Tag Archives: Oil and gas industry

Business

Shell posts profit of nearly $40 billion and announces $4 billion in buybacks

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Hong Kong/London
CNN
 — 

Shell made a record profit of almost $40 billion in 2022, more than double what it raked in the previous year after oil and gas prices soared following Russia’s invasion of Ukraine.

Europe’s largest oil company by revenue reported adjusted full-year earnings of $39.9 billion on Thursday — more than double the $19.3 billion it posted in 2021 — driven by a strong performance in its gas trading business. The company’s stock was up 1.7% in London.

The company reported $9.8 billion in profit in the fourth quarter. Just over 40% of Shell’s full-year earnings came from its integrated gas business, which includes liquified natural gas trading operations.

Shell CEO Wael Sawan said the results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world.”

The earnings are the latest in a series of record-setting results by the world’s biggest energy companies, which have enjoyed bumper profits off the back of soaring oil and gas prices.

ExxonMobil this week posted record full-year earnings of $59.1 billion. Last month, Chevron

(CVX) reported a record full-year profit of $36.5 billion.

That has led to renewed calls for higher taxation. Governments in the European Union and the United Kingdom have already imposed windfall taxes on oil company profits, with the proceeds used to help households struggling with rising energy bills.

Shell said it expected to pay an additional $2.3 billion in tax related to the EU windfall tax and the UK energy profits levy. The company paid $13 billion in tax globally in 2022.

Shell

(RDSA) also announced another $4 billion share buyback program and confirmed it would lift its dividend per share by 15% for the fourth quarter.

— This is a developing story and will be updated.

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Business

Keystone Pipeline shuts down after oil leak, halting flow of 600,000 barrels a day

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New York
CNN Business
 — 

The Keystone Pipeline has been shut down following a leak discovered near the border of Kansas and Nebraska.

The shutdown of the major oil pipeline that carries crude from Canada triggered volatility in the energy market on Thursday, with oil prices briefly surging as much as 5% before retreating.

Federal safety regulators are investigating the leak and have deployed to the site, a spokesperson for the Pipeline and Hazardous Materials Safety Administration told CNN.

Canada’s TC Energy

(TRP) said it launched an emergency shutdown of the Keystone Pipeline System at 9 p.m. ET on Wednesday after alarms were triggered and pressure dropped in the system. The company said the system remains shut as “our crews actively respond and work to contain and recover the oil.”

Calgary-based TC Energy said there has been a “confirmed release of oil” into a creek located about 20 miles south of Steele City, Nebraska. An estimated 14,000 barrels of oil have been discharged as of late Thursday, the company said.

The PHMSA, an arm of the Transportation Department charged with enforcing safety regulations for pipelines, said the leak is located near Washington, Kansas, which is near the border with Nebraska.

The spokesperson said the agency continues to investigate the cause of the leak.

US oil prices climbed as high as $75.44 a barrel on the news, before easing. In recent trading, oil was up 0.8% to $72.57 a barrel. The gains follow a steep selloff in recent days that left crude at levels unseen since December 2021.

No timetable has been given for restarting the Keystone Pipeline, a 2,700-mile system that delivers mostly Canadian oil to major refineries across America. The pipeline can transport more than 600,000 barrels of oil per day.

Matt Smith, an analyst at commodity data provider Kpler, said Canadian oil normally transported by Keystone can’t be easily replaced.

“We’re seeing a pop in prices because this will impact refiners that take this crude,” Smith said.

“Our primary focus right now is the health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release,” TC Energy said in a statement.

The leak happened on an existing Keystone pipeline that is separate from Keystone XL, a controversial pipeline project that was terminated last year after President Joe Biden revoked the pipeline’s permit on his first day in office.

The Keystone Pipeline has experienced leaks in the past, including one in South Dakota in 2016 and another one in 2019 in North Dakota that impacted nearly five acres.

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World

When China and Saudi Arabia meet, nothing matters more than oil

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Hong Kong
CNN
 — 

Chinese leader Xi Jinping is visiting Saudi Arabia this week for the first time in nearly seven years, during which he signed a comprehensive strategic partnership with the world’s largest oil exporter and met leaders from across the Middle East.

The visit is a sign that China and the Gulf region are deepening their economic relations at a time when US-Saudi ties have crumbled over OPEC’s decision to slash crude oil supply. As Xi wrote in an article published in Saudi media, the trip was intended to strengthen China’s relations with the Arab world.

