The price of crude oil rose on Wednesday as markets waited for news on the new package of sanctions imposed on Russia by the European Union. The member states are still in disagreement over the oil embargo, with Hungary leading countries opposing the ban. Meanwhile, crude oil inventories in the United States increased by 1.62 million barrels in the week ending May 6, a report showed. West Texas Intermediate (WTI) for deliveries in June grew by 2.19% at 4:12 am ET to sell for $102.25 per barrel. Brent for settlements in July added 2.37% to go for $104.98 per barrel.
Russian Gas Flows To Europe Via Ukraine To Stop Wednesday
Ukraine and Russia clashed over natural gas sent via pipelines to Europe in a spat that could disrupt supplies transiting the former Soviet Union nation for the first time since the war started. Russian gas flowing via one of two key entry points will stop from Wednesday as occupying forces disrupt operations, the Gas Transmission System Operator of Ukraine said in a statement on its website. While the network manager said the fuel could still be rerouted to avoid disruptions, Russian gas giant Gazprom PJSC said the switch isn’t possible because of how its system works. Russia has been sending gas via Ukraine normally despite the conflict, but initial orders show overall transit shipments are set to decline 18% on Wednesday from a day earlier. The reduction is likely to send European gas prices traded in the Netherlands even higher after gains of 5.4% on Tuesday. Kyiv had already warned Russia that the actions of its troops and occupiers in the Luhansk region of eastern Ukraine could end up halting about a third of the gas it transits to Europe. Ukraine’s gas network manager said it can’t meet contractual obligations via the Sokhranivka border point, but said flows could be rerouted via Sudzha. “Ukraine doesn’t bear responsibility for gas transit via Russia-occupied territories and Gazprom was properly informed about that,” Ukrainian state-run energy company Naftogaz said in a statement on its website. The firm said it offered to reroute the gas, a switch that it said presents no technical difficulties and doesn’t involve additional costs for Russia.
A Gazprom spokesman said the company was notified by Ukraine of the pending disruption, but didn’t receive any confirmation of force majeure. While the company said switching to Sudzha would be technically impossible, gas orders show an increase of 12% through the entry point.
Oil prices fall further, WTI goes under $100 per barrel
The prices of oil futures extended losses on Tuesday, with West Texas Intermediate (WTI) falling under $100 per barrel at 11:51 am ET. The growing recession worries seemingly continued to raise concerns in investors. Meanwhile, natural gas prices jumped after Ukrainian gas operator OGTS announced earlier that from tomorrow it will be halting the transmission of natural gas through the Lugansk region. West Texas Intermediate (WTI) for deliveries in June plunged 3.12% at 11:54 am ET to sell for $99.79 per barrel. A minute later, Brent for settlements in July plummeted 3.18% to go for $102.31 per barrel. The UK natural gas futures for delivery in June skyrocketed 10.75% to 142,550 pence per therm at 5:55 pm CET.
Ukraine says Russia hit Odessa with hypersonic missiles
The bodies of 44 civilians have been found in the rubble of a building destroyed by Russia, a Ukrainian official said. It comes as Ukraine’s vital Black Sea port of Odesa is repeatedly bombed, including by hypersonic missiles. The civilians were inside a five-storey building that collapsed in Izyum in the Kharkiv region in March, said Oleh Synehuboy, the head of Kharkiv’s regional administration. “This is another horrible war crime of the Russian occupiers against the civilian population,” he said. Izyum is an eastern Ukrainian city that Russia has been holding as a key frontline node. Mr Synehubov did not say specifically where the building was. Earlier, the Ukrainian military said Russian forces fired seven missiles from the air at Odesa, hitting a shopping centre and a warehouse. As part of the barrage, a Russian supersonic bomber fired three hypersonic missiles, according to the Centre for Defence Strategies, a Ukrainian think tank tracking the war.
The centre identified the weapons used as Kinzhal, or “Dagger”, hypersonic air-to-surface missiles.
The Kinzhal can fly at five times the speed of sound and has a range of 1,240 miles. Using advanced guided missiles allows Russia to fire from aircraft at a distance without being in Ukrainian air space and exposed to potential anti-aircraft fire. But Ukrainian, British and American officials warn Russia is rapidly expending its stock of precision weapons and may not be able to quickly build more, raising the risk of more imprecise rockets being used as the conflict grinds on. That could result in more civilian deaths and other collateral damage. Ukraine alleged at least some of the munitions used dated back to the Soviet era, making them unreliable in targeting. The strikes came after Russian President Vladimir Putin marked his country’s biggest patriotic holiday without being able to boast of major new battlefield successes. He watched troops march in formation and military hardware roll by in a Victory Day parade on Moscow’s Red Square in a celebration of the Soviet Union’s role in the 1945 defeat of Nazi Germany. Many Western analysts had expected Mr Putin to use the Victory Day holiday to trumpet some kind of victory in Ukraine or announce an escalation, but he did neither. Instead, he sought to again justify the war as a necessary response to what he portrayed as a hostile Ukraine. Mr Putin has long bristled at Nato’s creep eastwards into former Soviet republics. Ukraine and its western allies have denied the country posed any threat. “The danger was rising by the day,” Mr Putin said. “Russia has given a pre-emptive response to aggression. It was forced, timely, and the only correct decision.” Intense fighting also raged in Ukraine’s east, and Russian forces sought to end the resistance of Ukrainian defenders making their last stand at a steel plant in Mariupol.
