The market has erased all price gains that had followed the OPEC+ decision to cut supply last month – although it has only started to get implemented this month. The group’s export trends have not helped support prices in April, as their total level remained stable near 28 Mbd when excluding Iran and Venezuela. Higher exports from Saudi Arabia and Russia offset declines from Nigeria, Iraq and Kazakhstan, while the group’s crude inventories remained stable at 259 Mbbls.
The average API density of European crude imports continues to rise in early 2023 as imports from the US remain robust, which has been keeping demand for heavier grades high, with Europe increasingly leaning towards Latin America for these barrels.
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Following a series of extensive stakeholder consultations and proposal periods, price reporting agencies S&P Global Commodity Insights (Platts) and Argus announced that WTI Midland will be included as part of their physical North Sea Brent basket price assessments, from June 2023 deliveries onwards. This widely accepted decision comes as a result of the dwindling production from the North Sea and the need to introduce new barrels to maintain the benchmark’s robustness.
OPEC+ members remain committed to keeping output quotas unchanged until the end of this year, with the group expected to gradually take back market share over time as non-OPEC sources of supply run out of steam.
The normalisation of diplomatic relations between the two Middle Eastern powerhouses is a bearish event for flat prices. The main impact is going to be seen in the Yemen war, removing some risk premium due to higher costs of insuring Saudi oil cargoes and its onshore infrastructure’s exposition to attacks. In the long run, the deal could also result in more production from Iran and Yemen. Finally, it is an essential foreign policy success for China but is yet to mark the beginning of a new era.
February marks the group’s highest combined level of oil exports in a year. OPEC+ oil exports jumped by 612 kbd m/m in February to 28.1 Mbd (excluding Iran and Venezuela) despite a large decline of 375 kbd from the group’s non-OPEC countries. On the other side, OPEC members increased shipped volumes by 826 kbd, driven by a major uptick from Iraq (+390 kbd m/m), Saudi Arabia (+250 kbd), Nigeria (+137 kbd) and Libya (+135 kbd).
The Chinese reopening has certainly injected a fresh set of uncertainties into a market already overrun with unknowns. In the weeks since China has undone much of the zero-Covid policies in place for more than two years, mobility has shown clear signs of picking up and yet, refinery runs surged to new highs months earlier.
As the first of the oil majors publish their annual results in 2022, we take the opportunity to extract the key takeaways from these releases. After a very strong start to 2022 within both the up and downstream segments of the market, it is no surprise that earnings came in at historical record highs finishing at nearly double the levels realized through 2021.
As Urals flows to Europe are drying up, being partly replaced by a ramp-up and re-routing of Johan Sverdrup deliveries, Russian crude supply should decline from December onwards. Moreover, a short-term supply disruption was resolved, after a dispute between the Turkish government and a club of WoS maritime insurers caused a backlog of 15-30 vessels in the Turkish straits.
