Chart of the week The collapse of natural gas paves the way for a renewed coal sector – Coal prices on all continents soared to all-time highs this week, nearly tripling from a year ago, as uncertainty over European gas flows and stagnant LNG volumes favor ‘royal coal’ ». – Asia’s benchmark contract, ICE Newcastle futures, jumped to $463.75 a metric tonne on Monday, while spot natural coal loaded in Australia settled just $30/mt lower. – Paradoxically, the coal price rally may still see further upside as La Nina weather patterns may affect the supply side, especially with the weather disruptions due to rainfall in Australia. – In Europe, the recovery in natural gas prices caused by Gazprom’s Nord Stream-1 shutdown, with first-month spot prices around $75/mmBtu, pushed the 2023 annual API2 coal contract to $340/ Mt. Market Mobiles – EQT Corp. (NYSE:EQT), the largest private natural gas producer in the U.S., is nearing a deal with peer THQ Appalachia, a producer of about 760 mcf per day, for about $4 billion. – US royalties company Sitio Royalties (NYSE:STR) said it would acquire oil and gas royalties company Brigham Minerals (NYSE:MNRL) for $4.8 billion in an all-stock deal expected to close by 1 quarter of 2023. – Germany’s largest natural gas importer Uniper (ETR:UN01) has signed a 16-year deal with Australian LNG exporter Woodside (ASX:WDS) to supply 1 bcm of LNG, touching volumes that traditionally go to Asia. Tuesday 06 September 2022 OPEC+ is rethinking its role in oil markets, and while its promise of a small reduction is certainly not entirely impressive, the geopolitical symbolism of its actions should never be underestimated. Signaling that the oil group is willing to make quick changes should geopolitical realities (er, Iran) change, the lower October production target is also a mirror into the Middle East’s psyche – as oil began to approach Saudi fiscal levels Arabia. Arabia or Iraq, keeping crude prices in the $90-100 per barrel band will remain high on the OPEC+ agenda. OPEC+ brings an end to the era of production increases. OPEC+ agreed to cut collective output by 100,000 b/d, reversing the oil group’s decision from last month, marking the first month in more than two years that they have cut production targets amid unprecedented price volatility. Iran talks again “at risk”. The EU’s chief negotiator in nuclear talks with Iran, Josep Borrell, said the talks were in jeopardy as Washington and Tehran began to diverge on several contentious points, notably guarantees that the US cannot unilaterally withdraw from the JCPOA again . The EU wants to cap gas prices on the Russian pipeline. The European Commission is considering ways to curb the price of Russian natural gas exported intermittently by Gazprom ( MCX:GAZP ), although some countries remain wary of such measures, fearing a full shutdown in retaliation. The UK’s new prime minister faces a $150 billion dilemma. Liz Truss, the UK’s new prime minister, is considering ways to freeze household gas and electricity bills at the current peak of $2,281, avoiding another 80% rise due in October in a move of £150bn dollars. PEMEX’s methane leaks show no sign of abating. Just two months after Mexican scientists discovered massive methane leaks at PEMEX’s offshore fields in Mexico, a massive methane plume appeared in the Ku-Maloob-Zaap complex throughout August, sparking concerns about crumbling infrastructure. Conoco pioneers hydrogen gas production in the US. US oil company ConocoPhillips (NYSE:COP) will develop a hydrogen gas plant that it will jointly operate with Japan’s JERA, with the latter supplying natural gas for the plant (located along the Gulf Coast) as well as the operation of the CCS facility. Heat waves are putting California electricity prices under pressure. Amid a prolonged heat wave, electricity prices in California have risen to their highest level since the state’s grid operator imposed rolling blackouts in August 2020, with SP-15 electricity prices trading above 500 $ per MWh. Indonesia prepares for widespread fuel protests. Seeking to ease fiscal pressures stemming from a bloated $44 billion package of energy subsidies, Indonesian President Joko Widodo has raised subsidized fuel prices by 30 percent, with analysts expecting widespread protests and disruption. Canada’s refinery explosion puts renewal at risk. A massive explosion at the idle 140,000 b/d Come by Chance refinery in Canada’s Newfoundland and Labrador province has injured eight people as the refinery transitions to a biofuels producer with a focus on SAF and renewable diesel. Shell and Exxon Sell Europe’s Largest Natural Gas Field. The UK’s Shell ( LON:SHEL ) and US major ExxonMobil ( NYSE:XOM ) have decided to sell their NAM joint venture in the Netherlands, which among others operates the supergiant Groningen natural gas field that has been ordered to close (by government decree ) in 2024. Markets rejoice as Chile rejects new Constitution Bill. Chile’s stock market and Chile-focused companies soared on Monday after the country’s citizens rejected a new constitution proposed by President Gabriel Boric, allaying fears that Chile’s leftward turn could jeopardize metal interests companies.
The US will announce combined orders in November. With the refining industry lacking a long-term vision for biofuel blending mandates amid ongoing delays, the Biden administration is set to announce a three-year blending target for 2023-2025 this November.
Hitting the bottom, the iron ore gradually bounces up. With benchmark Chinese Dalian iron ore prices falling to a contract low of 92 per metric ton, iron ore futures rebounded this week to 100/mt despite ongoing COVID restrictions in China with 33 cities under some form of lockdown.
By Tom Kool for Oilprice.com More top reads from Oilprice.com: