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Chart of the Week
– Depressed by draconian lockdowns that might be extended well into May, Chinese refinery runs are set to reach a post-pandemic low this month.
– According to S&P Platts, throughput rates at the country’s four state-owned refiners fell to 76%, the lowest since April 2020, as movement controls in 18 provinces kept demand subdued.
– Even though several refineries are out for spring maintenance, high stocks have led to some 3 million b/d refining capacity being idled currently, especially in most-impacted coastal areas.
– China’s so-called teapots (independent refiners) are seeing run rates of 50% in April, 25 percentage points lower year-on-year, perpetuating the financial strain on them.
Market Movers
– US refiner Valero (NYSE:VLO) has reported its most profitable results in seven years with its Q1 earnings, with its operating income reaching $1.47 billion.
– US oil service major Halliburton (NYSE:HAL) warned that the impending May 15 sanctions deadline could mean the company will face charges on $340m of Russian assets as trade restrictions are blocking its ability to move out equipment.
– The Dutch activist group Friends of the Earth has stepped up pressure against oil major Shell (LON:SHEL), claiming that if the firm fails to comply with a 2019 Dutch court order to deepen emission cuts, the company’s board will be held personally responsible.
Tuesday, April 26, 2022
The extreme volatility in crude prices has kept the oil market fixed to the $100 per barrel mark, with alternating news of further Chinese lockdowns effectively offsetting Europe’s attempts to find a consensus solution on Russian oil sanctions. Largely thanks to the 180 million barrel SPR release, the US seems to be better positioned to withstand the upcoming turbulence and further bouts of tightness – decreasing net positions in NYMEX/ICE WTI taking place concurrently to marginal increases in net Brent contracts indicate a longer-term structural weakness in Europe.
US Shale Growth Marred by Frac Fleet Shortage. The shortage of frac fleets (equipment to perform hydraulic fracturing) has become one of the main impediments to US crude production this year, with the current number of frac spreads deployed (270) being well below pandemic levels (360-370).
Iran Signals Talks Might be Revived Soon. Top Iranian officials have indicated that the current hiatus in the nuclear talks is not in the interest of either side and that a restart of negotiations, coming to an abrupt halt in early March, might be imminent.
Libya Skirmishes Damage Only Refinery. Continuous armed clashes around the 120,000 b/d Zawiya refinery have reportedly damaged Libya’s only refinery and the adjacent storage tank farm, coming on the back of simultaneous efforts of the two rival governments to appease the protesters.
Canada Drilling Heats Up to Unseen Highs. Drilling activity has risen to the highest level on record in Canada, with the latest available January data showing 617 active wells in Alberta, surpassing the previous high set in October 2011.
CPC Terminal Comes Back to Full Capacity. Following a month-long disruption caused by a storm in late March that wiped some 600,000 b/d off the market, the CPC loading terminal in southern Russia returned to full capacity operation, easing the pressure on the world’s largest light sweet stream. Related: Libya May Reach Full Oil Production Within Days
China Keeps Lockdown Impact in the Dark. China-watchers are having an increasingly difficult time gauging the impact of COVID-19 lockdowns in the country as Beijing restricts the release of industry-relevant real-time data such as commodity inventories or cargo traffic data.
UK Wants Mandatory Climate Plans for Companies. The British government launched a new task force to enforce UK-listed companies (over 1,300 firms in total) to publish climate plans with specific short-to-long-term targets, starting as soon as this year.
Rosneft’s Megatender Fails Spectacularly. Russia’s national oil company Rosneft (MCX:ROSN) failed to sell oil in its recently announced tender that offered Urals, ESPO, and Sokol cargoes loading in May-June, arguably triggered by the rouble-payment clauses.
Nigerian Illegal Oil Refinery Blast Kills Dozens. More than 100 people died in an explosion at an illegal oil refinery in southeastern Nigeria, another tragedy in the African country that loses as much as 150,000 b/d of crude production due to theft.
Petroecuador Seeks Contract Renegotiation with PetroChina. Ecuador’s state-owned oil company Petroecuador has been holding talks with PetroChina (SHA:601857) to renegotiate two supply contracts that run until 2024, in the hope it could free up some products to sell directly in the spot market.
European Power Prices Rise Again as Winds Tame. Day-ahead power prices have been on the rise across Europe as wind generation forecasts indicate a week of below-average speeds, triggering a rebound in gas prices above $100 per MWh despite increased nominations for Russian supplies.
Russia Wants Its Own Lithium Industry. Russia’s nuclear holding Rosatom and leading metals producer Nornickel (MCX:GMKN) plan to develop a lithium deposit in the country’s northwestern Murmansk region, confronted with curbed supplies as only Bolivia continues to provide it with lithium carbonate.
Germany Legalizes Nationalization of Energy Firms. The German government approved a legal amendment that would enable Berlin to seize ownership of energy companies in the event of an emergency, putting the potentially impacted firms under trust administration, hinting at what might happen to Gazprom’s (MCX:GAZP) subsidiary.
By Josh Owens for Oilprice.com
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