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Business

Keystone pipeline shut after 14,000-barrel oil spill in Kansas

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Dec 8 (Reuters) – Canada’s TC Energy shut its Keystone pipeline in the United States after more than 14,000 barrels of crude oil spilled into a creek in Kansas, making it one of the largest crude spills in the United States in nearly a decade.

The cause of the leak, which occurred in Kansas about 20 miles (32 km) south of a key junction in Steele City, Nebraska, is unknown. It is the third spill of several thousand barrels of crude on the pipeline since it first opened in 2010.

The 622,000 barrel-per-day Keystone line is a critical artery shipping heavy Canadian crude from Alberta to refiners in the U.S. Midwest and the Gulf Coast. It is unclear how long the closure will last.

There have been no effects on drinking water wells or the public, the U.S Environmental Protection Agency said in a statement, though surface water of Mill Creek was affected.

Kellan Ashford, spokesperson for EPA Region 7, which includes Kansas, said the cause of the leak was still unclear on Thursday evening.

TC had mobilised around 100 people to respond to the spill, while the EPA had dispatched two coordinators, Ashford said. Washington County Emergency Management and Kansas’s Department of Health and Safety were also on the scene.

Keystone shut the line at about 8 p.m. CT Wednesday (0200 GMT Thursday) after alarms went off and system pressure dropped, TC (TRP.TO) said in a release. It said booms were being used to contain the spill.

LARGEST ONSHORE SPILL IN YEARS

According to U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) data, this would be the largest crude oil leak since a Tesoro pipeline leaked more than 20,000 barrels of oil in North Dakota in October 2013.

PHMSA is also investigating the leak, which occurred near Washington, Kansas, a town of about 1,000 people.

There have been seven Keystone spills since it became operational in June 2010, according to PHMSA data. The largest were in December 2017, when more than 6,600 barrels spilled in South Dakota, and in November 2019, when more than 4,500 barrels spilled in North Dakota, according to PHMSA figures.

“It is troubling to see so many failures and so much oil spilled from any pipeline, but it is especially troubling from such a relatively new pipeline,” said Bill Caram, executive director of the nonprofit Pipeline Safety Trust, in a statement.

LENGTH OF SHUTDOWN UNCLEAR

TC declared force majeure over the outage, according to a source with direct knowledge, referring to unexpected external circumstances that prevent a party to a contract from meeting its obligations. TC did not respond to a request for comment.

Two Keystone shippers said TC had not yet notified them how long the pipeline may be shut.

Keystone’s shutdown will hamper deliveries of Canadian crude both to the U.S. storage hub in Cushing, Oklahoma and to the Gulf, where it is processed by refiners or exported.

The shutdown is expected to increase the discount on Western Canada Select (WCS) heavy oil from Alberta to U.S. crude , which was already high due to lackluster demand for heavy, sour Canadian oil.

WCS for December delivery traded at $33.50 a barrel below WTI, compared with Wednesday’s settle of $27.50 a barrel below the benchmark, according to one broker.

“It’s really a worst-case scenario if this outage is long-lasting,” said Rory Johnston, founder of energy newsletter Commodity Context, noting that if the price falls further, shippers may opt to move crude by rail.

Steele City is roughly the junction where Keystone splits, with one segment moving crude to Illinois refineries and the other carrying oil south to Oklahoma and the Gulf Coast.

If the spill is located south of the junction, TC may be able to quickly restart the segment to Illinois, RBC analyst Robert Kwan said in a note.

Past shutdowns have generally lasted about two weeks, but this could last longer as it involves a water body, Kwan said.

TC shares ended down 0.1% in Toronto.

Reporting by Arpan Varghese, Brijesh Patel and Deep Vakil in Bengaluru, Rod Nickel, Nia Williams and Arathy Somasekhar; Editing by Josie Kao and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

Rod Nickel

Thomson Reuters

Covers energy, agriculture and politics in Western Canada with the energy transition a key area of focus. Has done short reporting stints in Afghanistan, Pakistan, France and Brazil and covered Hurricane Michael in Florida, Tropical Storm Nate in New Orleans and the 2016 Alberta wildfires and the campaign trails of political leaders during two Canadian election campaigns.

