If last week was all about accusations, this week was about action - deals and projects.

Multiple countries have finally gotten into action to mitigate supply issues, and inflation, there has been a frenzy of political travel back and forth, and countries are striking oil, distillate, and natural gas deals across the globe:

Russian oil flows to Asian countries have increased

India is considering purchasing oil from Brazil

Iraq is striking an LNG deal with Qatar

Korea has struck a natural gas deal with BP

Europe to buy more diesel from the Middle East

Multiple new exploration projects are being kicked off as well. New ideas are being devised, e.g. use of nuclear (small module reactors) for oil sands is being considered.

Countries such as China are also kicking off new infrastructure projects to re-energize their economies. The infrastructure pill is also being prescribed to countries such as Sri Lanka that are already bankrupt or are on the brink of bankruptcy.

Let us hope that these actions, and any more to come, will revive the global economy in the following few months.

Russia's war on Ukraine is spurring an exploration boom, says Schlumberger. “The dislocation of supply flows from Russia will result in increased global investment across geographies and the entire energy value chain to ensure the diversification and security of the world’s energy supply,” Chief Executive Officer Olivier Le Peuch said in a statement. 

The Saudis also seem to be upping their upstream exploration and production game. 

Hashtags: #Schlumberger #Russianwar #exploration #OOTT 

Read more at: Schlumberger Says Russia Isolation Spurs Drilling Elsewhere

US crude oil production declined by 242 kbd in January.  It declined again by 50 kbd in February. 

The US Permian basin is faced with multiple challenges including labor, materials supply chain crunches, and cash. 

(See the previous edition for how this does not align with Biden administration statements that everything is hunky dory) 

For the first time, US renewable energy output exceeds nuclear generation. 

Meanwhile, US February oil demand was at 20.436mbp, the highest February level since 2007. This is in addition to the current opportunity to export to the world thirsty for oil, and cheaper oil at that. 

Reeling under the pressure of a sudden Covid outbreak, Beijing is planning to impose stricter lockdowns and restrictions to curb the spread of the virus in China. Shanghai, among other cities, is now at a standstill, with a record high number of cases since the new wave emerged. This kind of response is consistent with China’s “zero-Covid” policy, which aims to eliminate Covid spread during an outbreak. 

Governments and businesses around the world should be concerned about a supply-short summer, not just Chinese citizens. From disruptions in supply chains to acceleration in inflation, the systemic effects could throw the global markets off the balance if not properly handled. 

Although some companies like Foxconn and Bosch practice “closed-loop” management by isolating the workers inside, it is becoming increasingly difficult to get raw materials and ship them due to strict curbs. According to some companies, logistical issues only allow them to operate at 60% capacity. However, Pegatron Corp, the iPhone assembler, has suspended production and expects no sales for the next two months. 

Read more at: How China’s Lockdown Will Cause Ripple Effects in the World’s Global Supply Chain

The war is aggravating the conflict between sustainability and energy independence. 

The fracking rise due to rising gas and oil prices also raises concerns around tremors only increasing in Texas, which a few now call the earthquake capital of the US. 

TC Energy is interested in helping bring nuclear power to oilsands. This could be an excellent use for small module reactors (SMR). 

The Oil Sands Pathways to Net Zero initiative, an alliance of Canada’s largest oilsands companies, has also proposed accelerating the application of small-scale nuclear reactors as part of its plan to reach net-zero carbon emissions from oilsands production by 2050.

Occidental and Enterprise Products plan to monetize C02 storage and intend to build a Carbon Capture and Storage (CCS) network Along Texas Gulf Coast.

An article on what the EU needs to do, in order to mitigate dependence on Russian fossil fuels and finalize the transition to #renewable energies. 

Germany now says that they are ready to stop buying oil from Russia. 

European refiners have been diversifying their crude oil intake amid growing political pressure to phase out imports of Russian oil, shunning Russian barrels and replacing them with a broad mix of crudes from the North Sea and farther afield. 

Meanwhile, Russia has blocked gas to Poland and Bulgaria giving payment term issues as a reason. 

Read more at: Four European Gas Buyers Made Ruble Payments to Russia

Most big oil companies are bringing in record results. Chevron (NYSE: CVX) profits nearly quadrupled. ExxonMobil (NYSE: XOM) doubled its earnings to $5.5 billion for Q1 compared to the same period of last year, despite a $3.4 billion after-tax charge

related to its decision to exit the Russia Sakhalin-1 project. 

