Everyone is trying to figure out how the current banking crisis will impact global commodities. We believe that the banking crisis, in the short term, will impact the ability to pay and hence oil demand. This is also validated by the recent OPEC+ cuts, although the cut did raise prices in the interim. Continued longer term deal making between Russia and China, and now with Saudi getting into the mix signing a deal to put up a refinery in China, will ensure the flow of discounted oil and potentially oil products to satiate large demand markets such as China and India. This will, in the short to medium term keep oil prices in check, and will compel the oil benchmarks to dip towards discounted oil prices. Meanwhile, the Russian “shadow fleet” is now 20% of the global tanker share.
In the long term, the banking crisis will hit upstream and operational investments and hence supply, and the oil and gas arena will heat up in major importing countries in China and South and Southeast Asia as well as in supplier regions such as Venezuela, Iran and Iraq as these supply constraints hurt. The battle for E&P and mining land rights might also very well be spilling over into the Arctic with the announcement of the Polar Silk Road project, which also has major geopolitical implications.
New deals between major demand markets and origin markets will have the effect of a fresh throw of the dice in the markets and have a potential to reshape tanker movement and routes.
And amidst all this, refining companies and countries will have a field day.
Meanwhile, rising biofuel demand, is re-raising the food vs. fuel debate, and could lead to a vegetable oil and feedstock crunch.
PetroYuan and PetroRupee media narratives will bloat as new yuan and rupee deals are made and the death of the US dollar will be announced, although we still hold that a credible shift away from the PetroDollar is unfeasible in the short to medium term.
From our Trading Desk
The most conspicuous geopolitical development is a picture in the WSJ on 10th Mar of the Secretary of Iranian National Security Council, Saudi Arabia’s national security advisor and a senior Chinese diplomat in Beijing. This is built on the back of what seems like an elaborate image building plan which included the Chinese leader agreeing to reopen the economy following protests, or heeding calls from its citizens.
The weakness in the Ruble over the past nine months is reminiscent of a similar weakness following the Ruble’s depegging in 2013 followed by a cash generating long-dated gas supply arrangement with China in mid-2014. The meetings between China and Russia over the past month included signing several natural resources linked agreements; the impact of those agreements may not be felt in the near dated price.
The near-term implication of a multi-tier market created by sanctions and bilateral arrangements is its impact on the price transmission mechanisms to global benchmarks. The price of the sanctioned, marginal barrel may be lower as opposed to being higher. The dampening effect of the lower priced marginal barrel gets replaced by an asymmetric upside risk on the benchmark at the point disappearance outpaces restricted supply.
Forward curves have traded relatively flat and the modest contango in the front contracts has traded to a flat structure. Cash basis reflects a balanced to tight availability of crude oil, globally.
From our Narratives Scan
Crude Oil and Oil Products
Banking crisis may be more a supply hit than demand hit: Goldman
The current banking crisis in conjunction with interest rate hikes will impact investments and supply operations costs more than it will impact demand which will regain pre-pandemic levels and some more, says Goldman Sachs.
TOP 10 countries that dominate the World Crude Oil Imports.— TradeImeX® (@TradeImeX) March 23, 2023
.#trade #crudeoil #imports #top10 #TrendingNow #importexport #business #petrol #diesel #thursdaymorning #China #India #USA #Ukraine #Russia #Germany #Tweets pic.twitter.com/cfqC6wUsn2
Quick Update— QuickUpdate (@BigBreakingWire) March 21, 2023
Goldman Doesn't See Crisis Contagion In Physical Commodity Market
Goldman Sachs $GS Head Of Commodities Says Banking Crisis Is More A Supply Hit Rather Than A Demand Hit On Commodities.https://t.co/mHClJy4pPy#USA #Europe #USBanks #BankingCrisis #Bankcollapse pic.twitter.com/W7HQEf8Ang
Goldman Sachs said commodities demand was surging in China, the world's biggest oil importer, with oil demand topping 16 million barrels per day.#OOTT #CrudeOil #WTI #OPEC #oilprices #Crude #naturalgas #BreakingNews #BREAKING— CallMe-CrudeHead (@callmevineeth) March 24, 2023
Sanctioned oil continues to flow, large deal making is in progress
NEW: Saudi Arabia has inked an 80 billion yuan deal with China to build a Chinese oil refinery.— Collin Rugg (@CollinRugg) March 29, 2023
Are you paying attention yet?
Our adversaries are teaming up.
China is loading up on gold.
China and Russia have penned their alliance.
