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With increasing demand for petroleum confronting rising prices, the oil market appears to be in a state of flux—against the backdrop of calls to transition global energy away from fossil fuels.
Central bankers around the world have stated that skyrocketing energy prices are contributing to the inflationary pressures that are threatening the global economic recovery, blaming energy producers as the source of inflation, according to S&P Global Platts. Oil producers have argued that energy price volatility is due to emissions-conscious declines in investment that have been exacerbated by the pandemic. Disregarding pleas from U.S. President Joe Biden and leaders from Japan and India for the international oil alliance to pump more oil supply into the market to help stabilize prices, the Organization of the Petroleum Exporting Countries (OPEC) alongside Russia and nine additional partners on Nov. 4 maintained a planned modest output quota increase of 400,000 barrels per day for December. In response, the U.S. may release stocks from its strategic reserves.
All eyes remain on international policymakers. But OPEC’s shrinking capacity—with members like Nigeria and Malaysia unable to pump their full quotas due to technical issues and national instability—could still leave the oil market uneven and tight.
OPEC heavyweights Saudi Arabia and Kuwait today signaled their unwillingness to increase output above their quotas to compensate for other countries’ production shortfalls.
S&P Global Platts Analytics anticipates that global oil consumption to will likely reach 103.2 million barrels per day in 2022, totaling a monumental 700,000 barrels per day above pre-pandemic levels in output. But this forecast is pressured by the 2.1 million barrels per day fall in OPEC’s spare capacity that S&P Global Platts Analytics anticipates could materialize by January. S&P Global Platts Analytics cut its forecasts last month for global oil demand in 2021 and 2022 due to weaker activity data in Western Europe, the U.S., and Southeast Asia, and projects that the annual growth of global oil demand for 2021 may now be 5.1 million barrels per day. OPEC itself lowered its 2021 global oil demand outlook by 160,000 barrels per day on Nov. 11, noting that the market will likely remain at a high deficit through year-end.
If demand far outpaces supply, market participants fear that a super-cycle could eclipse the oil market, which many foresee remaining tight in 2022.
Painting a portrait of the complexity of the moment, the energy price surge, the U.N. Climate Change Conference (COP26), and the latest OPEC+ meeting have occurred at the same time.
OPEC members at COP26 made their case for oil in the energy transition, expressing their support for emissions-reduction approaches and the inclusion of clean energy supplies rather than reducing investment in hydrocarbons. On the sidelines of COP26 last week, Russian and U.S. deputy energy ministers “discussed multilateral cooperation within the G20 on further stabilization of the world oil market," according to a Russian energy ministry press release.
"Oil remains the main source of the GDP of OPEC countries,” Yousef al-Shammari, CEO of the consultancy CMarkits that advises the U.N. on sustainable energy, told S&P Global Platts. “Which means that a switch over from oil to other energy sources will undoubtedly affect their economies."
Today is Monday, November 15, 2021, and here is today’s essential intelligence.
Uncertainty in the Global Economy
Supply Chain Finance Industry Ramps Up As Greensill Memory Fades
A major failure in supply chain finance has proven to be just a bump in the road for the nascent sector. Supply chain finance provider Greensill Capital (U.K.) Ltd.'s collapse in March has had little impact on the availability of this type of trade finance, as existing lenders are ramping up their capabilities while new players are entering the market.
—Read the full article from S&P Global Market Intelligence
The Credit Cycle
Emerging Markets Monthly Highlights: Rising Yields Could Expose Pockets Of Funding Constraints
Financing conditions tightened in emerging markets in recent months, mostly due to the rising benchmark yields. Overall, funding costs have risen toward pre-pandemic levels. In EMEA and Latin America, central banks have been working on rate normalization, pushing up the benchmark yields.
—Read the full report from S&P Global Ratings
Credit Trends: U.S. Public Finance Saw Upgrades Almost Double In The Third Quarter
The third quarter saw U.S. public finance upgrades almost double to 216 (from 110), while downgrades rose to 89 (from 80). The ratio of upgrades to downgrades was 2.9 to 1 (the highest since first-quarter 2018), above the 10-quarter average of 1.23 to 1.