Meanwhile, Warren Buffet significantly increased his investments in big oil. And CPPIB, the Canada Pension Plan Investment Board says it will continue investing in high-carbon industries including oil and gas. 

Read more at: Exxon And Chevron Post Blockbuster Earnings As Oil Prices Soar

In related news, PJSC Gazprom revealed on Sunday that its natural gas deliveries to China via the Power of Siberia pipeline soared 60% in the first four months of 2022, compared to the same timeframe in 2021. 

Morgan Stanley raised its third-quarter Brent price forecast by $10 per barrel to $130, citing a greater deficit this year due to lower supply from Russia and Iran. 

Meanwhile, WTI crude futures fell nearly 1% to below $104 per barrel on Monday, retreating further from a recent peak, as concerns about slowing economic growth in top importer China outweighed fears of further supply disruptions from a looming EU ban on Russian crude. 

Read more at: tradingeconomics.com

US natural gas futures traded close to $6.9 per million British thermal units, after shedding roughly 6% due to recovering output levels and a larger-than-expected build in domestic inventories. 

Following recent freeze-offs in the Rockies, production of natural gas showed signs of recovery, although supply risks remained as the industry entered its maintenance season. 

Also, EIA data showed US stocks rose by 40 billion cubic feet, more than median analyst estimates of a 38 build, but came short of the 5-year average build of 53 bcf, widening the gap between current stocks and the 5-year average levels. 

Still, losses were limited by signs of higher cooling demand as the weather turns seasonally warmer and by robust overseas demand, elevated after Moscow cut supplies of natural gas to Poland and Bulgaria, stoking fears of wider supply disruptions in the region. 

On a monthly basis, natural gas is set for a 22.6% jump, while gains could settle at 4% for the week. 

Read more at: tradingeconomics.com

While EU refiners are racing to capitalize on high diesel prices and the widening crack spread, the biggest beneficiary might end up being the US refiners. 

The NYH diesel crack spread was higher than the average retail price in the U.S. for almost 11 months during the pandemic. 

PBF Energy says it could look to crack heating oil and turn it into gasoline if gasoline cracks are much higher than diesel.

A key risk to these plans is demand destruction if prices rise to unsustainable levels and/or if economies crash bringing demand down with them due to inflation, war, or pandemic. Valero sees higher consumer tolerance to elevated fuel prices, it is indeed hard to tell at what point high prices cut demand. 

Another constraint is refinery capacity, and how agile the refiners can be in changing proportions of gasoline, diesel, jet fuel and other distillates as the demand proportions amongst these will remain volatile. 

Meanwhile, governments all over the world, both at the country and state levels are scrambling to provide tax relief to their citizens. 

China is planning to bump up infrastructure investments to boost its economy.

Russian oil flow to countries such as China, India, Malaysia, Sri Lanka has increased over the past couple of months.

Iraq to sign LNG deal with Qatar to secure supply. Qatari LNG will help replace some of the gas currently piped from Iran, Iraqi Electricity Minister, Adel Kareem, said in an interview.

India, the world's third-largest oil importer and user, is considering increasing its purchases from Brazil.

Read more at India Plans Oil Import From Brazil

Korea Gas Corporation (KOGAS) will import 1.58 million tonnes of US liquified natural gas (#LNG) under a newly inked deal with BP.

Read more at: KOGAS, BP ink US LNG deal

In a very tight market for distillates, Middle Eastern crude producers are ramping up diesel exports, which would alleviate the crunch and offset the loss of supply from Russia. 

Diesel volumes from the Middle East to Europe in April are expected to more than double to 379,000 barrels a day (BPD), offsetting an expected loss of 166,000 BPD of Russian diesel supply, according to loading schedules and tanker-tracking data compiled by Bloomberg. The Arab Gulf’s diesel exports to Europe are set this month for their highest level since October 2020, per Bloomberg estimates.

Read more at Middle East’s Diesel Exports To Europe Soar As Russian Supply Slumps

House Democrats are seeking more information about a natural gas leak at a ConocoPhillips oil field project in Alaska’s North Slope.