crude oil prices

Markets remain composed after Iran attack on Israel

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Oil markets, weighing the consequences of Iran’s first ever direct attack on Israel over the weekend, with missiles and drones, opened cautiously in early Asian trade Monday and will be shaped by the extent of Tel Aviv’s response.

First signs indicate that investors are relieved by the scope of Iran’s attack as it has been perceived as a controlled attack that is not expected to force Israel to escalate action and prompt a forceful response from the US and allies, which would certainly lead to a regional conflict.

In early Asian trading Monday morning, Brent crude oil futures were trading at a level of 90.50 dollars a barrel, marginally up compared to Friday, while WTI futures fell slightly to 85.57 dollars a barrel.

Over the past month, Brent prices have risen by 8.5 percent, in expectation of action by Iran. Though this ascent cannot be ignored, forecasts of a spike to levels of between 95 and 100 dollars a barrel have yet to be confirmed.

Worse-case scenarios entailing further escalation – which would consequently cut off oil supply from the region and, worse still, prompt Tehran to block the Strait of Hormuz, a highly important strategic location for international trade offering passage to a third of the world’s liquefied natural gas and almost 25 percent of total global oil consumption – still seem far off.

Markets have remained composed. Iran has tested reactions, while Israel’s ability to intercept and the support of its allies have both been confirmed.

This means that any oil price rises, as an initial reaction following Iran’s weekend attack, will be short-lived.

Iran launched drones and missiles at Israel over the weekend as retaliation for an attack on its consulate in the Syrian capital Damascus on April 1. Israel has not claimed responsibility for the consulate strike but is widely regarded to have been behind it.

 

Latest events prompt energy market turmoil ahead of winter

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Last weekend’s outbreak of the Israel-Gaza war, undermining any attempt at peace in the Middle East and the process of normalizing Israel’s relations with the Arab countries, and, in addition, the suspected sabotage of the Baltic-connector gas pipeline, used by Finland and Estonia for access to an underground gas storage facility in Latvia, are two developments that have come at the worst possible time for European energy security and cost concerns, right before winter and following an EU decision to end energy crisis-related support measures for consumers all over Europe.

The two developments would have impacted energy markets any time of year, but their pre-winter emergence makes them even more critical. This is the time of year when demand for natural gas and oil increases in Europe, along with prices. In Greece, the heating oil trading season is set to begin October 13.

Markets around the continent have not been appeased by the fact that European storage facilities are 95 percent full, but instead, are being driven higher by the unease brought about by the latest events.

Besides the Israel-Gaza war, the Baltic-connector pipeline has just been shut down after a sudden drop in pressure, raising fears of Russian sabotage as retribution for Finland joining Nato in April this year.

The damage to this infrastructure has revived concerns about energy security following the Nord Stream pipeline blasts last year.

According to macroeconomic research consultancy Capital Economics, the combination of events could raise oil prices to levels well above 100 dollars a barrel for some time.

Wholesale natural gas prices rose 12.3 percent in a day, to just under 50 euros per MWh at the Dutch TTF hub.

The Greek government may need to reconsider its decision to end energy subsidies for all consumers. Supply companies may need to hedge prices and factor in the new risk factors. Also, refineries and gas importers may need to secure loads before prices escalate.

With Israel preparing for a ground attack on Gaza, it has become clear that decisions such as the choice of route for Israeli gas exports to Europe; promotion of Israel’s energy cooperation with Greece and Cyprus; and the development of projects such as the Israel-Cyprus-Greece electricity grid interconnection, are, for the time being, not a top priority.

 

Major east Mediterranean projects brought to a standstill

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The Brent crude price began trading today 5 percent up, over 88 dollars a barrel, as markets have not ruled out stricter US sanctions by the US against Iran, which supports Hamas, responsible for the weekend’s shock attack on Israel.

European and US markets are also expected to rise today, reflecting anxiety over an escalated conflict that would be brought about by an Israeli ground military operation in Gaza and the involvement of the powerful Hezbollah from the Israel’s north, with the support of Iran and Syria.

Should the US impose stricter sanctions on Iran, global oil supply would be reduced, creating an opportunity for Russia to increase its share, analysts have noted.

Washington, since late 2022, has turned a blind eye to an increase in Iranian exports circumventing US sanctions, on the basis of an informal détente with Tehran, analysts have reminded. The US has pursued such a course knowing it would hurt Russia.

Israel’s energy-related interests in the eastern Mediterranean, including talks with Cyprus and other regional players for gas exports to Europe, will now be put on hold following the Hamas attack on Israel.

Earlier today, Israel’s energy ministry ordered US oil giant Chevron to halt operations at the Tamar gas field, off the coast of Israel. The company stated it is complying with the ministry’s request.

The development of a Cypriot LNG terminal, planned to receive Israeli pipeline gas, and, even more crucially, a recent push by Israeli Prime Minister Benjamin Netanyahu for decisions promoting exports from east Mediterranean fields within the next three to six months, are now being brought to a standstill.