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World

Oil prices fall on economic fears, dollar strength

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LONDON, Dec 6 (Reuters) – Oil prices fell in a volatile market on Tuesday as the U.S. dollar stayed strong and economic uncertainty offset the bullish impact of a price cap placed on Russian oil and the prospects of a demand boost in China.

Brent crude futures were down 61 cents, or 0.74%, to $82.07 a barrel at 1447 GMT. West Texas Intermediate crude (WTI) fell 51 cents, or 0.66%, to $76.42.

Earlier in the session, both contracts fell by more than $1, while Brent rose by more than $1 in Asian trading.

Crude futures on Monday recorded their biggest daily drop in two weeks after U.S. services industry data indicated a strong U.S. economy and drove expectations of higher interest rates than recently forecast.

The U.S. dollar index edged lower on Tuesday but was still buoyed by bets of higher interest rates, following the biggest rally in two weeks on Monday.

A stronger greenback makes dollar-denominated oil more expensive for buyers holding other currencies, reducing demand for the commodity.

“Inflationary headwinds could still cause global economic turbulence in coming months,” said Tamas Varga of oil broker PVM, but added that “China’s gradual COVID opening is a tentatively positive development”.

In China, more cities are easing COVID-19-related curbs, prompting expectations of increased demand in the world’s top oil importer.

The country is set to announce a further relaxation of some of the world’s toughest COVID curbs as early as Wednesday, sources said.

The market was weighing the production impact of a price cap of $60 per barrel on Russian crude imposed by the Group of Seven (G7), the European Union and Australia, contributing to market volatility.

The price cap adds to the disruption caused by the EU’s embargo on imports of Russian crude by sea and similar pledges by the United States, Canada, Japan and Britain.

The embargo is likely to tighten market supply as the EU has to source crude from elsewhere, Commerzbank analyst Carsten Fritsch said in a note.

Russia has declared its intention not to sell oil to anyone who signs up to the price cap.

The threat of losing insurance will limit Russia’s access to the tanker market and could reduce crude exports by 500,000 barrels per day from February levels, said analysts from Rystad Energy in a note.

Russia’s January-November oil and gas condensate production rose 2.2% from a year earlier to 488 million tonnes, according to Deputy Prime Minister Alexander Novak, who expects a slight output decline following the latest sanctions.

Reporting by Rowena Edwards in London, additional reporting by Muyu Xu in Singapore; editing by Jason Neely and Barbara Lewis

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Business

Oil prices climb after OPEC+ keeps output cut targets, China eases COVID curbs

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  • Brent gained 0.8% at 0430 GMT, WTI up 0.9%
  • OPEC+ sticks to plans to cut production by 2 mln bpd
  • More Chinese cities relax COVID-19 restrictions

MELBOURNE, Dec 5 (Reuters) – Oil prices rose as much as 2% on Monday after OPEC+ nations held their output targets steady ahead of a European Union ban and a price cap kicking in on Russian crude.

At the same time, in a positive sign for fuel demand, more Chinese cities eased COVID-19 curbs over the weekend, though a patchwork easing in policies sowed confusion across the country on Monday.

Brent crude futures were last up 72 cents, or 0.8%, to $86.29 a barrel at 0430 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 70 cents, or 0.9%, to $80.68 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million barrels per day (bpd) from November through 2023.

Analysts said the OPEC+ decision was expected as major producers wait to see the impact of the EU import ban and Group of Seven (G7) $60-a-barrel price cap on seaborne Russian oil, with Russia threatening to cut supply to any country adhering to the cap.

“While OPEC remained steady on output over the weekend, I expect they will continue to balance the market,” said Baden Moore, head of commodity research at National Australia Bank.

“(A) Roll-off of the SPR releases, and implementation of the EU sanctions and price cap act to tighten the market, although we’d expect the market has already positioned for this outlook,” he said, referring to the U.S. strategic petroleum reserve.