—Read the full report from S&P Global Ratings
Market Dynamics
Listen: Gas Pays The Price
S&P Global Platts' Ciaran Roe and Ira Joseph break down the unprecedented price movements in recent LNG and gas markets. The discussion focuses on how we arrived at this point of unusual tightness and whether the conditions that brought us here will persist.
—Listen and subscribe to Commodities Focus, a podcast from S&P Global Platts
An Efficient, Rules-Based Approach To Factor Rotation
Explore how the design of the S&P 500 Factor Rotator Daily RC2 7% Index is helping democratize access to factor investing, providing a simple, rules-based blueprint for building dynamic factor strategies.
—Watch the full video from S&P Dow Jones Indices
Banking Industry Under Pressure
ABN Amro Interested In Private Banking Acquisitions – CEO
ABN Amro Bank NV has been on the lookout for potential acquisitions in recent months and is keen to take over companies that would bolster its private banking business, according to CEO Robert Swaak. The Dutch bank, which reported its third-quarter and nine-month financial results Nov. 10, is particularly interested in bolt-on deals that fit its business and geographical footprint
—Read the full article from S&P Global Market Intelligence
Technology & Media
Mid-Band Spectrum Delays For Verizon, AT&T Only Significant If Extended
While the current one-month delay in Verizon Communications Inc.'s and AT&T Inc.'s deployment schedules for a key band of wireless spectrum seems minor to analysts, the potential for a longer, more detrimental delay looms. Both wireless operators recently agreed to delay their rollout of spectrum in the 3.7 GHz-3.98 GHz band, a portion of the C-band.
—Read the full article from S&P Global Market Intelligence
Voestalpine Sees Auto Sector Issues Limiting Flat Steel Sales Well Into 2022
Voestalpine expects supply chain problems in the auto manufacturing sector will continue to limit its flat steel shipments well into next year, it said Nov. 10, but on the positive side anticipates some benefit from the removal of section 232 tariffs on EU steel exports to the U.S., which were landing it with a Eur40 million/year duty bill.
—Read the full article from S&P Global Platts
Theater Earnings Beat Expectations, Highlight Long Road To Recovery
New COVID-19 cases are dropping, but the pandemic's impact on the movie theater business is not receding as quickly. Both AMC Entertainment Holdings Inc. and Cinemark Holdings Inc., two of the country's largest theater operators, experienced continued growth in attendance, revenue, and profits in the third quarter.
—Read the full article from S&P Global Market Intelligence
ESG in the Time of COVID-19
COP26: India's 2030 Goals Pose Challenge On Long Haul To 2070 Net-Zero
India's new climate goals of reducing carbon intensity and boosting renewables by 2030 pose stiff challenges to an economy dominated by coal, commentators told S&P Global Platts. Addressing the UN's Climate Change Conference in Glasgow Nov. 1, India's Prime Minister Narendra Modi announced a 2070 net-zero emissions target, the least ambitious deadline of the world's top 10 emitters.
—Read the full article from S&P Global Platts
COP26: 'Cars Have Turned A Corner' As Nations Target End Of Polluting Vehicles
A host of countries, cities, and companies committed Nov. 10 to phasing out the sale of fossil fuel-powered cars and vans by 2040, and even earlier in some markets, in a declaration at the COP26 climate conference in Glasgow, Scotland.
—Read the full article from S&P Global Market Intelligence
COP26: Hydrogen Key To Decarbonizing Rail Transport To Meet Net-Zero Goals: Alstom
Hydrogen will be key to decarbonizing rail transport to meet mid-century climate goals, train manufacturer Alstom said at the UN Climate Change Conference Nov. 10. The company also signed an agreement with British train owner and financier Eversholt Rail for a new hydrogen train fleet in the U.K.
