December 2022 - Portland Pricing

Monthly Pricing - 01/12/2022

Brent crude started the month at around $94.83/bbl, before peaking at $98.57/bbl a few days later on November 4th, as planned OPEC+ production cuts initially impacted global supply levels. However, in the weeks to follow, Brent crude depreciated by over 14% to end the month at $83.03/bbl, as fears of a global recession and ongoing market uncertainty in China caused by widespread COVID lockdowns and protests started to negatively impact the demand outlook.

GBP started November at $1.151 against USD and fell to its lowest point of the month at $1.118 within the first week, as investors responded to the BoE announcing its 8th consecutive interest rate hike (3%), despite the UK declaring that it had entered an official recession. GBP then proceeded to rise by 7% to end November at its highest level in over 3 months, trading at $1.214 against USD, following a positive market response to the British Government’s autumn budget statement.

November has seen some key developments in the war between Russia & Ukraine, with Ukraine successfully recapturing the regional capital of Kherson earlier this month and the Russian price cap on crude oil due to come into effect from the beginning of December. However, EU ambassadors are yet to reach an agreement on the price for the upcoming cap, with the deadline for an official announcement currently set for December 5th.

Price Drivers

Supply A month-long strike at 2 major French refineries (Feyzin 117kbpd & Gonfreville 240kbpd) came to an end earlier this month, with further strike action still ongoing at a large BP refinery in Rotterdam over pay disputes. Despite OPEC+ implementing a 2 million bpd production cut at the start of the month, a virtual meeting is to be held on December 4th to discuss the possibility of further cuts in line with the faltering global oil market.

Demand As one of the world’s top crude importers, China’s widespread COVID outbreak and stringent lockdown policies largely dampened the global demand appetite, as they reported record-high levels of positive COVID cases across the country. November has seen many major central banks raise interest rates to unprecedented levels in an attempt to bring down record-high levels of inflation, with countries such as the UK declaring an official recession period.

Geo-Political Talks between the EU ambassadors are still ongoing as they try to unanimously decide on a reasonable price cap on Russian oil, with estimated prices of between $65/bbl and $70/bbl and a decision due on December 5th. Earlier in the month, world leaders travelled to Sharm el-Sheikh, Egypt for the annual COP27 climate conference, as the EU agreed to a loss & damage fund to help poorer countries with climate disasters.