…Traders weigh demand against economic headwinds

Following China’s economic reopening, against broader global economic headwinds, oil prices fell at the start of trading yesterday [Monday] as traders weighed demand growth prospects.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.84 per cent lower at $84.56 a barrel at 10am UAE time, while West Texas Intermediate, the gauge that tracks US crude, was down 0.80 per cent to $79.22 a barrel.

Oil prices have eased after closing strong on Friday to mark the biggest weekly gain since October as inflation in the US cooled, sending the dollar to a seven-month low, and the outlook of growing demand from China, the world’s biggest crude importer, improved.

Brent futures added 8.5% while WTI rallied 8.3% to recoup most of the losses from the previous week.
Chief economist at Emirates NBD, Khatija Haque, said in a research last Monday, “Improving sentiment around China’s demand recovery, along with hope that central banks will be able to move to a slower pace of monetary tightening, will help oil prices in the near term.”

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Inflation in the US continued to slow in December, easing pressure on households and businesses.
The consumer price index increased by 6.5% annually last month, from 7.1% in November, the US Bureau of Labour Statistics said on Thursday.

It was the smallest 12-month gain since October 2021. On a monthly basis, the CPI decreased by 0.1% in December. Meanwhile, core CPI, which excludes food and energy, fell to 5.7% annually, from 6% in the previous month.

“The slowdown in US inflation helped to reinforce expectations that the Federal Reserve can move down a gear in tightening policy,” Ms Haque said.

China, the world’s second-largest economy, reopened its borders earlier this month as it almost reversed all border controls introduced to stem the spread of Covid-19.

Also Read: Global Oil Prices Rise As China Reopens Borders

The easing of restrictions by Beijing ended about three years of strict entry requirements that had hampered its economic growth.

On Monday, Emirates, the world’s biggest long-haul airline, said it was ramping up its operations in China ahead of the New Lunar Year and in response to strong travel demand.

The Dubai airline will boost flights to Guangzhou, Shanghai and Beijing as the country reopens its borders and eases its coronavirus-related entry restrictions.

China’s crude imports are set to increase by 1.1 million barrels per day in 2023, compared with last year, with the country reopening and issuing new product export and crude import quotas, Energy Aspects said in a report earlier this week.

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Investors will look for clues for broader crude demand this week when OPEC releases its monthly oil market outlook, while prospects for the further oil market recovery remain bright in the sort terms.
The International Energy Agency will also release its data, which is expected to underpin consumption trends. Meanwhile, the US oil drilling rig count increased by five last week, taking the total to 623.
Oil companies would prefer having WTI prices closer to $90 a barrel before a “substantial increase in drilling”, the Emirates NBD note said, citing a survey from the Kansas City Federal Reserve.

By Bosco Agba with agency report

Egypt is surely breathing life to its ambition of dominating the gas market development in the region. A report yesterday said the North African country exported some 8 million tons of liquefied natural gas last year, worth $8 to $8.5 billion, quoting the country’s mineral resources ministry.

The mineral resource ministry however took note of the price rally in liquefied natural gas [LNG] that helped drive revenues higher.

The report said Egypt plans to become one of the biggest players in the region. The country’s ambition took shape after the 2015 discovery of the giant Zohr field by Italy’s Eni. Zohr has reserves estimated at 850 billion cubic meters of gas.

Earlier this week, Egypt reportedly granted Exxon oil and gas exploration rights to two offshore blocks in the outer Nile Delta. Exploration in the blocks is slated to begin later this year, with Exxon having full operatorship of both with a 100% stake.

Also Read: Eni Boss Points Way To Africa For Europe’s Natural Gas Supply

The blocks cover 11,000 square kilometers. Last month, Egypt announced a gas discovery in its section of the Mediterranean, in a block operated by Chevron. The discovery could hold some 3.5 trillion cubic feet of natural gas, Bloomberg reported

Egypt has some 2.21 trillion cubic meters of proven gas reserves and produced over 95 billion cubic meters as of 2021, with exports at 12 billion cubic meters in that year, which was an annual increase of 58%.