China has mediated a peace deal between…
Russia may now be China’s top crude oil supplier but Saudi Arabia is clearly still betting on China as the future of oil demand in the long-term. Aramco may have increased its crude & diesel exports to Europe but the long term deals show its betting on China. #oott #oil— Ellen R. Wald Ph.D.🛢 (@EnergzdEconomy) March 27, 2023
The New ‘Wild West’ In Oil Shipping https://t.co/Dkpceye8Dd— Nino Brodin (@Orgetorix) March 23, 2023
Japanese shipper Nippon Yusen asked the Japanese government to guarantee war insurance for vessels that enter Russian waters. The company asked the government to consider a framework similar to the one created for Iranian crude. #OOTT #JAPAN #SHIPPING— OTR (@OTR444) March 23, 2023
📢Partial list of over 6,000 products made from 1 barrel of oil (after creating 19 gallons of gasoline) China & Brazil just reached a deal to ditch the US TRADE dollar. China now buying oil from Russia in their own currency also brokered a deal between Saudis & Iran. 🚨EV's too pic.twitter.com/4eJn16zq67— Sunnie (@sunniewithrain) March 30, 2023
Global oil refinery expansion is centered in China, India, and Asia
Resource wars ahead in the New World Order— Art Berman (@aeberman12) March 28, 2023
"Global oil refinery expansion is expected to center in China, India & parts of Asia, while Europe & the US...focus on the green sector."https://t.co/dYg53J7oph#energy #OOTT #oilandgas #WTI #CrudeOil #fintwit #OPEC #Commodities
"Among the big deals Aramco embarked on last year was an investment in the development of a major integrated refinery and petrochemical complex in northeast China." @ayaelb on Saudi Aramco's whopping profitshttps://t.co/ZGResFgNc4— Nishant Dahiya (@nprnishant) March 12, 2023
We are facing a global shortage on heavy distillates (diesel) About time companies take the initiative Exxon prepares to start up $2 billion Texas oil refinery expansion" - https://t.co/DCIAR3Quvx— Laique Rehman (@LaiqueRehman1) January 14, 2023
Talk to @GregAbbott_TX about that then, because China owns over 130K acres of Texas farmland under his watch. Also, saudi bought the largest oil refinery in the US in Port Arthur under the last administration and greg. They made over 4 billion last quarter in profits. R’s did it!— Matt (@kch_always) January 17, 2023
Refining and Blending capacity major constraint for Russian exports
Russia has already procured the vessel capacity to tap into major global product markets, its refining and blending capacity now is a major cap on its products exports.
Iraq, Iran and Venezuela will play a big role in the future oil arena
Venezuela, Iran, Iraq will play a big role in the future oil arena.
Iraq can triple its oil production output, but the current internal strife in Iraq with the Kurd region does pose a major challenge. Moreover, its deal with TotalEnergies is also going through tough times, political maneuvers by its competitors are putting a wrench in the works.
The largest #Oil #reserves in the World#energy #oilandgas #demircankose #Venezuela #SaudiArabia #Canada #Iran #Iraq #Russia #kuwait #UAE #USA #Libya #Nigeria #Kazakhstan #China #Qatar #Algeria pic.twitter.com/MQ2kBRPFNt— Demircan KÖSE (@globemonitoring) March 28, 2023
Iraqi Kurdistan's oil exports to Israel through Turkey were stopped due to Baghdad's complaint — Iranian Telegram Channel— Iran Observer (@Iranobserver01) March 26, 2023
#GKP>>>Baghdad, Erbil to agree on oil and gas lawhttps://t.co/k6G90kG2Yr— fair enough (@fairenough11) March 28, 2023
NEW🇮🇶— Bachar EL-Halabi | بشار الحلبي (@Bacharelhalabi) July 19, 2022
Stakes are high in #Iraq's Kurdistan region (#KRG). @Deloitte's latest audit report outlines what's at risk for Erbil in its battle with Baghdad for oil sovereignty. My latest for @ArgusMedia. #oott 🔓https://t.co/IvcpveVz3K
🇮🇶 #ArgusMedia news story: The proposed $27bn energy deal between #Iraq and @TotalEnergies still needs a "political answer", the French firm's CEO Patrick Pouyanne said this week | #oilandgas #renewables #OOTT@Bacharelhalabi reports: https://t.co/mJIMW0opGQ pic.twitter.com/4TRpF7YBcj— Argus Media (@ArgusMedia) March 23, 2023
Iran & Saudi Arabia are resuming diplomatic relations & China brokered the peace deal. Russia is now supplying oil & natural gas to China.— @magaxtremist (@magaxtrmist82) March 23, 2023
Xi says change is coming.
Wake up America, before it’s too late.
We are no longer the super power.
Thanks to Biden.
Upstream oil M&A activity in Southeast Asia heats up
Indonesia, Malaysia and Vietnam are going be hotspots for upstream oil M&A activity in the Southeast Asian region.
Southeast Asia is expected to see over $5 billion in upstream oil and gas mergers and acquisitions (M&A) in the next two years, with Indonesia, Malaysia, and Vietnam as the key markets, according to Rystad Energy research 🌏 #OilAndGashttps://t.co/lXgmMzpkVZ— OilPrice.com (@OilandEnergy) March 27, 2023
OIL & GAS: Malaysia among hotbeds for upstream M&A in Southeast Asia, Rystad says https://t.co/btwVmx3m1w— The Edge Malaysia (@theedgemalaysia) March 27, 2023
The battle for E&P and mining land rights spills into the Arctic
The Polar Silk Road project underlines the burgeoning interest in the Arctic for E&P, mining rights, this also has geopolitical implications.
