The European energy crunch is set to worsen this week after Norwegian offshore oil and gas workers went on strike, threatening to sever the Scandinavian country’s energy supplies to the UK and Europe, according to Reuters.
As much as 1,117,000 barrels of oil equivalent, or 56% of daily natural gas exports, while 341,000 barrels of oil would be lost by Saturday if strikes continue closing down fields, the Norwegian Oil and Gas (NOG) employer’s lobby warned.
“The strike has begun,” Audun Ingvartsen, the leader of Norway’s oil workers’ union, Lederne, said in an interview. He added the strike would escalate as workers pressure oil/gas companies to increase wages and benefits amid the worse inflation in Europe in decades.
Norway is Europe’s second-largest energy supplier after Russia. The timing of strikes comes as European countries rush to inject NatGas supplies into storage ahead of the winter, and Russian energy giant Gazprom significantly reduced Nord Stream flows to Europe. Gazprom plans to halt Nord Stream flows for routine maintenance from July 11 for ten days.
Norway’s Gassco, a state-owned pipeline operator, explained to Financial Times, “in a worst-case scenario, deliveries to the UK could stop totally.”
“The UK has also become a key conduit for moving supplies on to Europe over the summer, with its export pipelines to Belgium and the Netherlands running at speed to send excess imports of liquefied natural gas and Norwegian supplies into continental storage ahead of the winter,” FT said.
News of the strikes sent British wholesale NatGas price for day-ahead delivery up 16%.
Strikes began on Monday and knocked offline 89,000 barrels of oil equivalent a day of production at three fields on Norway’s continental shelf. Three more fields could be closed by Wednesday, affecting even more production. If the labor union and energy companies don’t come to a resolution on wages, a total of 14 sites could be offline by Saturday, representing a 56% reduction in NatGas exports.
Considering Norway is the UK’s largest source of NatGas in 2021, NatGas and power prices are soaring on supply woes. Prices in Europe are rising as well.
Tom Marzec-Manser, an analyst at consultancy ICIS, said the UK will receive four LNG cargos between July 10 and July 19 and might be able to weather the acute loss of NatGas supplies from Norway.
“But for Europe as a whole this couldn’t really be happening at a worse time, outside the depths of winter, as we desperately need to fill storage ahead of the colder months,” Marzec-Manser added.
Besides Norwegian supplies, Europe has been betting on LNG cargoes from the US. However, the closure of the Freeport LNG Terminal in Texas last month due to an explosion will affect roughly 16% of the total US LNG export capacity through late year.
As the supply crunch worsens across Europe, Goldman Sachs’ Samantha Dart increased her European NatGas price forecast as she “no longer sees” a full resumption of Nord Stream flows.
“Instead, the lack of resolution around required turbine repairs, and the absence of any Gazprom-driven re-routing of the reduced NS1 flows via an alternative pipeline to mitigate the impact to supply suggest a prolonged reduced flow rate at NS1 is more likely going forward,” Dart wrote in a note to clients on Monday. She bumped her TTF price forecasts to €153 per MWh in the third quarter, up from €104.
Strike developments from Norway, affecting supplies to the UK and Europe, couldn’t have come at the worst time.
Entire industries in Germany could collapse due to natural-gas supply cuts from Russia, said Yasmin Fahimi, the country’s top union official.
“Entire industries are in danger of collapsing permanently because of the gas bottlenecks: aluminum, glass, the chemical industry,” Fahimi, the head of the German Federation of Trade Unions, told Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”
The chemical industry, which employs about 346,000 people, is the third-largest industry in Germany, according to Germany Trade & Invest, the country’s investment promotion agency.
Germany — Europe’s largest economy — is reliant on piped natural gas from Russia, which accounts for 35% of its imports of the fuel. The industrial powerhouse imports almost all of the natural gas it uses, which accounts for about a quarter of the country’s total energy mix, according to the economy ministry.
One morning in early June, a fire broke out at an obscure facility in Texas that takes natural gas from US shale basins, chills it into a liquid and ships it overseas. It was extinguished in 40 minutes or so. No one was injured.
It sounds like a story for the local press, at most — except that more than three weeks later, financial and political shockwaves are still reverberating across Europe, Asia and beyond.
That’s because natural gas is the hottest commodity in the world right now. It’s a key driver of global inflation, posting price jumps that are extreme even by the standards of today’s turbulent markets — some 700% in Europe since the start of last year, pushing the continent to the brink of recession. It’s at the heart of a dawning era of confrontation between the great powers, one so intense that in capitals across the West, plans to fight climate change are getting relegated to the back-burner.
In short, natural gas now rivals oil as the fuel that shapes geopolitics. And there isn’t enough of it to go around.
By Tsvetana Paraskova of Oilprice.com
The world’s largest crude oil exporter, Saudi Arabia, continues to keep close ties with Russia while the top oil consumer, the United States, pleads with major producers—including the Kingdom—to boost supply to the market and help ease consumers’ pain at the pump. While the U.S. and its Western allies are sanctioning Moscow and banning oil imports from Russia, U.S. President Joe Biden is also turning to Saudi Arabia to ask it to pump more oil as Americans pay on average $5 a gallon for gasoline.
The Saudis prefer to keep close ties with Russia in oil policy as the OPEC+ pact and the control over a large portion of global oil supply has benefited both OPEC+ leaders—the Kingdom and Russia—over the past half a decade. Saudi Arabia, however, could use a little thaw in Saudi-U.S. relations under President Biden, who is no longer talking about the world’s top crude exporter as a “pariah” state.