The European Union will need to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put a floor under oil prices at least in the near term, Wood Mackenzie vice president Ann-Louise Hittle said in a note.

“Prices are currently weighed down by expectations of slow demand growth, despite the EU oil import ban on Russian crude and the G7 price cap. The adjustment to the EU ban and price cap is likely to support prices temporarily,” Hittle said.

A key factor that has weighed on demand is China’s zero-COVID policy, but that appears to be easing now after protests were followed by several cities, including Beijing and Shanghai, relaxing restrictions to varying degrees.

Hittle added that the EU’s looming embargo on Russian oil products, in addition to crude oil, from Feb. 5 should support crude demand in the first quarter of 2023, as the market is short of diesel and heating oil.

Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell

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Business

Oil prices erase 2022 gains as China’s protests spark demand worries

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  • WTI hits lowest since Dec 2021, Brent at lowest since Jan 2022
  • Clashes in Shanghai as COVID protests flare across China
  • Investors focus on next OPEC+ meeting on Dec 4

Nov 28 (Reuters) – Oil prices fell close to their lowest this year on Monday as street protests against strict COVID-19 curbs in China, the world’s biggest crude importer, stoked concern over the outlook for fuel demand.

Brent crude dropped by $2.67, or 3.1%, to trade at $80.96 a barrel at 1330 GMT, having dived more than 3% to $80.61 earlier in the session for its lowest since Jan. 4.

U.S. West Texas Intermediate (WTI) crude slid $2.09, or 2.7%, to $74.19 after touching its lowest since Dec. 22 last year at $73.60.

Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines.

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“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty caused by rare protests over the government’s stringent COVID restrictions in Shanghai prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Markets appeared volatile ahead of an OPEC+ meeting this weekend and a looming G7 price cap on Russian oil.

China has stuck with President Xi Jinping’s zero-COVID policy even as much of the world has lifted most restrictions.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for a third day and spread to several cities.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on Dec. 4. In October OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023.

Meanwhile, Group of Seven (G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.

However, EU governments were split on the level at which to cap Russian oil prices, with the impact being potentially muted.

“Talks will continue on a price cap but it seems it won’t be as strict as first thought, to the point that it may be borderline pointless,” said Craig Erlam, senior markets analyst at OANDA

“The threat to Russian output from a $70 cap, for example, is minimal given it’s selling around those levels already.”

The price cap is due to come into effect on Dec. 5 when an EU ban on Russian crude also takes effect.

Reporting by Noah Browning
Additional reporting by Yuka Obayashi in Tokyo and Mohi Narayan in New Delhi
Editing by Kirsten Donovan and David Goodman

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Business

Oil dives, hits 10-month low on reports of OPEC+ output boost

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  • Saudi Arabia and other OPEC producers eye output increase -WSJ
  • Chinese demand fears and strong dollar also weigh on prices

NEW YORK, Nov 21 (Reuters) – Oil prices plunged on Monday to their lowest since early January, after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.

Brent crude futures for January tumbled $4.07, or 4.7%, to $82.93 a barrel by 11:43 a.m. EST (1643 GMT). U.S. West Texas Intermediate (WTI) crude futures for December were down $4.48, or 5.6%, at $75.60 ahead of the contract’s expiry later on Monday. The more active January contract was down $4.05, or 5%, at $76.04.

An increase of up to 500,000 barrels per day (bpd) will be discussed at the OPEC+ meeting on Dec. 4, The Wall Street Journal reported.

Reuters was not immediately able to verify the report.

“It’s hard to believe they’re going into a market that is basically trading in contango,” said Bob Yawger, director of energy futures at Mizuho in New York, referring the effect of current oil futures trading at a discount to later dated contracts. “That’s playing with fire.”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia’s energy minister was quoted this month as saying the group will remain cautious.

Releasing more oil at the same time as weak Chinese fuel demand and U.S. dollar strength could move the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, Yawger said.

Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.

