Keep Prices Rangebound

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Chart of the Week

– By lifting all of its May-loading formula prices, Saudi Aramco took the differentials of its marketed crudes to unprecedented levels, with its key Arab Light stream set at a $9.35 per barrel premium over Oman/Dubai for Asian buyers.

– Saudi Arabia sells the overwhelming majority of its crude under long-term contracts where the price differential is manually set by the national oil company against a regional pricing benchmark.

– Saudi Aramco usually bases its pricing moves on overall changes in the Dubai futures curve and last month witnessed the M1-M3 spread spike to an unseen $5 per barrel, with backwardation in the three-month spread averaging around $9 per barrel in March.

– Despite Chinese demand ebbing on the back of the country’s COVID lockdowns, the shortage of supply combined with ultra-low inventories continues to keep the oil markets extremely tight.

Market Movers

– US oil major ExxonMobil (NYSE:XOM) is expecting a $4 billion write-down as it attempts to exit the operation of the Russian Sakhalin-I LNG project.

Excelerate Energya US company developing and operating floating LNG terminals, might kickstart this year’s energy IPO season as billionaire owner George Kaiser seeks to raise some $400 million from the deal.

– The Brazilian state-controlled oil company Petrobras (NYSE:PBR) discovered a new oil field in the southern part of the Campos Basin, opening a new pre-salt play with block partner BP (NYSE:BP).

Tuesday, April 05, 2022

The Russia-Ukraine war and its increasingly global ramifications continue to dominate the narratives of the oil market, with the European Union still shying away from an outright ban on Russian oil and gas. The latest round of suggested sanctions revolve around an EU ban on imports of Russian coal and barring Russia-flagged vessels from accessing European ports, though even these might be watered down in later stages. Concurrently, the call for a coordinated SPR release by the United States last week has so far fallen on deaf ears with no OECD country joining the initiative so far. Thus, ICE Brent has remained range-bound, trading around $108 per barrel as of Tuesday.

IEA Still Discussing Joint Oil Release. Member states of the International Energy Agency are still in talks about how much oil to release from their strategic stocks, leaving the United States as the only industrialized country to specify volumes and timing on its unprecedented 180 million-barrel release.

Floating Mines Continue to Present a Black Sea Shipping Risk. Several maritime organizations have stated that floating mines will continue to present a threat to the safe passage of vessels in the Black Sea for the foreseeable future, with some estimates putting their number at 400.

Related: Oil Prices Rebound Despite Biden’s Best Efforts

Iraq Notches Up Pressure on Kurdistan. The Iraqi government has demanded that Kurdistan transfer its oil and gas activities to a new company (tentatively called Kurdistan Oil Co.), marking the gradual return of Kurdish production under federal control, a move that Erbil opposes.

Italy Speeds Up Gas Diversification Effort. Italy is working to wrap up its first deals to diversify gas supplies from Russia over the upcoming weeks, with Rome claiming that it expects to receive an extra 10 billion cubic meters of gas from Algeria, Libya, and Azerbaijan.

IPCC Report Warns Half Measures Won’t Avert Climate Change. Stating that net anthropogenic emissions have increased over the 2010s across all major sectors globally, a new IPCC report warns that this decade will be a decisive one for climate as emissions are still yet to peak.

US East Coast Sees Jet Fuel Shortage Fears. Jet fuel prices have been soaring on the US East Coast, with spot market prices already up at $6.60 per gallon amidst unprecedentedly low middle-distillate stocks, aggravated by the sanctioning of Russian supplies and ebbing imports from Europe.

Mediterranean Fuel Suppliers Stop Serving Russian Vessels. Sellers of marine fuel in the Mediterranean have reportedly stopped serving vessels under a Russian flag, with most of them self-sanctioning, making it even more difficult for Russia’s shipping sector to continue to do business.

Road Access Row Hinders Alaska Oil Prospect. Australia’s Santos (ASX:STO)operator of the $3 billion Pikka oil field on Alaska’s North Slope, remains locked in a legal dispute with ConocoPhillips (NYSE:COP) over road access as its project can only be accessed via roads that run through the latter’s Kuparuk field.

Ukraine’s Only Operational Refinery Destroyed. Ukraine’s only operational downstream asset, the 363,000 b/d Kremenchug Refinery, has reportedly been severely damaged by Russian shelling, making Ukraine’s product supply further down the road even more dependent on imports.

Singapore Authorities Probe Contamination Breakout. After at least 14 vessels were found to contain contaminated high-sulfur fuel oil in Singapore, triggering engine breakdowns, the Maritime and Port Authority of Singapore started an investigation into the matter.

The Brazilian Soap Opera Continues. Rodolfo Landim declined a presidential nomination to chair the board of Brazil’s state-controlled oil company Petrobras (NYSE:PBR)saying that he would prefer to focus on his current role as president of the Flamengo soccer club.

ExxonMobil Gets Fourth Guyana Approval. US oil major ExxonMobil (NYSE:XOM) received the approval of the Guyanese government to begin work on the fourth offshore project in Guyana, the 250,000 b/d capacity Yellowtail project that is set to start in 2025, with the permit prohibiting routine flaring.

Climate Change Protesters Continue Blocking UK Oil Infrastructure. Activists from the Extinction Rebellion group blocked the entrance to the Esso West oil facility next to London’s Heathrow Airport, marking another step in their drive to disrupt oil terminals and refineries across Britain as they seek to prompt the government to end its reliance on fossil fuels.

By Josh Owens for Oilprice.com

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