The partnership agreement signed by the two sides includes a number of deals and memoranda of understanding, such as on hydrogen energy and enhancing coordination between the kingdom’s Vision 2030 and China’s Belt and Road Initiative, according to the official Saudi Press Agency (SPA). It did not provide specific details.

China is Saudi Arabia’s biggest trading partner and a source of growing investment. It’s also the world’s biggest buyer of oil. Saudi Arabia is China’s largest trading partner in the Middle East and the top global supplier of crude oil.

“Energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team. “There is great recognition of the need to build a framework to ensure that this interdependence is accommodated politically, especially given the scope of energy transition in the West.”

Governments around the world have committed to drastically cutting carbon emissions over the coming decades. Countries such as Canada and Germany have doubled down on renewable energy investments to expedite their transition to net-zero economies.

The United States has significantly increased domestic oil and gas output since the 2000s, while accelerating its transition to clean energy.

The Russian invasion of Ukraine in February has triggered a global energy crisis that has left all countries racing to shore up supplies. And the West has further scrambled the oil markets by slapping an embargo and price cap on the world’s second biggest exporter of crude.

Energy security has also increasingly become a key priority for China, which is facing significant challenges of its own.

Last year, bilateral trade between Saudi Arabia and China hit $87.3 billion, up 30% from 2020, according to Chinese customs figures.

Much of the trade was focused on oil. China’s crude imports from Saudi Arabia stood at $43.9 billion in 2021, accounting for 77% of its total goods imports from the kingdom. That amount also makes up more than a quarter of Saudi Arabia’s total crude exports.

“Stability of energy supplies, in terms of both prices and quantities, is a key priority for Xi Jinping as the Chinese economy remains heavily reliant on oil and natural gas imports,” said Eswar Prasad, a professor of trade policy at Cornell University.

The world’s second largest economy is heavily reliant on foreign oil and gas. 72% of its oil consumption was imported last year, according to official figures. 44% of natural gas demand was also from overseas.

At the 20th Party Congress in October, Xi stressed that ensuring energy security was a key priority. The comments came after a spate of severe power shortages and soaring global energy prices following Russia’s invasion of Ukraine.

As the West shunned Russian crude in the months that followed the invasion, China took advantage of Moscow’s desperate search for new buyers. Between May and July, Russia was China’s No. 1 oil supplier, until Saudi Arabia regained the top spot in August.

“Diversity is a key ingredient for China’s long-term energy security because it cannot afford to put all of its eggs in one basket and turn itself into a captive of another power’s energy and geostrategic interests,” said Ahmed Aboudouh, a nonresident fellow with the Middle East Programs at the Atlantic Council, a research institute based in DC.

“Although Russia is a source of cheaper supply chains, nobody can guarantee, with utmost certainty, that the China and Russia relationship will continue to shore up 50 years from now,” Aboudouh said.

The Saudi Press Agency cited Saudi energy minister Prince Abdulaziz bin Salman as saying Wednesday that the kingdom would remain China’s “credible and reliable partner in this field.”

Saudi Arabia also has strong motivations to deepen energy ties with China, according to Gal Luft, co-director of the Institute for the Analysis of Global Security.

“The Saudis are concerned about losing market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” he said. “Their goal is to ensure China remains a loyal customer even when the competitors offer [a] cheaper product.”

Oil prices have fallen back to where they were before the Ukraine war on fears of a sharp global economic slowdown. The extent to which the Chinese economy can pick up pace next year will have a huge bearing on how bad that slump will be.

Beyond security of supply, Saudi Arabia could offer Beijing another prize with bigger geopolitical ramifications.

Riyadh has been in talks with Beijing to price some of its oil sales to China in the Chinese currency, the yuan, rather than the US dollar, according to a Wall Street Journal report. Such a deal could be a boost to Beijing’s ambitions to expand the Chinese currency’s global influence.

It would also hurt the long-standing agreement between Saudi Arabia and the United States that requires Saudi Arabia to sell its oil only for US dollars and to hold its reserves partly in US Treasuries, all in return for US security guarantees. The “petrodollar system” has helped preserve the dollar’s status as the top global reserve currency and payment medium for oil and other commodities.

Although Beijing and Riyadh never confirmed the reported talks, analysts said it was logical that the two sides would be exploring the possibility.

