US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 
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Mauston, Wisconsin USA - October 31st, 2021: Joe Biden stickers on fuel pumps saying I Did That due to high fuel prices (shutterstock)
US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 
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Updated 24 November 2021

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

LONDON: Despite warning from analysts, US President Joe Biden finally announced the release of crude oil from the country’s strategic stockpile, a unilateral move first mooted by his Energy Secretary Jennifer Granholm in October, as he seeks to curb inflationary pressure in the US economy.

Gasoline prices nationwide are averaging about $3.40 a gallon, more than double their price a year ago, according to the American Automobile Association.

Biden confirmed the release from the US Strategic Petroleum Reserve on Tuesday after months of failed pressure by the President to convince OPEC to hike production amid rising gasoline prices in America - currently at a seven year high - and heightened worries that rising inflation could derail the post Covid-19 economic recovery.

The move, which will make 50 million barrels of oil available from the SPR in conjunction with releases from China, India, Japan, South Korea, and the UK, underlines the intense domestic pressure the President is under as his poll ratings tumble.

The Indian government also announced it would release 5 million barrels of oil from strategic reserves in coordination with other buyers. 

The rules of the International Energy Agency (IEA) – the inter-governmental group charged with managing global supply - specifically state that reserves should only be released to manage market shocks, such as wars or natural disaster, not as a mechanism to correct market imbalances caused by lack of investment and rising demand.

Natasha Kaneva at JP Morgan said the unilateral emergency sale from the SPR, without coordination with the IEA, was unprecedented.

She said: “Presidentially-directed emergency releases have occurred only three times over the last 30 years and all happened before the US shale revolution significantly reduced US dependence on imported crude.”

It is also the first time the US has involved China in any coordinated action to release oil reserves, although China, which is only an affiliate member of the IEA, has so far failed to release all the details of its release.

Giovanni Staunovo at UBS described the release as a “big headline number” but added that the “details provide a less strong narrative”.

He said: “Fifty million barrels from the US is above the market expectations, but the effective volume is much smaller, only 32mb. Moreover,18mb of the 50mb were already planned to be sold next year, now this amount is sold at the start of the year instead of later in 2022.”

He added: “Also the amount being so far mentioned from other countries joining the US looks more symbolic.”

The Strategic Petroleum Reserve was created after the 1973 energy crisis. Two sites in Louisiana and two in Texas currently hold oil in caverns hollowed out of salt domes — mountainous salt deposits that are almost entirely underground.

The most obvious risk in releasing reserves, as Goldman Sachs commented in a recent note, is that it can only offer a short-term solution to Biden for what is clearly a structural problem in the market.

However, a bigger immediate issue will be how OPEC+  responds when it meets next week. Will the organization now decide to adjust its planned oil production increases?  

Most market analysts suggest OPEC is more concerned about the prospect of renewed COVID-19 restrictions in Europe, but add Biden’s decision does provide an opportunity for the organization to downwardly revise its current production levels.

UBS’s Staunovo said: “They (OPEC+) will closely track the developments on mobility restrictions in Europe. That is probably their biggest concern at the moment and increasing the probability that they might pause at the next meeting.”

OPEC+, which comprises OPEC members essentially led by Saudi Arabia and other producers led by Russia, has so far doggedly stuck to its strategy of increasing production by 400,000 barrels per day each month.

OPEC has been wary about opening up the taps amid fears that a worrying spike in COVID-19 rates in Europe and the US could result in fresh economic restrictions.

Austria returned to a full lockdown this week, while the Netherlands is currently in a partial shutdown. Germany is considering the imposition of regional lockdowns as infection rates spiral and Italy is poised to introduce tough restrictions for non-vaccinated people.

Virus cases are rising across the US at a rate of almost 100,000 a day, a trend that prompted the US government’s chief medical adviser, Anthony Fauci, to warn of “dangerous” new surge of infections as Americans prepare to travel across the country for this week’s Thanksgiving holiday.

Government restrictions to prevent the spread of COVID-19 deliberately suppress economic activity while fear of the virus reduces consumption. But even without further restrictions there are increasing concerns about the slow speed of the post pandemic economic recovery.

It is against this backdrop that OPEC+ believes demand is not yet strong enough to justify increased production and be shifting towards a reduction.