As for the role of Turkey, statements made yesterday by President Recep Tayyip Erdogan, who called for restraint from both sides without condemning the Hamas attack on Israel and spoke again of a Palestinian state with Jerusalem as its capital, probably reinforce Israel’s reservations against Turkey.

At a recent meeting in New York, Netanyahu and Erdogan agreed to schedule an exchange of visits aimed at restoring relations between the two countries. Erdogan, at that meeting, had proposed the transportation of Israeli gas to Europe via a subsea pipeline running alongside the Turkish coast.

Operations by Greece’s Energean Oil & Gas, listed on the London Stock Exchange, at licenses within the Israeli EEZ have not been disrupted by the conflict, company officials informed, noting the Energean Power FPSO and all other company facilities are not situated close to the battle zone.

 

 

Crucial OPEC meeting Sunday, amidst Moscow-Riyadh dispute

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OPEC +, the Organization of the Petroleum Exporting Countries, plus allies led by Russia, are scheduled to hold a crucial meeting this Sunday, just days after Saudi Arabia’s stern warnings to market players involved in short-selling activity, as well as amidst an output policy row that has broken out between Riyadh and Moscow.

Journalists have not been invited to the forthcoming meeting, a development that has surprised global media outlets.

The latest OPEC meeting comes after the organization caught the internationally community off guard by announcing, in April, it would make further cuts in oil production.

At the time, the move drove up oil prices by approximately 9 dollars per barrel, to levels over 87 dollars per barrel. Prices eventually eased off, the Brent oil price falling as low as 70 dollars per barrel.

The oil market’s volatility makes it impossible to predict what OPEC’s next move could be. Signs offered by major producers as to what may follow remain ambiguous and could be interpreted in a number of ways.

Also, Saudi Arabia and Russia are currently embroiled in a dispute over the organization’s output policy. Riyadh has expressed disappointment over Moscow’s breach of an OPEC agreement to cut output. Saudi Arabia wants oil prices to rise to between 80 and 81 dollars a barrel.

Riyadh has also been angered by the short-selling practices of speculators, seeking to manipulate markets for lower oil prices and profitable selling.

 

Natural gas price increases seen as inevitable following oil-price rally

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A rise in natural gas prices appears inevitable as a result of the sharp increase in oil prices prompted by a drastic cutback in oil production decided on by the eight-member OPEC+ group.

Dutch TTF gas futures rose by as much as 30 percent over the past ten days before easing.

TTF gas futures for May are priced at 45 euros per MWh, but rise for ensuing months. July futures are currently at 46.3 euros per MWh, August futures are at 47.1 euros per MWh, September futures are at 48.6 euros per MWh, October futures are at 52 euros per MWh and November futures are at 57.9 euros per MWh.

In comments to energypress, local energy company officials shared concerns of a new round of gas price increases, noting conditions are currently fluid but will clear up over the next few weeks.

The impact of the rise in oil prices is already being felt at retail level in the US, while Europe is also bracing for an ascent as the price of crude shapes the price of natural gas by a coefficient of at least 50 percent, according to IEA.

If applied to its full extent, as of May 23, the OPEC+ decision to slash oil production could have greater impact on natural gas prices than Russia’s war in Ukraine, leading analysts, including Tom Kloza, global head of energy analysis at OPIS (Oil Price Information Service), have noted.

 

Oil, gas prices surge to record levels, confirming Russia war market fears

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Oil and gas prices have reached unimaginable levels, breaking one record after another to cause the biggest market shock in decades and confirm fears of the extent of the impact Russia’s invasion of Ukraine would have on international energy markets.

Since Russia’s invasion of Ukraine almost a fortnight ago, prices for electricity, gasoline, diesel, natural gas, as well as grains and virtually all other basic commodities have skyrocketed after stabilizing at elevated levels over many months.

Yesterday’s price surges in international energy markets were extraordinary. Natural gas futures contracts, set for delivery in April, reached a record high of 345 euros per MWh, up 79 percent in a day, before de-escalating to 215 euros per MWh at the end of trading.

The Brent crude oil price is now steadily over 120 dollars a barrel. It has been driven higher by media reports of a US plan to ban Russian oil and gas imports.

Such price levels, even if there are no further rises, will result in major inflationary pressure for the global economy.

According to a Bloomberg report, US president Joe Biden is examining the prospect of imposing an embargo on Russian oil, even without the participation of European allies.

Any European breakaway from Russian gas supply would require extreme measures from European governments and the energy sector to cover the resulting gap and ensure energy supply needs for consumers and enterprises are met, officials at French energy group Engie noted.

Highlighting the shock felt in markets around the world, Ole Hansen, head of commodity strategy at Saxo Bank, remarked: “I’m lost for words.”

 

Natural gas prices rebound 14% over Ukraine concerns

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The timing of the Russia-Ukraine crisis, coinciding with the ongoing energy crisis affecting Europe, including Greece, is proving detrimental to the recent de-escalation of record-level energy prices, especially in central European markets, where wholesale electricity prices have fallen below 100 euros per MWh for the first time in months.