“In the near future, Saudi Arabia could sell some of its oil and receive revenues in Chinese yuan, which makes economic sense as China is the kingdom’s top trading partner,” said Naser Al Tamimi, senior associate research fellow at ISPI, an Italian think tank on international affairs.

Some believe it’s already happening, but that neither China nor the Saudis want to highlight it publicly.

“They know too well how sensitive this issue [is] for the United States,” said Luft. “Both parties are overexposed to the US currency and there is no reason for them to continue to conduct their bilateral trade in a third party’s currency, especially when this third party is no longer a friend of either.”

Xi’s visit could mark another step “in the erosion of the dollar’s status” as reserve currency, he added.

Nonetheless, there are limits to the growing ties between Riyadh and Beijing.

“The Biden administration’s approach to the Middle East has concerned the Saudis, and they see a growing relationship with China as a hedge against potential US abandonment and a tool for leverage in negotiations with the United States,” said Jon B. Alterman, director of the Middle East Program at the Center for Strategic and International Studies, a Washington DC-based think tank.

The Biden administration has reoriented its policy priorities with a focus on countering China. At the same time, it has indicated its intention to downsize its own presence in the Middle East, sparking worries among allies there that the United States may not be as committed to the region as it used to be.

“All that being said, Chinese-Saudi ties pale in both depth and complexity to Saudi-US ties,” Alterman said. “The Chinese remain a novelty to most Saudis, and they are additive. The United States is foundational to how Saudis see the world, and how they have seen it for 75 years.”

Despite the possibility of shifting to yuan transactions, it’s too early to say Saudi Arabia would ditch the dollar in pricing its oil sales, analysts said.

Eurasia Group’s Kamal believes it’s “highly unlikely” that Saudi Arabia would take such a step, unless there is an implosion on the US-Saudi relationship.

“In essence there could be discussion on pricing of barrels to China in yuan, but this would be limited in size and probably only correspond to bilateral trade volumes,” he said.

Prasad from Cornell University said countries like China, Russia, and Saudi Arabia are all eager to reduce their dependence on the dollar for oil contracts and other cross-border transactions.

“However, in the absence of serious alternatives and with few international investors willing to place their trust in these countries’ financial markets and their governments, the dollar’s dominant role in global finance is hardly under serious threat,” he said.

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World

Oil tankers are getting stuck in the Black Sea. That could become a problem

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CNN
 — 

A bottleneck is building across an important trading route for oil, which if left unresolved could knock global supply and boost prices at a fragile moment for energy markets.

As of Thursday, 16 oil tankers traveling south from the Black Sea were waiting to cross the Bosphorus strait into the Sea of Marmara, an increase of five from Tuesday, according to a report from Istanbul-based Tribeca Shipping Agency. A further nine tankers were waiting to cross southbound from the Sea of Marmara through the Dardanelles strait into the Mediterranean.

The snarl-up in waterways controlled by Turkey, which Turkish officials said is mostly affecting crude oil shipments destined for Europe, has caught the attention of UK and US government officials who are now in talks with Ankara to resolve the growing impasse.

The snag is linked to a Western price cap on Russian oil that came into effect on Monday. The cap is supposed to limit the Kremlin’s revenues without adding to stress on the global economy by reducing supply. But Turkey is insisting that vessels prove they have insurance that will pay out in light of the new sanctions, before allowing them to pass through the straits linking the Black Sea and Mediterranean.

Although currently causing no disruption to global oil supply and thus prices, the hold-up could become a problem if left unresolved, said Jorge Leon, senior vice president for oil market analysis at Rystad Energy. “This is a very popular route around the world for global trade and specifically for crude,” he told CNN Business.

Countries including Russia, Kazakhstan and Azerbaijan use the Turkish straits to get their oil to world oil markets.

The traffic jam in the Turkish straits arose following the imposition this week of the price cap on Russian oil. The cap bars ship owners carrying Russian oil from accessing insurance and other services from European providers unless the oil is sold for $60 a barrel or less.

In light of the cap, Turkish maritime authorities are concerned about the risk of accidents or oil spills involving uninsured vessels, and are preventing ships from passing through Turkish waters unless they can provide additional guarantees that their transit is covered.

In a notice issued last month by Turkey’s government ahead of the price cap, maritime director general Ünal Baylan said that given “catastrophic consequences” for the country in the event of an accident involving a crude tanker, “it is absolutely required for us to confirm in some way that their [protection and indemnity] insurance cover is still valid and comprehensive.”

