Oil Prices Are Falling
Oil prices fell on Thursday as higher US interest rates buoyed the dollar and raised concerns that a global recession will dampen demand for the fuel while supply worries about limiting losses.
Brent oil was down 85 cents, or 0.9%, to $95.30 a barrel. Meanwhile, US Crude futures for WTI declined $1.01, or 1.1%, to $88.99.
Both rose $1 on Wednesday, buoyed by another move in US oil stocks, despite the Fed raising interest rates by 75 bps and Chairman Jerome Powell saying it was too early to consider a break.
According to CMC Markets analyst Tina Teng, oil is being dragged down by a strong dollar, with some market participants likely booking profits after recent gains.
A strong dollar affects oil demand, raising fuel costs for buyers using other currencies. The EU embargo on Russian oil due to the invasion of Ukraine begins on December 5, followed by a freeze on the import of oil products in February.
OPEC may also struggle to meet previously fixed output limitations in the coming months, keeping supplies tight.
For the first time since June, OPEC output declined in October. OPEC and its partners, including Russia, have also agreed to reduce their goal output by 2 million barrels per day (BPD) beginning in November.
The market also anticipates more demand from China, hoping Beijing will relax its zero-COVID regulations. Chinese authorities vowed on Wednesday that growth would remain a priority and that changes would continue.
Eastward Gas Flows
Eastbound gas flows from Germany to Poland via the Yamal-Europe pipeline increased on Thursday, while Russian gas flows to Europe via Ukraine remained constant.
Exit flows at the Yamal pipeline’s Mallnow metering station on the German border were 4m and half kilowatt hours (kWh) per hour between 0700 CET and 0800 CET, up from roughly 4m kWh/h for most of Wednesday, according to statistics from pipeline operator Gascade.
According to statistics from Ukraine’s energy transmission system, Russian gas is supplied to Slovakia via Ukraine, via the Belke-Kapusa border, compared to the previous day.
On Thursday, Russia’s Gazprom announced it would ship 42.4 million cubic meters (mcm) of gas to Europe via Ukraine, in line with recent reports.
Gas flows through the Nord Stream 1 pipeline, which connects Russia to Germany across the Baltic Sea, remained at zero.
The pipeline has not reopened since it was shut down for three days of repair on August 31.
According to Moscow, the outage has been blamed on Western sanctions and technical concerns. The pipeline has also been harmed by sabotage.
BP. Shares About to Crash
Despite its success, BP appears to be reasonably priced. It is now trading at 14.9 times earnings. If we factor in expected earnings, the P/E ratio drops four times. This demonstrates how swiftly their revenues are increasing right now.
On Monday, BP reported Q3 underlying replacement cost earnings of $8.15B, a 145% increase over last year’s $3.32B. This was a tiny decrease from the previous quarter’s $8.45B. However, with a barrel of Brent oil hanging just below $100, revenues should continue to stream in.
However, success attracts opponents. Calls for a harsher windfall tax on ‘excessive profits’ have increased. Activists are now pushing for taxing stock buybacks, citing BP’s $2.5B return to shareholders in this manner.
BP is facing three major threats. Oil prices may decline. Taxes may grow. It also needs to improve its environmental performance. The corporation has a net debt of $22B, which appears to be a small concern now. According to CMC Markets, it spends 60% of its surplus cash flow on share buybacks and only 40% on-balance-sheet strengthening.
