Aug 25 (Reuters) – Saudi Arabia is considering a Chinese bid to build it a nuclear power plant, the Wall Street Journal reported on Friday, a decision that could derail U.S. plans in the kingdom. China National Nuclear Corp, a state-owned company known as CNNC, has bid to build a nuclear plant in Saudi Arabia’s Eastern Province, near the border with Qatar and the United Arab Emirates, the newspaper reported, citing Saudi officials familiar with the matter. CNNC did not immediately respond to a request from Reuters for comment. The foreign ministries of both China and Saudi Arabia did not respond to requests for comment on the report. Saudi Arabia has previously sought U.S. cooperation in establishing a civilian nuclear programme on its soil as part of a possible normalisation deal with Israel. U.S. officials have said in the past they would share nuclear power technology only if the agreement prevents enrichment of uranium or reprocessing of plutonium made in reactors – two routes to making nuclear weapons. Saudi officials acknowledged that exploring the issue with China was a way of goading the Biden administration to compromise on its non-proliferation requirements, the newspaper added. Saudi officials said they would prefer to hire South Korean state utility Korea Electric Power to build the plant’s reactors and involve U.S. operational expertise, but without agreeing to the proliferation controls that Washington generally requires, the newspaper said. The Saudi officials said Crown Prince Mohammed bin Salman was prepared to move ahead with the Chinese company soon if talks with the U.S. failed, the WSJ said. China would continue to cooperate with Saudi Arabia in civil nuclear energy while abiding by international non-proliferation rules, the newspaper cited China’s foreign ministry as saying. Israel’s energy minister has voiced opposition to the idea of Saudi Arabia developing a civilian nuclear programme as part of any U.S. effort to forge closer Israeli-Saudi relations. Israel has said it expected to be consulted by Washington on a U.S.-Saudi deal affecting its national security. Israel, which is outside the voluntary Non-Proliferation Treaty (NPT) and has no nuclear energy, is widely believed to have atomic weapons. Saudi Arabia has built closer relations with China over the past year. In March, China brokered a resumption of ties between Saudi Arabia and its arch-regional foe Iran. China and Saudi Arabia have extensive trade relations in the energy field, given the former is the world’s biggest importer of crude oil and the latter the biggest exporter. State-run China Energy Engineering Corp is building a 2.6-GW solar power station in Al Shuaiba alongside Saudi utility developer ACWA Power, in what is to be the Middle East’s largest solar project. Chinese President Xi Jinping visited the kingdom in December last year, in what was described by China’s foreign ministry as an “epoch-making milestone in the history of the development of China-Arab relations”. Nevertheless, Saudi Arabia has sought to maintain a balance between China and the United States, with the U.S. remaining its most important security partner.
U.S. Government Reduces Gulf Of Mexico Oil And Gas Lease To Save Whale Habitat……. Why not just reduce the numbers of whales
The federal government has reduced the area to be offered in the next Gulf of Mexico oil and gas lease sale by 9% to safeguard the habitat of a rare whale species. The adjustment, which will see the Interior Department auction 67 million acres instead of 73.4 million acres, followed a legal settlement with environmentalists regarding the whale habitat, Bloomberg reports. The American Petroleum Institute was not happy with this and other changes. “While the Department of the Interior announced a much-needed offshore lease sale today, the Biden administration continues to throw up roadblock after roadblock to American energy production, prioritizing their campaign promise to stop American oil and natural gas development in federal waters over their duty to meet Americans’ energy needs,” the industry body said in a statement. “With this announcement, the administration is removing more than 10 million acres of the Gulf of Mexico and adding new and unjustified restrictions on oil and gas vessels operating in this area, amounting to a lease sale in name only,” the API continued. “These restrictions are not supported by the record and target the men and women of the oil and natural gas industry operating in this region, ignoring all other vessel traffic,” the industry body also said. The API was not the only unhappy party, however. The National Ocean Industry Association also had something to say about the latest lease sale. “The Gulf of Mexico is a long-standing and vital source of reliable, affordable, and environmentally responsible energy that is crucial to the wellbeing of our nation,” the NOIA said, as quoted by Offshore Engineer.
“The removal of nearly 11 million acres and the application of needless restrictive measures, included as part of the Stipulated Stay agreement, poses a real barrier to America’s energy production capabilities, at a time when they’re needed more than ever, with inflation driving up the costs of everything for Americans including gasoline at the pump.”
Money Manager Sees $120 Oil Surprising Bears
- Cole Smead: China’s underwhelming economic performance is as bad as it gets right now.