HOUSTON (Reuters) -More than 5 million barrels of oil that were part of a historic U.S. emergency reserves release to lower domestic fuel prices were exported to Europe and Asia last month, according to data and sources, even as U.S. gasoline and diesel prices hit record highs.
More than 5 million barrels of oil that were part of a U.S. emergency oil reserves release aimed at lowering domestic fuel prices . . . were exported to Europe and Asia last month, according to data and sources, even as U.S. gasoline and diesel prices touched record highs.
The export of crude and fuel is blunting the impact of the moves by U.S. President Joe Biden designed to lower record pump prices. Biden on Saturday renewed a call for gasoline suppliers to cut their prices, drawing criticism from Amazon founder Jeff Bezos.
About 1 million barrels per day is being released from the Strategic Petroleum Reserve (SPR) through October. The flow is draining the SPR, which last month fell to the lowest since 1986.
U.S. crude futures are above $105 per barrel and gasoline and diesel prices above $5 a gallon in one-fifth of the nation https://gasprices.aaa.com/. U.S. officials have said oil prices could be higher if the SPR had not been tapped.
The fourth-largest U.S. oil refiner, Phillips 66, shipped about 470,000 barrels of sour crude from the Big Hill SPR storage site in Texas to Trieste, Italy, according to U.S. Customs data. Trieste is home to a pipeline that sends oil to refineries in central Europe.
Atlantic Trading & Marketing (ATMI), an arm of French oil major TotalEnergies, exported 2 cargoes of 560,000 barrels each, the data showed.
Phillips 66 declined to comment on trading activity. ATMI did not respond to a request for comment.
Cargoes of SPR crude were also headed to the Netherlands and to a Reliance refinery in India, an industry source said. A third cargo headed to China, another source said — even though China is buying oil directly from Russia and ignoring US Sanctions upon Russia!
At least one cargo of crude from the West Hackberry SPR site in Louisiana was set to be exported in July, a shipping source added.
“Crude and fuel prices would likely be higher if (the SPR releases) hadn’t happened, but at the same time, it isn’t really having the effect that was assumed,” said Matt Smith, lead oil analyst at Kpler.
The latest exports follow three vessels that carried SPR crude to Europe in April helping replace Russian crude supplies.
Oil prices tumbled Tuesday with the U.S. benchmark falling below $100 as recession fears grow, sparking fears that an economic slowdown will cut demand for petroleum products.
West Texas Intermediate crude, the U.S. oil benchmark, settled 8.24%, or $8.93, lower at $99.50 per barrel. At one point WTI slid more than 10%, trading as low as $97.43 per barrel. The contract last traded under $100 on May 11.
International benchmark Brent crude settled 9.45%, or $10.73, lower at $102.77 per barrel.
Ritterbusch and Associates attributed the move to “tightness in global oil balances increasingly being countered by strong likelihood of recession that has begun to curtail oil demand.”
Germany’s banks would be forced to put extra funds aside to cover a potential spike in defaults if the country were to get cut off from Russian gas, several senior bankers said.
The scenario would lead to a recession in Europe’s largest economy and require lenders to back up corporate loans with more capital, BNP Paribas (OTC:BNPQY) Germany head Lutz Diederichs said Monday at a conference in Frankfurt. He echoed comments made by Commerzbank (ETR:CBKG) Chief Financial Officer Bettina Orlopp published over the weekend in an interview with the weekly Focus Money.
Lenders are particularly concerned about planned maintenance work on the main gas pipeline connecting Germany with Russia as there is a chance that supplies won’t resume as before once the work is completed, said two top bankers who asked not to be named discussing the deliberations. The pipeline is slated to be shut down between July 11 and 21 for maintenance.
German banks’ provisions for the potential economic consequences emanating from the war on Ukraine have so far been lower than the large reserves they built at the height of the pandemic. But the country is heavily reliant on continuing gas imports from Russia, and a complete loss of access to the energy supply would deal a heavy blow to the economy.
Deutsche Bank (ETR:DBKGn) Chief Executive Officer Christian Sewing said such an event would force “a deep recession,” at the same event on Wednesday.
- Russia is poised to temporarily shut down the European Union’s single biggest piece of gas import infrastructure, stoking fears of a delayed or only partial return of gas supplies.
- Some fear the Kremlin could use planned maintenance works to turn off the taps for good.
- “If it doesn’t come back after maintenance because President Putin plays games or wants to hit Europe while it hurts, then the plan to fill up gas storage by the end of summer will probably not work,” said Eurasia Group’s Henning Gloystein.
Geopolitical Bombshell: Saudi Arabia in Discussion with China to Join BRICS+ Coalition. What Impacts on the Energy Market and the Global Economy?
Is this strategic geopolitical pressure from Saudi leader Mohamed Bin Salman (MbS) ahead of the meeting with Biden; or is this a genuine possibility that looms as likely? If the former, then Joe Biden is being geopolitically slow roasted by Saudi Arabia for his previous disparagements and ideological hypocrisy in his visit. If it is the latter, well, then the tectonic plates of international trade, banking and economics are about to shift directly under our American feet.We have been closely monitoring the signs of a global split around the energy sector taking place. Essentially, western governments’ following the “Build Back Better” climate change agenda which stops using coal, oil and gas to power their economic engine, while the rest of the growing economic world continues using the more efficient and traditional forms of energy to power their economies.
This article from Newsweek is exactly about this dynamic with Saudi Arabia now potentially joining the BRICS team.