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Germany’s Uniper SE is just “days” away from insolvency, deputy chairman of Uniper’s supervisory board, Harold Seegatz, told Bloomberg on Friday.

Uniper is Germany’s largest purchaser of Russian natural gas, securing contracts with Gazprom. But as Gazprom cut flows of natural gas to Germany and Russia’s Nord Stream 1 pipeline undergoes maintenance, Uniper’s purchases of gas on the spot market have increased—a costlier scenario than its arrangement with Gazprom.

The high costs are creating an untenable situation for Uniper, and it is taken to withdrawing gas from storage—gas that was destined to help Germany make it through the coming winter as the country tries to wean itself off of Russian natural gas. Withdrawing gas from storage helps Uniper save on natural gas purchases, but this is merely a game of kicking the can into an inevitable insolvency oblivion.

“We are currently reducing our own gas volumes in our storage facilities in order to supply our customers with gas and to secure Uniper’s liquidity,” Uniper said, adding that it was clear “that Uniper cannot wait weeks, but needs help in a few days.”

Related: The EU Has Frozen $13 Billion In Russian Assets

Uniper is already negotiating with the German government a possible bailout that could give Germany a stake in the utility.

Uniper’s CEO Klaus-Dieter Maubach warned last Friday that the utility was unable to continue to refill storage ahead of winter, and could ultimately be forced to raise prices and even reduce supply.

Germany has a plan to fill its gas storage by 90% ahead of the winter season, with a deadline to achieve this set for November. But early withdrawals during summer—a relatively tame demand season for natural gas—this plan is now in serious jeopardy, and Germany could stare down winter heating season with precious little inventory.

Russian fuel oil exports to Saudi Arabia rose almost twofold during the second quarter as the Saudis sought to free up more local crude for export while using the discount imports for power generation.

According to Reuters data, Saudi Arabia imported some 647,000 tons of Russian fuel oil between April and June, compared with 320,000 tons a year earlier.

Saudi Arabia is one of the relatively few countries that use crude oil for power generation, although it has taken steps to reduce this amount by boosting its natural gas output and switching power plants to gas, so there is more crude left for exports.

The discounts in Russian oil and fuel exports due to sanctions have made Russian fuel oil a preferred feedstock for power plans during peak demand season in the summer.

This increased reliance on Russian fuel, however, is likely to make President Biden’s task to convince Saudi Arabia to join an oil price cap on Russian oil and fuels all the more challenging.

The Saudis already have a close working relationship with Russia, and signing up for the U.S.-led oil price cap will kill this relationship.

Related: Is Biden Really Responsible For High Oil Prices?

Saudi Arabia is not the only one increasing its intake of Russian fuels, either. Bloomberg reported earlier this week that Russian diesel and other fuels that are being shunned by European buyers for fear of sanction violation are being redirected to the Middle East.

Some analysts expect the flow of fuels from Russia to the Middle East to continue growing during the second half of the year as well. As of June, Russian fuel exports to the Middle East had reached 155,000 bpd, after rising for five months in a row, Bloomberg said, quoting Vortexa data.

So far in July, shipments of fuels from Russia to Middle Eastern buyers are running at an average of 220,000 bpd, the data also showed.

Oil market watchers have become senior macroeconomists lately, with price swings increasingly dependent on larger market sentiment. This week’s seesawing was in large part driven by the market expecting a 100 basis point hike, sending all global crude benchmarks crashing down to double digits, however as soon as the US Federal Reserve opted for a more modest 75 bps hike, ICE Brent bounced back to $102 per barrel. Following the recent hedge fund sell-off, it seems that there is still no consensus on the main driving trend in the markets – fears of economic recession are just as strong as the feeling of immediate physical tightness.

Biden Visit Ends Without Production Boost Promise. With President Biden’s visit to Saudi Arabia in full swing, senior US officials have confirmed that Washington is not expecting Riyadh to boost crude production immediately, lifting crude prices by $2/barrel in Friday’s trading.

Asian LNG Prices Feel the European Heat. Spot Asian LNG prices have been trending above $40 per mmBtu lately, with increasing cooling demand and outages in several key suppliers (Peru, Australia) adding a layer of upward pricing pressure, whilst gas-strapped Europe continues to see prices well above those in Asia.

