Oil falls again, China in focus

Oil prices continued to decline on Wednesday as concerns over China's health situation intensified while the world's second largest economy is in the grip of a major covid.

Share:

Around 10:30 GMT (11:30 in Paris), the barrel of Brent North Sea for delivery in March, lost 2.25% to 80.25 dollars.
Its U.S. equivalent, a barrel of West Texas Intermediate (WTI) for February delivery, was down 2.09% to $75.32. The two global crude oil benchmarks have thus started the year with losses of around 6%.

The drop in prices is largely attributed by analysts to fears for black gold consumption in China, as the country is currently facing its worst outbreak of coronavirus cases since the pandemic began. Especially since “despite the relaxation of its zero Covid policy, the Chinese economy is weakening,” notes Stephen Brennock, analyst at PVM Energy.

Manufacturing activity in China declined in December for the fifth consecutive month, according to an independent index released Tuesday, as factories were disrupted by contamination outbreaks. The analyst believes that “economic activity and oil demand in the world’s largest crude importer will continue to weaken as it learns to live with the virus.”

In early December, Beijing put an end to its draconian “zero Covid” policy, which imposed widespread screening tests, strict monitoring of travel, and mandatory confinement and quarantine as soon as cases were discovered.

These measures, which have largely isolated China from the rest of the world, have dealt a severe blow to the world’s second largest economy. But the abrupt lifting of the sanitary restrictions has led to a resurgence of infections, which is also disrupting the economic life of the country. At the same time, “fears of a slowing global economy and a strengthening U.S. dollar” are adding to oil’s downward trend, say analysts at Energi Danmark.

Investors are awaiting the release of the U.S. Federal Reserve’s minutes on Wednesday to look for clues on the institution’s monetary policy. Since oil is traded in dollars, a strong greenback reduces the purchasing power of investors using other currencies, and thus weighs on demand.

The Canadian government is now awaiting a concrete private-sector proposal to develop a new oil pipeline connecting Alberta to the Pacific coast, following recent legislation intended to expedite energy projects.
Petrobras is exploring various strategies for its Polo Bahia oil hub, including potentially selling it, as current profitability is challenged by oil prices around $65 per barrel.
Brazilian producer Azevedo & Travassos will issue new shares to buy Petro-Victory and its forty-nine concessions, consolidating its onshore presence while taking on net debt of about USD39.5mn.
Major oil producers accelerate their return to the market, raising their August quotas more sharply than initially expected, prompting questions about future market balances.
Lindsey refinery could halt operations within three weeks due to limited crude oil reserves, according to a recent analysis by energy consultancy Wood Mackenzie, highlighting an immediate slowdown in production.
The flow of crude between the Hamada field and the Zawiya refinery has resumed after emergency repairs, illustrating the mounting pressure on Libya’s ageing pipeline network that threatens the stability of domestic supply.
Libreville is intensifying the promotion of deep-water blocks, still seventy-two % unexplored, to offset the two hundred thousand barrels-per-day production drop recorded last year, according to GlobalData.
The African Export-Import Bank extends the Nigerian oil company’s facility, providing room to accelerate drilling and modernisation by 2029 as international lenders scale back hydrocarbon exposure.
Petronas begins a three-well exploratory drilling campaign offshore Suriname, deploying a Noble rig after securing an environmental permit and closely collaborating with state-owned company Staatsolie.
Swiss commodities trader Glencore has initiated discussions with the British government regarding its supply contract with the Lindsey refinery, placed under insolvency this week, threatening hundreds of jobs and the UK's energy security.
Facing an under-equipped downstream sector, Mauritania partners with Sonatrach to create a joint venture aiming to structure petroleum products distribution and reduce import dependency, without yet disclosing specific investments.
Oil companies may reduce their exploration and production budgets in 2025, driven by geopolitical tensions and financial caution, according to a new report by U.S. banking group JP Morgan.
Commercial oil inventories in the United States rose unexpectedly last week, mainly driven by a sharp decline in exports and a significant increase in imports, according to the US Energy Information Administration.
TotalEnergies acquires a 25% stake in Block 53 offshore Suriname, joining APA and Petronas after an agreement with Moeve, thereby consolidating its expansion strategy in the region.
British company Prax Group has filed for insolvency, putting hundreds of jobs at its Lindsey oil site at risk, according to Sky News.
Orlen announces the definitive halt of its Russian oil purchases for the Czech Republic, marking the end of deliveries by Rosneft following the contract expiry, amid evolving logistics and diversification of regional supply sources.
Equinor and Shell launch Adura, a new joint venture consolidating their main offshore assets in the United Kingdom, aiming to secure energy supply with an expected production of over 140,000 barrels of oil equivalent per day.
Equinor announces a new oil discovery estimated at between 9 and 15 mn barrels at the Johan Castberg field in the Barents Sea, strengthening the reserve potential in Norway's northern region.
Sierra Leone relaunches an ambitious offshore exploration campaign, using a 3D seismic survey to evaluate up to 60 potential oil blocks before opening a new licensing round as early as next October.
Faced with recurrent shortages, Zambia is reorganising its fuel supply chain, notably issuing licences for operating new tanker trucks and service stations to enhance national energy security and reduce external dependence.