OilFix: What Drove Prices This Week?
A continuous stream of news has been playing with the heart strings of oil market sentiment.
Housekeeping:
The Events That Shaped Last Week
Authored by Brynne Kelly ; contributions by VBL
Weather, geopolitical risk, and underinvestment narratives continue to swoop in and provide the tailwind needed to push markets higher.
CHINA SPR RELEASE
Last week, China announced that it will release crude oil from its national strategic stockpiles around the Lunar New Year holidays that start on Feb. 1 as part of a plan coordinated by the United States with other major consumers to reduce global prices, sources told Reuters
BANK COMMENTARY
On January 13, JPM publicly forecast oil prices to rise as high as $125 a barrel this year and $150 a barrel in 2023. "We see growing market recognition of global underinvestment in supply," the bank said.
LIBYA UPDATE
Last week, the Libyan NOC announced that it was Halting Exports from Es Sider Oil Port due to bad weather. They also stated that 50k bpd of Waha Oil Production was also cut. Prior to this news, the NOC media office reported that Libya's total oil output is 896,000 barrels per day. Update: Libya Says Oil Output Back to 1.2 Million Barrels a Day
PIPELINE EXPLOSION IN VENEZUELA
On Monday January 10, it was reported that a condensate pipeline in Naricual, Venezuela had blown up after someone allegedly attempted to siphon it. It was described as a large explosion with an unknown number of casualties.
DRONE ATTACK ON THE UAE
DUBAI (Reuters) -Yemen's Iran-aligned Houthi group attacked the United Arab Emirates using drones on Monday January 17, setting off explosions in three fuel trucks (not tankers) and causing a fire near the airport of Abu Dhabi, capital of the region's commercial and tourism hub. The strike on a leading Gulf Arab ally of the United States takes the war between the Houthi group and a Saudi-led coalition to a new level, and may hinder efforts to contain regional tensions as Washington and Tehran work to rescue a nuclear deal. Dr. Anwar Gargash, Special Adviser to the UAE President, described the group as a "terrorist militia" after two blasts in the capital. Explosions that killed three people in Abu Dhabi on Monday were a "heinous attack on civilian facilities" by Yemen's Houthi militia, a senior Emirati official said.
TONGA VOLCANO
On Saturday, January 15 an underwater volcano in the South Pacific erupted Saturday with a stunning blast, sending tsunami waves onto nearby Tonga and to the north in Japan, with warnings of dangerous ocean surges issued as far away as the US West Coast. Dramatic satellite images showed the long, rumbling eruption of the Hunga Tonga-Hunga Ha'apai send a huge mushroom of smoke and ash into the air and a shockwave across the surrounding waters. A tsunami wave measuring 1.2 metres (four feet) was observed in Tonga's capital Nuku'alofa, according to Australia's Bureau of Meteorology.
NORTH KOREA SRBM (short-range ballistic missile)
SEOUL (Reuters) - North Korea fired two suspected short-range ballistic missiles (SRBM) on Monday, January 17 from an airport in its capital city of Pyongyang, South Korea's military reported, the fourth test this month to demonstrate its expanding missile arsenal.
Japan also reported the launch, with chief cabinet secretary Hirokazu Matsuno condemning it as a threat to peace and security while China urged all sides to preserve for stability. "We call on relevant sides to keep in mind the overall peace and stability on the peninsula," Chinese foreign ministry spokesman Zhao Lijian told a daily briefing in Beijing when asked about the suspected launch.
WINTER STORM IZZY
A major winter storm erupted over the weekend, dropping snow and freezing rain on the Southern U.S. and sending temperatures plunging, cause hazardous road conditions and power outages before eventually moving up the East Coast. The major system was projected to leave more than a foot of snow and in excess of a quarter inch of ice in some areas, the National Weather Service warned. Airlines canceled over 2,700 U.S. flights on Sunday as a winter storm combining high winds and ice was poised to hit the U.S. East Coast over the holiday weekend.
MARKET IMPACT
A continuous stream of news has been playing with the heart strings of oil market sentiment. On the one hand, Omicron looms in the background continually threatening to dampen demand, even managing to pull the market lower at the end of 2021. On the other hand, weather, geopolitical risk, and underinvestment narratives continue to swoop in and provide the tailwind needed to push markets higher.
In both directions, crude oil has a history of