Oil Futures Prices Were Mixed
Oil futures were mixed on Friday, buoyed by hopes of further easing of COVID restrictions in China. That could help revive demand in the world’s second-largest economy, but a stronger dollar limited gains.
Brent crude futures were down one cent, or 0.01%, to $86.87, after rising to $87.40 earlier.
WTI crude oil futures in the USA fell 21 cents, or 0.3%, to $81.01, after climbing to $81.63 earlier in the session.
The virus’s strict containment measures have decreased oil demand, which is currently 1M barrels BPD lower than average at 13M barrels per day (BPD).
All EU governments must formally approve the agreement by Friday. Poland advocates for the cap to be as low as possible. It had not formally declared its support for the deal.
Buyers would have to pay more for oil if Russian crude prices had a cap, creating “a significant upside risk to prices in 2023.” If Russia produces significantly less oil, it may “turbocharge oil prices higher.” Russian oil output would be 10M barrels per day in 2023, while the International Energy Agency projects 9.59M barrels daily. Greece, Bulgaria, Romania, and Hungary agreed on Thursday to improve their gas networks’ connectivity and transport capacity as part of their ongoing efforts to diversify gas sources and strengthen their role in European energy supply chains.
In 2016, the four countries agreed to build the infrastructure needed to build the so-called Vertical Gas Corridor, allowing bidirectional gas flows from Greece to northern Europe via Bulgaria, Romania, and Hungary.
Turkish Gas Hub for Europe
Last month, international media reported that Russia and Turkey were discussing the establishment of a gas hub in Turkey. The nation was an obvious choice for rerouting some of the gas that had previously left Europe because it is one of Russia’s largest gas consumers.
But doubts quickly arose about whether that would be a good idea, given that Europe has been slapping sanctions on Russia, including on its energy industry, as well as boycotting Russian oil and coal, with talk of sanctions on gas as well.
Because Europe is the region’s largest gas market and does not want to purchase Russian gas, the idea of a new gas hub in Turkey is useless. By signing a long-term agreement with Qatar this week to supply 2M tons of LNG annually starting in 2026 and lasting for 15 years, Germany took a historic step in that direction. However, this amount represents only a small part of Germany’s gas needs, so the country will have to continue looking for new LNG sources.
Some believe establishing a gas hub in Turkey would be a convenient way for Russia to continue selling gas to Europe without calling it Russian, thus making it politically acceptable to Europe’s political elite.
As a major gas artery for an energy-starved Europe that will soon realize it cannot rely solely on LNG imports because there is no LNG available in the world for it and everyone else who needs it, the hub would be an opportunity for Turkey to strengthen its regional influence in energy matters.
A hub of scale that Russia and Turkey are discussing would be costly. Due to Russia’s involvement in the project, most likely, the investment won’t be secure without Western participation.