—Read the full article from S&P Global Platts
COP26: 22 Countries Sign Clydebank Declaration To Boost Green Shipping
Over 20 countries including the U.S., Japan, Australia, and Canada have signed the Clydebank Declaration to develop at least six green shipping corridors between two or more ports by 2025 and "many more" by 2030, the U.K. COP26 presidency said Nov. 10. The global maritime shipping sector accounts for 2.5%-3% of global CO2 combustion emissions, according to S&P Global Platts Analytics.
—Read the full article from S&P Global Platts
COP26: OPEC's Saudi Arabia, UAE Push Emissions Reduction, Not Fossil Fuel Extinction
While highlighting their green investments, core OPEC members Saudi Arabia and the UAE on Nov. 10 defended the embattled oil industry to the UN Climate Change Conference, saying environmental policies should be balanced with energy security and economic development. Both countries are spending billions to expand their crude oil production capacity.
—Read the full article from S&P Global Platts
COP26: Article 6 Talks Grind Forward As Countries Seek Common Ground
Discussions on the rules for international trading of emissions reduction units ground forward at the UN Climate Change Conference in Glasgow, with a cluster of political issues still holding up agreement, ministers said Nov. 10.
—Read the full article from S&P Global Platts
COP26: Major Automakers, Governments Fail To Sign 2040 Zero-Emissions Transport Pledge
A pledge at the UN's Climate Change Conference in Glasgow to accelerate the transition to zero emission cars and vans, greeted as a "landmark global agreement" by the U.K.'s COP26 presidency, has fallen short of expectation with China, the U.S., and Germany and a clutch of major automakers all failing to sign the accord.
—Read the full article from S&P Global Platts
Terrapower's CEO Sees Key Role For Advanced Nuclear In Clean Energy Transition
TerraPower LLC, the Bill Gates-backed nuclear innovation company, is poised to "change the face of nuclear energy" as power companies race to decarbonize their electric generation fleets while maintaining grid reliability, President and CEO Chris Levesque said Nov. 9.
—Read the full article from S&P Global Market Intelligence
Singapore Kicks Off Multi-Pronged Energy Transition Strategy
Singapore's journey from an international oil and refining hub, that has been core to its economy for decades, to a new energy future, has kicked off in earnest. A slew of announcements at Singapore International Energy Week 2021 included plans to have around 30% of Singapore's electricity supply from low-carbon electricity imports by 2035.
—Read the full article from S&P Global Platts
U.K. Keen To Back African Clean Energy Projects Amid $13 Bil Investments: Official
U.K. started last year reducing its support to overseas investments in fossil fuels and totally halted assistance this year amid the clean energy transition that country has embarked on. Nearly all of the current U.K. private sector investment pipeline in Africa, which is supported by the government and exceeds GBP10 billion ($13.6 billion), is dedicated to clean energy projects.
—Read the full article from S&P Global Platts
The Future of Energy & Commodities
Analysis: Shortage Of Diesel Exhaust Fluid Could Halt South Korea's Automotive Fuel Demand Recovery
South Korea could potentially see a large number of diesel-fueled vehicles become non-operational within the next two-three months due to a severe shortage of diesel exhaust fluid, after China drastically reduced its production and exports in an effort to save coal for power usage.
—Read the full article from S&P Global Platts
Infrastructure Bill Challenged By Dearth Of U.S. Upstream Mining, Refining
The massive infrastructure bill passed by the U.S. House of Representatives on Nov. 5 could stimulate demand for domestically sourced materials through expanded "Buy America" requirements, but the country will not be able to supply all of the metal it needs to build the projects funded in the $1.2 trillion bill.
—Read the full article from S&P Global Market Intelligence
Fujairah Data: Oil Product Stockpiles See Record Jump, Rise 27% On Week
Oil product inventories at the UAE's Port of Fujairah climbed a record 27% in the week to Nov. 8, led by heavy distillates which jumped 42% week on week, the most ever, according to Fujairah Oil Industry Zone data provided exclusively to S&P Global Platts on Nov. 10.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.