The International Group of P&I Clubs, which provides protection and indemnity insurance for 90% of the goods shipped by sea, has said it cannot comply with the Turkish policy.

The Turkish government’s requirements “go well beyond the general information that is contained in a normal confirmation of entry letter” and would require P&I Clubs to confirm coverage even in the event of a breach of sanctions under EU, UK and US law, the UK P&I Club said in a statement.

Turkish officials say this position is “unacceptable” and on Thursday reiterated demands for letters from insurers. “The majority of the crude oil tankers waiting to cross the strait are EU ships and a majority of the petrol is destined for EU ports,” the Turkish maritime authority said in a statement.

“It is difficult to understand why EU-based insurance companies are refusing to provide this letter… for ships that belong to the EU, carrying crude oil to [the] EU when the sanctions in question have been set forth by the EU,” it added.

Western officials, clearly worried about potential disruption to oil supply, say they are in talks with Turkey’s government to resolve the situation.

US Deputy Treasury Secretary Wally Adeyemo told Turkish Deputy Foreign Minister Sedat Onal on a call that the price cap only applies to Russian oil and “does not necessitate additional checks on ships” passing through Turkish waters.

“Both officials highlighted their shared interest in keeping global energy markets well supplied by creating a simple compliance regime that would permit oil to transit the Turkish straits,” the Treasury Department said in a statement.

“The UK, US and EU are working closely with the Turkish government and the shipping and insurance industries to clarify the implementation of the Oil Price Cap and reach a resolution,” according to a statement from the UK Treasury.

“There is no reason for ships to be denied access to the Bosporus Straits for environmental or health and safety concerns,” it added.

Despite the backlog of tankers, the average waiting time to cross the Bosphorus strait is still well below where it was this time last year, according to Leon of Rystad Energy. “Given the reaction from UK and US officials, my hunch is that this is going to be resolved very soon,” he said.

-— Gül Tüysüz in Istanbul contributed to this article.



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Business

IEA: The world will gain enough renewable energy in 5 years to power China

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London
CNN Business
 — 

Global renewable power capacity is set to grow as much in the next five years as it has over the past two decades, as soaring energy prices and the climate crisis force governments to ditch fossil fuels.

In a report published Tuesday, the International Energy Agency forecast a sharp acceleration in installations of renewable power. It now expects green energy to overtake coal to become the largest global source of electricity by early 2025.

Global renewable power capacity is now expected to grow by 2,400 gigawatts (GW) between 2022 and 2027, an amount equal to the entire power generating capacity of China today, according to the report. The increase is 30% higher than the Paris-based agency’s forecast of just a year ago.

“Renewables were already expanding quickly, but the global energy crisis has kicked them into an extraordinary new phase of even faster growth as countries seek to capitalize on their energy security benefits,” IEA executive director Fatih Birol said in a statement.

“This is a clear example of how the current energy crisis can be a historic turning point towards a cleaner and more secure energy system. Renewables’ continued acceleration is critical to help keep the door open to limiting global warming to 1.5 °C,” he added.

Soaring prices of most energy sources, including oil, natural gas and coal, have stoked inflation around the world and highlighted Europe’s previous over-reliance on oil and natural gas imports from Russia.

According to the IEA report, the war in Ukraine is a “decisive moment for renewables in Europe,” where governments and businesses are scrambling to replace Russian gas with alternatives.

The European Union now prohibits Russian crude oil imports by sea, setting up the bloc to have phased out 90% of oil imports from Russia by the end of the year. Flows of Russian natural gas via pipeline to Europe are now running at just 20% of their pre-war level, according to analysts.

“The amount of renewable power capacity added in Europe in the 2022-27 period is forecast to be twice as high as in the previous five-year period, driven by a combination of energy security concerns and climate ambitions,” the report said.

Policy and market reforms in China, the United States and India are also driving the growth in renewable power. China is expected to account for almost half of new global renewable power capacity added between 2022 and 2027, according to the IEA report.

Meanwhile, the Biden administration’s Inflation Reduction Act is expected to boost the expansion of renewables in the United States.

Most of the growth in renewables will come from investments into solar and wind power. Global solar generation capacity is set to almost triple over the next five years, with global wind capacity almost doubling over that period.

“Together, wind and solar will account for over 90% of the renewable power capacity that is added over the next five years,” the IEA said.

— Julia Horowitz contributed reporting.