The dollar rose 0.9% against the Japanese yen to 141.665 yen, on pace for its largest one-day gain since Oct. 14. read more

“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the U.S. dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.

“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the U.S. Federal Reserve last week also sparked concerns over the U.S. economic outlook.

New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.

Additional reporting by Noah Browning, Florence Tan and Emily Chow
Editing by Jason Neely, David Goodman and David Gregorio

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Exclusive: Russian oil cap doubts spur insurer fears of ships left at sea

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LONDON/BRUSSELS, Nov 10 (Reuters) – Oil-laden tankers risk being left languishing at sea if insurers do not urgently get clarity on an unfinished G7 and European Union plan to cap the price of Russian crude, two senior industry executives told Reuters.

The Group of Seven (G7), which includes the United States, Britain, Germany and France, agreed in September to enforce a low price on sales of Russian oil.

U.S. officials said the move, which is due to start on Dec. 5, was aimed at allowing it to continue to flow, heading off a potential price shock after total EU bans were ratified in June.

And with just three weeks to go, time is running out to fully convince the shipping services industry it will work.

Concerns are centred around a scenario in which insurers discover that oil in transit at sea, which was believed to have been sold below the price cap, was in fact sold above it.

This would trigger the withdrawal of insurance cover as well as a refusal by buyers to accept delivery, leading to financial and logistical headaches and risking environmental dangers.

“If the time is too short, I think everyone will have a Plan B to de-risk, terminate, stay away, not maybe conclude any new contracts until there is some clarity,” said George Voloshin, Global Anti-Financial Crime Expert at ACAMS, the Association of Certified Anti-Money Laundering Specialists which consults with oil industry bankers, traders and insurers.

If insurance was withdrawn mid-voyage, buyers and traders would have to figure out what to do with a stranded cargo potentially exposed to sanctions, complicating a strategy to deprive Russia of funds over its invasion of Ukraine.

“It will probably be quite messy,” Voloshin said.

A European Commission official said the EU is aware that much more additional detail will be needed as time runs short for businesses to learn about their obligations, but that the issue must be dealt with at the G7 level.

The official spoke to Reuters on condition of anonymity because they are not authorized to speak about the matter.

U.S. State Department Ambassador James O’Brien, who heads the coordination of sanctions against Russia, said G7 countries will be ready with all the operational details and that technical talks were underway on pricing and governance.

‘SANCTION ISLANDS’

But if information gaps remain on the cap, it is possible oil-filled tankers could be left without insurance and marooned near ports, posing a major safety issue for nearby countries in the event of a spill, as well as any cleanup costs.

“In that situation, the vessel will go off risk and financial and technical services will be withdrawn and no one is going to take delivery of the cargo,” Mike Salthouse, head of claims at British-based global ship insurer North, told Reuters.

“This would be a bad development as no one will want uninsured ships sitting off coasts,” he added.

Salthouse said an owner of a ship which was potentially not earning anything for many months “will price that into any decision they make about carrying cargo in the future”, adding that this was likely to act as a disincentive.

“If that happens too often, it will run contrary to what the EU/G7 Coalition is trying to achieve.”

Although the EU ratified the price cap last month, insurers point to still unpublished legal details which must align with incomplete but more detailed U.S. Treasury guidance, especially over guarantees that insurers will not face surprise obstacles in the middle of a ship’s voyage.

“We need regulation in the G7 community which is similar, that is, the U.S. – where we have interim guidelines in the meantime – the U.K. and the EU,” said Lars Lange, secretary general of the International Union of Marine Insurance (IUMI).

“We fear that if we get different regulations from these three ‘sanction islands’ we will struggle to comply with all at the same time,” Lange said, adding that any vessels which are spurned by ports pose serious consequences.

The IUMI and the separate International Group insurance association have let G7 and EU governments know that their guidelines must include guarantees that the proof that a Russian cargo was sold in line with the cap is all that an owner is required to check before agreeing to load and carry the cargo.