Indeed, figures from the International Energy Agency indicate OPEC+ production is 700,000 bpd less than planned during September and October, a shortfall largely attributable to Angola and Nigeria.

The sharp decline in industry investment, a symptom of environmental pressures on oil majors in the shape of environmental, social and governance concerns, has left many producers, with the exception of Saudi Arabia, the UAE, and Iraq, unable to pump more.

It is worth bearing in mind that the so-called “sweet spot” for global crude prices is currently thought to be between US$75 to $90, a price that is seen to provide sufficient revenues for producers, while not at a level to hurt demand or encourage investment in other forms of energy.

Oil ticked up slightly following the release announcement to almost $80.

The other danger for Biden is that releasing reserves may well be seen by the American public as the very least he could do. Reversing his decision to revoke the Keystone XL Pipeline and his suspension of new oil and gas leases on federal government lands would prove a good deal more effective in sending the market a message.

Speaking earlier this month in Abu Dhabi, the chief executive of US oil firm Occidental Petroleum said Biden should ask domestic shale producers to increase production rather than the OPEC+.  
US Republican Sen. John Barrasso, echoed that view. “President Biden’s policies are hiking inflation and energy prices for the American people. Tapping the Strategic Petroleum Reserve will not fix the problem. We are experiencing higher prices because the administration and Democrats in Congress are waging a war on American energy.”

Prior to the pandemic, the US shale industry was seen as the world’s swing producer, and had even turned the US into a net exporter.

While oil production from the Permian Basin, the largest US shale field, is set to surpass its pre-pandemic record next month, overall shale output is below its boom years of 2018 and 2019 amid inflationary pressures, labor shortages, and some banks charging higher interest rates on loans for fossil fuel than green projects.

Against that backdrop, one could argue some US producers appear to be as unwilling to ramp up production of crude oil to levels that would lower prices at the pump as OPEC+. 

 


TASI falls 4.5% to near 5 month-low: Market wrap

TASI falls 4.5% to near 5 month-low: Market wrap
Image: Shutterstock
Updated 13 sec ago

TASI falls 4.5% to near 5 month-low: Market wrap

TASI falls 4.5% to near 5 month-low: Market wrap

RIYADH: The Saudi stock market ended the session on Sunday, down 4.5 percent or 512 points, to close at 10,788 points.

Some 233.1 million shares changed hands in 407,000 deals, with heavy trading in Al Rajhi bank, Alinma Bank, SABIC.

Today’s decline is the largest in percentage terms and points since May 2020, when the market fell by 7.4 percent and 527 points.

On Friday, global markets suffered sharp losses after the World Health Organization (WHO) warned that Omicron, the new COVID-19 variant with numerous mutations, is likely to resist the current vaccines.

In addition, Brent crude dropped 11.6 percent to $72.72 a barrel, while WTI sank 13 percent to $ 68.15 a barrel.

The parallel Nomu index was down 790 points, or 3.41 percent, It closed at 22,374.24 points, after 313,000 trades.

Most of the shares declined today, led by Al Rajhi Bank and SABIC closing at SR133.80 ($35.6) down 5 percent and SR112 down 6 percent.

Saudi Aramco finished at SR34.90 down 2 percent amid trading of about seven million shares.

Saudi National Bank, Alinma Bank, Riyad Bank, Banque Saudi Fransi, Bank Albilad, Sipchem, Maaden, SABB and SABIC Agri-Nutrients declined between 3 and 6 percent.

Petro Rabigh, Saudi Kayan, JAZADCO and Tasnee were among the top decliners.

Meanwhile, Amana Insurance and Saudi Enaya were top gainers, rising to SR37.30 and SR33.35, respectively.


Saudi Energy Ministry to help SABIC develop renewable energy projects

Saudi Energy Ministry to help SABIC develop renewable energy projects
Updated 3 min 14 sec ago

Saudi Energy Ministry to help SABIC develop renewable energy projects

Saudi Energy Ministry to help SABIC develop renewable energy projects

RIYADH: Saudi Energy Ministry on Sunday signed a memorandum of understanding with the Saudi Basic Industries Corp. to help develop the company’s renewable energy projects. 

SABIC CEO Yousef Al-Benyan said the support from the Energy Ministry would enable the company achieve its net-zero emissions goal.

Al-Benyan said the chemical manufacturing company plans to increase its use of renewable energy to further reduce emissions of greenhouse gases.

