Bearish Sentiment Drags Oil Prices Lower

While there are still plenty of supply risks that could send oil prices soaring, bearish sentiment has taken over oil markets this weak due to falling Chinese demand and the expectation of a global economic slowdown.

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Friday, April 22, 2022

Prospects of weakening economic growth globally have continued to weigh on crude prices, with the US Fed hinting at a half-point interest rate increase at the next policy meeting in May and China’s COVID woes getting ever-more protracted amid Shanghai announcing another round of lockdowns . Upside risks are still on the table with the European Union mulling oil sanctions against Russia and Libya on the brink of war, but for the time being bearish sentiment is pulling prices lower.

Russia’s Rouble Payment Scheme Compatible with EU Law. The European Commission stated that Russia’s newly-introduced gas payment system that would convert prices into roubles in Gazprombank, a subsidiary of the country’s gas giant Gazprom (MCX:GAZP), might be compatible with the EU sanctions regime, easing fears across the European gas market.

The World is Headed for a Protracted Energy Crunch. The world needs to find $1.3 trillion of additional investment by 2030 to ramp up global energy production and improve infrastructure, US investment bank JP Morgan said, otherwise the world risks seeing energy demand exceeding supply by a whopping 20%.

US SPR Barrels Set to Stay at Home. The US Department of Energy awardedcontracts for 30 million barrels of SPR crude, with US refiner Valero (NYSE:VLO) and Saudi-owned Motiva Enterprises landing the largest volumes at 6.85 and 4.05 million barrels, respectively, implying most of the barrels will be refined domestically.

China’s Overseas Coal Ban Halts 15 Projects. According to a recent studyChina’s decision to ban overseas coal financing has led to the closure of 15 power generation projects with a total capacity of 12.8 GW and could potentially halt another 37 GW that are currently in the pre-construction phase.

US Wants Brazil to Produce More Oil. Brazil’s energy minister Bento Albuquerque said the United States has asked the Latin American country to produce more crude to lower outright oil prices, a feat Brazil considers logistically difficult as production has been hovering around 3 million b/d recently.

Argentina Wants Gas Links Amid Booming Gas Output. Just as Argentina’s gas production rose 10% in March to reach a new monthly record, Argentina said it wants to speed up the construction of gas connections that would connect the Vaca Muerta shale play to Buenos Aires, with the government calling for a mid-2023 deadline for the planned Nestor Kitchener pipeline (to which the contract has not even been awarded).

Low-Producing Wells Become US Emission Headache. According to a new studylow-producing oil and gas wells that account for just 6% of total US production emit more than half of methane coming from all well sites, a harbinger of methane monitoring changes to come from the Environmental Protection Agency.

Russia Asks for Full Pre-Payment in Crude Tender. Russia’s national oil company Rosneft (MCX:ROSN) have you asked for full pre-payment in roubles (alternatively in Chinese yuan or Turkish lira, too) in its most recent Urals and ESPO tend for May-loading charges, amidst tangibly low Western buying interest.

US Refiners Receiving Last Russian Charges. As the April 22 wind-down deadline set for US refiners to halt buying of Russian crude and products comes into effect today, there has been a total of nine tankers delivering their cargo to the USGC, the overwhelming majority of which carried fuel oil.

LyondellBasell Quits US Refining, Shuts Houston. international chemicals major LyondellBasell (NYSE:LYB) announced it would permanently close the 265,000 b/d Houston Refinery by the end of 2023 and exit US refining altogether, citing high costs and low margins as key reasons for the decision.

Shell Set to Sell Russian Gas Stake to Chinese Firms. according to average reportsUK oil major Shell (LON:SHEL) is in talks to sell its 27.5% stake in the Sakhalin-2 LNG project with Chinese state oil companies CNOOC (HKG:0883), CNPC (SS:601857), and Sinopec (SS:600028).

European Carbon Prices Shoot Up on Weak Auctioning. European carbon prices have shot-up to a seven-week high of €89 per metric ton this week, most probably coming on the back of market participants building up positions again amidst low auctioning activity and dropping gas prices.

PEMEX to Finally Pay Its Debt. Thanks to windfall profits coming from elevated crude prices, Mexico’s national oil company PEMEX will reportedly summarize its debt maturities this year, totaling some 5 billion, no longer requiring the government to make the payments for its expense.

Copper Hit by China Demand Malaise. Along with other industrial metals, copper prices stumbled this week, down at $10,230 per metric ton, stemming from worries that China’s longer-than-expected lockdowns and aggressive US monetary tightening will hinder demand, as seen in rising copper inventories.

By Josh Owens for

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