Editing by Alexander Smith

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Business

Exxon’s record-smashing Q3 profit nearly matches Apple’s

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  • Oil firm smashes Wall Street forecasts with $19.7 billion profit
  • Exxon’s fossil-fuel bets eclipse rivals Shell, TotalEnergies
  • Company projects flat oil output this year on Russia losses

HOUSTON, Oct 28 (Reuters) – Exxon Mobil Corp (XOM.N) on Friday smashed expectations as soaring energy prices fueled a record-breaking quarterly profit, nearly matching that of tech giant Apple.

Its $19.66 billion third-quarter net profit far exceeded recently raised Wall Street forecasts as skyrocketing natural gas and high oil prices put its earnings within reach of Apple’s (AAPL.O) $20.7 billion net for the same period.

As recently as 2013, Exxon ranked as the largest publicly traded U.S. company by market value – a position now held by Apple. Exxon shares rose 3% to $110.70, a record high that gave it a market value of $461 billion.

Oil company profits have soared this year as rising demand and an undersupplied energy market collided with Western sanctions against Russia over its invasion of Ukraine. U.S. exports of gas and oil to Europe have jumped and promise to set all-time profit records for the industry.

The top U.S. oil producer reported a per-share profit of $4.68, exceeding Wall Street’s $3.89 consensus view, on a huge jump in natural gas earnings, continued high oil prices and strong fuel sales.

“Where others pulled back in the face of uncertainty and a historic slowdown, retreating and retrenching, this company moved forward, continuing to invest,” Chief Executive Darren Woods told investors. Its quarterly profits “reflect that deep commitment” as well as higher prices, he added.

Exxon led record gains among oil majors in the second quarter and has leapfrogged Shell Plc (SHEL.L) and TotalEnergies SE (TTEF.PA) with earnings almost twice as big from continued bets on fossil fuels as competitors shifted investment to renewables.

Reuters Graphics Reuters Graphics

Exxon banked $43 billion in the first nine months of this year, 19% more than in the same period of 2008, when oil prices traded at a record level of $140 per barrel.

Earnings from pumping oil and gas tripled last quarter while profit from selling motor fuels jumped tenfold compared with year-ago levels. Natural gas sales to Europe and soaring demand for diesel fuel led the company’s better-than-expected results.

“The refining businesses – both in the U.S. and international – was the star performer,” said Peter McNally, an analyst at Third Bridge.

Those rising fuel profits have renewed calls by U.S. President Joe Biden for companies to invest the windfall from this year’s energy price run-up in production rather than buy back their own shares.

Exxon will maintain its $30 billion share buyback through 2023 while increasing dividends, Chief Financial Officer Kathryn Mikells told Reuters. On Friday, it declared a fourth-quarter per-share dividend of 91 cents, up 3 cents, and will pay $15 billion to shareholders this year.

Exxon said its U.S. oil and gas production from the Permian Basin was near 560,000 barrels of oil and gas per day (boepd), a record. Production for the year will increase about 20% over 2021, said CEO Woods.

“We’re optimizing and adjusting our development plans,” he told analysts, with the full-year production gain below the 25% increase Exxon had forecast in February.

Results also were helped by an almost 100,000-boepd increase over the previous quarter in Guyana, where Exxon leads a consortium responsible for all output in the South American nation.

But its withdrawal from Russia reduced its overall production forecast for the year by about 100,000 barrels per day. Exxon said its Russian assets were expropriated.

“We are going to end up at about 3.7 million barrels a day for the full year,” Mikells said, down from a 3.8 million bpd goal set in February.

Reporting by Sabrina Valle; Editing by Ana Nicolaci da Costa, Jonathan Oatis and Marguerita Choy

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Business

Shell reports drop in profit to $9.45 billion, hikes dividend

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  • Shell to boost dividend by 15%
  • Announces plans to buy further $4 billion in shares
  • Profit hit by weak LNG trading and refining

LONDON, Oct 27 (Reuters) – Shell (SHEL.L) on Thursday posted a third-quarter profit of $9.45 billion, slightly below the second quarter’s record high, due to weaker refining and gas trading, and said it will sharply boost its dividend by the end of 2022 when its CEO departs.