- Smead: The crucial factor for oil is the ongoing supply cuts.
- Smead: Crude oil prices could be on track to hit $100 and even $120 per barrel.
Crude oil prices could be on track to hit $100 and even $120 per barrel, which calls for aggressive buying moves into the oil market now, Cole Smead, president and portfolio manager at Smead Capital Management, told BBN Bloomberg on Wednesday. China’s underwhelming economic performance is as bad as it gets and still, oil prices have not fallen apart, Smead told BBN Bloomberg, arguing about his commodity strategy. The weakness in China’s economy is not driving oil prices currently. The crucial factor for oil is the ongoing supply cuts, he added. The supply side calls for faster price moves higher than the market has been probably expecting, according to Smead.
“There should be money being thrown around trying to take advantages because if we wait back to a $100 or $120 a barrel, I think people are going to feel ‘Gosh, I really missed that,” he told BBN Bloomberg.
So far this year, concerns about China’s economy have stopped any sustained oil price rallies in their tracks. The chances of a ‘soft landing’ in the United States have increased, analysts and the Fed say, but concerns continue about the need of more Fed hikes to fight inflation. The Chinese weakness has made the market take a wait-and-see approach to find if China’s policies to revive its real estate sector and consumer confidence are yielding results. Market participants expect additional stimulus and other measures from China to put its economic growth and industrial production on track to meet the authorities’ 2023 targets. At the same time, the supply cuts from the OPEC+ alliance have started to tighten the market, analysts say. The cuts from OPEC+ and Saudi Arabia, coupled with expected continued strength in demand, are set to result in inventory draws for the rest of the year, supporting oil prices, according to analysts and forecasting agencies.
Saudi Arabia Likely To Extend Production Cuts To October
Saudi Arabia is likely to extend its voluntary 1 million-barrel oil supply cut for the third consecutive month into October amid uncertainty about supply, five Wall Street analysts have predicted. The initial cuts appear to have worked, with oil prices climbing about 15% in the past month to about $86 a barrel. However, the gradual rise in oil prices as inventory tightened has reversed over the past week with traders worrying again about weak economic data coming from China as well as the upcoming Jackson Hole symposium. Current Brent prices of $82.71 is too low for Saudi Arabia since it needs $100-a-barrel crude to balance its books, giving it another incentive to keep supplies tight.
“We think Saudi Arabia will extend the cut in full at least through October. The kingdom is adopting a cautious approach after the weakness in oil markets over the first half of the year and will want to see global inventories significantly decline before starting to unwind the additional voluntary cuts,” Richard Bronze, analyst at consultancy Energy Aspects, has told Reuters.
Meanwhile, brokerage PVM Oil’s John Evans and Saxo Bank’s Ole Hansen, have both predicted that a possible resumption of oil production from Iraq’s Kurdistan region may prompt the Saudis to withhold additional supplies to the market for now. Nevertheless, oil markets are expected to gradually tighten, which should boost prices as the months roll on. The International Energy Agency(IEA) in Paris has predicted an oil shortage of about 1.7 million barrels a day during the second half of the year. Commodity experts at Standard Chartered have predicted that global oil markets will register a supply deficit of 2.81 million barrels per day in August; 2.43mb/d in September and more than 2mb/d in November and December. The analysts have also projected that global inventories will fall by 310mb by end-2023 and another 94mb in the first quarter of 2024 thus pushing oil prices higher. According to the experts, Brent prices will climb to $93/bbl in the fourth quarter.
Wagner Prigozhin killed in plane crash…… Wonder what took Vladimir so long
The Wagner Group founder Yevgeny Prigozhin was listed as a passenger killed on a flight from Moscow to Saint Petersburg that crashed in Tver Oblast, The Russian Federal Air Transport Agency (FAVT) Rosaviatsiya told in a statement issued to the media on Wednesday. The Ministry of Emergency Situations reported that, according to the preliminary results of the investigation, all the ten people on board, including three crew members, died. The ministry stressed the probe is still ongoing. Meanwhile, Rosaviatsiya said it launched its own investigation into the crash. It noted that the plane in question was produced by Embraer S.A. Eight bodies were found at the site of the plane crash in Tver Oblast, RIA Novosti reported on Wednesday, citing a source familiar with the matter. According to the publication, the source belongs to one of the emergency services investigating the crash. They did not specify if the Wagner Group founder Yevgeny Prigozhin, who was listed as one of the passengers on the flight, was among those eight or not. Meanwhile, it was reported that one of the Wagner Group leaders, Dmitry Utkin, whose own call sign is allegedly Wagner, was also on board the plane. NN: I am surprised he made it this long! Never wound a King!
