Global oil markets under turmoil

During this past week, global oil markets faced plenty of turmoil. The European Union (EU) banned Russian oil, OPEC expressed intention to increase production, stockpiles declined in United States once again. At the end of the week, sentiment turned bullish with OPEC unable to calm the oil price rally.

China finally came out of its three-month lockdown nightmare, oil prices were moved by reports that Saudi Arabia and the UAE would seek to speed up the monthly increments of OPEC Plus. The oil group did in fact opt for about 650,000 barrel per day (bpd) increases in July and August.

It was anticipated that prices might genuinely come lower, closer to the US$110 mark. Unfortunately for oil bears, news of dropping US inventories, combined with the EU's decision to ban Russian oil imports, sent oil prices climbing once again. 

OPEC Plus members agreed to raise their overall production targets by 648,000 bpd in July and August, bringing the final unwinding of the oil group’s production cuts forward by one month on fears of ban on Russian oil.

The European Union finalized its prohibition of financing and financial assistance services for Russian oil cargoes, a measure that is set to come into effect after a wind-down period of six months, effectively banning EU entities from providing insurance to Russian trade. 

Iran cut gas supplies to Iraq a little more than one month after it had restarted them, with the decision stemming from the non-payment of arrears. Supplies were supposed to rise to 50 million cubic meters per day, as a result now Iraq faces widespread power shortages.

Russian Trade Ministry announced to limit the exports of noble gases, most notably neon, a key ingredient in making chips, aggravating a supply crunch that has already seen one of the world’s largest producers – Ukraine – disappear from the markets.

The government of Spain announced that it should be the EU that pays for any new natural gas interconnections between Spain and its European neighbors, with Madrid being completely independent of Russian energy supplies and taking in LNG instead.

Chevron CEO, Michael Wirth warned against banning fuel exports as a means of decreasing the price of oil products, saying that over the next few month product shortages will materialize, with Europe being the most likely candidate.

With Australia taken aback by a cold snap that sent heating demand spiking along with demand for natural gas, Canberra has called on the industry to help as gas prices have quadrupled and the government mandate to keep LNG at home could only be triggered from 2023.