Energy and commodities highlights: Oil market tensions, European gas flows, Mozambique’s LNG plans

For the second time in as many weeks, oil markets were jolted by events in the Middle East, with prices jumping on reports that Iran had shot down a US drone over the Strait of Hormuz on June 20.

Crude prices continued to rise on June 21, on fears that the US and Iran could be headed towards a military confrontation.

The latest incidents could affect flows of oil and products from the Persian Gulf, with traders and shipowners saying they were assessing risk premiums and freight rates. Japanese refiners have started considering alternative crude supply sources in order to avoid transit through the Strait of Hormuz.

The situation is also of great concern for Iraq, which is heavily dependent on shipping through the Persian Gulf to export its oil to Asia, Europe and the US. A rocket strike on June 19, on a compound near Basrah that houses several international oil companies, has added to the tension.

Earlier in the week, OPEC and its allies finally confirmed the dates for their next Vienna meeting as July 1-2, after a long period of uncertainty that unsettled markets.

In Europe, gas market stakeholders were set for the start of two-way flows on the BBL pipeline that links the Netherlands and the UK, on July 1. Enabling UK exports via the BBL will add to existing export capacity on the IUK pipeline. This could change gas flow and pricing dynamics in northwest Europe at a time when the Netherlands’ gas output is declining.

Meanwhile, Russian gas exporter Gazprom tried to reassure the sector that gas supply to Europe via Ukraine was not in peril, offering to extend current transit arrangements past the scheduled expiry at the end of 2019. Disagreements over transit contracts, as well as the expected startup of Nord Stream 2, have led to concerns about the future of the transport route.

For Ukraine’s part, the halt of direct purchases of Russian gas from November 2015 has driven the need to boost domestic production. The country is seeing a resurgence in upstream activity and recent tenders attracted interest from several international companies.

GRAPHIC OF THE WEEK

Mozambique’s nascent LNG sector received a boost this week after a final investment decision was made on the

. S&P Global Platts explored the country’s projects and the LNG and gas infrastructure landscape across Africa.

Click for full-size infographic

LISTEN: Angola’s challenges as crude production and differentials slide

Production is at fresh lows and prices are following suit, but there are signs Angola is taking steps to stem the decline. S&P Global Platts editors Joel Hanley, Eklavya Gupte and Kristi Rotlaender discuss an expected upturn in demand for Angola's heavy sweet crude, and China's role as a major buyer.

SHIPPING

Eleven major shipping banks, representing a bank loan portfolio to global shipping of about $100 billion, will for the first time integrate climate considerations into lending decisions to incentivize maritime shipping's decarbonization.

LNG

US LNG feedgas demand edged up toward record levels on June 17, as commissioning activity at recently completed export facilities along the Texas and Louisiana Gulf Coast continues to ramp up.

EVs

The car industry should prioritize hybrids over fully electric vehicles to bring about a more immediate and meaningful reduction in CO2 emissions, independent emissions testing company Emissions Analytics said June 17.

THE LAST WORD

– US secretary of state Mike Pompeo called on other states to step up efforts to protect navigation through the Strait of Hormuz.