The OPEC+ decision to cut its production quota by 2 million bpd has placed the Biden Administration between a rock and a hard place, with oil prices climbing ahead of the mid-terms and very few viable options to counter it.
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Friday, October 7th, 2022
Any doubt about the cohesion of OPEC+ was put to bed this week as the group’s summit in Vienna ended with a 2 million bpd production cut. This cut appears to have achieved exactly what the participating members wanted, namely higher oil prices. It appears that fears of a global economic slowdown have taken a back seat to oil market fundamentals and geopolitical uncertainty. Saudi Arabia, the country that will spearhead the production cuts (Russia is already producing at its decreased target), has put the Biden Administration between a rock and a hard place only several weeks before the midterm elections. Confronted with the prospect of rising gasoline prices, the White House needs to react swiftly if it does not want to be seen as weak.
White House Mulls Antitrust Case Against OPEC+. On the back of the OPEC+ 2 million bpd production cut, the Biden Administration threatened to trigger anti-trust action against the alliance, with legal committees in both chambers of Congress approving legislation that would allow the White House to do so.
EU Publishes Eighth Russia Sanctions Package. The European Union issued its new set of sanctions against Russia, including a ban on almost all steel products, a legal basis for a price cap on oil exports to third countries, as well as a further tightening on services involved in the seaborne transport of Russian oil.
Nigerian Oil Theft Gets Creative. Nigeria’s state oil company NNPC said it had discovered an illegal 4-kilometer connection line from the Forcados export terminal into the sea, siphoning off crude undetected for nine years, as part of its clampdown against widespread oil theft.
US to Delineate New Drilling Auctions. In accordance with the IRA act, the US Interior Department started the process of organizing oil and gas drilling auctions in New Mexico, Wyoming, and the Gulf of Mexico, preparing the legal groundwork for the higher royalty rates and price bidding floors.
No Lithium Support for Warren Buffett. The Biden Administration hailed Berkshire Hathaway’s plans to produce lithium from geothermal brines in California’s Salton Sea as a breakthrough for U.S. lithium, however, it subsequently rescinded support for the project after Hathaway sought control over patents.
EVs Might be Generating Renewable Credits. The US Environmental Protection Agency is expected to propose that electric vehicles be eligible for renewable fuel credits, meaning that carmakers such as Tesla (NASDAQ:TSLA) will gain access to a new type of credit known as e-RINs.
Germany In Talks for More Gas Aid. The German government is nearing a deal to provide billions of euros in additional guarantees to SEFE, formerly Gazprom’s German subsidiary now under government trusteeship, to ensure the company can honor its supply commitments to German consumers.
PEMEX Keeps Mum on Methane Leaks. According to Mexico’s environmental regulator, the country’s national oil company PEMEX did not report any methane leaks at its Ku-Maloob-Zaap offshore production cluster, despite the European Space Agency seeing it from space.
Malaysia LNG Goes Into Force Majeure. Malaysia LNG, one of the largest liquefied natural gas projects globally operated by Petronas, declared force majeure on LNG supplies after it discovered a leak along the Sabah-Sarawak onshore pipeline, jeopardizing term deliveries to Japanese buyers.
Congo Rejects US Environmental Warning. The government of the Democratic Republic of Congo has formally rejected a request by US climate envoy John Kerry to withdraw some oil blocks from its upcoming licensing round on environmental grounds, saying it would undermine the African country’s development.
The Last Nuclear Leak Before Decommissioning. A nuclear leak occurred during flushing measures on a discharge line at Germany’s Brunsbuettel nuclear power plant, which permanently shut down in 2007 and has been in the dismantling process since early 2019.
Europe’s Zinc Industry Is Going Down. International trading firm Glencore (LON:GLEN) is shuttering its Nordenham zinc smelter in Germany, marking the third case of zinc refining capacity loss in Europe this year as power prices render operations financially untenable, further tightening the already squeezed physical market.
Russians Want to Build Up Own Alumina Plants. According to media reports, the Russian government wants to build up its own capacity of alumina, used in aluminum production, as the country is 65% reliant on imports from China after the shutting of the Ukrainian and Australian markets.
Qatar Sticks to its Trusted Partners in the West. After confirming TotalEnergies (NYSE:TTE) as a partner in the second phase of its LNG expansion project North Field South, Qatar is now expected to unveil Shell (LON:SHEL) and ExxonMobil (NYSE:XOM) as new NFS partners over the upcoming weeks.
By Tom Kool for Oilprice.com
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OPEC+, which is the core group of the Organization of the Petroleum Exporting Countries, in addition to the other 10 oil exporting countries, decided in a vote to cut oil production by two million barrels per day starting in November. Two very prominent members of OPEC+ are Russia and Saudi Arabia. Oil production has been a very prominent issue as the cost of gas all over the world has increased tremendously, partly due to Russia’s war on Ukraine.
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OPEC+ announced it’ll slash output by 2 million barrels per day (bpd) on Wednesday (Oct. 5), the biggest cut since the pandemic started in 2020. The White House’s reaction was swift, calling the decision “shortsighted” and accusing the oil cartel of “aligning with Russia.”