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World

The West just scrambled the oil market. What happens next is up to Russia

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London
CNN Business
 — 

Most Russian crude oil exports to Europe are now banned, marking the boldest effort yet by the West to pile financial pressure on President Vladimir Putin as his brutal war in Ukraine enters its tenth month.

The oil embargo, which was agreed upon in late May, took effect in the European Union on Monday. It was accompanied by a new price cap on Russian crude set by G7 countries. That’s designed to limit the Kremlin’s revenues while allowing countries such as China and India to continue to buy Russian oil, provided they don’t pay more than $60 a barrel.

What happens next will likely hinge on the response from Moscow, which has vowed not to cooperate with the price cap and could slash its production, rattling global energy markets. Global crude prices were up 2.6% on Monday as investors watched nervously for the next move.

Here’s what you need to know about the oil embargo, the price cap and the potential impact.

The European Union now prohibits Russian crude oil imports by sea, setting up the bloc to have phased out 90% of oil imports from Russia. It’s a huge move given that Europe received roughly a third of its oil imports from Russia in 2021. More than half of Russia’s exports went to Europe 12 months ago.

There are a few exceptions. Bulgaria received a temporary carve-out. The embargo also doesn’t target imports via pipeline. That means the Druzhba pipeline can continue to supply Hungary, Slovakia and the Czech Republic. (Germany and Poland are working to end pipeline imports from Russia as soon as possible.)

But the embargo is significant. In 2021, the EU imported €48 billion ($50.7 billion) worth of crude oil and €23 billion ($24.3 billion) of refined oil products from Russia. Two-thirds of those imports arrived by sea.

A ban on Russian refined oil products, such as diesel fuel, imported by sea will launch in early February.

The European Union, plus the other members of the G7 — the United States, Canada, Japan and the United Kingdom — and Australia also agreed on Friday to cap the price of Russian crude oil at $60 a barrel, a policy aimed at Moscow’s other customers. This measure took effect Monday, too.

The price cap, which can be adjusted over time, is designed to be enforced by companies that provide shipping, insurance and other services for Russian oil. If a buyer pays more than the cap, they would withhold their services, in theory preventing the oil from being shipped. Most of these firms are based in Europe or the United Kingdom.

Despite unprecedented sanctions from the West, Russia’s economy and the government’s coffers have been padded by its lucrative position as the world’s second largest exporter of crude oil behind Saudi Arabia.

In October, Russia exported 7.7 million barrels of oil per day, just 400,000 barrels below pre-war levels, according to the International Energy Agency. Revenues from crude oil and refined products currently stand at $560 million per day.

By quickly phasing out imports, Europe hopes to limit inflows to Putin’s war chest, making it harder for him to continue his war in Ukraine.

But countries like China and India have stepped in buy surplus barrels. That’s where the price cap comes in.

G7 countries don’t want Russian oil taken off the market entirely, since that would push up global prices at a time when high inflation is hurting their economies. By enacting a price cap, they hope that can keep barrels flowing, but make the business less profitable for Moscow.

That’s far from certain. Countries like Poland and Estonia wanted a lower price cap, emphasizing that $60 is too close to the current market price for Russian oil. At the end of September, Russian Urals crude was trading just under $64 a barrel.

“Today’s oil price cap agreement is a step in right direction, but this is not enough,” Estonian foreign minister Urmas Reinsalu tweeted Friday. “Why are we still willing to finance Russia’s war machine?”

Enforcement could also prove difficult. Russia and its customers could start using more ships and insurance providers outside Europe and the United Kingdom to circumvent the rules, increasingly relying on what’s termed a “shadow fleet.”

“Capacity in that fleet has been growing, and it could probably handle Russian volumes for a while,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.

Kremlin spokesperson Dmitry Peskov said Monday that Moscow will “not recognize any price caps.” Russian Deputy Prime Minister Alexander Novak said Sunday that Russia would not export oil to countries adhering to the cap, even if that will mean cutting production.

Oil prices have fallen sharply since the spring as fears about a global recession that may hit demand have come to the fore. Now, all eyes are on Russia’s response. Peskov said the price cap was a step towards “destabilizing the world energy markets.”

Moscow needs to find replacement customers for 1.1 million barrels per day of crude that had still been flowing to Europe, according to the IEA. That may not be easy, especially as coronavirus restrictions and a growth slowdown in China affect demand from the world’s second biggest economy.

