Fears of recession are taking hold of the oil markets

Oil prices have returned to the levels they were at before Russia invaded Ukraine, highlighting that a global recession and the destruction of demand are now the central focus of traders.

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Friday 5th August 2022

It’s hard to escape the fact that almost every single piece of news and analysis seems to indicate that a recession is looming. Whether it’s the Bank of England’s warning of a five-quarter recession or OPEC +’s lack of action on oil production, the bad omens keep coming. Inevitably, this also impacted oil prices, almost returning to where they were before the Russian invasion began, with Brent ICE trending around $ 96 a barrel. For the first time in weeks, oil futures contracts began to reflect expectations of a weak winter, with monthly spreads halving week after week. We are still firmly set back, but it no longer seems as drastic as it was before the summer.

OPEC + raises its September target by just 100,000 barrels per day. Meeting to set its collective production target for September 2022, OPEC + agreed to raise its lowest monthly quota since 1986, to 100,000 barrels per day, implying that the oil group is still assessing the risks of recession for take more radical measures.

The giant Kazakh oil field has stopped due to a gas leak. Crude oil production at the 13 billion barrel Kashagan field in Kazakhstan was completely halted mid-week on fears that the oil pipelines connecting the shallow water platforms to the shore could leak, possibly due to equipment corrosion.

The UN chief calls for a tax on “grotesquely greedy” oil. UN Secretary-General Antonio Guterres has called on governments around the world to tax these excessive profits and redistribute them, claiming that oil companies have made immoral profits on the backs of the poorest people.

OPEC promises to have more capacity for the winter. It appears that Saudi Arabia and the UAE are increasing spare production capacity to be able to meet any significant demand in the event of a winter supply crisis, trying to mitigate the reputational blow after the quota increase by 100,000. b / g of September.

Diesel stocks indicate that problems are brewing. While markets in general have focused on increasing U.S. gasoline stocks, middle distillate stocks have approached extremely low levels with this week’s data showing another 2 million barrel drop, with stocks totals of more than 21 million barrels below the corresponding point in 2008.

China doubles very high voltage power lines. By connecting China’s far west regions, where most of the solar and wind power plants are located, to large coastal cities, the country’s state grid plans to invest approximately $ 22 billion in ultra-high-voltage power lines. year, increasing the prospects of copper and aluminum for H2.

The Russian government sells Sakhalin-2 to Gazprom. A Russian government decree issued this week saw Gazprom receive 50% of the Sakhalin-2 LNG project, with the remaining shares split among project partners who re-applied for their share, with Shell (LON: SHEL) trying to sell its 27.5% stake before it’s too late.

India wants to stimulate fuel exports. Just a month after the introduction of fuel export taxes, the Indian government cut export taxes on gasoline, jet fuel and diesel in half, while increasing the taxation on domestically produced crude, grossing $ 30 a barrel of local production.

Germany has legal problems with the gas tax. The German government acknowledged that it should have changed its recently adopted energy security law as it was found that it cannot impose the often discussed gas tax on consumers who have their gas contracts at fixed prices, about a quarter of all deliveries.

The bad news will now arrive more frequently in the UK. With the Bank of England expecting the cap on energy bills to rise to £ 3,500, UK energy market regulator Ofgem has announced that it will review the country’s price cap on a quarterly basis rather than twice a year.

Russia bans Western companies from selling energy quotas. The Russian government has banned companies from so-called hostile countries from selling shares in key energy projects until the end of the year, implying that major US companies Exxon Mobile (NYSE: XOM) will not be able to get out of Sakhalin-1.

Singapore banishes Glencore from the Bunkering Pool. The Singapore Maritime and Port Authority has banned the Swiss commercial major Glencore (LON: GLEN) from the country’s bunkering market for two months after a chlorine contamination incident in March drastically reduced fleet availability.

Chesapeake seeks the sale of South Texas assets. US oil company focused on shale Chesapeake Energy (NYSE: CHK) It is reportedly considering selling its Eagle Ford shale business amid an ongoing shift towards natural gas production, possibly under pressure from private equity firm Kimmeridge Energy for changes.

Nickel smelting drops to a 5-year low. Satellite imagery indicates that nickel smelting has dropped to its lowest point globally in more than 5 years of data tracking, with high electricity prices holding back activity in Europe and Africa, while China remains hampered. from the weak recovery in demand after the blocks.

By Josh Owens for Oilparmi

Other key readings from Oilcludes:


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