Algeria Becomes Largest Gas Supplier to Italy. In an ongoing diplomatic row with Morocco and Spain, Algeria has been rerouting its gas exports to Italy and is now set to supply the southern European country with 25 bcm of natural gas, with increased throughput rates starting next week already.

Iraqi Export Capacity Upgrades Get Delayed. Whilst Baghdad has been maintaining that it would expand crude export capacity by 150,000 b/d (to 3.4 million b/d in total) thanks to new infrastructure in Basrah, that goal is now postponed into Sept-Oct amidst pumping station upgrade setbacks.

China’s Power Supply Strained Under Record Heat. Peak power loads in several Chinese regions (Zhejiang, Jiangxi, Jiangsu etc.) have hit all-time highs this week, with temperatures above 40 degrees Celsius, leading to 5-6% year-on-year increases in average electricity consumption rates.

ConocoPhillips Doubles Down on Port Arthur LNG. US oil major ConocoPhillips (NYSE:COP) agreed to buy a 30% stake in Sempra Energy’s 13.5mtpa Port Arthur LNG project, agreeing to purchase 5 mtpa of LNG produced by the first phase of the project and supply the natural gas for its share of output.

Tripoli Government Pulls Off Hostile Takeover. The UN-backed Government of National Unity has sacked the longtime chairman of Libya’s NOC Mustafa Sanalla and replaced him with former central bank governor Farhat Bengdara, storming the oil company’s headquarters to install the new head.

China Might Scrap Australia Coal Ban. According to a Bloomberg report, Chinese officials are proposing to end a ban on Australian coal, introduced in October 2020, wary that Europe’s buying spree after the sanctions on Russian coal kick in

Russia plans to create its own national oil benchmark in 2023 as a means to protect its oil export revenue while the West is stepping up sanctions against Russian oil, a document seen by Bloomberg News showed on Friday.

Russia’s oil producers, its central bank, and relevant ministries are working to launch a national trading platform for Russian oil in October this year. The goal would be to attract enough foreign partners to buy Russia’s crude and generate enough volumes so as to set up a national oil benchmark at some point between March and July next year, according to the document Bloomberg News has seen.

Russia’s efforts to create a national oil benchmark come as the Western allies are looking at ways to impose a price cap on Russian oil traded globally. The price cap is expected to hurt the huge oil revenues Vladimir Putin is currently getting from energy exports.

Russia, for its part, is looking to protect its oil revenues, and one of the ways it has come up with is a national oil benchmark.

After their summit in Germany last month, the leaders of the G7 group of the world’s leading industrial nations invited all importing countries to consider a cap on the price of Russian oil.

“We will consider a range of approaches, including options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners,” the G7 leaders said in their final communique.

“We invite all like-minded countries to consider joining us in our actions,” they added.
Related: Europe’s Big And Expensive Energy Mistake

U.S. Treasury Secretary Janet Yellen is on a tour of Asia with stops in Japan, South Korea, and Indonesia this week to seek support for the U.S. idea of capping Russian export crude oil prices.

Secretary Yellen even pitched China the idea of capping the price of Russian oil during a virtual meeting last week.

A price cap on Russian oil will “aid in maintaining the global supply of oil, helping put downward pressure on prices for consumers in America and globally at a time when energy prices are spiking,” Secretary Yellen said on Thursday at the Group of 20 finance ministers and central bank governors meeting in Bali, Indonesia.K

There will be no public announcements about an oil supply rise during or after U.S. President Joe Biden’s visit to Saudi Arabia, Bloomberg reported on Friday, quoting sources with knowledge of the matter.

President Biden is visiting Saudi Arabia today, where he will meet King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman, after making a U-turn in his attitude toward the Kingdom.

Soaring oil prices and record national average gasoline prices of over $5 per gallon in the United States on some days in June, months before the midterm elections, have prompted President Biden to consider a visit to Saudi Arabia and a meeting with its rulers. Two years ago, he described Saudi Arabia as a “pariah” state and criticized it for its track record of abuses of human rights.

In an op-ed published in The Washington Post on Saturday, President Biden defended his decision to visit Saudi Arabia, writing that the Middle East’s “energy resources are vital for mitigating the impact on global supplies of Russia’s war in Ukraine.”