All these measures are part of the Saudi Green Initiative. The Kingdom aims to reach net zero in carbon emissions by 2060.  

The main vehicle for the Saudi green initiative is the Circular Carbon Economy, a framework that mitigates carbon emissions but allows different countries to pursue their own economic strategies.


Saudi Arabia’s net foreign assets decline 3.3% in October

Saudi Arabia’s net foreign assets decline 3.3% in October
Updated 11 min 41 sec ago

Saudi Arabia’s net foreign assets decline 3.3% in October

Saudi Arabia’s net foreign assets decline 3.3% in October

CAIRO: Net foreign assets held by the Saudi Central Bank went down by a monthly rate of 3.3 percent to reach SR1.63 trillion ($433 billion) in October, according to newly released data by SAMA.

The central bank’s net foreign assets declined by 2 percent compared to last year’s October.

Commercial banks’ net foreign assets also decreased to SR47.9 billion in October down from SR59.8 billion in the previous month. 

The banks’ net foreign assets nearly halved in value compared to the same month a year ago.

SAMA’s total assets slipped by 2 percent to be valued at SR1.85 trillion in October. This was mainly driven by 11.8 percent decline in the central bank’s deposits with international banks.


OPEC+ likely to be cautious on oil demand at upcoming meeting, Vitol says

OPEC+ likely to be cautious on oil demand at upcoming meeting, Vitol says
Image: Shutterstock
Updated 9 min 35 sec ago

OPEC+ likely to be cautious on oil demand at upcoming meeting, Vitol says

OPEC+ likely to be cautious on oil demand at upcoming meeting, Vitol says
  • Opec+ is a group consisting of both Opec and some of the world's largest non-Opec oil exporting nations

RIYADH: The OPEC+ group is likely to take a cautious stance when deciding next week whether to go ahead with planned production increases following the discovery of a new COVID-19 variant has emerged, Geneva-based oil trader Vitol Group said. 

The new variant, named Omicron, has rattled the oil market globally, pushing prices down to their biggest decline since April 2020. 

There are signs that demand may be weakening in some markets going into the winter months in Asia and Europe, said Mike Muller, the head of the Asia unit at Vitol, as reported by Bloomberg.

The new coronavirus variant will probably lead to more flight cancellations this week, he said.

Several countries have tightened travel restrictions against a number of African countries, following the discovery.

Opec+ is a group consisting of both Opec and some of the world's largest non-Opec oil exporting nations.

“OPEC+ have erred on the side of caution,” Muller said on a weekly webinar by Dubai consultancy Gulf Intelligence.

“Post facto they’ve proven to be right. It is likely they will take into account these fundamentals and the possibility of a demand hit over the winter months.”

OPEC and its partners, including Russia, will meet next week to discuss whether it will implement a planned production increase of 400,000 barrels per day.

 


Qatar’s wealth fund might acquire $7bn gas assets from UK’s National Grid: CNBC

Qatar’s wealth fund might acquire $7bn gas assets from UK’s National Grid: CNBC
Image: Shutterstock
Updated 28 November 2021

Qatar’s wealth fund might acquire $7bn gas assets from UK’s National Grid: CNBC

Qatar’s wealth fund might acquire $7bn gas assets from UK’s National Grid: CNBC
  • Goldman Sachs and Barclays are advising National Grid on the sale

RIYADH: Qatar Investment Authority (QIA),  the country’s sovereign wealth fund, may acquire assets of the UK’s National Grid, which operates electricity and natural gas transmission networks, CNBC Arabia reported, citing two unnamed sources.

QIA was part of a consortium of investors that acquired about 61 percent of the British company's gas pipeline assets five years ago.

Now the Qatari fund is competing with other global investment funds, including Macquarie and Equitix, to acquire the gas assets in an estimated $7 billion deal, the sources said. 

Goldman Sachs and Barclays are advising National Grid on the sale, the report added.

This comes amid a protracted energy crisis that has affected the UK and Europe significantly in recent months amid the disruption of global supply chains. 

The country earlier announced it reached an agreement with Qatar to secure its gas needs or 40 percent of the UK’s total energy mix. 

National Grid has a primary listing on the London Stock Exchange and a secondary listing in the form of its American depositary receipts on the New York Stock Exchange.