Oil news: signs of reversal, new field and more
#Oil #Technicalforecast #Brent #Oilprice #PMIdata
- Oil shows signs of reversal
- British energy industry to boost profits by 27%
- New field in North Sea.
In early May, Brent prices failed to overcome the support level of 73 – $5 and cautiously recovered to $9.
Production around the world is struggling. This is evident in the PMI data.
PMI data in Japan, France, Germany and the US were released on Tuesday 23.05. Only Japan showed signs of recovery with a small rise of 50.8 after 6 months of decline.
In the rest of the countries the production continues to decline. It has collapsed hardest in Germany, where the index has fallen to levels previously seen during the financial crisis of 2008 and during the Covid-19. This state of affairs in production continues to put pressure on metals and commodity prices.
Earlier support to Brent prices was provided by the news about the beginning of replenishment of the US strategic reserve, which is at its lowest level for the last 40 years and OPEC production cuts, which started from May. This factor will certainly provide support, but against the background of falling demand it is unlikely to increase prices much.
Technically, the price of oil is rebounding from the upper boundary of the descending (green) channel. Today’s candlestick has already covered all of yesterday’s growth, which could be a signal for a local price reversal. The nearest target is the support level of 73-75.
In addition to negative data on the manufacturing sector, there is also a strong strengthening of the dollar, which puts additional pressure on commodities. Most likely, we will see correction to the levels of 73 – 75. From here we will have to keep an eye on the price behavior near that level.
British energy companies are allowed to increase their margins by 27%.
After many energy companies in the UK faced financial difficulties during the energy crisis, the country’s energy market regulator has proposed changing the rules on the profits companies can make. This could lead to a 27% increase in their margins.
The U.K. has an energy price cap that protects consumers from over-billing by limiting how much energy suppliers can charge them. However, it also creates additional financial obligations for the suppliers themselves.
A proposal put forward by regulator Ofgem proposes to implement a hybrid interest and tax (EBIT) supplement to earnings, within a set tariff. This supplement would consist of a fixed and a variable component based on a revised estimate of the capital used and its cost. This revision is considered necessary because the energy market has changed significantly since the initial supplement was established in 2018.
The proposal is to set an indicative EBIT surcharge of £47 per customer, instead of the current margin surcharge of £37 per customer, allowing energy companies to make more money.
There is now an open comment and response period that runs through June 28, 2023.
The changes based on the consultation are expected to take effect in October 2023, an Ofgem spokesman said.
This would be good news for energy suppliers in the U.K. as they have struggled with rising commodity prices in late 2021 and last year, especially for natural gas.
Ofgem also announced today that households that use two fuels and pay their bills by direct debit based on typical consumption will have a ceiling price for energy between July 1 and Sept. 30. That price will be $2,566 (£2,074) per year. The new cap is down $618 (£500) from current levels due to recent declines in wholesale energy prices.
New field in the North Sea
Aker BP of Norway has reported the discovery of a large oil field in the Yggdrasil area of the North Sea, exceeding expectations. Preliminary estimates indicate the possibility of recovering 40 to 90 million barrels of oil equivalent, well above the company’s previous projections of 18 to 45 million barrels. The discovery will allow Aker BP to expand its resource base and develop the Yggdrasil field, previously estimated at 650 million barrels. Production licenses 873 and 442 associated with this discovery include Equinor ASA and PGNiG Upstream Norway as partners. A development and operating plan for the project was submitted in December 2022, with production planned for 2027.
The North Sea is known for its significant oil and gas reserves. According to a report by the Oil and Gas Authority, known reserves in the region were 4.4 billion barrels of oil equivalent at the end of 2020. The Authority estimates that up to 14.9 billion barrels of oil equivalent could be recovered by 2035, subject to future studies. Despite warnings from climate scientists and energy economists to reduce fossil fuel development, the U.K. government is now considering approving the development of a new oil and gas field in the North Sea. The Rosebank field is expected to produce 500 million barrels of oil over its lifetime.