The British oil and gas giant also extended its share repurchasing programme, announcing plans to buy $4 billion of stock over the next three months after completing $6 billion in purchases in the second quarter.

Shell said it intends to increase its dividend by 15% in the fourth quarter, when Chief Executive Officer Ben van Beurden will step down after nine years at the helm. The dividend will be paid in March 2023.

It will be the fifth time that Shell will have raised its dividend since slashing it by more than 60% in the wake of the 2020 COVID-19 pandemic.

Shell shares were up nearly 6% by 1430 GMT, compared with a 3.5% gain for the broader European energy sector (.SXEP).

Van Beurden will be succeeded by Wael Sawan, the current head of Shell’s natural gas and low-carbon division.

With a profit of $30.5 billion so far this year, Shell is well on track to exceed its record annual profit of $31 billion in 2008.

The strong earnings were likely to intensify calls in Britain and the European Union to impose further windfall taxes on energy companies as governments struggle with soaring gas and power bills.

Van Beurden said the energy industry “should be prepared and accept” that it will face higher taxes to help struggling parts of society.

Shell’s shares have gained more than 40% so far this year, lifted by soaring oil and gas prices in the wake of Russia’s invasion of Ukraine in February and amid tightening global oil and gas supplies.

French rival TotalEnergies posted a record profit in the third quarter.

[1/2] A view shows a board with the logo of Shell at the company’s fuel station in Saint Petersburg, Russia May 6, 2022. REUTERS/Anton Vaganov/File Photo

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LNG WOES

Shell’s quarterly adjusted earnings of $9.45 billion, which slightly exceeded forecasts, were hit by a sharp 38% quarterly drop in the gas and renewables division, the company’s largest.

Earnings for the second quarter were a record $11.5 billion.

The world’s largest trader of liquefied natural gas (LNG) produced 7.2 million tonnes of LNG in the period, 5% less than in the previous quarter, mainly due to ongoing strikes at its Australian Prelude facility.

Its gas trading business was hit this quarter by “supply constraints, coupled with substantial differences between paper and physical realisations in a volatile and dislocated market.”

Earnings from the refining, chemicals and oil trading division also dropped sharply by 62% in the quarter due to weaker refining margins.

Shell said it would stick to its plans to spend $23 billion to $27 billion this year.

Shell’s cash flow in the third quarter dropped sharply to $12.5 billion from $18.6 billion in the second quarter due to a large working capital outflow of $4.2 billion as a result of changes in the value of European gas inventories.

Shell’s net debt rose by around $2 billion to $46.4 billion due to lower cash flow from operations and to pay for a recent acquisition. Its debt-to-capital ratio, known as gearing, also rose above 20%.

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Reporting by Ron Bousso and Shadia Nasralla; editing by Jason Neely, Simon Cameron-Moore and Paul Simao

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Shadia Nasralla

Thomson Reuters

Writes about the intersection of corporate oil and climate policy. Has reported on politics, economics, migration, nuclear diplomacy and business from Cairo, Vienna and elsewhere.

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Business

World is in its ‘first truly global energy crisis’ – IEA’s Birol

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SINGAPORE, Oct 25 (Reuters) – Tightening markets for liquefied natural gas (LNG) worldwide and major oil producers cutting supply have put the world in the middle of “the first truly global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

Rising imports of LNG to Europe amid the Ukraine crisis and a potential rebound in Chinese appetite for the fuel will tighten the market as only 20 billion cubic meters of new LNG capacity will come to market next year, IEA Executive Director Fatih Birol said during the Singapore International Energy Week.

At the same time the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as the IEA sees global oil demand growth of close to 2 million bpd this year, Birol said.

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“(It is) especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession…I found this decision really unfortunate,” he said.

Soaring global prices across a number of energy sources, including oil, natural gas and coal, are hammering consumers at the same time they are already dealing with rising food and services inflation. The high prices and possibility of rationing are potentially hazardous to European consumers as they prepare to enter the Northern Hemisphere winter.

