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Thursday, December 08, 2022

G7 should install brent ceiling asap

In less than a month almost all companies in the EU will be banned from buying sea freight from Russia and as of today, fuel inventories are already tight.

As explained by consultancy Tempos Energy, the Brent production cut by OPEC+ has already pushed crude prices very close to triple digits. “At the moment the balance is on the bullish side,” said Antonio Acetunno, general director of the consultancy, who understands that “already touching three figures represents a clear risk to the pocket, as the demand peak weathers the new restrictions.” Will coincide with Russian supplies.”

For the General Director of Tempos Energia, “The G7 countries have more than four months to prepare a cap on the price of Brent and now, we can face the end and start of the year with one barrel of Brent that That’s 26 percent more expensive ».

Acetuno qualifies that this is due, on the one hand, to the fact that OPEC+ has already started reducing production in line with its decision to reduce its quota by two million barrels per day. On the other hand, European sanctions on Russian oil will come into force on 5 December and finally, a possible increase in Chinese demand, thanks to the release of Covid restrictions. “These factors will propel the Brent price above $120 a barrel, a 26 percent upside from the current price.”

The expert indicated that this bullish estimate could be surpassed following a decision by the United States Federal Reserve, on a possible hike in interest rates. Note that Europe has now overtaken Asia as the top consumer of US oil for the first time in six years. From January to May, the Old Continent bought about 213 million barrels from the United States, while Asia received 191 million.

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It is projected that US crude oil production will reach 12.31 million barrels per day in 2023, the fifth consecutive revision, therefore, “with a high probability of being insufficient to meet the needs of both Asia and Europe”, CEO Outlined Tempo Energy.

80 Euro to 320 per MWh

In contrast, the electricity market continues to decline, Acetuno said. The expert has highlighted that, with December facing up to February 2023 and coinciding with the three coldest months of the year, the German Meteorological Service forecasts an average temperature of at least two degrees Celsius That would put 2022/23 at 33 per cent of the mildest temperatures. Winters in the reference period 1991–2020.

This rise in temperature during the winter eases electricity prices as well as gas prices, eliminating fears of a shortage. “If all positive vectors continue to align,” said Acetuno, Central European gas “will remain around the level of 80 euros per MWh, with the Iberian GAS Market (Migas) at 20/30 euros per MWh at the most competitive times. Will stand.” , This would cause the adjustment mechanism to disappear from the equation, with a power pool of around 115/130 Euro per MWh.

Despite these positive prospects, the General Director of Tempos Energy wanted to clarify that “in the gas market we practically move on a knife edge, which makes it extremely difficult to align all the positive parameters at the same time in a wide time window”. It happens”.

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In fact, he stressed, the chairman of the German energy regulator has said that “the situation could change radically when the cold comes and the extraction starts in underground storage.” It warned that “just a few days of bitter cold could cause a dramatic increase in gas use and that inventory, even at the current fill level of 99.6 per cent, would only last nine to 10 weeks”. “

To this we must add the fact that “Russia, at any moment, could decide to completely cut off its gas supplies to Europe, putting at stake some 16 million cubic meters of gas, ten percent of the gas it had before the invasion”. “

Consequently, “if any parameter is removed from the equation, be it the presence of a cold winter, a reduction in liquefied natural gas supplies by Gulf of Mexico countries or Euro-Asian supplies, it will keep the market on alert. Max, standing up again, above the level of 200 euros per MWh”, Acetuno has had an effect.

Experts point out that this price would mean an Iberian gas market at 150 euros per MWh, making it possible for the adjustment mechanism to reappear with a price between 135-140 euros per MWh and 180 euros per MWh Will go … All this will lead us to endure a winter with energy prices of 320 Euros per MWh. “That would be the most pessimistic scenario,” Acetuno concluded.

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