Chinese Energy Moves Jolt Prices
October 1, 2021
The big news from yesterday was that China’s central government officials ordered the country’s top state-owned energy firms to secure supplies for winter needs at all costs. This news spiked the market to up roughly five cents per gallon quickly after this news hit the wires. Prices did ease back from the highs as the day wore on. China has had some blackouts recently as a result of high prices for coal and natural gas. This is something the government is desperately trying to alleviate and, as a result, issued the order to get supplies bought at any cost.
Today is October 1, and OPEC+ is supposed to add 400,000 BPD to supply. Will they be able to do this is the market’s question as this was difficult for them to do in September. There are some rumblings that the OPEC+ group may decide to increase production due to the market’s needs at a meeting on Monday.
S&P Global Platts Analytics said gas-to-oil switching and increasing demand in Asia amid tighter inventories could increase prices through October, before increased supply from OPEC+ and elsewhere limits the upside.
The dollar is at its highest level to start the fourth quarter of 2021. This week is shaping up to be the best week for the dollar since June, as investors are expecting the hawkish sounding Fed to lift US interest rates sooner than its major peers. This brought pressure to commodities across the board, as the dollar has rallied 1.1% so far this week.
Analysts at MUFG maintain a bearish oil price profile along the curve, forecasting Brent at $64 per barrel at the end of the year but acknowledge that the global gas crunch could lead to tightening physical markets. UBS analyst noted it is only a matter of time before pressure builds on OPEC+ to limit higher prices.