No SPR Resupply, Qatar Invests in Plastic, and more

💰 DoE Turns Down SPR Resupply Bids

In December, the Department of Energy (DoE) said they would begin repurchasing oil for the US Strategic Petroleum Reserve (SPR) for delivery in February. 

After a record release of 180 million barrels through 2022, the SPR dropped to its lowest level since 1984. The DoE intends to initially resupply 3 million barrels in the price range of $67-$72 per barrel. 

According to a recent statement, the DoE rejected initial bids for the SPR stockpile, saying the bids failed to meet price specifications. 

🏭 Qatar, Chevron Expand Petrochemicals

QatarEnergy and Chevron Phillips Chemical are teaming up for the largest petrochemicals complex in the Middle East. 

The Ras Laffan Petrochemicals Complex comes with a price tag of $6 billion and will expand Qatar’s production of plastics and packaging materials. 

QatarEnergy will hold a 70% stake in Ras Laffan, with Chevron Phillips Chemical taking the balance. 

The venture includes two high-density polyethylene (HDPE) derivative units and an ethane cracker. With its North Field expansion project, Qatar’s LNG production capacity will expand from 77 million metric tons to 126 million metric tons by 2027. 

The ethane cracker, with an annual capacity of 2.1 million metric tons of ethylene, will facilitate the transformation of ethane, a component of natural gas, into usable plastic products. 

The new Ras Laffan complex will double Qatar’s ethylene production capacity when it assumes operations in 2026. 

🛢 Oil Navigates Mild Winters and Opening Borders

It appears Europe’s fears of a harsh winter might have been overblown. Warmer-than-average temperatures in the US and abroad have mitigated the need for heating oil and natural gas, driving down near-term prices. 

In the first week of the new year, both Brent and West Texas Intermediate (WTI) had their sharpest weekly decline since 2016 after falling over 8%. 

On the other hand, a moderately encouraging US jobs report and China’s softening COVID policies are creating the potential for a soft economic landing instead of a crushing recession.

There is mixed sentiment around China’s opening borders. Oil and distillate demand is expected to rise as the country drops COVID lockdown measures, though high rates of infections are easing demand forecasts. 

Overall, oil futures show optimistic expectations.

This week, front-month US crude contracts traded at a 56-cent discount to 6-month futures, the largest gap since early December. 

Quick Shots: 

💡 French Utilities Agree To Guaranteed Tariff

French utilities agreed to a guaranteed tariff of 280 euros per megawatt-hour (MWh) for small businesses this week. 

Large swings in energy prices through 2022 put many small businesses in a bind. Firms were forced to book contracts after prices jumped, only to pay above-market rates when prices settled. 

French president, Emmanuel Macron, said contracts booked above the guaranteed rate should be reviewed. 

In August 2022, France’s wholesale electricity prices jumped to over 1000 euros/MWh. 

💨 UK Gets Windy

British wind farms contributed a new record of 26.8% of the country’s electricity in 2022, up from 21.8% the year prior. 

The most notable addition to Britain’s renewables was the Hornsea 2 wind farm in the North Sea. The project became fully operational in August of 2022, and produces enough electricity for 1.4 million homes. 

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