The price cap adds to the uncertainty. Would-be customers may decide buying Russian cargoes has become too risky and complex, taking another batch of buyers off the market.

As the Kremlin has threatened, Russia may reduce its oil output as a result. The IEA has estimated Russia will slash output by an additional 1.4 million barrels per day by early 2023.

Other factors will dictate prices, too. Rare protests in China have raised questions about the country’s commitment to its “zero-Covid” policy, and demand could increase if its economy picks up pace.

The Organization of the Petroleum Exporting Countries, or OPEC, could also alter its output. The cartel on Sunday decided to stick with previously announced production cuts, giving it more time to assess the effects of the embargo and the price cap.

Europe’s embargo on refined oil products in February could also be a flash point for energy prices, since the region remains dependent on Russian diesel. Finding alternative sources in just two months may be tricky.

— Anna Chernova contributed reporting.



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World

Europe agrees to cap the price of Russian oil at $60 a barrel

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London
CNN Business
 — 

The European Union has reached a consensus on the price at which to cap Russian oil just days before its ban on most imports comes into force.

News of the deal, which had needed approval from holdout Poland, was confirmed on Twitter by the president of the European Commission, Ursula von der Leyen, marking a key milestone in the West’s efforts to punish President Vladimir Putin without adding to stress on the global economy.

“Today, the European Union, the G7 and other global partners have agreed to introduce a global price cap on seaborne oil from Russia,” von der Leyen said, adding that it would strengthen sanctions on Russia, diminish Moscow’s revenues and stabilize energy markets by allowing EU-based operators to ship the oil to third-party countries provided it is priced below the cap.

The bloc’s 27 member states agreed Friday to set the cap at $60 a barrel, an EU official with knowledge of the situation told CNN on Friday.

The West’s biggest economies agreed earlier this year to establish a price cap after lobbying by the United States, and vowed to hash out the details by early December. But setting a number had proved difficult.

Capping the price of Russian oil between $65 and $70 a barrel, a range previously under discussion, wouldn’t have caused much pain for the Kremlin. Urals crude, Russia’s benchmark, has already been trading within or close to that range. EU countries such as Poland and Estonia had pushed for the cap to be lower.

“Today’s oil price cap agreement is a step in right direction, but this is not enough,” Estonian foreign minister Urmas Reinsalu tweeted Friday. “Intent is right, delivery is weak.”

A price of $60 represents a discount of almost $27 to Brent crude, the global benchmark. Urals has been trading at discounts of around $23 in recent days. Reuters reported that the EU agreement included a mechanism to adjust the level of the cap to ensure it was always 5% below the market rate.

The risk of settling on a lower price is that Russia could retaliate by slashing its output, which would roil markets. Russia previously warned that it will stop supplying countries that adhere to the cap.

With EU countries in alignment, the last remaining obstacle to a wider G7 agreement was lifted. A top US Treasury department official said Thursday that $60 would be acceptable.

“We still believe that the price cap will help limit Mr. Putin’s ability to profiteer off the oil market so that he can continue to fund a war machine that continues to kill innocent Ukrainians,” National Security Council coordinator for strategic communications John Kirby told reporters.

“We think that the $60 per barrel is appropriate and we think it will have that effect,” Kirby added.

The price cap is designed to be enforced by companies that provide shipping, insurance and other services for Russian oil. If a buyer has agreed to pay more than the cap, they would withhold those services. Most of these firms are based in Europe or the United Kingdom.

Investors are already on edge, with the European Union’s embargo on Russian oil traveling by sea set to take effect on Monday. Confusion about the impact of that measure, along with lingering questions about the price cap, have unsettled traders.

“There’s so much uncertainty and doubt and lack of clarity about the policy that no one’s really confident about how to act,” said Richard Bronze, head of geopolitics at the research firm Energy Aspects.

Oil prices have dropped sharply since the summer, as China’s coronavirus lockdowns and global recession fears have dented demand. OPEC and Russia announced a big production cut in October, but that had little sustained impact on prices. The EU embargo and efforts to set a price cap could begin to push them higher again.

— Chris Liakos and Betsy Klein contributed to this article.



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Business

China markets tank as protests erupt over Covid lockdowns

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Hong Kong
CNN Business
 — 

China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

Hong Kong’s Hang Seng

(HSI) Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

(HSI) China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

(N225) shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

“Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

“In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

“For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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World

US provides Chevron limited authorization to pump oil in Venezuela after reaching humanitarian agreement

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Washington
CNN
 — 

The US has granted Chevron limited authorization to resume pumping oil from Venezuela following the announcement Saturday that the Venezuelan government and the opposition group have reached an agreement on humanitarian relief and will continue to negotiate for a solution to the country’s chronic economic and political crisis, including a focus on the 2024 elections.