Crude Oil Prices Down on Broader Market Selloff
Crude oil prices fell amid a broader market selloff but news that Europe could soften sanctions on Russian oil also weighed on sentiment, Australia’s ANZ Bank said in a Tuesday note. The European Union has been struggling to garner support for the proposed Russian oil import ban and countries that are highly dependent on Russia are holding out for an extended phase-out, the bank noted. The bloc may cancel a proposal to ban vessels transporting Russian oil to third countries but could push through with prohibiting insurance on those shipments, according to a Bloomberg report. The G7 group of countries has vowed to ban Russian imports but acknowledged that orderly change is needed, ANZ Bank said. Weak demand from China took its toll on prices, while Saudi Arabia cut prices for Asian crude oil buyers on lower consumption due to the COVID-19 lockdowns in China, the bank said. Still, China’s crude oil imports grew in April as refiners took advantage of steep discounts for Russian supplies. NN: Anyway it goes Russia oil and gas will not be coming to market at the same levels as today. The expertise and investment has left. No spares and formidable obstetricals to supplying their customers. And All the wishing and declarations can not make oil that is not their magically appear. Their is not enough oil to meet demand and prices will double from here.
China’s COVID Lockdowns Force Aramco To Slash Oil Export Prices
Saudi Aramco has reduced its oil export prices for the first time in four months amid Covid lockdowns in China that are spurring concern about demand stability. According to a Bloomberg report, Aramco cut the price for its Super Light for Asia by more than $5 per barrel and the price for its Extra Light by $4.95 per barrel for June deliveries. Crude oil prices for Europe were reduced more moderately by the Saudi state giant, by between $2 and $3 per barrel, Bloomberg also reported. Prices for exports to the United States remained unchanged from May. The price cuts follow several hikes that brought Saudi crude prices to a record high earlier this year amid soaring international prices driven by supply tightness and the war in Ukraine. China’s latest series of lockdowns has had the whole business world worried about the future. In Europe, close to 60 percent of businesses with a presence in China were cutting their 2022 growth projections, with more than half of the cuts at between 6 and 15 percent, CNBC reported last week. Business sentiment among Chinese businesses also suffered from the lockdowns, according to local surveys. Currently, the effect of the lockdowns on China’s oil demand is pretty much the only bearish factor for oil. Tight global supply, the war in Ukraine, and OPEC’s unwillingness—and inability—to boost production significantly have joined forces to maintain benchmarks well above $100 per barrel. Saudi Arabia is playing a vital role in keeping prices high because it is, along with the UAE, the only member of OPEC that has the actual capacity to boost production. However, it has signaled that it has no intention of boosting production beyond what has already been agreed, even as the global oil supply situation worsens because of Western sanctions on Russia. NN: This story caught the markets today and led to $10 sell off. I believe it was overdone BUT still see more downside. We got lucky again and took profits on Friday at damn near the high around $110. We continued the trade and started buying operations today at $103. Our intent is to buy as the market drops and hopefully we can get positions in the lower nineties. We shall see if we can get lucky again.
EU drops plan to stop Russian oil tankers
The European Union is set to soften its sanctions package on Russian oil exports after a weekend of wrangling, though it aims to keep a key shipping provision that will hinder Moscow’s ability to export its crude. The bloc will drop a proposed ban on EU-owned vessels transporting Russian oil to third countries, according to documents seen by Bloomberg and people familiar with the matter. Critically, a prohibition on insurance is still in the works and would remain a significant impediment to exports. Greece, whose economy is heavily reliant on shipping, was among the member states that pushed the provision on exporting to third countries to be dropped from the EU’s sixth package of sanctions over Russia’s invasion of Ukraine, the people said. The lack of a single position among Group of Seven nations was central to the proposal being dropped. The measure would have further dented Moscow’s exports — a vital source of hard currency — especially given that Greeks own more than a quarter of the world’s oil tankers by capacity. But current proposals will nevertheless make life considerably harder for Moscow, assuming they are adopted. The ban on providing insurance would span the vast majority of the global fleet of oil tankers seeking to transport Russian barrels. Tanker companies insure their vessels collectively against risks including oil spills. Through an over-arching organization called the International Group of P&I Clubs in London, vessel owners collectively purchase cover from 80 reinsurers, including from more than 20 of the 25 largest providers in the world. As such, an insurance ban would make it all but impossible to obtain such cover given how many reinsurers are European, according to a senior lead underwriter directly involved in the trade. The International Group’s members sort out cover for 95% of the tanker fleet for spills and other maritime liabilities. If they could no longer do so, then it would force Moscow or its buyers to come up with alternative arrangements at a time when Russia is already being heavily sanctioned.
