Mid-Week Review – June 29, 2022

Summary by Alan Apthorp

Price cap on Russian oil could shake up the market

Europe and the United States have barred the import of Russian oil to cut off a crucial revenue source for the Kremlin. But the plan to pile pain on President Vladimir Putin, forcing him to reconsider his war in Ukraine, hasn’t worked. Russia’s government is making just as much money from energy exports as it was before the invasion. Meanwhile, inflation is surging globally, adding to political pressure on heads of state such as US President Joe Biden, British Prime Minister Boris Johnson and French President Emmanuel Macron.

Oil Markets Could Face A Doomsday Scenario This Week

Global oil markets are going to be very volatile in the coming months if news emerging from OPEC’s main producers about production capacity constraints turns out to be true. OPEC will be meeting again in the coming days to discuss its export agreements, while today the oil group is presenting its Annual Statistical Bulletin (ASB) 2022. While the media is likely to be focused on rumors in the next 24 hours of a possible change in the export strategy of OPEC+, the real focus should be on whether or not the oil cartel is even capable of substantially increasing its production.

Energy Markets: Is Electricity The Next Black Swan?

Problems with power grids across the US, and other countries are a potential catalyst for chaos in energy markets that are underappreciated. High profile markets like motor gasoline receive much media attention as their price point is readily available. Regional disparities in retail gasoline prices (versus benchmark futures) can be attributed to local taxes, transportation costs and refining capacity. This is not the case in electricity markets.

Shell Warns Spare Oil Capacity Is Running Very Low

Global spare capacity is running very low, which will keep oil and gas markets on edge for some time, according to the chief executive of supermajor Shell. While global spare energy capacity continues to deplete, demand for oil and gas is still recovering despite the current economic and pandemic challenges, van Beurden told reporters.