The return of Iranian oil to markets is back on the global agenda after Moscow received guarantees that it could continue trading with Iran after sanctions are lifted. This news sent crude prices below the US$100/barrel mark, the lowest level in three weeks.
The reappearance of COVID-19 in China only added to the downward pressure in oil markets as the country hit a two-year high of 3,500 cases on Monday, doubling day-on-day. Stringent curbs were reintroduced in many major cities, most notably Shanghai and Shenzhen being put under lockdown.
This raises fears that Chinese demand over the upcoming weeks might drop below the stagnating levels of first two months of 2022.
In spite of the IEA claiming that Europe could essentially halve its dependence on Russian gas imports within a year, March gas flows have so far averaged 30% higher than February.
Leading oil majors Shell, BP, and Equinor announced they would not be trading Russian oil and products for the foreseeable future, but that is not the case with gas.
European spot gas prices have in fact come down over the past week on higher Russian pipeline supplies, with May ‘22 TTF prices trending around US$40/mmBtu.
Gazprom exports in January 01 to March 15 to non-CIS countries have totaled 30.7bcm, down 28%YoY, primarily on the back of Europe seeing mild weather throughout the winter season.
European Union Endeavor
European Union member states have agreed on a fourth package
of sanctions against Russia following its invasion of Ukraine. The details of
the sanctions were not disclosed. It is anticipated Russia's "most favored
nation" trade status would be revoked. This could open the door to the
bloc banning or imposing punitive tariffs on Russian goods and putting Russia
on a par with North Korea and Iran.
Sanctions
were set to include an import ban on Russian steel and iron, an export ban on
luxury goods including cars worth more than US$55,000 and a ban on investments
in oil companies and the energy sector. They would also add Chelsea football
club owner Roman Abramovich and 14 others to the EU list of sanctioned Russian
billionaires, diplomats said earlier in the day.
European Commission President Ursula von der Leyen has also
said the EU was working to suspend Russia's membership rights of leading
multilateral institutions, including the International Monetary Fund and the
World Bank.
The latest sanctions will be formally in place once they
have been published in the EU's official journal, which will follow soon.
OPEC Stance
Organization of the Petroleum Exporting Countries (OPEC)
said on Tuesday that oil demand in 2022 faces challenges from Russia's invasion
of Ukraine and rising inflation as crude prices soar, increasing the likelihood
of reductions to its forecast for robust demand this year.
Oil prices shot above US$139 a barrel this month, hitting
peaks not seen since 2008, as Western sanctions tightened on Moscow over its
invasion of Ukraine and disrupted oil sales from Russia, helping to fuel
inflation that was already rising.
In a monthly report, OPEC stuck to its view that world oil
demand would rise by 4.15 million barrels per day (bpd) in 2022 and increased
its forecast of global demand for its crude.
But OPEC, which just a month ago had raised the possibility
of a more rapid demand increase in 2022, said the war in Ukraine and continued
concerns about COVID-19 would have a negative short-term impact on global
growth.
"Looking ahead, challenges to the global economy –
especially regarding the slowdown of economic growth, rising inflation and the
ongoing geopolitical turmoil will impact oil demand in various regions,"
OPEC said in its report.
"While the year started on relatively solid underlying
footing, the latest events in Eastern Europe may derail the recovery,"
OPEC said in its commentary on the world economy.
World oil consumption is expected to surpass the 100 million
bpd mark in the third quarter, in line with OPEC's forecast last month. OPEC
nudged up its forecast of the year's total oil use by about 100,000 bpd to
100.90 million bpd.
On an annual basis, OPEC said the world last used more than
100 million bpd of oil in 2019.
Oil prices extended their earlier decline after the report
was issued, trading further below US$99/barrel on the perception of easing
supply risks.
The report also showed higher output from OPEC as the group
and allied non-members, known as OPEC+, gradually unwind record output cuts put
in place in 2020.
OPEC+ has aimed to raise output by 400,000 bpd a month, with
about 254,000 bpd of that due from 10 participating OPEC members, but
production has been increasing by less than this as some producers struggle to
pump more.
Still, the report showed OPEC output in February bucked that
trend and rose by 440,000 bpd to 28.47 million bpd, driven by higher supply
from top exporter Saudi Arabia and a recovery from outages in Libya.
The growth forecast for overall non-OPEC supply in 2022 was
left unchanged, as was that for production of US tight oil, another term for
shale.
OPEC said it expects the world to need 29 million bpd from
its members in 2022, up 100,000 bpd from last month and theoretically allowing
further increases in output.
