There is more volatility to come for the oil markets

Oil prices have been pushed lower by both Bank of England and ECB rate hikes, but there are still plenty of bullish catalysts to watch out for. There is likely to be much more volatility in the oil markets to fill out 2022.

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Friday, December 16, 2022

Oil prices have recovered slightly since last week’s plunge, but downward pressures are still very much present. Interest rate hikes by both the Bank of England and the ECB on Thursday halted the upward momentum in oil prices that had been building. However, the ongoing disruption to Keystone deliveries should provide some hope for bulls as it has caused supply shortages in a continent that has had a relatively safe year thus far. With uncertainty about China’s post-Covid reopening lingering, we may see more of the traditional 2022 volatility in the remaining weeks of this year.

The rises of the Central Bank scare investors. Global stocks and bonds fell to a one-month low on Friday as the US Federal Reserve’s 0.5pp hike was followed by interest rate hikes from central banks in the EU, the UK, Switzerland, Mexico, Norway and Taiwan (all in one day). ), triggering a new whirlwind of bond/equity selling.

Bad news from Dilbit for Keystone Cleanup. According to to the US Environmental Protection Agency, oil spilled from the ruptured Keystone pipeline operated by TC Energy (TSE:TRP) it was diluted bitumen that tends to sink in water, complicating efforts to clean up affected bodies of water, especially when a cold snap is looming.

The IEA forecasts growth in oil demand to 2023. The International Energy Agency believe Next year will see further oil demand growth of 1.7 million b/d, driven mainly by China’s recovery from this year’s contraction and adding 1 million b/d, taking it to a new all-time high of 101.6 million b/d.

Canada once again sanctions turbine maintenance. According to Bloomberg reportsThe Canadian government will revoke the country’s waiver that exempted Nord Stream turbines from Russia’s sanctions, greatly complicating future maintenance of Siemens equipment there.

Egypt discovers huge gas field. Egyptian Oil Minister Tarek El Molla Announced that major American tanker Chevron (NYSE: CVX) has discovered a large natural gas field in the Nargis offshore exploration block in the eastern Mediterranean, with potential reserves of up to 3.5 TCf.

There is no way to stop Aramco’s petchem push. Saudi Aramco (TADAWUL:2222) and major in French energy TotalEnergies (NYSE:TTE) will join forces to build an $11 billion project petrochemistry complex in Jubail, on the east coast of Saudi Arabia next to the SATORP refinery, with commercial operation scheduled for 2027.

Norway warns about the consequences of the gas price cap. Norwegian state controlled energy company Equinor (NYSE: EQNR) has warned that the gas price cap proposed by the European Commission risks greatly reducing liquidity, as trade will shift away from exchanges towards bilateral OTC agreements.

Egypt moves all its gas for export. egypt has maximized its fuel oil consumption at power plants across the country to move as much natural gas as possible to its LNG export terminals, buying most of the residue from Russia and raising the share of fuel oil in power generation inputs at 21-22%.

Russia approaches Venezuela. Just as US oil major Chevron is preparing to ramp up production at its Venezuelan joint ventures, Russian Deputy Prime Minister Alexander Novak, traveled to the Latin American country this week, stating that Moscow is interested in increasing oil production as part of the country’s debt payment.

Gates-backed reactor suffers fuel delays. A $4 billion nuclear power project thrown out by TerraPower, backed by Bill Gates, will be pushed back at least two years to 2028, as Russia is the only country in the world that currently produces and sells the requisite fuel, High Assay Low Enriched Uranium (HALEU).

The EU agrees the ninth package of sanctions on Russia. The last EU summit of 2022 saw Brussels agree to provide 18 billion euros to Ukraine, impose sanctions on investment in Russian mining and create a framework agreement for the gas price cap, which is expected to end early next week.

India’s mega-refinery project falls apart. Struggling to overcome challenges in land acquisition, India is considering the construction of several smaller refineries across the country instead of a single massive 1.2 million barrel per day asset that would be co-owned by Saudi Aramco and ADNOC, each with 25% ownership.

The largest oil field in Europe launches the second phase. Norway Equinor (NYSE: EQNR) has started production from the second phase of the Johan Sverdrup oil field, the largest active producer in Europe, which will see its total production increase to 720,000 b/d, around 6% of Europe’s oil demand.

Earthquake risk limits Texas drilling. A magnitude 5.4 earthquake in mid-November obliged Texas and Oklahoma authorities will limit the amount of wastewater that can be injected into wells, particularly deep wells, to 60-70%, which will inevitably hamper production growth from the US shale patch. .

By Michael Kern for

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