Oil Pares Losses as Stockpiles Fall to 2022 Lows…… EIA: US crude inventories down by 6.1 million barrels
(Bloomberg) — Oil pared losses as US stockpiles dropped to the lowest level this year and a rally in equities bolstered risk assets. West Texas Intermediate traded above $79, rebounding from an earlier plunge below $78. US crude inventories dwindled to the lowest since December 2022, according to a government report Wednesday, showing that supplies remain tight despite concerns about a potential slowdown in demand. Inventories at the nation’s biggest storage hub in Cushing, Oklahoma, slid the most since October 2021. While the bullish stockpile report supports oil prices, the market moves are “all macro right now,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors. Earlier in the session, prices fell to monthly lows as the contraction in euro-area private-sector activity intensified in August. China’s stuttering economy also continues to threaten demand for global commodities. Crude’s rally since late June has faltered over the last couple of sessions amid the worsening outlook in China and signs the Federal Reserve isn’t yet done with its campaign of monetary tightening. That has overshadowed a tightening market following supply cuts by OPEC+ kingpins Saudi Arabia and Russia. Adding to bearish sentiment, observed exports from Iran have surged to 2.2 million barrels a day this month. Meanwhile, Turkey and Iraq have held a flurry of talks as they seek to restart a major oil pipeline, though they have failed to reach a breakthrough so far.
EIA: US crude inventories down by 6.1 million barrels
Crude oil prices moved higher today, after the Energy Information Administration reported an inventory draw of 6.1 million barrels for the week to August 18. This compared with a decline of a substantial 6 million barrels for the previous week, which in turn followed a build of almost identical size for the week before that. At 433.5 million barrels as of August 18, U.S. commercial crude oil inventories are 2% below the five-year average for this time of the year, the EIA said. In fuels, the authority estimated a gasoline stock build and a middle distillate inventory increase for the week to August 18. Gasoline inventories added 1.5 million barrels in the reporting period, which compared with a minor draw of some 300,000 barrels for the previous week. Gasoline production averaged 9.7 million bpd last week, compared with 9.6 million bpd for the previous week. In middle distillates, the EIA estimated an inventory build of 900,000 barrels for the week to August 18. Production was seen at 5.1 million barrels daily. These figures compared with an inventory build of a modest 300,000 barrels for the previous week, with production during that week averaging 4.7 million barrels daily. Oil prices, meanwhile, remain bound by worry about another U.S. rate hike and China economic indicators. “Investors are reluctant to take big positions ahead of the Jackson Hole symposium as they want to find clues for the next step by the U.S. Federal Reserve,” a Nissan Securities analyst told Reuters. “Concerns over higher interest rates and sluggish demand in China are expected to outweigh tightening supply from OPEC+ in the short term,” Hiroyuki Kikukawa also said. “However, given that fundamentals remain constructive, we believe any price weakness will be relatively short-lived.”
Goldman Sachs: Large Inventory Draws Limit Downside Risk To Oil Prices
Larger than previously expected oil inventory draws in developed economies could limit downside risks to oil prices and add $2 a barrel to Goldman Sachs’s end-year call for $86 per barrel Brent, the bank said in a note. Commercial oil stocks in the OECD region in August are trending 30 million barrels lower than Goldman Sachs analysts have previously expected, the Wall Street bank said in the Tuesday note carried by Reuters.
“The main reason for oil outperformance is that the oil market continues to price sizeable deficits,” Goldman analysts wrote in a research note on Tuesday, adding that draws tempered the bearish risk of what they previously called “persistently higher-than-expected inventories”.
Goldman said higher refinery runs slashed U.S. and Asia crude stocks by 21 million and 11 million barrels, respectively, since the end of June. Together with a China-driven fall in non-OECD stocks by 50 million barrels this month, and a Saudi Arabia-led draw of 20 million barrels from stocks on water, global oil stocks saw a month-to-date decline of 80 million barrels. Another bullish risk to prices from lower-for-longer OPEC+ supply has grown with “Saudi’s reiterated commitment to cuts and apparent willingness to extend and even deepen cuts”, Goldman said. China demand news was mixed and suggested that weakness in macro data was concentrated outside the oil-intensive services sector while international jet demand was still recovering. It also noted a bearish risk from higher Iranian supply, citing an estimated 500,000 bpd rise in exports through Aug. 20. Last month, Daan Struyven, head of oil research at Goldman Sachs, told CNBC that the bank expects oil prices to go higher as record-high oil demand and lowered supply are set to lead to a large market deficit.