China's research interests in Canada's Artic region have also doubled as attempts to surveil military assets in the Arctic.— Rouge 🇨🇦 (@WildlingsThings) February 27, 2023
That is my point Jon, China is getting increasingly aggressive, in its dealings with Canada, some real sketchy shit going on. Russia is looking at our Artic space, Siberia isn’t cold enough.— Valerie Karlsson (@valgsp) March 28, 2023
Climate change & melting of the Artic has the Pentagon worried about control there, especially with China & Russia eyeing resources & potential trade routes. The Biden admin's 4-pillared Arctic strategy includes a foundation of econ development & infrastructure investment: npr pic.twitter.com/ZHBxyZcwN5— fazal kamal (@kamal_fazal) March 26, 2023
Russia and China's New Project on Artic Ocean SHOCKS Entire West https://t.co/m16himjeQR— EnviRio (@EnviRioYT) March 22, 2023
Putin's decision may ultimately give China the leverage it wants to negotiate more gas purchases from Russia in the future, while also giving the Chinese a greater say in the Arctic region more broadly.https://t.co/p69sZMpbvw— OilPrice.com (@OilandEnergy) March 29, 2023
France labor strikes cause refining shortfall
France labor strikes cause refining shortfall prompting release of strategic reserves.
Strikes over pension reform in France have led to oil tankers being rerouted to Rotterdam to avoid Le Havre, causing a loss of 500k bpd of crude oil refining for March and prompting the release of strategic reserves. #pensionreform #energysecurity 🛢️🚫🔒 https://t.co/GiZgv22LUA— OilPrice.com (@OilandEnergy) March 23, 2023
Global biofuel boom impacts veg oil supply, raises the food-fuel question
A global #biofuel boom is set to drive a shortage of vegetable oils, intensifying a debate over #food versus fuel ⛽️https://t.co/Oqv16m0nQI pic.twitter.com/cLCa0ZFeWK— FarmPolicy (@FarmPolicy) March 24, 2023
A global #biofuel boom spanning from US to Brazil & Indonesia may lead to a shortage of vegetable oils & intensify the debate of using crops for food VS fuel— Anuradha Raghu (@ByAnuradha) March 22, 2023
We speak to veteran analysts Mistry, Mielke and Fry on what this means for #palmoil #oatt #FCPOhttps://t.co/IYWRnTahIl
China conducts first LNG trade settled in Yuan
China's first trade of liquefied natural gas (LNG) settled in yuan challenges the US dollar's dominance in international energy trade. Learn more in our latest video.— OilPrice.com (@OilandEnergy) March 29, 2023
Full Story Here: https://t.co/3y0ffeX4sb #China #LNG #Yuan #USD pic.twitter.com/nHkGCuKdpX
California might penalise companies for high gas prices
Gov. Newsom will sign a bill that may allow California to penalize oil companies for high gas prices. https://t.co/KV0MG2L6Wo— FOX40 News (@FOX40) March 28, 2023
Dip in gas prices may provide families relief in their fuel and power bills
Fuel bill savings of £500-a-year 'on the way' for hard-pressed families— ECIU (@ECIU_UK) March 22, 2023
The drop would be the first since the #energy crisis triggered by Russia's invasion of Ukraine and reflects a dip in the wholesale #GasPrices and electricityhttps://t.co/2zLxMM3KWn
Is a reliable decarbonised power system possible by 2035?
At least some people think this is possible, and hydrogen will have a major role to play.
A reliable, secure and decarbonised power system by 2035 is possiblehttps://t.co/PKu4HhgClW#AMTE #AMTEPower #LithiumIon #BatteryTechnology #EnergyStorage #EV #Aerospace #Defence #OilandGas #EV #Investing #UltraPrimeCells #Hydrogen pic.twitter.com/jveVE4qdsY— DirectorsTalk (@DirectorsTalk) March 23, 2023
Saudi and China collaborate on solar power plants
"Saudi ACWA Power and China Gezhouba Group Investment Company will build two solar power plants in the Tashkent region with a total capacity of 1.1 GW, according to the Ministry of Energy."https://t.co/f3o90k5OcY— Esfandyar Batmanghelidj (@yarbatman) March 24, 2023
New 1 GW wind farm planned off the coast of France
Maple Power, a joint venture b/w @cppinvestments & Enbridge, & EDF Renewables were chosen to develop a 1-GW wind farm 32km off the coast of France. It's expected to go online around 2030 & generate enough renewable energy for 1.5 million people. #cdnpoli https://t.co/goiK7W1mpb— Shift Action for Pension Wealth and Planet Health (@ActionShift) March 28, 2023