Market Movers Europe, May 9-13: Oil Market Supply Concerns Intensify

In this week’s highlight: Supply concerns have intensified in the European oil market, with energy prices also set to hit records and gas companies in the region face uncertainty over continued imports from Russia.

This week’s focus in the oil market is on supply tightness as we head into the Northern Hemisphere driving season and air travel opens up again.

On everyone’s mind is the ongoing debate over the EU’s proposed ban on Russian oil imports at the national government level, coupled with the country’s already evident drop in production, with analysts estimating a decline in April about 900,000 b/d.

Adding to the tightness are the limited prospects for higher production from OPEC+ after the last meeting of the producer group on May 5, and the US administration’s plans to buy 60 million barrels of crude to replenish strategic stocks.

Over time, US shale production is expected to rise and demand is limited for now by China’s COVID-19 lockdowns and accompanying recession fears. But at present, it is supply fears that seem to be dominating the market.

We’ll get an analysis of all this in the monthly oil market reports from the International Energy Agency and OPEC, due out on Thursday.

Also, the World Utilities Congress kicks off in Abu Dhabi on Monday, with key OPEC ministers in attendance, including Saudi Arabia’s Prince Abdulaziz bin Salman and United Arab Emirates Energy Minister Suhail Mazrouei.

Meanwhile, European energy prices for the coming year have set record highs almost daily as the new reality of rising fuel costs becomes apparent.

Power prices in Germany for this year and next are on track to double again to record highs in 2021, and market attention is shifting to policymakers as they try to deal with the shock.

The governments of Spain and Portugal are expected this week to detail plans to cap gas prices for power at €50/MWh as a temporary measure agreed by the European Commission to reduce consumer bills. The EC is preparing to update its REPowerEU plan on May 18 with the focus now on reducing imports of Russian gas to the EU.

And that brings us to our social media question of the week: Will energy prices in Germany double from 2021 levels? Tweet us your thoughts.

And finally, to European gas, where uncertainty over whether buyers plan to comply with the Kremlin’s recent order to switch to ruble payments for Russian gas continues to weigh on the market.

At the end of April, Gazprom cut off supplies to Poland and Bulgaria for their refusal to comply with the new Russian decree on payments.

But it is unclear whether big gas buyers in the rest of Europe will accept the new terms and, if not, whether they could face the same fate as Poland and Bulgaria.

According to industry officials, the end of May could be critical as more long-term contracts are paid out under new terms.

Italy’s Eni has said it continues to bill in euros and has not opened a ruble account, while Germany’s Uniper and Austria’s OMV have said they are looking for ways to continue paying for Russian gas that comply with EU sanctions against Moscow. .

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Thanks for starting your Monday with S&P Global Commodity Insights!

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