Russia’s Oil Price Cap Will Not Affect OPEC

The remarks could help ease tensions between the United States and Saudi Arabia, the world’s biggest oil exporter and the de facto leader of OPEC.

Last week, OPEC+, including Russia, announced a 2M barrel per day reduction in production to balance markets and reduce volatility.

According to Saudi Arabia, production cuts will be around 1M barrels (BPD), with several OPEC members struggling to meet production plans. International oil prices fell after the US Energy Information Administration (EIA) announced on October 14 that crude inventories fell by 1.7 million barrels.

That compares with last week’s inventory of 9.9 million barrels and the October 14 API estimate for crude and oil declines. The EIA reported a 100,000-barrel drop in gasoline inventories, compared with a two million-barrel increase last week.

Meanwhile, President Biden has announced the release of an additional 15M barrels of crude oil from the strategic petroleum reserve, bringing the 180M-barrel release program announced earlier this year to combat rising gasoline prices to a close.

Estonia Turns Back to Shale Oil

In response to Moscow’s invasion of Ukraine, Baltic states turned off Russian power. They halted other imports, prompting Estonia to restart its shale oil power plants and reverse its efforts to phase out heavily polluting fuels.

It reflects actions by the European Union as the government tries to cut Russian gas, which once supplied nearly 40 percent of the bloc’s demand, and races for the winter break to find alternative gas or alternative fuel suppliers.

According to the Estonian Ministry of Economy and the US Energy Information Administration, generating 1 MWh (megawatt hour) of electricity from shale oil emits about 1 ton of coal-equivalent CO2.

Electricity prices in the three Baltic countries, which were previously major importers of Russian power, have risen sharply, reaching 4,000 euros ($3,908) per MWh in August, the maximum allowed by the stock exchange. In the three states, inflation has reached around 20%.

Estonian power plants had a capacity of 3 gigatonnes in 2020. Two gigatonnes came from plants that burn local shale oil.

EU Gas Prices Mixed

Wholesale gas prices in the UK and the Netherlands were mixed as uncertainty over a new EU price cut proposal, strong LNG flows, and mild weather pushed down prices for some contracts.

The benchmark Dutch contract also rose 5.80 euros in the first month to 117.02 euros per megawatt-hour (MWh) and fell for a fifth straight day to its lowest level since mid-June.

Furthermore, the next-day delivery contract was down 0.51 euros to 72.023 euros/MWh.

UK futures were down 9.01 pence at 31.02 pence. Meanwhile, November futures were up 5.98 pence at 194.98 pence.

EU leaders will endorse the bloc’s latest proposals to reduce energy prices this week, but the Commission is under pressure to go further and cap the price of gas used in power generation.

The gas system in the United Kingdom was 14M cubic meters (mcm) oversupplied.

Peak wind generation was around 14.92 gigatonnes (GW) on Wednesday and Thursday, out of a total metered capacity of around 20 GW, according to Elexon data.

Wind power typically reduces the demand for gas from power plants.

The benchmark contract in the European carbon market was 1.11 euros higher at 68.842 euros per tonne.