Concerns over a possible Russian invasion of Ukraine have prevented markets from easing. Natural gas prices yesterday rose by an average of 14 percent to register a two-week high of 88 euros per MWh. As a direct consequence, electricity prices increased today following a downward trajectory in recent weeks.

In Germany, wholesale electricity skyrocketed 51.63 percent, in a day, to 155 euros per MWh. France registered a 3.3 percent increase to 193.44 euros per MWh. In the Netherlands, wholesale electricity rose by 14.98 percent to 202.1 euros per MWh, and, in Spain, the price of wholesale electricity increased by 9.07 percent to 199.94 euros per MWh.

A Russian invasion of Ukraine, which would disrupt Russian gas supply to Europe, would push up natural gas prices to new record levels exceeding records set in December.

Russia is Europe’s biggest natural gas supplier, covering 40 percent of the continent’s natural gas imports, of which 30 percent is transported through pipelines running through Ukraine.

The Russia-Ukraine crisis is also impacting oil prices, now close to 100 dollars per barrel.

 

Energean’s Prinos field losses seen reaching €32m in 2021

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Upstream company Energean’s Prinos field concession, south of Kavala in northern Greece, is projected to incur yet another increase in losses this year, in excess of 32 million euros, according to a 2021 budget submitted by the company to EDEY, the Greek Hydrocarbon Management Company.

These losses, which do not include debt payments for investments made in previous years, will add to accumulated losses of 200 million euros incurred by the company through its operations at Prinos, Greece’s only active hydrocarbon field.

Production at the Prinos field is expected to narrowly exceed a total of 500,000 barrels this year, according to the company budget’s projections.

The budget’s projections were based on the assumptions of an average Brent index oil price of 60 dollars per barrel, reduced revenues of between 7 and 8 dollars per barrel at the Prinos field as a result of the inferior quality of oil produced, as well as a euro-dollar exchange rate of 1.20.

Based on these figures, the Prinos field’s revenue for 2021 is projected to reach 22.3 million euros, with expenses reaching 54.3 million euros.

Despite the negative results amid an unfavorable climate, Energean plans to recommence investments at the Gulf of Kavala’s “Epsilon” field with an amount of 13 million euros, part of total investments worth 23 million euros.

Prinos is currently producing from 14 wells, two out of which are horizontal at the North Prinos and Epsilon Fields.

The horizontal drills at the Epsilon field are expected to begin producing 15 months after the recommencement of investments.

These investments will include the completion of a new platform at the Lamda deposit, to emerge as the first new platform in Greece since 1977. Prinos began producing 40 years ago.

 

 

Oil prices rise sharply, time running out for oil-rich countries

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Petroleum-rich countries, seeking to end the reliance of their economies on oil trade through investments in new domains as they prepare for the diminished role of fossil fuels in the new era, currently have a golden opportunity to boost output and make the most of elevated oil prices, especially if other producers remain disciplined in accordance with OPEC rules.

The UAE, a pertinent case, have invested heavily over the past decade in facilities boosting output, the objective being to maximize oil-export revenues for the financing of the country’s economic transition.

However, OPEC will first need to accept this increased production ability before the UAE can implement it. This is a tricky issue as if OPEC accepts the UAE plan, the cartel will then also face similar-minded requests by other members, which would hammer oil prices to low levels.

The UAE seem adamant on their national plan, considering it a matter of existential significance. Saudi Arabia and Russia face a difficult mission as the two countries will need to quell the UAE intention without instigating its withdrawal from OPEC.

In general, oil producers are now striving to sell as much oil as they can, for as long as they can, taking into account that the global decarbonization effort is gaining momentum.

Spain’s Repsol on verge of exiting Greek upstream market

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Spanish petroleum firm Repsol, a member of consortiums holding licenses to three fields in Greece, is on the verge of leaving the country’s upstream market as a part of a wider strategic adjustment prompted by the oil crisis and the pandemic, developments that have impacted exploration plans, as well as a company plan to reduce its environmental footprint, sources have informed.

The upstream industry has been hit hard by the pandemic, which has driven down prices and demand. The EU’s climate-change policies are another key factor behind Repsol’s decision.

Repsol is believed to have decided to significantly reduce the number of countries in which it is currently present for hydrocarbon exploration and production, the intention being to limit operations to the more lucrative of fields.

All three fields in Repsol’s Greek portfolio are still at preliminary research stages and do not offer any production assurances, meaning they will most probably be among the first to be scrapped by the company from its list of projects.

Respol formed a partnership with Hellenic Petroleum (ELPE) for offshore exploration in the Ionian Sea. Repsol is the operator in this arrangement. A license secured by the two partners for this region in 2018 was approved in Greek Parliament a year later.

Also, in 2017, Repsol agreed to enter a partnership with Energean Oil & Gas, acquiring 60 percent stakes, and the operator’s role, for onshore blocks in Ioannina and Etoloakarnania, northwestern Greece.

Repsol maintains interests in over 40 countries, producing approximately 700,000 barrels per day.

