Oil Updates — Crude edges up; US says Russian oil revenues falling due to price cap

RIYADH: Oil prices edged up on Thursday, building on gains in the previous session as China’s demand outlook improved, though gains were limited ahead of upcoming inflation data from the US. 

Brent crude had risen 8 cents, or 0.10 percent, to $82.75 per barrel by 09.40 a.m. Saudi time, while US West Texas Intermediate crude also rose 6 cents, or 0.08 percent, to $77.47 per barrel. 

Both benchmarks rose 3 percent in Wednesday’s session, boosted by hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output. 

China’s CNOOC targets record oil, gas output in 2023 

China’s CNOOC Ltd. has raised its 2023 production target by around 8 percent to a record 650 million to 660 million barrels of oil equivalent, it said on Wednesday. 

The state-controlled offshore oil and gas company produced about 620 million boe last year, exceeding its goal of 600-610 million boe, CNOOC said in a filing to the Hong Kong Stock Exchange outlining its annual strategic outlook. 

CNOOC is aiming for 6 percent average annual production growth by 2025 when output is forecast to hit 2 million boe a day, CEO Zhou Xinhuai told reporters following the release. 

Under its stated strategy to boost the share of natural gas in its portfolio, CNOOC is stepping up the development of large domestic finds like Baodao 21-1 in the Qiongdongnan basin of South China Sea as well as gas reservoirs in global projects. 

CNOOC has made a “good discovery” of natural gas in Gabon and is pushing for more condensate and gas development in Guyana, Zhou added. He did not elaborate. 

The company this year plans to spend 100-110 billion yuan ($14.8-16.3 billion). That compares with last year’s 100 billion yuan, the second highest ever after the 105.7 billion yuan it spent in 2014. 

CNOOC said it expects to launch production at nine new projects this year, including domestic fields Bozhong 19-6 in the Bohai Bay basin and Lufeng 12-3 in the Pearl River Mouth basin, and global projects like Mero 2 in Brazil and Payara in Guyana. 

CNOOC is also accelerating the drilling of coal-seam methane in the onshore Ordos basin in northern China, as well as in the early exploration of shale oil in the Beibuwan basin of the South China Sea. 

On green energy, the listed entity repeated that it will allocate 5-10 percent of capital expenditure to low-carbon investment with a focus on offshore wind power, but said it has no plan to acquire new energy businesses. 

Separately, CNOOC pledged to maintain its dividend payout ratio at 40 percent or higher between 2022 and 2024. 

Russian oil revenues falling because of price cap: US official 

Russian oil revenues are falling due to the price cap that Western countries imposed on its crude oil shipments and, ahead of further caps on Russia’s oil products, Europe is well positioned to manage any price pressures, a US Treasury official said on Wednesday. 

The Group of Seven countries, Australia and the EU will extend sanctions on Russia for its war in Ukraine by putting a price cap on its oil products, such as gasoline and diesel, on Feb. 5. The coalition placed a $60 per barrel limit on sea-borne Russian crude oil sales late last year.

Russia is losing a great deal of money daily because of the cap, the senior Treasury official told reporters in a teleconference. 

“For every dollar, Russia is not getting in revenue, that’s one less dollar they can use propping up their economy, or investing into weapons they need to fight this illegitimate war in Ukraine,” the official said. 

The official did not estimate Russian revenue losses from crude oil shipments. But the cap has increased shipping costs on some Russian oil cargoes because it forces countries that want Russian oil above the cap to use a shadow fleet of non-Western ships and risk using “less trustworthy” insurance, the official said. 

US officials say the cap is “institutionalizing” price discounts for Russian oil pursued by big petroleum consumers, including India and China. 

(With input from Reuters)