A Bright Spot in Global Oil Market
China is a bright spot in the global oil market, with refined gasoline demand anticipated to rise next year even as consumption in many other economies falls.
In a new study delivered to Rigzone, a Fitch Solutions Country Risk & Industry Research analyst said Beijing’s zero-coronavirus policy had delayed the recovery of other countries in 2021-2022.
Since last year, most major economies have gradually lifted lockdown restrictions as vaccination rates and immunity have lowered the threat of COVID-19. China’s oil demand growth will be supported by a recovery in China’s real GDP growth as eased coronavirus restrictions and fiscal and monetary stimulus enter the new year, according to analysts at Fitch Solutions.
U.S. Oil and Gas Drillers to Raise Production
In August, the EIA reported that the number of uncompleted wells drilled in the U.S. shale region reached an all-time low.
This is a positive sign. It shows that drilling is completing and producing more wells than they are leaving. The total number of wells completed in August was 969, the lowest level since 253 in June 2020.
Despite these positive indicators of increased production, the industry remains cautious. A recent study from the Dallas Fed shows that many gas and oil executives are bracing for a recession, raising concerns about cost inflation and supply chain issues.
The Dallas Fed’sgas and oil industry index decreased to 33.1 points from 66.1 points during the year’s second quarter, while its uncertainty index tripled to 35.7 points.
E.U.’s Search for Energy
In recent months, E.U. leaders have been working hard to find solutions to ensure energy security and availability within the bloc.
Moreover, as the heating season begins, E.U. member states are turning on each other. Some believe that this could lead to drastic price cutting efforts.
Germany, for example, has successfully turned several European countries against it after announcing a 200-billion-euro aid plan for businesses and individuals to deal with rising energy prices. Naturally, less rich E.U. members did not like this. They were irritated even more by Germany’s opposition to a gas price ceiling. Under duress, the E.U. relies on those supplying it with gas. In Germany, Economy Minister Habeck and an M.P. accused the U.S. of overcharging for LNG.
E.U. leaders will meet again at the end of the month. They hope to have crafted a conclusion on gas prices that will bring some relief to poor economies facing a recession.
Crude oil futures prices during European trade hours Tuesday were lower following the previous session’s late selloff. However, markets were mainly holding last week’s big gains. Front-month December ICE Brent futures were trading at $95.042/b, down from $96.191/b on Monday. At the same time, Nov22 NYMEX WTI was trading at $89.89/b, down from $91.133/b on Monday.
Prices fell as inflationary concerns resurfaced. This raised the potential of more aggressive U.S. rate hikes, limiting global growth and enhancing the dollar’s value.