Rescue talks for Prinos, Greece’s only producing field, making progress

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Talks between Energean Oil & Gas and officials at the energy and economy ministries for a solution to rescue offshore Prinos, Greece’s only producing field in the north, are making progress, sources have informed.

Heightened Turkish provocations in the Aegean Sea over the past few days – the neighboring country sent a survey vessel into Greece’s EEZ – and greater US presence in the wider southeast Mediterranean region, are two developments that have injected further urgency into the Prinos field rescue talks.

The east Mediterranean is at the core of geopolitical developments that promise to create new political and energy sector conditions.

US oil corporation Chevron, America’s second-biggest energy group, has joined fellow American upstream giant ExxonMobil in the east Mediterranean with a five billion-dollar acquisition of Noble Energy.

This takeover by the California-based buyer adds to the Chevron portfolio the gigantic Leviathan gas field in Israel’s EEZ, as well as the Aphrodite gas field, situated within the Cypriot EEZ and estimated to hold 4.5 trillion cubic feet.

It also offers Chevron prospective roles in the East Med pipeline, to supply Europe via the Leviathan field, and Egypt’s LNG infrastructure, all elevating the petroleum group into a dominant regional player.

Israel and Cyprus recently ratified the East Med agreement, as has Greece, while Italy appears to be examining the prospect.

In another regional development, the Total-ENI-ELPE consortium is preparing to conduct seismic surveys at licenses south and southwest of Crete, and an environmental study southeast of Crete has been approved by Greek authorities. Also, oil majors with interests in Cyprus’ EEZ have planned a series of drilling operations for 2021.

Meanwhile, Turkey, trespassing into both Greek and Cypriot EEZ waters, consistently cites a memorandum recently signed with Libya as support for its actions, as well as its refusal to sign the UN’s International Law of the Sea treaty, strongly disagreeing with an article that gives EEZ and continental shelf rights to island areas.

Greek government officials are well aware that closure of the Prinos field amid such precarious conditions would lead to major consequences, not just economic and social, as would be the case under normal conditions, but also geopolitical.

Hydrocarbons can push RES sector to next stage, new EDEY official says

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The hydrocarbons industry will continue to play an important role in the energy mix until 2050, despite a shift in policies turning to renewable energy, and could also serve as a lever of support propelling the RES sector to its next stage, according to Aristofanis Stefatos, the newly appointed chief executive of EDEY, the Greek Hydrocarbon Management Company.

Stefatos and Rikard Skoufias, concurrently named new president of EDEY, offered their views on the upstream sector during questioning by Greek Parliament’s permanent committee on institutions and transparency.

The two men, both proposed by energy minister Costis Hatzidakis for the top EDEY jobs, officially assumed their roles following approval by the committee.

During questioning, committee members asked about the future of the hydrocarbons sector and licenses in Greece given the major decline in crude oil prices, as well as climate change policies being adopted.

Stefatos described the dip in crude oil prices as a temporary condition, noting the sector has experienced such situations in the past before rebounding. “It is only a matter of time before the same thing happens again,” he noted.

The two officials were also asked to comment on environmental protection issues, while Stefatos, the new chief executive, was asked to clarify on his position as shareholder of a Norwegian upstream company.

An offshore corridor running down from Albania into Greece’s EEZ has potential, while signs of a deposit in the area are encouraging, Stefatos told the committee. However, further 3D seismic surveys must soon be conducted in the area, he stressed.

Crisis’ impact on Prinos looked at, Energean up against time

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The energy ministry has turned to specialized consulting firm assistance for a detailed analysis on the pandemic’s financial impact on the Prinos offshore oil field in northern Greece, the country’s only producing field at present.

The energy ministry’s secretary-general Alexandra Sdoukou, handling the matter on behalf of the ministry, is currently holding talks on a daily basis with officials at Energean Oil & Gas, the field’s license holder.

The company wants emergency government support amid the extraordinary market conditions, energypress sources have informed.

The two sides are believed to be closely examining related data to determine the extent of the financial damage, for this project, due to the plunge in international oil prices, prompted by lower demand amid the widespread lockdown.

Energean Oil & Gas has invested 50 million euros between September, 2019 and May to keep production flowing at Prinos, an aging field, sources noted.

Sustainability is becoming a growing challenge at this venture, employing a workforce of approximately 270 employees, market authorities have noted. A cutdown in operating costs is seen as essential.

A cash injection for “Epsilon”, a fresher field in the area also licensed to Energean, could be made as a support for the company. Another option may entail financial support by the Greek State in exchange for a stake in Energean. Alternatively, state guarantees could be offered for a bank loan.

The finance ministry is also expected to become involved in the Prinos rescue effort. Much work lies ahead before any decisions can be reached. These will require European Commission approval.

Gov’t examining pandemic’s impact on Prinos oil field

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The pandemic’s financial impact on offshore Prinos, Greece’s only producing oil field, south of Kavala, is being closely examined by government officials and specialized advisors, energypress sources have informed.

Conclusions have yet to be reached on the extent of the financial damage to the Prinos oil field, licensed to Energean Oil & Gas, but it appears the government will seek financial support for this venture through the European Commission’s Directorate-General for Competition.

