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The Energy Cable #22 – China is not playing ball

Will OPEC+ be able to rock the boat in energy markets again? Saudi Arabian budget break-evens are probably 5-7$ above current selling prices and MBS could be tempted to try and force the price higher again. The issue is that China is not playing ball and other OPEC+ members oppose further production cuts.
2023-05-30

Let’s have a look at the energy markets with an appetizer from Steno -and 3F Research’ institutional coverage of the energy markets. We do NOT always agree, but this is the strength of this maverick energy publication.

 

Steno Research – From China with love

We’ll start out this week’s energy cable with a screenshot from a headline in the Financial Times. This is what it looks like when Putin has become Xi’s padawan thinking he could easily diversify away from his European markets. Turns out that is not quite as easy, especially given the weak demand in China, which is not incentivizing any rush to get piped natural gas from Russia to China. This just tells you all you need to know about the bleak energy demand outlook at the moment.

 

 

It really does seem like Putin is currently stuck with mediocre cards and given the weak natural gas demand worldwide we’ll put on our tinfoil hat for a minute and wonder if the last piped gas from Russia to Europe is the next shoe to drop.

For Putin, it would give him an opportunity to disrupt flows to Europe and recreate some of the havoc from last summer and it will come at the cost of already plummeting prices and he could send prices back up which would benefit his LNG export. His major downside here would of course be the loss of steady income via the piped gas.   

 

 

Will OPEC+ be able to rock the boat in energy markets again? Saudi Arabian budget break-evens are probably 5-7$ above current selling prices and MBS could be tempted to try and force the price higher again. The issue is that China is not playing ball and other OPEC+ members oppose further production cuts.

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