A senior Biden administration official described Saturday’s announcements as “important steps in the right direction,” but noted that there is still much to be done as both parties work toward a more permanent solution to the ongoing crisis. The official also highlighted the license’s limited nature saying that they do not expect this to have a tangible impact on international oil prices and that the move is intended as an inducement for the negotiations – not a reaction to high global oil prices.

The Treasury Department’s Office of Foreign Assets Control on Saturday issued Venezuela General License 41, which authorizes Chevron to “resume limited natural resource extraction operations in Venezuela,” according to a news release from the Treasury Department. This is a 6-month license, and the US can revoke it at any time. Additionally, any profits earned will go to repaying debt to Chevron and not to the Maduro regime, according to the senior official, and states that the US government will continue to require significant reporting by Chevron on its financial operations.

“GL 41 authorizes activity related to Chevron’s joint ventures in Venezuela only, and does not authorize other activity with PdVSA. Other Venezuela-related sanctions and restrictions imposed by the United States remain in place; the United States will vigorously enforce these sanctions and will continue to hold accountable any actor that engages in corruption, violates U.S. laws, or abuses human rights in Venezuela,” the release said. PdVSA is the state-owned Venezuelan oil and gas company.

Chevron CEO Mike Wirth told Bloomberg TV earlier this year that if there was a thaw that it would take months and years to refurbish their oil fields in the country and that there “wouldn’t be an instantaneous” effect on oil production.

If the Venezuelan regime continues to take concrete steps toward reaching a negotiated solution, then future targeted sanctions relief is possible, according to the official.

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World

UK raises its windfall tax on energy companies and bets on nuclear power

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London
CNN Business
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The UK government is hiking a windfall tax on oil and gas companies and extending the levy to electricity generators, as it scrambles to balance its budget amid an economic downturn. It is also investing in nuclear power for the first time in decades.

UK finance minister Jeremy Hunt announced the measures on Thursday while delivering the government’s medium-term budget, which laid out plans for higher taxes and cuts to public spending.

Beginning January 1, the Energy Profits Levy on oil and gas companies will increase from 25% to 35% and remain in place until the end of March 2028. That takes the total tax on the sector to 75%, according to the Treasury.

There will also be a new, temporary 45% levy on the excess profits of electricity generators over this period. In the United Kingdom, electricity prices are tied to wholesale gas prices, which means many power generators are also enjoying mega profits.

Together, these measures will raise £14 billion ($16.5 billion) next year and more than £55 billion ($65 billion) between 2022 and 2028.

There have been growing calls in Britain for higher taxes on the windfall profits of oil and gas companies, which have enjoyed record earnings this year thanks to rising prices driven by Russia’s invasion of Ukraine.

At the same time, households and businesses are being squeezed by decades-high inflation as a result of spiraling energy and food bills. The annual rate of UK inflation rose to 11.1% in October, its highest level in 41 years.

“I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices,” Hunt said in parliament on Thursday. “Any such tax should be temporary, not deter investment and recognize the cyclical nature of energy businesses,” he added.

The United Kingdom will spend an additional £150 billion ($176.9 billion) on energy bills this year compared to pre-pandemic levels, according to Hunt. That’s the equivalent to paying for a second National Health Service.

Hunt on Thursday also extended government support for energy bills by another 12 months until April 2024, but said average households should expect to pay £3,000 ($3,451) annually, up from £2,500 ($2,951) currently.

As well as hiking energy taxes, Hunt affirmed a £700 million ($824 million) investment into Sizewell C, a nuclear power station operated by France’s EDF in the east of England.

The deal was first announced by former prime minister Boris Johnson last September and is the first state backing for a nuclear project in over 30 years.

It will provide power to the equivalent of six million homes for over 50 years and represents “the biggest step” in Britain’s “journey to energy independence,” Hunt said.

Hunt reaffirmed the United Kingdom’s commitment to a 68% reduction in carbon emissions by 2030. “Last year nearly 40% of our electricity came from offshore wind, solar and other renewable sources,” he said.

He added that from April 2025 electric vehicle drivers will no longer be exempt from paying car taxes.

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