But Saudi Arabia, the world’s biggest crude oil exporter, may not have the capacity and/or the willingness to tap deeper into capacity despite the continuous calls from major oil-consuming nations.

The U.S. doesn’t expect the Saudis to raise production immediately, a U.S. official told Reuters just before President Biden’s visit to Saudi Arabia. The United States will be looking closely at what will happen at the next meeting of the OPEC+ group in early August, the U.S. official said.

Saudi Arabia and the UAE are believed to hold most of the world’s spare capacity, which is critically low now, analysts say. Experts also point out that Saudi Arabia would likely prefer to manage oil supply via the OPEC+ agreements rather than with unilateral increases in production. The Saudis are also looking to keep their cooperation with Russia as part of the OPEC+ pact.

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99.65 $ brent

Warren Buffett’s Berkshire Hathaway has bought another 4.3 million shares in Occidental Petroleum, bringing its total stake in the company to 19.2 percent, Reuters has reported, citing an SEC filing by Buffett’s investment vehicle.

The stock purchase is the latest in a series that has seen Berkshire Hathaway increase its interest in Oxy from less than 14 percent to close to 20 percent. This has prompted talk that the investment firm might be planning to take over the oil major.

Three years ago, Berkshire Hathaway funded Oxy’s takeover of Anadarko with $10 billion in the form of equity. It was as part of this deal that the investment firm received the stock purchase warrants that could see it acquire 20 percent or more in Occidental.

Occidental bought Anadarko for $55 billion in 2019, making it one of the biggest M&A deals in energy over the past few years. In that, it outbid Chevron, which had earlier announced a bid for the energy company.

Yet Buffett is betting on more than one oil and gas horse. Earlier this year, the billionaire investor began reducing his holdings in financial services in favor of oil and gas, including, besides Oxy, Chevron.

Occidental has seen its stock price double since the start of the year thanks to the supply and demand imbalance in the oil markets and Russia’s invasion of Ukraine, which aggravated the already grave supply situation.

As a whole, the energy industry has outperformed every other industry, including Big Tech, this year, thanks to supply tightness in both oil and gas. This, in turn, has prompted investors to return to companies that were just months ago considered more or less a pariah because of their activities in oil and gas. Now, with the energy transition taking the back seat to energy security, oil and gas are once again a good investment opportunity, it seems.

We are at 10p old moneyWhy is no one buying us.?

Oil prices plunged early on Thursday amid expectations of a large Fed rate hike at the end of the month and signs of weakening U.S. gasoline demand as prices remain elevated.

As of 10:46 a.m. ET on Thursday, WTI Crude was down by 4.61% at $91.64, and Brent Crude traded down 3.53% at $95.67, for a third consecutive day of losses.

The higher-than-expected U.S. inflation data for June and crude and gasoline builds, both reported on Wednesday, weighed on market sentiment and prices on Thursday.

The U.S. Bureau of Labor Statistics announced on Wednesday consumer prices for June 2022, saying that over the last 12 months, the all items index jumped by 9.1 percent—the fastest consumer price increase since November 1981.

The figure was above expectations and prompted intensified market speculation that the Fed, which meets on July 26-27, could opt for another major rate hike to curb inflation after raising the key interest rate by 75 basis points in early June. The latest rise in June resulted in market sell-offs as traders and speculators started fretting that the aggressive rate hikes would lead to a recession.

At this month’s meeting, the Fed could even decide on a supersized rate hike of 100 basis points, with traders pricing in a nearly 80% probability of a full percentage-point rise, Reuters notes, citing an analysis of the contracts by CME Group.

On top of the expected large rate hike, oil prices were weighed down on Thursday by Wednesday’s EIA weekly inventory report, which showed crude and gasoline builds for the week to July 8.

“The large build in gasoline inventories was driven by a steep decline in implied demand over the week, which fell by 1.35MMbbls/d. This resulted in implied gasoline demand averaging 8.06MMbbls/d, which is the lowest level seen for this stage of the year in at least a decade,” Warren Patterson, Head of Commodities Strategy at ING, said on Thursday.

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11,035.84 -211.75 (1.88%)

https://www.reuters.com/business/energy/oil-prices-tick-down-inflation-woes-take-centre-stage-2022-07-14/