EU wide Russian Oil ban still being negotigated
EU countries are still debating the sixth package, with diplomats trying to overcome objections from Hungary to a proposed ban on Russian oil. They were unable to reach a deal over the weekend. In its initial proposal, the EU had planned to prohibit the transportation,
including through ship-to-ship transfers, to third countries of crude oil and petroleum products that originate in Russia, or have been exported from Russia. That has now been dropped. NB: Making sanctions meaningledd
The EU’s executive arm is also proposing to ban European companies from providing services, including insurance, that are needed to transport Russian oil anywhere in the world. That provision is expected to stay, despite a reluctance from some member states, the people said. Discussions are ongoing and measures could change by the time they are approved by all 27 countries. Under the current proposals, the ban will fully exempt goods that don’t originate in Russia even if they transit through the country. That would free up oil from Kazakhstan or other third countries. The EU’s proposal seeks to ban crude oil imports into the bloc over the next six months and refined fuels by early January. European companies would be barred from providing “technical assistance, brokering services, financing or financial assistance or any other services related to those prohibitions.” The EU had offered Hungary and Slovakia until the end of 2024 to comply with the measures and the Czech Republic until June of the same year since they are heavily reliant on Russian crude. Bulgaria was also seeking a similar transition period, the people said. The EU had hoped to reach an agreement on Sunday to align with a G-7 announcement to phase out Russian oil, ahead of Moscow’s Victory Day parade, which earlier on Monday commemorated the Soviet Union’s defeat of Nazi Germany in World War II. The ongoing haggling over oil has meant that the rest of the measures the EU has proposed as part of its sixth suite of sanctions are also in limbo. Other measures steps include cutting more Russian banks off the international payments system SWIFT, including Russia’s largest lender Sberbank; restricting Russian entities and individuals from purchasing property in the EU; and a ban on providing consulting services to Russian companies. NN: Sanctions do not work for things people want and need. Its called a black market. If you really want to stop Putin you must use force….. And their are no hairy balls left in Europe…
Europe’s Russian oil embargo hits roadblock: Hungary balks, calls sanction a ‘red line’
The European Union’s proposal to embargo Russian oil by the end of 2022 has kicked up a storm. After Hungary and Slovakia showed resistance to join the plan, the European Union is now planning tweaks to its proposal. A ban on Russian oil, essentially means that the 27 member political and economic bloc will move to non-Russian sources of crude oil. This includes the Organization of the Petroleum Exporting Countries led by Saudi Arabia, U.S, Latin America or Africa. Hungary and Slovakia, under the embargo plan, have been given an extra year to make alternative arrangements. The Hungarian PM, while criticising the European Union’s move, has said that the commission has crossed a red line. He added that it was impossible for Hungary to make such a big move by the end of 2023. NN: Getting 27 people to agree on anything is near impossible. Now add over inflated politican egos, advised by experts and you got what can only be described as a cluster fuck. At some point they will agree on a face saving deal. that will be so watered down making it meaningless….. But they will get the headline….
Russia to increase oil output in May – Novak…… Oil loses 2% as China lockdowns fears persist
Russia’s oil output rose in early May from April and production has stabilized, Deputy Prime Minister Alexander Novak said on Monday, news agencies reported, after output fell in April in the wake of Western sanctions imposed over the Ukraine crisis. He didn’t provide details on production. “Looking at the figures of early May, they are better than in April. The situation is stable, the output increased in comparison to April. We are counting on partial recovery of data in May and that it will be better,” Novak was quoted as saying by TASS news agency. Russian oil production has faced headwinds from Western sanctions over what Moscow calls its “special military operation” in Ukraine. The United States has banned Russian oil imports, while Western sanctions against Russian banks and vessels crippled the oil trade, one of Moscow’s key sources of revenue. The European Union is also considering fully banning Russian oil. Interfax news agency, citing a source familiar with the data, said last week that Russian oil and gas condensate production declined in April by almost 4 percent year on year to 41.12 million tonnes, which amounted to around 10.05 million bpd for the whole month. It has also said oil and gas condensate output on May 1-3 edged up by 2 percent from April to 1.402 million tonnes per day (10.28 million bpd). Novak also said Russia was considering expanding capacity of its oil-exporting ports and the ESPO pipeline in Russia’s far east, according to the reports, after President Vladimir Putin ordered the diversification of Russian oil exports to tackle sanctions.