“We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high,” Struyven said.
Global observed oil inventories declined by 17.3 million barrels in June, led by draws in the OECD, the International Energy Agency (IEA) said in its monthly report in August. Observed oil stocks decreased for a third consecutive month in July, with OECD industry stocks now sitting at more than 100 million barrels below the five-year average. “Market balances are set to tighten further into the autumn as Saudi Arabia and Russia extend supply cuts at least through September,” the agency noted. If the OPEC+ alliance maintains its current production and export levels, oil inventories could draw by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth quarter, “with a risk of driving prices still higher,” the IEA said.
US oil inventories reportedly down by 2.41M barrels
U.S. crude oil stocks likely fell by almost 2.5 million barrels last week, with a build almost as large in distillates and a slight drop in gasoline stocks, petroleum industry group API indicated in a preliminary report on Tuesday ahead of official inventory data. The U.S. crude inventory dipped by 2.418M barrels during the week ended Aug 18, according to the API, or American Petroleum Institute. The petroleum industry group reported a crude build of 6.195M barrels in the prior week to Aug 11. The API numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration, or EIA, on Wednesday. In the previous week, the EIA reported a record crude build of 5.851 barrels, underscoring Saudi Arabia’s claims that it has taken an additional million barrels per day off its production since the start of July. The Saudis have pledged to keep up with such cuts through September. Along with the broader crude stockpile gain it reported for last week, the API cited a slide of 2.21M barrels last week at the Cushing, Oklahoma hub that takes delivery of U.S. crude. In the prior week, the API reported a Cushing deficit of 1.0M barrels. On the fuels side, API reported a gasoline slide of 0.153M barrels and a distillate stock build of 1.898M barrels. In the previous week, it noted a 0.7M barrel draw for gasoline and 0.8M deficit for distillates. With the API report out, anticipation builds on what the EIA will cite for last week’s oil supply-demand in the United States, and how that will impact crude prices that fell for the first time last week after a seven-week rally. For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 2.299 million barrels, versus the 5.96M barrel reduction reported during the week to Aug 11. On the gasoline inventory front, the consensus is for a build of 0.436M barrels over the 0.261M-barrel decline in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product. With distillate stockpiles, the expectation is for a climb of 0.095million barrels versus the prior week’s gain of 0.296M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
Europe’s Natural Gas Prices Soar
European gas prices continued to rise on Tuesday as workers at Australian liquefied natural gas producer company, Woodside Energy Group Ltd., handed the corporation a seven-day notice to resolve the dispute before going on strike as early as September 2. The potential industrial action at Australia’s top gas exporter spiked fears over disruption of the commodity supply around the world. For deliveries in September, UK natural gas futures jumped 6.05% to go for 108.190 pence per therm at 1:33 pm CET. For the same month contracts, Dutch TTF natural gas soared 6.03% to €44.23 per megawatt hour. Woodside’s North West Shelf is the largest LNG production project in Australia, with a capacity of 16.9 million tons annually, followed by Chevron’s Gorgon, which has a capacity of 15.6 million tons. Wheatstone, also operated by Chevron, can produce 8.9 million tons of LNG annually. Because of that substantial capacity, disruption at the three facilities would send ripples across the global gas market. If workers go ahead with strikes and if those strikes result in maximum LNG export disruption, Europe’s natural gas prices could exceed $109 (100 euros) per MWh, Goldman Sachs said in a note carried by The Wall Street Journal.
U.S. And China Top The Chart In Global Oil Consumption
- In 2022, the US led global oil consumption with 19 million barrels daily, while China followed with 14 million barrels.
- From 2012 to 2022, China and India exhibited the most significant growth in oil consumption, increasing by 42% and 41%, respectively.
- Of the BRICS nations, four are among the top eight oil consumers, with three showing a marked growth in oil consumption over the past ten years.
When looking at the change in oil consumption between 2012 and 2022, the picture changes significantly. U.S. oil usage only increased by about nine percent, with China and India emerging as growth leaders with 42 and 41 percent consumption growth, respectively. All in all, four out of the five BRICS countries are featured in the top 8 oil-consuming countries, and three out of four have shown a considerable increase in appetite for fossil fuel over the past decade.