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Market News Oil falls $1 after deep Saudi price cuts spur demand concerns

Oil falls $1 after deep Saudi price cuts spur demand concerns

Oil extends losses after deep cuts to Saudi crude prices for Asia; TotalEnergies to Invest $27 Billion in Iraq.

Eden
2021-09-06
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Oil prices fell about $1 on Monday, extending losses after the world's top exporter Saudi Arabia slashed crude contract prices for Asia over the weekend, reflecting well-supplied global markets and concerns over the outlook for demand.


Brent crude oil price for fell 0.9%, to $72.04 a barrel by 16:00(GMT+8) while U.S. West Texas Intermediate crude oil price was at $68.73 a barrel, down 56 cents, or 0.8%.


State oil giant Saudi Aramco notified customers in a statement on Sunday that it will cut October prices for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel. The price cuts were larger than expected, according to a Reuters poll among Asian refiners.


The decline in crude oil futures added to falls on Friday after a weaker than expected U.S. jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic.


Losses were capped by concerns that U.S. supply would remain limited in the wake of Hurricane Ida.


The U.S. government is releasing crude from strategic petroleum reserves as production in the U.S. Gulf Coast struggled to recover. Some 1.7 million barrels of oil and 1.99 billion cubic feet natural gas output remained offline, government data released on Friday showed, while power shortages are preventing some refineries from resuming operations.


The hurricane also led U.S. energy firms to cut last week the number of oil and natural gas rigs operating for the first time in five weeks, data from Baker Hughes showed on Friday. The oil rig count alone fell the most since June 2020.


TotalEnergies to Invest $27 Billion in Iraq


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French energy giant TotalEnergies SE plans to invest $27 billion in Iraq in a 25-year deal, according to people familiar with the matter, boosting its position in the country at a time when other Western companies have been rethinking their exposure.


The deal includes investments in various energy projects, including injecting seawater into oil fields to increase the amount of oil recovered, a natural-gas processing plant and a solar farm, the people said. Total has pledged an initial investment of $10 billion, one of the people said.


"This is the largest investment in Iraq by a Western company,"   Iraq Oil Minister Ihsan Ismail said. "Implementing these projects is the challenge we face now."


"Happy to be in Basra where I visited gas and oil fields," Pouyanne tweeted in January. "Reducing flaring and increasing gas production is a priority for Iraq as well as for Total. Let's work together!"


Iraq has immense reserves of oil and gas.


Despite being the number two producer in the Organization of the Petroleum Exporting Countries, it is experiencing an acute energy crisis and chronic blackouts that fuel social discontent.


Officials justify the lack of investment and the dilapidated state of its energy network by citing falling oil prices, which represent more than 90 percent of state revenue.


The country is highly dependent on neighbouring Iran, which supplies a third of its gas and electricity needs.


The contract inked on Sunday with TotalEnergies covers four projects, an Iraqi oil ministry source said ahead of the signing ceremony.


One of these aims to pipe seawater from the Gulf to southern Iraqi oilfields. Water is used to extract oil from subterranean deposits.


Another is intended to increase production from the Artawi oilfield near the southern port of Basra from 85,000 barrels per day to 210,000 bpd.


A third project will see the construction of a complex to exploit production from the sector's gas fields.


Rather than flaring or burning off the excess, the plan is to recover it for use in electricity generation.


The premier's office said this will "reduce gas imports".


The fourth project will see the installation of a solar farm in Artawi.


The Iraqi source said that ultimately, the solar panels should produce "1,000 megawatts" of electricity, the equivalent of the energy produced by a nuclear reactor.


"Iraq will not pay anything," the source added.


Electricity produced by solar power "costs 45 percent less than that produced by traditional power stations", the Iraqi government said.


In January, Ismail said the relationship with the French firm was "developing rapidly".


France's former Total, which has renamed itself TotalEnergies to symbolise a diversification into cleaner sources of power, is one of the world's top five energy companies.


While still focused on oil and gas, the company has indicated that this year it will devote 20 percent of its growth investments to electricity and renewable energies.

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