Oil Updates — Crude Climbs; US drillers add oil and gas rigs; EU proposes changes to planned Russian embargo
RIYADH: Oil prices rose nearly 1.5% on Friday, posting a second straight weekly increase as looming EU sanctions on Russian oil raised fears of a supply crunch and prompted traders ignore concerns about global economic growth.
Brent crude futures rose $1.49, or 1.3%, to settle at $112.39 a barrel. U.S. West Texas Intermediate crude rose $1.51, or 1.4%, to end at $109.77 a barrel.
US drillers add oil and gas rigs for seventh consecutive week – Baker Hughes
U.S. energy companies last week added oil and gas rigs for a seventh consecutive week amid high prices and government incentives, though most shale producers prioritized shareholder returns rather than new production expenses.
The number of oil and gas rigs, an early indicator of future production, rose by seven to 705 in the week to May 6, its highest level since March 2020, the service company said on Friday. Energy Baker Hughes Co. in its closely followed report.
Baker Hughes said the total number of platforms increased by 257, or 57%, compared to the same period last year.
U.S. oil rigs rose five to 557 this week, their highest since April 2020, while gas rigs gained two to 146, their highest since September 2019.
Since Moscow invaded Ukraine on February 24, the US government has urged drillers to produce more oil and gas to reduce domestic prices and help allies break their dependence on Russian energy. .
Even though the number of rigs rose for a record 21 consecutive months through April, weekly increases were mostly single digits and oil production is still well below pre-COVID-19 record highs. pandemic.
Crude production in the United States, which reached a record 12.3 million barrels per day in 2019, is expected to increase from 11.2 million bpd in 2021 to 12.0 million bpd in 2022 and 13.0 million bpd in 2023, according to federal energy data.
This week, major shale producers in the United States reported bumper first-quarter profits and most poured cash into higher dividends and share buybacks as oil prices hit record highs. For years.
But with oil prices up around 47% so far this year to around $110 a barrel, after climbing 55% in 2021, a growing number of energy companies have said they plan to increase their capital expenditure for the second consecutive year in 2022.
U.S. financial services firm Cowen & Co. said the independent exploration and production companies it tracks expect to increase spending by about 29% in 2022 from 2021 after increasing spending by about 4% in 2021 compared to 2020.
This follows a drop in capital spending of around 48% in 2020 and 12% in 2019.
US investment bank Piper Sandler expects the total number of rigs in the US to average 684 in 2022 and 783 in 2023. That compares to an average of 478 in 2021, according to Baker Hughes.
The average annual rig count peaked at 1,919 in 2012 and hit a record high of 433 in 2020, according to Baker Hughes data dating back to 1988.
EU changes oil sanctions plan against Russia: sources
The EU has offered to modify its planned Russian oil embargo to give Hungary, Slovakia and the Czech Republic more time to redirect their energy supplies, EU sources said, although they failed to achieve a breakthrough on May 6.
The EU executive this week announced the embargo in its toughest set of sanctions yet against Russia over the conflict in Ukraine. But Hungary and other EU member states have said they are worried about the impact on their own economies.
The amended proposal – which EU envoys discussed on the morning of May 6 without reaching an agreement – would help the three countries upgrade their refineries to process oil from elsewhere and delay their exit from Russian oil until 2024, they said. indicated the sources.
The initial proposal called for an end to European imports of Russian crude oil and petroleum products by the end of this year.
There would also be a three-month transition before banning EU shipping services from carrying Russian oil, instead of the initial month – to address concerns raised by Greece, Malta and Cyprus over their shipping companies, said added one of the sources.
Diplomats said the talks were complex, but many said they were confident the 27 EU governments could agree before next week.
One said the Commission was in talks on Friday afternoon to find a compromise with Budapest and possibly Bratislava.
“I don’t think we’ll see a breakthrough today, more likely this weekend,” the diplomat said.
According to the initial proposal, most EU countries were to stop buying Russian crude oil six months after the measures were adopted and to stop imports of refined petroleum products from Russia by the end of the year. year. Hungary and Slovakia initially had until the end of 2023 to adapt.
According to the changes, Hungary and Slovakia could buy Russian oil from pipelines until the end of 2024, and the Czech Republic could continue until June 2024, if it does not obtain oil via a pipeline. from southern Europe earlier, the sources said.
Bulgaria had also asked for waivers, if others got them, but was not offered any concessions on deadlines, “because they don’t really matter”, an official said. The other three countries that have been given more leeway “have an objective problem”, the official added.
One of the sources said the extended timelines were calculated on likely construction times for pipeline upgrades. The official said Hungary and Slovakia only account for 6% of EU oil imports from Russia, and the exemptions would not change the impact of the ban on the Russian economy.
Top EU diplomat Josep Borrell said on Friday he would call an extraordinary meeting of EU foreign ministers next week if no deal was reached by the weekend.
Ukraine calls for a total Russian embargo
Meanwhile, Ukrainian Finance Minister Serhiy Marchenko on May 6 called for a full international embargo on Russian oil and gas following Moscow’s invasion of Ukraine.
Marchenko told an online briefing that Ukraine was struggling to balance its budget after 10 weeks of war and said as finance minister he could not be happy with how quickly the Financial aid came from abroad.
Referring to what he called “the inadequacy of the sanctions that have been introduced”, he said the high price of oil and natural gas meant that Moscow had a budget surplus and “they feel quite easy”.
“The main issue is a complete embargo on the purchase of gas and oil from the Russian Federation. This is something that needs to be worked on and that the Ukrainian authorities are actively working on,” he said. “This will remove the possibility of financing the war.”
(With contributions from Reuters)