Bearish Sentiment Begins To Take Hold In Oil Markets

It has been a quiet start to the week for oil markets, but bearish sentiment is undeniably building as the Delta variant threatens to damage global demand.

Chart of the Week

– Oil and gas majors have withstood the immediate ramifications of a sternly-worded IPCC report warning of the dire consequences of climate change quite well.

– Energy companies remain the second-most lucrative investment in the S&P 500 pool, having gained 30% over the course of this year, Bloomberg reports.

– At the same time, the era of energy stocks soaring above others in relative terms is over, with energy companies now accounting for a mere 2.5% of the broader index.

– Overall, energy firms in the S&P 500 saw sales more than double in Q2 and revenues in H2 are assumed to exceed those of every other sector.

Market Movers

– Saudi Aramco is reportedly in advanced talks with Indian conglomerate Reliance (NSE:RELIANCE) to acquire a 20% stake in its refining and chemical business, in a monster deal worth some $25 billion.

BHP Group (NYSE:BHP), the Anglo-Australian energy firm, reported its best annual profit in more than a decade, taking in $17.06 billion in fiscal year 2021. BHP will also shift its main market listing from London to Sydney.

LG Energy (KRX:003550) signed a deal with Australian Mines Ltd (ASX:AUZ) to supply 100% of projected nickel and cobalt output from the miner's flagship Sconi Project in southeastern Australia.

Tuesday, August 17, 2021

It has been a relatively quiet start to the week for oil markets, with Brent trading just below the $70 per barrel mark and WTI hovering around $67.5 per barrel. Despite the relative lull, short-term sentiment turned more bearish as China’s July readings indicated its weakest refining performance since May 2020, denting hopes of a robust Chinese demand bounce-back coming anytime soon.

OPEC+ Not Willing to Ramp up Output. OPEC+ nations see no utility in ramping up crude production beyond the already agreed gradual roll-back, turning a blind eye on US President Biden’s call to boost output as gasoline prices spiral out of control, Reuters writes.

Woodside to Buy BHP’s Oil Business. UK-Australian firm BHP (NYSE:BHP) is negotiating the divestment of its oil and gas assets with Woodside Petroleum (ASX:WPL) in a deal that could create Australia’s largest producer, surpassing the recent Santos-Oil Search Merger.

Related: How Can Emerging Markets Capitalize On Geothermal Energy’s Potential?

US Treasury to Oppose Development Banks Investments into Fossil Fuels. The latest investment guidance US Treasury Dept guidance states Washington would be against international development banks (World Bank, African Development Bank) investing in fossil fuel projects, except for some downstream gas facilities in poor countries.

Canada to Finally See Pipeline Capacity Expansion. Enbridge (TSE:ENB) intends to commission its Line 3 replacement pipeline project in late September-early October, although it would take months until it reaches full throughput, increasing Canada’s export capacity by 390,000 b/d.

Rosneft Courts Vostok Oil Investors. Russia’s state oil company Rosneft is still wooinginvestors into its Vostok Oil megaproject, having already sold 10% to Trafigura and negotiating on further 5% sales to trading firms Vitol and MME. Vostok Oil will combine Vankor fields with newly purchased Payakha acreage, aiming for 2 mbpd of production by 2030.

EIA Cuts 2022 Us Crude Supply Forecast. The EIA cut its 2022 crude output estimate by a further 100kbpd to 11.76mbpd, indicating that production next year will still remain below pre-pandemic levels on an annual average. This year will see an 11.12mbpd annual output rate.

Europe to See Retail Energy Prices Hike. In a harbinger of things to come amid sky-high gas prices, EDF Energy, a subsidiary of France’s EDF (EPA:EDF), announced it will hike retail energy prices in the UK by 12% starting from October 01.

Germany to Sell Quarter of Lufthansa Stake. Germany’s government will sell a quarter of its 20% stake in Lufthansa (ETR:LHA), one of the world’s largest airlines, in a deal that is supposed to bring some $1 billion to the state coffers.

Shell Declares Force Majeure at Forcados. The Shell-operated (NYSE:RDS.A) Forcados terminal in Nigeria’s Niger Delta declared force majeure over the weekend after a sheen was noticed around the loading buoy. Market sources indicate that the incident might have happened during the loading of the George S vessel.

Saudi NOC Invests into Solar. Saudi Aramco (Tadawul:2222) agreed to invest in the 1.5 GW Sudair solar PV plant, the first project under the Saudi Public Investment Fund’s renewable portfolio. Aramco will own 30% in the $0.9 billion project, already wielding a 25-year power purchase agreement with Saudi Power Procurement.

Aluminum Prices Soar to Record Highs. Triggered by Russia’s half-year aluminum export tax and a strike-induced supply drop at Rio Tinto’s (NYSE:RIO) Kitimat site in Canada, aluminum prices were at all-time highs – US prices have surged to $3400 per metric tonne already, some $400 metric tonne higher than the previous high from 2018 when the US sanctioned Rusal (MCX:RUAL).

Iraq Clinches Drilling Deals. Seeking to rekindle drilling activity in Iraq, the state-owned drilling firm IDC is closing on an array of drilling contracts with international majors. BP (NYSE:BP) got a contract to drill 30 wells at the Rumaila field, whilst the Italian ENI (NYSE:E) is set to sign off to 37 wells for the Zubair oil field.

IKEA Starts Selling Renewable Energy. The world’s largest furniture brand, the privately-owned IKEA, will start selling renewables-sourced electricity on the Swedish market starting this September.

By Tom Kool for

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Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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