Though it is still considered too early for any decisions, the government has apparently already recognized the damage inflicted on Prinos by the pandemic and subsequent drop in demand and oil prices.

The Greek government has pledged production continuity and job protection for Prinos, as was recently highlighted by deputy energy minister Gerassimos Thomas.

Limits have been exhausted to keep Prinos operating, Energean Oil & Gas officials have pointed out, stressing the cost burden on the company.

 

Oil drilling plans on hold, forced by price collapse, pandemic

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Preliminary hydrocarbon exploration work planned by oil companies at licenses in the Ionian Sea and south of Crete is being postponed for an indefinite period that could last as much as a year, possibly more.

Upstream players are revising plans as a result of the collapse in oil prices and the coronavirus pandemic, a double setback for the sector.

Worse still, investment conditions for the Ionian Sea and Crete areas are made even more challenging by the fact that neither has yet to reveal sustainable fields.

In addition, both Greek zones are deep-sea areas of depths ranging from 2,500 to 3,000 meters, making exploration a high-cost venture.

Global oil majors are reducing investments and expenses by the billions in response to the unfavorable market conditions that have emerged over the past couple of months.

Fields with proven reserves have not been spared, which pushes untested fields such as those in Greece even further down the priority list.

The resumption of drilling ventures still at preliminary stages is not likely until oil prices rebound, energy minister Costis Hatzidakis noted in an interview with Greek daily To Ethnos.

It is a similar picture for Cyprus. The Eni-Total consortium yesterday announced it is postponing oil drilling activities in Cyprus’ Exclusive Economic Zone until March or April next year.

PPC boss: Oil cost benefits outweigh pandemic’s damage

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Benefits offered by the sharp drop in oil prices promise to outweigh the negative impact of pandemic-related tariff discounts offered to customers and lower revenues, power utility PPC’s chief executive Giorgos Stassis highlighted to analysts and investors during a two-hour virtual conference held yesterday.

Company financial figures for 2020 and the first half of 2021 have needed to be revised but the coronavirus lockdown measures imposed until now do not appear to have negatively impacted the corporate group, the CEO informed.

On the contrary, operating profit has risen as a result of a significant reduction of energy costs, Stassis explained, noting this gain is greater than reduced turnover figures prompted by lower energy consumption during the pandemic as well as the consequences of electricity bill payment delays by customers.

PPC’s energy expenses rose by 425 million euros in 2019, according to yesterday’s presentation.

The state-controlled corporation’s decarbonization schedule, or withdrawal of lignite facilities, will not be postponed by the pandemic, Stassis noted, responding to related questions.

PPC plans to soon withdraw its Amynteo facility from the grid, while the corporation’s lignite-based electricity generation has been significantly reduced, according to recent company announcements.

Lignite-based production at PPC has dropped by 65 percent compared to last year, according to a monthly report released by the Greek energy exchange in March.

PPC’s lignite facilities financially burden the corporation by 200 to 300 million euros per year, analysts were told yesterday.

The power utility’s retail electricity market share is expected to keep falling in 2020 but an attempt will be made to limit this slide through a new commercial policy, Stassis told analysts.

The company’s renewable energy portfolio will grow to 650 MW from a current capacity of 160 MW over the next three years, he noted.

WTI may plunge again, local market indirectly impacted

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Monday’s unprecedented collapse on the US market of May oil futures, driven down to negative territory by a pandemic-induced evaporation of demand that left the world with an oil oversupply and not enough storage capacity — meaning producers were willing to paying buyers to take it off their hands – could be repeated towards the end of May for June oil futures, analysts have noted.

Besides this week’s price collapse of oil futures in the US, the biggest day-to-day price drop in the history of oil trading was also recorded Monday.

Output, especially by small-scale producers, will gradually be wound down for market equilibrium, or a production correction reflecting the dive in demand prompted by these extraordinary times. However, this process will require some time and may be achieved slightly before June, according to a Goldman Sachs estimate.

The below-zero prices have mostly affected holders of futures contracts, the majority of these being traders, not actual buyers of oil. Actual buyers, namely refineries, make oil purchases at average price levels determined over extended time periods.

The Greek oil market is not directly influenced by the US market’s WTI index, but, instead, primarily takes its cue from Brent prices. Their fall was less acute, dropping to a level of 19 dollars per barrel when the WTI had fallen into negative territory. Brent prices then rose to levels of between 20 and 25 dollars per barrel the following day, yesterday.

The current oil market volatility has created conditions for lower price levels but the lockdown does not permit consumers to take full advantage.

 

US oil futures collapse to below-zero price, unprecedented

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US oil price futures collapsed to unprecedented below-zero prices in New York trading yesterday as a result of the coronavirus pandemic’s evaporation of demand that has left the world with excess oil and not enough storage space, meaning producers are paying buyers to take it off their hands.

The price of crude scheduled for delivery in May collapsed by 55.90 dollars, or 306 percent, to -37.63 dollars per barrel. This means that US traders will need to be paid to forward crude to the country’s main delivery point of Cushing, Oklahoma.

