The Largest Weekly Gain in Oil Prices Is Coming

Despite a lukewarm reaction to OPEC+’s plan to cut output by a nominal 2M BPD, oil prices are on track for their greatest weekly gain since March, the month following Russia’s invasion of Ukraine.

Although prices are still much below the $100 per barrel that many banks and experts view as a possible Brent price this quarter, they have made some significant gains this week, with WTI up 11%.The cartel’s decision this week was not explained in detail, but as the Saudi energy minister phrased it, he couldn’t risk the market.

This rationale indicates that the cartel wishes to reduce supply to anticipate the demand destruction predicted due to the dimming global economic outlook and ongoing inflation. Even though supply already has a limit, the decision adds a huge upward potential for pricing.

The actual cut will be about 1M BPD because only a few producers in the cartel have not been undershooting their production objectives.

However, the fact that they are willing to cut is significant at this time—two months before the EU’s embargo on Russian oil takes effect, limiting nearly all Russian oil imports into the bloc.

Oil

Britain Launched Oil and Gas Exploration Licensing

On Friday, Britain opened its first oil and gas exploration license round since 2019 to boost local hydrocarbon output as Europe transitions away from Russian fuel.

The British North Sea, home to the worldwide Brent benchmark grade, is an aging basin where oil and gas output has declined from a peak of roughly 4.41M barrels of oil equivalent to 1.54M in 1999.

Britain hopes to boost domestic supply as it grapples with record-high energy prices, which have compelled it to invest billions of pounds in initiatives to help lessen the impact on families and businesses and stem spiraling inflation. The North Sea Transition Authority (NSTA) is offering 898 blocks in the latest licensing cycle, encouraging applications in particular for the Southern North Sea, where hydrocarbons are close to existing infrastructure, allowing for rapid development.

Depending on the amount and quality of applications received, around 100 licenses may be issued.

It believes that the time from discovery to oil or gas production has decreased dramatically in recent decades to roughly five years.

Britain did not join an alliance of countries committing to halting new oil and gas developments on their territory when hosting the COP26 climate meeting last year.

Britain imported about 40% of its energy last year. According to the OEUK offshore industry association, British fields supplied around 38% of its gas and 75,6% of its oil requirements.

Oil and gas companies can apply for licenses until January 12, with awards expected in the second quarter of next year. The Norwegian government expects to record profits from its oil and gas business next year, expecting an 18% gain over this year’s level and a fivefold increase over 2021 as output increases and prices surge.

European gas prices have tripled approximately in 2022 due to Russia’s supply cuts before and after its invasion of neighboring Ukraine, and the price has increased tenfold since last year. As a result of rising prices, the government intends to boost taxes on the country’s oil and gas business by 2B crowns in 2023, undoing a portion of an incentive package implemented during the coronavirus outbreak.

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