Oil Prices Decreased

Oil prices dipped on Monday on expectations that China’s expanding COVID-19 limitations could reduce consumption, countering signals that output at the largest US shale sector is slowing.

Brent oil futures fell 36 cents, or 0.4%, to $95.41 a barrel by 0151 GMT. This followed a 1.2% drop on Friday.

US West Texas Intermediate (WTI) crude was trading at $87.67 per barrel. It was down 23 cents, or 0.3%, from Friday’s close of $1.3%.

Wider Covid restrictions in China inevitably generate concerns about demand from the world’s largest crude importer.

As epidemics spread, Chinese localities are pressing down on Beijing’s zero-COVID policy, dimming early prospects for a comeback in demand.

WTI is nevertheless underpinned by signs from significant US producers that productivity and volume growth in the Permian Basin — the country’s main shale production — are stalling.

The warnings came as US oil shipments hit a record last week, helping to send WTI prices up 3.4%. Brent gained 2.4% last week, marking its second weekly rise in a row.

Separately, China’s central bank restated its existing policy goals of maintaining relatively sufficient liquidity. Moreover, it provided credit support to the real economy. The world is using increased amounts of renewable energy and electric vehicles. However, the OPEC should maintain its stance that oil demand will rise for the next decade in its outlook.

Conditions to Gas Price ‘brake’

The German government will impose requirements on enterprises that profit from a proposed “break” in gas costs, such as remaining in the nation or retaining 90% of the jobs they supply for a year.

Last month, Berlin announced an energy relief package that included a gas price freeze and a reduction in fuel sales tax to assist households and small and medium-sized businesses (SMEs).

The brake sets a specific price. It contrasts from proposals to cap market prices, a policy on which the European Union has been unable to reach an agreement, partly due to resistance from Germany, which claims it will make it more difficult to acquire supply. German expert commission charged with developing solutions to mitigate the impact of rising gas prices until well past midnight and proposed specific conditions to attach to the brake.

To encourage citizens to save gas, the brake would apply to 80% of households’ fundamental consumption with a maximum of 12 euro cents per kilowatt hour (Kwh). In contrast, market pricing will apply to the remaining users.

The gas procurement price for around 25,000 major industrial clients will be set at 7 euro cents per Kwh for 70% of usage. Furthermore, the government will make a one-time payment to gas customers in December.

Oil Majors Expect Oil Production in The Permian

Two major oil companies have stated that they expect oil output in the Permian to be lower than expected this year, implying that industry issues are substantial enough to stifle growth in the country’s most prolific shale play.

Though only slightly, Chevron and Exxon also revised their expected Permian output in their third-quarter reports. Chevron says its Permian output reached a new high of 700,000 BPD in the most recent quarter.

However, the industry has ongoing supply chain issues and a persistent labor shortage. Hence, these estimates are unlikely to alter significantly for the rest of the year.

Nonetheless, Exxon and Chevron’s statements concern that production growth, even in the Permian, is slowing. The number of DUCs in the United States was 4,333 in September, the lowest since late 2013.

The drop was largely due to a jump in completions following the end of pandemic restrictions when oil demand began to rebound rapidly. However, because new drilling was near pre-pandemic levels, DUCs and new well drilling fell, limiting output growth.

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