The previous record low figure, 10.42 dollars per barrel, was reached on March 31, 1986.

Considerably higher prices for June, registering approximately 21 dollars per barrel last night, indicate slightly better trader expectations concerning the supply and demand balance as the second half of the year.

 

Greek upstream investments suspended, oil crisis hits hard

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The current oil crisis, prompted by a Saudi-Russian price war and lower demand amid the coronavirus pandemic, comes as the latest setback for the upstream sector. The oil price slide, during which prices have plummeted to levels as low as 25 dollars per barrel, had added to the strain already felt by investors as a result of excessive bureaucracy in the Greek market.

Upstream players, troubled by the overall uncertainty, are believed to have suspended their investment plans despite a mild market rebound over the past few days, lifting oil prices to levels between 33 and 34 dollars per barrel.

Energean Oil & Gas’ Katakolo license off western Peloponnese and the Gulf of Patras license, co-owned by Hellenic Petroleum (ELPE) and Energean, rank as Greece’s two most mature upstream projects.

An environmental study for the Katakolo license has not yet been approved by the energy ministry. Even if it had, Energean would not move ahead with the venture under the existing market conditions. Current oil price levels would simply not cover investment costs.

Just before Christmas, investors behind the Gulf of Patras license were given an 18-month extension to begin drilling at this project, taking the date to June, 2021. Regional port facilities had been deemed insufficient by the consortium. All activity for this investment has also been suspended, sources informed.

Energean to utilize measures for crisis-hit Prinos field

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Energean Oil & Gas, whose offshore Prinos oil field in the country’s north has been heavily impacted by the coronavirus pandemic’s effects on the global economy, including record-low oil prices, intends to utilize relief measures offered by the Greek government for various sectors, including the upstream industry.

The government’s relief measures, introduced to help enterprises weather the financial impact of the unprecedented coronavirus crisis, promise respite in a variety of forms, including tax payment delays, VAT discounts as well as employee allowances covering suspended work contracts.

Energean, which has invested tens of millions of euros to keep upstream  activities alive in Greece, now needs to reduce its Prinos operating costs and keep production flowing. A disruption of production and resumption at a latter date is not technically feasible. Prinos is Greece’s only producing oil field.

The oil price plunge has made big impact on the Prinos field, an old high-cost venture whose production costs are estimated at 21.5 dollars per barrel.

This specific field produces heavy crude of higher refining demands. Subsequently, Energean sells the unit’s output to BP at price levels that are between 7 and 8 dollars lower per barrel compared to Brent prices.

Production at Prinos is declining. Output peaked at 4,000 barrels per day in 2018 but fell to 3,300 in 2019 and is projected to slide further in 2020, officials noted.

Energean has cut back on investments at Prinos by 80 million dollars.

International crude prices plunged from 66 dollars to less than 25 dollars per barrel in the first quarter. Prices have not fallen so low since 2003.

 

Crisis impacting energy sub-sectors in different ways

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Energy companies are not being impacted in a universal way by the impact of the coronavirus pandemic, its effects varying from one sub-sector to another, as was made clear during conference-call presentations of 2019 financial results by two different types of firms, Motor Oil, active in refining and fuel trade, and Mytilineos, whose interests include energy production and supply.

Motor Oil needs to counter lower international oil prices, lowered by the coronavirus outbreak combined with a price war between Russia and Saudi Arabia. Oil prices may have fallen but fuel demand is expected to slide further as stricter coronavirus stay-at-home orders are enforced.

The main challenge for Motor Oil is to maintain liquidity at levels ensuring sustainability.

As for the corporate group Mytilineos, represented by Protergia in the retail energy market, it has yet to experience a drop in electricity demand. Italy, hardest-hit by the coronavirus in Europe, has seen electricity demand drop by 7 percent.

The significant decline in natural gas prices is expected to offer Mytilineos purchase cost savings of about 99 million euros over a one-year period.

The group is continuing its development of a new gas-fueled power plant.

Despite the crisis, the Mytilineos group aims to continue operating its units at full capacity and utilize the availability of low-cost fuel.

Fuel price plunge pressuring refineries, opportunities seen

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The plunge of international crude oil prices is impacting Greek refineries and local fuel trade, while, worse still, market forecasts are impossible to make, even for the short term.

Hellenic Petroleum (ELPE) and Motor Oil, Greece’s two refinery groups, are being tested by the fall of Brent prices to levels of around 30 dollars per barrel. Highlighting this challenge, unleaded 95 octane fuel prices have dropped to less than 1,000 euros per cubic meter (including surcharges before VAT) for the first time in many years.

This represents a drop of more than 100 euros compared to prices on March 9, dubbed “Black Monday” as it was the worst day in markets since the financial crisis, a result of the outbreak of the oil price and output level war between Russia and Saudi Arabia, along with the coronavirus spread’s impact on demand.

