Oil prices rallied this week on a string of bullish forecasts from major investment banks, but may have climbed too high too fast.

Friday, January 21, 2022

Major investment banks released their outlook for 2022 this week, with Goldman Sachs and Morgan Stanley expecting crude oil prices to hit $100 a barrel this year as oil inventories continue to fall and the reserve capacity of OPEC+ is decreasing. Those reports lifted ICE Brent above $90 a barrel for the first time since 2014 this week, but the oil rally slumped on Friday as the geopolitical premium waned. Despite recurring forecasts of an impending supply shortage, the coming weeks should see more rough hitting the market – Libya is already back on track and Ecuador will soon be there too. The broad pullback in the futures markets, with the Brent M1-M12 spread at $8 a barrel, indicates that market fundamentals still point to a decline from here, rather than a continuation of the rally. On Friday, global benchmark Brent was trading around $88 a barrel, while WTI was trending at $85 a barrel.

The US Congress is once again attacking the big oil companies. A US congressional committee has invited senior officials from four major oil companies – ExxonMobil, Chevron, Shell and BP – to testify in February on the industry’s role in climate change, the next phase of the committee’s inquiry. House watch on fossil fuel companies blocking action on climate change.

Drug supply disrupted by Ceyhan pipeline explosion. A downed electricity pylon caused a force majeure stoppage of pumping along the Kirkuk-Ceyhan oil pipeline which carries Kurdish crude to the Mediterranean, although the impact was relatively brief as it took a day to Turkey to bring the pipeline back to design capacity.

Chesapeake lines up to buy Chief Oil & Gas. American oil company Chesapeake Energy (NASDAQ:CHK) reportedly in advanced talks to buy privately held Chief Oil & Gas for some $2.4 billion, just under six months after the former emerged from bankruptcy and began to refocus its operations around gas production .

China fines Petrochina for business irregularities. In addition to punishing independent refiners for evading the fuel tax, Chinese authorities have also fined the country’s main oil company, Petrochina, for irregularly trading crude oil totaling 180 million tons since 2006, to in turn “facilitating the blind development of obsolete production capacities among independents”.

The oil majors are leaving Myanmar. The oil majors TotalEnergies (NYSE: TTE) and Chevron (NYSE: CVX) decided to leave Myanmar after last year’s military coup, pulling out of the Yadana offshore gas project off the country’s southwest coast without any financial compensation.

The UK rejects the request to build a UK-France feeder cable. Despite soaring electricity prices in the UK during 2021, UK Business Secretary Kwasi Kwaryeng has rejected a request to build a 16 GWh high-voltage submarine power cable that would bring energy electricity from France.

Still-torn Libya aims to maximize production in 2022. While Libya only came out of the woods a few days after a month-long supply disruption, the country’s NOC chief, Mustafa Sanallh, said Libya was aiming for an average annual production level of 1, 2 million b/d in 2022.

The world’s first hydrogen tanker to test the waters. The world’s first liquid hydrogen carrier is about to start charging for the maiden voyage that would take it from Australia to Japan, with the Kawasaki-built Suiso Frontier (TYO: 7012) getting hydrogen from lignite produced in Australia.

Turkey to ration electricity to industry after pipe shutdown in Iran. Turkey’s energy ministry said it would impose mandatory power cuts at major industrial facilities after Iran cut off gas flows to Ankara for up to 10 days due to a technical failure in the Iran- Turkey.

Britain refrains from intervening in the carbon market. While the UK government reserves the right to chill the UK carbon market by adding free allowances as part of its cost containment mechanism, London has repeatedly decided not to do so, despite the fact that prices of carbon in the UK are already trading at £78 per mtCO2eq. ($105/mt) and draining industry margins.

Argentina’s oil production hits its highest level in 10 years. According to Argentine national statistics, oil production in the country hit a 10-year high of 560,000 bpd, the highest since October 2012, driven mainly by higher production from Vaca Muerta, up 64% from one year to the next.

ExxonMobil-SABIC joint venture increases capacity at USGC Petchem. Partnering with Saudi petrochemical giant SABIC, an American oil major ExxonMobil (NYSE:XOM) commissioned a 1.8 million tpa polyethylene plant near Corpus Christi, Texas, representing approximately 20% of future polyethylene capacity coming to the US Gulf Coast.

Rio Tinto faces the collapse of the Serbian lithium project. Serbia revoked the metallurgical enterprise Rio Tinto (NYSE: RIO) lithium exploration license for production in the Jadar region, largely due to the mass protests that have gripped the public consciousness of the Balkan country.

Col de Calcasieu at the edge of the commercial start. The largest LNG project commissioned this year in the United States, Venture Global’s Calcasieu Pass, saw the amount of gas flowing to the terminal more than double to 88 million cubic feet per day this week, indicating that the liquefaction plant should soon start producing LNG.

By Tom Kool for Oilprice.com

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