Oil loses 2% as China lockdowns fears persist
Prices of crude oil futures were down over 2% on Monday, with the sentiment seemingly driven by fears tied to coronavirus lockdowns in the world’s number one oil importer, China. On the supply side, there were no major shifts in the Ukraine conflict, as negotiations between the two sides reportedly continued in an online format. West Texas Intermediate for deliveries in June dropped 2.38% at 6:55 am ET, selling for $107.16 per barrel, while Brent for July settlements declined by 2.16% a minute later, to go for $110.05 per barrel.
Former Fed policymakers call for sharp U.S. rate hikes, warn of recession
(Reuters) – Two ex-Federal Reserve officials, now freed from having to set economic policy and be accountable for it, are warning the U.S. central bank will have to raise interest rates more than expected and the outcome could well be a recession – cautions neither voiced before leaving their posts a few months ago. The remarks this week from the Fed’s two most recent vice chairs – Richard Clarida, who until January served as one of Chair Jerome Powell’s top lieutenants for monetary policy formation and Randal Quarles, who oversaw banking regulation to the end of last year – rank among a small chorus of other former U.S. central bankers now offering up critiques of where Fed policy stands and is headed. Clarida, now returned to academia as an economics professor at Columbia University, said on Friday the Fed will need to raise interest rates well into “restrictive territory” to slow economic growth and curb inflation. Quarles, who has returned to the Utah-based investment firm he co-founded, chimed in earlier in the week that a recession was now “likely.” The dour views from the ranks of former officials come just as Powell has ramped up the central bank’s battle with inflation by raising interest rates a half percentage point and all but promising two more such rate hikes by July. The pace of policy tightening is designed to get overnight borrowing costs “expeditiously” to a neutral range of 2.25%-2.5% and in position to rise further if needed. Powell said he saw a “plausible path” to cooling inflation without creating an economic downturn. Clarida, speaking Friday to a conference at Stanford University’s Hoover Institution, said the Fed will need to raise rates to “at least” 3.5% if not higher to bring inflation back down to its 2% goal. “The Fed has the tools to meet this challenge, officials understand the stakes, and are determined to succeed,” said Clarida, whose role at the Fed gave him huge influence over policy but constrained him from departing in public much if at all from Powell’s view. “But the Fed’s instruments are blunt, the mission is complex, and difficult trade-offs lie ahead.” Quarles, who while at the Fed was more overtly hawkish than Clarida, was even sharper-tongued this week. “We would have been better served to start getting on top of it in September,” he told the Banking With Interest podcast, blaming the delay at least in part on President Joe Biden delaying until November the decision to renominate Powell for a second term as Fed chief. Even if Fed hikes in 50 basis point increments, it won’t get to neutral till September, says Jefferies’ Now with inflation pressure intense, unemployment low, and demand far outpacing supply, the effect of rapid rate hikes “is likely to be a recession,” said Quarles, a Donald Trump appointee who left his post in December when he did not get Biden’s nod for a second term. Neither he nor Clarida, also a Trump appointee, called for sharp rate hikes before leaving the Fed. Bill Dudley, who ran the New York Fed until 2018, also says the Fed has been late to raise rates and that a recession will result. Powell, for his part, has acknowledged that engineering a soft landing for the economy will be challenging and that the higher borrowing costs that lie ahead will cause “some pain” for Americans already struggling with higher prices. “But, you know, the big pain is in not dealing … with inflation, and allowing it to become entrenched,” he said Wednesday. On Friday, Clarida said that as early as last summer he saw that inflation risks were “skewed decidedly to the upside.” If inflation, now at 6.6% by the Fed’s yardstick, is a year from now still running at 3%, “simple and compelling” arithmetic by a widely cited policy guide known as the “Taylor rule” means rates will need to rise to 4%, he said. Powell has said he does not expect inflation to drop that fast, though rising rates should start to bring it down later this year. A “softish” landing will “not be easy, he said, but the economy is “very strong and well positioned to handle tighter monetary policy.” A Friday report showing U.S. job growth increased more than expected in April and the unemployment rate held steady at 3.6% provided some fresh evidence for that view. NN: What got little publicity was the fact the home survey is starting to pick up job loses. And the best leading indicator of them all small business hiring turned negative… This party is OVER. YES THEIR WILL BE MASSIVE RATE INCREASES AND A FULL BLOWN DEPRESSION