The drop in prices is seen continuing. Domestic fuel demand is falling as a result of the Greek government’s broadened enforcement of restrictive measures aiming to contain the coronavirus spread. Local transportation needs have subsequently dropped dramatically, while the only other viable option left for Greek refineries, exports, has been canceled out by plunging fuel demand internationally. Borders have closed and airlines are limiting flights.

The cost of fuel stocks, purchased at far higher prices, is a big concern for both ELPE and Motor Oil. This cost, however, can be partially offset by opportunities currently available for lower-cost production.

On a more positive note, both refineries reduced their loan servicing costs prior to the crisis. This is particularly so for ELPE as the petroleum group was pressured by high borrowing costs. Motor Oil has traditionally pursued a more conservative borrowing policy.

Both refineries will need to take extremely cautious steps amid these highly unpredictable market conditions, analysts agree.

Lower-cost oil, gas an obstacle for RES growth, electric cars

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Lower-cost oil and gas, as well as solar module supply chain irregularities caused by the coronovarirus spread in China, the world’s dominant supplier of solar energy systems, have emerged as obstacles for RES sector growth and investments.

Numerous solar energy projects around the world are being delayed or postponed as a result of the solar module supply problems in China.

The recent plunge of oil and gas prices, prompted by the impact of the coronavirus spread on economies and a simultaneous oil-price war between Russia and Saudi Arabia, has suddenly made RES investments less competitive against conventional technologies in terms of electricity generation, energy efficiency or electrification of sectors such as transportation or shipping.

The duration of lower oil prices remains unknown.

Natural gas prices have fallen as a result of idle LNG shipments in China and forecasts for weaker demand worldwide.

Under the current conditions, market forces will turn against green energy technologies, which had just begun establishing themselves as competitive options against conventional technologies.

Questions are also being raised about the growth prospects of the electric vehicle market, still at an embryonic stage.

 

Pros and cons for refineries, fuel demand sliding

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The drop in oil prices as a result of the price war between Saudi Arabia and Russia and the coronavirus spread presents a major challenge for petroleum firms.

Brent crude’s 30 percent plunge last Monday inflicted major damage on companies stocked with petroleum products, Greek refinery officials informed, as these products had been  purchased at previously higher prices.

The market volatility, however, has also created opportunities, namely lower-cost supply of raw materials without the need for high working capital. Operating costs have dropped considerably.

The major concern at refineries and petroleum product trading companies is demand, or fuel consumption, expected to drop amid the growing number of mobility restrictions being imposed by governments around the world in an effort to contain the coronavirus outbreak.

Demand for gasoline and diesel has dropped since last weekend as a result of reduced transportation needs. This decline in fuel demand is expected to continue following latest preventive measures. The Greek government yesterday announced a measure closing all educational institutions for 15 days as of today.

Fuel demand levels during the year’s first two-month period were unchanged compared to a year earlier, but the month of March has already shown first signs of a decline. Many airlines are cancelling flights.

Petroleum companies fear a further deterioration from May onward, when Greece’s tourism season begins in earnest.

For the first time since 2009, the International Energy Agency has forecast a drop in petroleum consumption for 2020.

Iranian crude buyers brace for prospect of new US sanctions

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The latest deterioration of US-Iran relations, prompted by US President Donald Trump’s policy shift towards the country since taking office, is likely to impact the global oil market, including supply to Greece, as the possible cancellation of a bilateral nuclear agreement between the two countries, which would lead to new US trade sanctions against Iran, cannot be dismissed.

A previous embargo imposed on the country had disrupted Iranian ol exports, forcing long-time buyers, including ELPE (Hellenic Petroleum), to turn elsewhere for supply.

The establishment of a nuclear agreement in 2016 enabled Iran to resume its oil exports. At present, these cover approximately 25 percent of ELPE’s needs.

According to Platts, the energy and commodities information provider, numerous Asian buyers of Iranian crude are preparing for the prospect of a new embargo. Some of these countries are believed to be looking at solutions that would restrict oil imports.

The pressure now being felt by buyers as a result of the unstable climate could prompt them to seek improved supply deals, sector pundits believe.

The US president is expected to discuss issues concerning Iran next week.

New trade sanctions on the country would be embraced by OPEC members as the resulting global oil supply reduction would raise international oil prices and, as a result, enable the cartel to relax or even end an agreement between its members to cut back on output.

Saudi Aramco chief sees future oil shortages, higher prices

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Though lower international oil prices over the past two years have led to a drop in sector investments, conditions for higher prices in the next few years are gradually ripening, according to Amin Nasser, president and chief executive officer of Saudi Arabian oil company Saudi Aramco.

Highlighting the subdued activity of recent times, Nasser, in comments reported by Bloomberg, noted that investments in the oil sector plummeted by one trillion dollars between 2014 and the present.

New production capacity and investment needed in the future are lagging, Nasser told an event at Columbia University in New York.

“While the short-term market is pointing to a surplus of oil, the supply required in the coming years is falling behind,” he noted.

Nasser forecast that a production level of 20 million barrels per day will be needed to cover increasing oil demand and offset shortages prompted by depleted older reserves.