Europe may make it through this winter, though somewhat battered, if the weather remains mild, Birol said.

“Unless we will have an extremely cold and long winter, unless there will be any surprises in terms of what we have seen, for example Nordstream pipeline explosion, Europe should go through this winter with some economic and social bruises,” he added.

For oil, consumption is expected to grow by 1.7 million bpd in 2023 so the world will still need Russian oil to meet demand, Birol said.

G7 nations have proposed a mechanism that would allow emerging nations to buy Russian oil but at lower prices to cap Moscow’s revenues in the wake of the Ukraine war.

Birol said the scheme still has many details to iron out and will require the buy-in of major oil importing nations.

A U.S. Treasury official told Reuters last week that it is not unreasonable to believe that up to 80% to 90% of Russian oil will continue to flow outside the price cap mechanism if Moscow seeks to flout it.

“I think this is good because the world still needs Russian oil to flow into the market for now. An 80%-90% is good and encouraging level in order to meet the demand,” Birol said.

While there is still a huge volume of strategic oil reserves that can be tapped during a supply disruption, another release is not currently on the agenda, he added.

ENERGY SECURITY DRIVES RENEWABLES GROWTH

The energy crisis could be a turning point for accelerating clean sources and for forming a sustainable and secured energy system, Birol said.

“Energy security is the number one driver (of the energy transition),” said Birol, as countries see energy technologies and renewables as a solution.

The IEA has revised up the forecast of renewable power capacity growth in 2022 to a 20% year-on-year increase from 8% previously, with close to 400 gigawatts of renewable capacity being added this year.

Many countries in Europe and elsewhere are accelerating the installation of renewable capacity by cutting the permitting and licensing processes to replace the Russian gas, Birol said.

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Reporting by Florence Tan, Muyu Xu and Emily Chow; Editing by Jacqueline Wong and Christian Schmollinger

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Business

Oil prices drop more than 1% as China demand data disappoints

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SINGAPORE, Oct 24 (Reuters) – Oil prices slid more than 1% on Monday after Chinese data showed that demand from the world’s largest crude importer remained lacklustre in September as strict COVID-19 policies and fuel export curbs depressed consumption.

Brent crude futures for December settlement slid $1, or 1.1%, to $92.50 a barrel by 0609 GMT after rising 2% last week. U.S. West Texas Intermediate crude for December delivery was at $84.02 a barrel, down $1.03, or 1.2%.

Although higher than in August, China’s September crude imports of 9.79 million barrels per day were 2% below a year earlier, customs data showed on Monday, as independent refiners curbed throughput amid thin margins and lacklustre demand.

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“The recent recovery in oil imports faltered in September,” ANZ analysts said in a note, adding that independent refiners failed to utilise increased quotas as ongoing COVID-related lockdowns weighed on demand.

“This was exacerbated by falling refinery margins and product export curbs,” the analysts said.

Saudi Arabia and Russia were neck and neck as China’s top two suppliers in September.

Uncertainty over China’s zero-COVID policy and property crisis are undermining the effectiveness of pro-growth measures, ING analysts said in a note, even though third-quarter gross domestic product (GDP) growth beat expectations.

The GDP data came a day after China’s Xi Jinping secured a precedent-breaking third leadership term on Sunday, cementing his place as the country’s most powerful ruler since Mao Zedong.

Brent rose last week despite U.S. President Joe Biden announcing the sale of a remaining 15 million barrels of oil from the U.S. Strategic Petroleum Reserves. The sale is part of a record 180 million-barrel release that began in May.

Biden added that his aim would be to replenish stocks when U.S. crude is around $70 a barrel.

“Biden’s comments that the U.S. will only buy crude once prices hit USD70/bbl provides a strong support level,” ANZ said.

Last week, U.S. energy firms added oil and natural gas rigs for the second week in a row as relatively high oil prices encourage firms to drill more, energy services firm Baker Hughes Co said in a report on Friday.

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Reporting by Florence Tan; Editing by Christian Schmollinger and Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

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