Enhanced by the gas shortage in Europe since last year, records of Egypt gas exports increased further last year, with most of Egypt’s LNG exports going to that continent.

In the last eight years, Egypt’s gas export revenues reportedly increased 13 times, with exports themselves swelling four times in the period. On the other hand, production during the same period increased by over 66%.

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Last year, Egypt signed a deal with Israel and the European Union to boost gas deliveries from the two formers to the latter, with the EU encouraging EU-based energy companies to participate in exploration projects in Egypt and Israel.

The United Kingdom will have enough energy to go through coming winter as has saved enough gas and electricity, and has more liquefied natural gas [LNG] coming in than in previous years.

In an interview yesterday with Bloomberg, the UK’s Business and Energy Secretary Grant Shapps said the probability is positive and high.

“The question’s not — as people were saying at the beginning — will the lights go out?” but rather “what will the cost be? The market will solve it,” Shapps told Bloomberg.

At the beginning of this winter the UK government launched a $22 million (£18 million) campaign, ‘It All Adds Up’, advising the public on simple actions to cut bills by bringing down the amount of energy needed to keep homes warm and stay safe.

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Households were urged to reduce the temperature a boiler heats water to before it is sent to radiators from 75?C to 60?C, which will not affect the room temperature, but be enough to save on energy bills.
Homes were also urged to turn appliances off at the plug and reduce heating loss from the property, such as putting draught excluders around doors or adding clear film across windows.

The report said milder weather at the start of this winter and continued LNG flows to the UK and Europe have helped ease the energy crisis and have brought down UK wholesale natural gas prices by some 70% since their peak in August last year.

UK energy firm, Centrica, also reopened in October its Rough natural gas storage site — which was closed five years ago — to boost storage capacity by 50% for this winter. Rough was closed in 2017 when the UK had enough gas supply from the North Sea, Norway, and northwestern Europe and was betting on receiving LNG supply.

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The facility will be operating at around 20% of its previous capacity this winter, Centrica said, but this immediately makes it the UK’s largest gas storage site once again and adds 50% to the UK’s gas storage volume.

The UK Business and Energy Secretary will look for opportunities for gas storage, but Britain’s power interconnections “are very good actually,” Shapps told Bloomberg. 

By Bosco Agba

A court in Libya has suspended the deal for offshore oil and gas exploration, which Libya and Turkey made the agreement last year.

The deal, which had sparked outrage from neighbors Egypt and Greece, concerned controversial waters that Libya and Turkey had declared to be theirs but that are disputed by Egypt and Greece.

Reuters said in a report yesterday that the Libyan government can however appeal the ruling. Greece’s Permanent Representative at the UN, Maria Theofili has been reported to have described the deal as one “violating the sovereign rights of Greece”.

Theofili also said the deal is “a violation of international law and a deliberate escalation that undermines stability in the region.”

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Signed in October last year, the deal followed an earlier, security agreement, inked in 2019, that demarcated the maritime border between Libya and Turkey; the same demarcation that angered Egypt and Greece.

“We’ve signed a memorandum of understanding on exploration for hydrocarbons in Libya’s territorial waters and on Libyan soil, by mixed Turkish-Libyan companies,” the foreign minister of Turkey, Mevlut Cavusoglu, said at the time, as quoted by the AFP.

The official noted, then, that the deal is only between Libya and Turkey, “two sovereign countries — it’s win-win for both, and other countries have no right to interfere”.

The eastern Mediterranean was put in the spotlight by a series of large gas discoveries off the coast of Israel in the past decade or so, as well as discoveries in Turkish and Cypriot waters.

Also Read: Global Oil Prices Rise As China Reopens Borders

Europe is looking for new sources of gas. At the same time, the events around the deal with Turkey had contributed to the deterioration of the internal political situation in Libya, as Ankara signed its deals with the Government of National Unity—the entity recognized by the UN but not by rival political factions in Libya itself.