New investments being made are primarily small-scale, short-term moves and therefore will not cover future production needs, Nasser noted.

The Saudi Aramco head said his company forecasts a continual rise in demand during 2018 and 2019, contrary to the current year, for which the International Energy Agency (IEA) expects a slowdown.

ELPE, spurred by favorable supply deals, seen posting 48% EBITDA rise

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Driven by a series of more profitable crude supply agreements reached in recent times, the refinery ELPE (Hellenic Petroleum) is expected to post a first-quarter EBITDA figure of more than 250 million euros, according to market analyst forecasts.

If achieved, this performance will represent a 48 percent year-on-year rise compared to the 169 million-euro EBITDA figure posted for the first quarter last year.

Besides the greater profit margins offered by the refinery’s more recent crude supply agreements, other factors contributing to ELPE’s upward trajectory include its rising production levels and over-performance levels.

These set of factors helped ELPE post a record EBITDA figure of 836 millions euros last year, propelled by a 16 percent production increase to 14.8 million metric tons, as well as a net profit of 329 million euros, up from 45 million euros in 2015 and a loss of 369 million euors in 2014.

In recent times, ELPE has established a number of direct deals with crude suppliers and relied less on traders acting as middlemen. Last year, the Greek refinery reached direct supply deals with Iran’s NIOC and Russia’s Rosneft.

Most recently, ELPE struck a deal for supply of Kurdish-controlled crude within Iraq. A first of at least two shipments is expected within the next two weeks. The order’s delivery should be completed by late May.

According to sources, this crude is of high-performing quality as reflected by its elevated cost of 2.5 dollars per barrel, compared to just one dollar per barrel paid for Iraqi crude. The Kurdish crude is expected to replace the Iraqi crude in ELPE’s energy mix.

According to sources, ELPE’s EBITDA figure totalled 184 million euros for January and February this year, while an additional 70 to 80 million euros is expected to be added by the company’s performance in March.

ELPE has announced it will report its first-quarter results on May 17, a week ahead of the refinery’s scheduled annual shareholders’ meeting.

 

 

Saudi Arabia output cut aiming to boost earnings, finance future investments

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Saudi Arabia, as part of an agreement reached between OPEC members and Russia, has limited its oil production over the past few months, the move’s objective being to support crude prices, reduce international oil reserves and ultimately bolster oil producer revenues.

The national budgets of major oil producing countries, heavily reliant on oil revenues, have been negatively impacted as a result of low oil prices supressed by an oversupply in the market.

It is believed that Saudi Arabia and fellow OPEC members are striving to boost oil prices up to a level of as much as around 60 dollars. If this level is exceeded, US shale production promises to benefit at the cost of OPEC members, whose global oil market share would consequently contract.

Saudi Aramco, the state-owned Saudi Arabian national petroleum and natural gas company, is pushing for an international oil market share of 5 percent by 2018 and earnings of as much as 100 billion dollars.

The country plans to invest its additional earnings in the development of ambitious projects aiming to greatly reduce and eventually eliminate Saudi Arabia’s hydrocarbon dependence.

Saudi Aramco’s market value is currently estimated at close to 2 trillion dollars, equal to that of Google and twice the market value of Apple.

Fuel prices to be pushed up by crude oil, imminent tax hike

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The arrival of higher fuel taxes in Greece, decided on earlier this year and set to take effect as of January 1, coupled with elevated international crude oil prices, which appear to have stabilized at the loftier levels recorded over the past few months, promise steeper fuel prices for all consumer categories.

The higher crude oil prices have already influenced fuel prices, up by about three to four cents over the past ten days or so, elevating gasoline prices to around 1.49-1.50 euros per liter, diesel to 1.18-1.19 euros per liter and heating fuel to 96-98 cents per liter.

The higher special consumption tax, which was imposed on heating fuel on October 15 and will now also be applied to all auto fuels as of January 1, will bring about further price increases.

An extra 3 cents per liter of special consumption tax will be imposed on unleaded fuel, which, along with the VAT surcharge, will increase the tax to 3.7 cents and elevate the fuel’s average retail price to 1.53-1.54 cents per liter.

An additional 8 cents per liter of special consumption tax will be imposed on diesel, which, with the VAT surcharge, will reach 9 cents, taking this fuel’s average retail price to 1.27-1.28 euros per liter.

As for LNG, an extra 10 cents per liter of special consumption tax, to reach 12 cents with the VAT surcharge, will increase the fuel to 84 cents per liter from the current level of 72 cents per liter.

The government anticipates it will collect 492 million euros from these new taxes in 2017.

However, the findings of an IOBE (Foundation for Economic and Industrial Research) study conducted in October support that the fuel tax hike will reduce fuel consumption and, by extension, tax revenues, while increasing business costs.

The tax hike will subdue expected GDP growth by 0.3 percent – 530 million euros per year – in 2017, 2018 and 2019, according to the IOBE study. The subdued GDP growth translates into 10,700 job losses per year and an annual 178 million-euro reduction in other tax revenues and social security fund contributions, the IOBE study determined.