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Oil Bulls Remain Confident Despite COVID Concerns

Oil prices climbed this week as U.S. inventories tightened and the risk of Iran reaching a new deal and bringing extra crude online decreased.

 Crude prices drew hefty support this week from U.S. inventory dynamics, with commercial stocks falling to their lowest since January 2020 and indications that the tightening is set to continue. Concurrently, the markets have seemingly got accustomed to the idea that there will not be any Iranian cliff-hanger as President-elect Raisi is to be sworn into office next week, mitigating erstwhile concerns that Tehran might flood the market with incremental barrels. COVID headwinds persist, however, as several European countries see rising Delta variant cases.

EU Fails to Replenish Gas Storage. European countries are struggling to replenish their gas reserves amid exorbitantly high LNG prices and limited availability of pipeline supplies, with total EU gas reserves standing at a mere 616 TWh, equivalent to some 63 billion cubic meters, the lowest level since 2015. 

TotalEnergies Buys into Singapore EV Charging. Teaming up with another French firm Bolloré, TotalEnergies (NYSE:TTE) agreed to buy Singapore’s leading electric vehicle charging network (accounting for 85% of the city-state’s charge points), acquiring Blue Charge for an undisclosed sum. TotalEnergies seeks to increase its charge point tally tenfold to 150,000 by 2025. 

Gasoline market backwardation. Whilst gasoline cracks remain the best-performing segment of most European refiners’ slate, the derivatives market indicates that the global gasoline balance is tightening as the Eurobob oxy M1-M2 swap surged past the $20 per metric ton earlier this week, the widest in almost two weeks. 

London court to reopen $7 billion BHP dam lawsuit. The London Court of Appeal reopened a lawsuit against the Anglo-Australian mining firm BHP (NYSE:BHP) over the 2015 Mariana dam disaster, Brazil’s worst-ever environmental disaster, allowing a 200 000-strong claimant group to appeal against a lower court decision. 

ADNOC to Ease October 2021 production cuts. The UAE state oil company ADNOC informed its term buyers that it would ease its export nomination cuts for October 2021, bringing back 10 percentage points worth of output compared to September, a clear indication that the Emirates remains earnest in its production ramp-up drive.

European Majors Leave Venezuela. France’s TotalEnergies (NYSE:TTE) and Norway’s Equinor (NYSE:EQNR) have quit their Petrocedeño joint venture, transferring their stakes to a subsidiary of PDVSA. The JV manages the Juni oil field in the Orinoco Belt and a 180kbpd heavy crude upgrader – this was used by both companies, arguing that developing the heavy barrels is incompatible with their low-carbon strategies. 

UK Seeks to Remove China from Nuclear Projects. UK media report that China’s national nuclear firm CGN might be blocked from building new infrastructure on the British Islands, triggered by concerns that increased Chinese participation in Britain’s energy infrastructure could be detrimental to the nation’s overall energy security.  

Rio Tinto Starts $2.4 Billion Serbia Lithium Project. Rio Tinto (NYSE:RIO) brought forward a much-anticipated investment decision on the project, stating that it would already launch construction next year with a commissioning aim of 2026-2027. Jadar in Serbia is bound to become Europe’s largest lithium supply source. 

Biden Administration to Revise Toxic Coal Wastewater Rule. The White House will revise a Trump-era rule that allowed US coal-fired plants to delay installing equipment that could prevent lead, selenium, or other pollutants seeping into rivers and streams, Reuters reports. The US government intends to finalize the new set of rules by 2024.

Shell Buys Inspire Energy as it Seeks to Gain Green Credentials. Shell (NYSE:RDS) purchased the US-based renewable energy retailer Inspire Energy, Reuters reports, amidst increasing domestic pressure to speed up its decarbonization efforts.

Spanish High Court Clears Repsol CEO. Antonio Brufau, the CEO of Spanish oil firm Repsol (BME:REP) was cleared of allegations that he had spied on market competitors to block a takeover bid by PEMEX and its partner. The court found no evidence of the chairman’s direct involvement in the spying case, triggering a more than 2% hike in Repsol stocks. 

Wheat Rises on Inclement Weather. Wheat futures at the Chicago BOT rose to a 2-month high as droughts in the US Midwest and freezing temperatures in Brazil have sapped global spring wheat yields. The Wv1 CBOT contract surpassed the $7 per bushel threshold, whilst the Paris December contract rose beyond €220 per ton (equivalent to $7.1 per bushel).

Indonesia Sets 2060 Net Zero Objective. Indonesia announced it would seek to achieve net carbon neutrality by 2060 or sooner, seeing its aggregate greenhouse gas emissions peak in 2030. Interestingly, it is oil that will be phased out the swiftest in the upcoming future, with abundant coal retaining its importance in power generation well into mid-century. 

NOVATEK Revisits Obsky LNG. The Russian LNG-focused producer abandoned its 5mtpa Obsky LNG project and revamped it instead into a gas petrochemicals complex that would produce ammonia and hydrogen from natural gas. NOVATEK initially intended to use its proprietary Arctic Cascade liquefaction technology for the project. 

Offshore Suriname Production Gets Real. Two appraisal drilling programs carried out by operator TotalEnergies (NYSE:TTE) in Suriname’s Block 58 confirmed net black oil pays in both the Sapakara and Kwaskwasi prospects, marking another important step towards oil commercialization. This year will still see another appraisal well at the Bonboni field and a flow test of Sapakara.

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The post Oil Bulls Remain Confident Despite Covid Concerns first appeared in Oilprice.com on July 30, 2021.  

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