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Oil Prices Crash As Covid Does What Biden Couldn’t

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·4 min read
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  • NG=F
  • CL=F
  • HG=F

Renewed Covid fears have managed to do what Biden couldn't, sending oil prices crashing as a new wave of demand destruction looms.

Friday, November 26th, 2021

Oil prices experienced one of their worst trading days in recent memory on Friday, plunging across the board by over 10% on fears that a new COVID-19 variant discovered in Southern Africa might dampen economic growth and trigger another demand slump. Following the spectacular failure of the SPR release, which instead of depressing prices ratcheted them up higher, renewed COVID-19 concerns have now brought about President Biden’s objective. OPEC+ might still have a say in this, with the group's December 02 meeting potentially resulting in a reduction in production targets for 2022.

China Remains Non-Committal on SPR Release. Despite repeated talks with the US government, China has pushed back against President Biden’s calls to “do more” and stated it would coordinate its own releases of strategic stocks according to its needs, cooling down the enthusiasm of market bears.

OPEC Panel Finds US SPR Release Superficial. OPEC’s Economic Commission Board estimates that the SPR releases carried out by the United States and its partners will only inflate the global crude surplus over Q1 2022, potentially paving the way for a slower-than-assumed OPEC+ production rollout coming up.

US Treasury Gives Chevron More Time to Leave Venezuela. The US Treasury Department extended the licenses of Chevron (NYSE:CVX) and drilling firms Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) to wind down operations in Venezuela until June 1, 2022, allowing the US major to continue producing for the time being.

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COVID Fears Put Temporary Chill on LNG Prices. Spot LNG prices in Asia have stopped climbing on concerns of the potential impact of the new coronavirus variant, dropping to $36 per mmBtu (still well above any seasonal average though), despite demand heating up in South Korea and Japan.

US Ethanol Woes Hamper Gasoline Blending. Supply chain disruptions, primarily delays in rail transportation coupled with high outright ethanol prices, have broughtethanol inventories in the US East Coast to an almost 7-year low, complicating gasoline blending for which ethanol is the prime component.

Lebanon Relaunches Second Licensing Round. Lebanon re-launched its 2nd offshore licensing round for eight remaining blocs, following several COVID-related postponements, seeking to lure more oil majors, with TotalEnergies (NYSE:TTE), ENI (NYSE:E), and Novatek (MCX:NVTK).

Petrobras Boosts Capex for Next Investment Cycle. Brazil’s national oil firm Petrobras (NYSE:PBR) increased its upstream capital expenditures to $68 billion for the 2022-2026 period, seeking to bring overall production to 2.6 million b/d by 2026, up 500,000 b/d from its current output levels.

Argentina’s YPF Seeks Lithium Expansion. Argentina’s state oil company YPF (NYSE:YPF) launched talks with major Chinese EV battery producer CATL (SHE:300750) in a bid to form a strategic partnership in lithium production, just weeks after the Chinese firm was outbid for Argentina-focused lithium miner Millennial Lithium.

US NatGas Prices Continue Upward Rise. Despite a shorter-than-usual trading week, US natural gas Henry Hub futures rose 5% on the week - to $5.16 per mmBtu - as prospects for colder weather triggered expectations of higher heating demand.

China Interested in Afghanistan’s Lithium Potential. Several Chinese firms have started on-site inspections of potential lithium projects in Afghanistan, with Jiangxi Copper (SHA:600362) having already taken over the country’s largest copper mine in Mes Aynak in September.

E.U. Seeks to Ban Routine Methane Flaring. In a regulation draft expected to be published 14 December, the European Commission will set up guidelines for methane reporting in Europe, aiming for maximum transparency, concurrently banning routine venting and flaring in member countries.

China Goes for Coal-to-Chemicals Technologies. China Energy Group, the Asian powerhouse’s largest coal producer, launched production at its 400,000 tons per year coal-to-ethylene glycol plant in Shaanxi, having already started a coal-to-methanol project nearby.

Indonesia Might Cut Off Tin Exports by 2024. Indonesia’s President Joko Widodo stated the Southeast Asian country might stop unrefined tin exports in 2024, being the second-largest producer globally, as it seeks to persuade international investors to locate their metal refining plants there.

E.U. Carbon Prices Shoot Through the Roof. The European Union’s carbon prices reached an all-time high this week, hitting €75 per metric ton CO2 on Thursday, following the German government’s announcement that it would seek to introduce a carbon price floor of €60 per metric ton in the upcoming years.

By Tom Kool for Oilprice.com

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