Saudi market bounces back as oil prices smash record: Opening bell

RIYADH: With crude prices surging past $125 a barrel, oil company executives attending CERAWeek in Houston called for a more favorable global government energy policy to help the industry resolve the supply crisis that deepened after Russia’s invasion of Ukraine.

On Tuesday morning, President Joe Biden announced a US ban on Russian oil and other energy imports, while Britain said it will phase them out by year-end.

Oil prices settled the session 4 percent higher and have shot up 30 percent since the invasion. Russia exports 7 to 8 million barrels of crude and products daily.

Even before the invasion, the oil industry had not kept up as demand rebounded to pre-pandemic levels. Several shale executives at the CERAWeek energy conference in Houston contended the market would not have been as tight had the government been more supportive of the industry.

“We knew this was a thinly balanced market and it didn’t take much to tip it one way or another,” said Ryan Lance, CEO of ConocoPhillips.

Washington should boost permits for natural gas 

Scott Sheffield, CEO of Pioneer Natural Resources, said Washington should boost permits of natural gas lines, speed up permits for liquefied natural gas (LNG) facilities and encourage more leasing activity.

Oil executives supported the ban on Russian oil, but they have criticized the Biden Administration since it imposed a temporary ban on new federal permits and canceled the Keystone XL project. The administration has countered by saying that shale companies are sitting on 9,000 existing permits they have yet to use to boost oil output. US oil company executives have cut drilling and exploration in response to shareholder demands for higher profit margins.

US Energy Secretary Jennifer Granholm told a petroleum conference in December the administration wants companies to drill more.

“We’re happy to see the administration do whatever they need to do to be effective in trying to end this invasion,” said Chesapeake CEO Nick Dell’Osso. He said Chesapeake has had some “limited or light conversations with politicians in general” as oil prices have spiked, but added, “We think there needs to be a lot more.”

US oil output not recovered

US oil output peaked at nearly 13 million bpd in late 2019, but producers cut activity drastically during the pandemic, and output has not recovered — in part because oil company investors have urged shale players not to overspend.

Some shale executives said a rapid increase in output is not likely because supply-chain issues have raised costs. That points to more pain for consumers and businesses dealing with spiraling costs for diesel and gasoline. 

And with major buyers effectively self-sanctioning Russia from global markets, executives warned there are few ways to replace that nation’s exports, and governments need to plan for long-term disruption. “We need to think about this in the context of more than just a few months — heaven forbid this lasts more than a year,” said Lance.

OPEC+ members struggling to meet existing production quotes

Consuming nations have been pressing for faster output increases by Saudi Arabia, the de facto head of the Organization of the Petroleum Exporting Countries and its allies known as OPEC+. But the group has limited spare capacity to produce more and some OPEC+ members are already struggling to hit existing production quotas.

The White House has also been pressing to revive a nuclear deal with Iran that would add barrels to global supply.

Skyrocketing oil prices underline the need to accelerate cleaner energies rather than having to rely on fossil fuel markets which are “vulnerable to bad actors,” White House press secretary Jen Psaki said in a tweet this week.

Sheffield said the industry should be responding on its own as well. “We need to ask for more increased activity from all the shale producers, both oil and gas,” Sheffield said.

900 million people have no access to energy for basic needs

Some 900 million people in the world, most of them in Africa, still have no access to energy for basic needs, Nigeria’s oil Minister Timipre Marlin Sylva said on Tuesday, speaking during the CERAWeek energy conference in Houston.

“We are still in transition from firewood to gas,” Sylva said. “Please allow us to continue with our own transition.” 

Other countries with oil discoveries still in development, including Ghana, Guyana, and Suriname, also have said they cannot be expected to give up the chance to benefit from oil and gas that helped build more developed economies.

“They want all of us, including those of us without food, to carry the burden of transition,” Nigerian National Petroleum Corporation, or NNPC, general manager Bala Wunti said, speaking at CERAWeek.

Nigeria is now facing a double blow from high prices of gas for cooking that it imports and lack of investment in its oil industry, minister Sylva said, amid a global push by banks and funds to restrict investment in oil as part of a drive to boost environmental, social and corporate governance.