Chart of the week – After more than 2 years of coordinated production cuts, OPEC+ has reached the point where it no longer has to raise production targets and must reconsider the future of the 23-member oil group. – Most analysts expect no or only very modest changes to OPEC+ September 2022 production guidance – with June figures already reaching a whopping 320% compliance, incremental supply remains the main challenge for members. – A worsening demand outlook will play a role in OPEC+ decision-making as the group looks to keep oil prices high enough to generate big profits without hampering sufficient market supply. – With Russia facing a series of sanctions from 2023 and as a result, Saudi Arabia seeks to keep OPEC+ as the coordinating force of the oil market, preferring to avoid sudden shocks in the market as Riyadh has finally grown to enjoy a prolonged unexpected period. Market Mobiles – Saudi Aramco (TADAWUL:2222) has reportedly bought US lubricants maker Valvoline (NYSE:VVV) as it seeks to expand its position in the downstream business, for a reported $2.65 billion. – The world’s largest EV battery maker China’s CATL (SHE:300750) saw its vice chairman Huang Shilin step down this week, with founder and chairman Zeng Yuqun taking on the role of CEO at the same time, sending the stock up 5% on Monday alone.
– One of the world’s largest wind turbine makers, Siemens Gamesa (BME:SGRE) is considering cutting around 10% of its current workforce, or 2,500 jobs, due to another cut in 2022. Tuesday, August 02, 2022 One major oil company after another is announcing surprise quarterly earnings and renewed share buyback programs, with the likes of BP, Marathon and Devon Energy joining the list this week. Meanwhile, Brent prices have hovered around $100 a barrel so far this week. If tomorrow’s OPEC+ meeting turns into another campaign of smoke and mirrors, structural demand weakness stemming from weak global manufacturing data and Europe’s ongoing struggle to contain Russia’s energy blackmail could resurface, pushing oil further further down into double-digit territory. Taxation of US crude oil imports raises questions. President Biden’s $433 billion tax and climate bill, which is likely to already have a Senate vote this week, aims to impose a 16.4 cents per barrel tax on imported crude oil and products, raising fears that it would inadvertently boost inflation as USGC refiners rely on heavy crude from Latin America and elsewhere. US again targets Iran’s oil trade. The US Treasury and State Department have sanctioned six more companies, based in Hong Kong, Singapore and the United Arab Emirates, for allegedly facilitating trade in Iranian oil and petrochemicals, the third round of blacklisting in the past two months.
OPEC wants Russia to stay in the Oil Group. Haitham al-Ghais, OPEC’s new secretary-general, said Russia’s participation in OPEC+ is crucial to the success of the deal, adding that the group does not control oil prices but improves the market in terms of supply and the demand. The Nord Stream Blame Game never stops. With markets still clueless about the whereabouts of the ominous Nord Stream 1 turbines, Russia has said it can do little to renew pumping along the pipeline as it continues to supply only 20% of nameplate capacity with a single turbine to operate. Iran signals readiness for new round of talks. As the European Union continues to propose new initiatives to bridge the gap between the US and Iran, with Brussels submitting a new draft text to revive the JCPOA, Tehran has said it is ready to start new talks provided they lead to a “reasonable and stable” agreement. . Australia wants to keep its natural gas at home. Australia is considering curbing its LNG exports after a national watchdog said it needs more natural gas to meet its east coast needs amid a dramatic decline in onshore production, with some curbs likely even into 2023. Luxembourg freezes Ecuadorian assets. Banks in Luxembourg have been ordered to freeze assets held by Ecuador after the Latin American failed to honor a $391 million payment to Anglo-French oil company Perenco as a result of the illegal termination of a production sharing agreement. ADNOC finds offshore gas. UAE national oil company ADNOC, along with block operator ENI (NYSE:E) and PTTEP, discovered a second gas play in Offshore Block 2, adding 1-1.5 TCf to a shallower target previously estimated this year, all this just three years after the acre was awarded in Abu Dhabi’s first round of block bidding. Nigeria’s main export grade was halted amid leaks. The Shell ( LON:SHEL )-operated Forcados terminal has been out of service since July 17 after a leak from a subsea pipe was found, with August cargoes already postponed to September as the 200,000 b/d flow remains tarnished by force majeure events. US Diesel becomes the new favorite of Hedge Funds. According to CFTC data, hedge funds and other money managers bought the equivalent of 9 million barrels of U.S. diesel futures in the week to July 26, a sign that a slow build in middle distillate inventories is a problem for diesel futures. Trembling copper after giant Chilean sinkhole. Chilean authorities have launched a formal investigation into a giant 82-foot-diameter sinkhole at Lundin Mining’s (TSE:LUN) Alcaparrosa mine, potentially spelling trouble for copper production in Chile’s northern regions, home to nearly 30% of the world’s copper production. China Pioneers Offshore Shale Oil Drilling. With China’s upstream sector increasingly focused on shale plays, state-controlled oil company CNOOC (HKG:0883) has successfully tested production at the Weiye-1 well, the country’s first offshore shale oil well. Texas is struggling with unbearable heat. The Electric Reliability Council of Texas (ERCOT) has issued a warning that power use in the Lone Star State will break records again this week, with peak demand expected to reach 80,076 MW on Wednesday (the previous all-time high had been reached two weeks ago, at 78,828 MW). By Tom Kool for Oilprice.com More top reads from Oilprice.com: