Supply disruption in Libya causes uncertainty in oil markets

Oil prices started the week with a major rally due to Khalifa Haftar’s government in Benghazi declaring a nationwide halt to oil production and exports.

– One of Libya’s two rival powers, the Benghazi government led by Field Marshal Khalifa Haftar has said it will halt the country’s crude oil production and exports, declaring national force majeure.

– The decision comes amid a growing dispute over who should appoint NOC officials and control oil revenues, exacerbated by the kidnapping of Central Bank officials and growing calls to investigate the potential misuse of Libya’s financial resources.

– Even the government in Tripoli has called for institutional change, calling for the replacement of central bank governor Sadiq al-Kabir, a key position given that all crude oil revenue goes to the central bank.

– After recovering from oil blockades in 2020 and 2022, Libya’s production has been relatively stable at 1.2 million b/d of late, with just over 1 million b/d exported to global markets.

Market movers

– Saudi Arabian shipping company Bahri has agreed to buy nine scrubber-equipped VLCCs from Greek firm Capital Maritime & Trading for $1 billion, adding to its current fleet of 40 super-large tankers.

– Norway’s state energy company Equinor (NYSE:EQNR) will close its Vietnamese office and cancel plans to invest in the Asian country’s offshore wind sector due to regulatory hurdles.

– Global oil trader Vitol is under investigation in the Netherlands over alleged bribery in Kazakhstan, with the country’s prosecutor claiming it failed to disclose suspicious transactions to consultants.

Tuesday, August 27, 2024

Khalifa Haftar became the savior of oil bulls this week, with Libya’s eastern government in Benghazi announcing a nationwide halt to oil production and exports. In an attempt to wrest control of the central bank and national oil company from the government in Tripoli, the current standoff could become the next phase of Libya’s high-stakes civil war. ICE Brent futures rose above $81 a barrel on Monday, holding roughly flat even as the market began to digest the news from Libya.

The UN calls for a global phase-out of oil and gas. UN Secretary-General Antonio Guterres called on world leaders to phase out oil and gas and halt any new hydrocarbon exploration, citing the Pacific island of Tonga and arguing that greenhouse gases are cooking our planet.

China signals M&A interest in oil projects. China’s national oil company CNPC said it is reviewing its global strategy and will look to sign new deals, focusing on gas liquefaction capacity and deepwater offshore projects, as it faces an uphill battle with maturing domestic production.

Kuwait signs long-term agreement with Qatar. Kuwait has signed a 15-year contract with Qatar to supply up to 3 million tonnes of LNG per year from 2025, to be delivered to Al Zour port, as meeting with Kuwait’s energy production made even more difficult amid recurring power outages.

Brazil allows producers to inject less natural gas. Brazil’s President Lula da Silva has signed a decree authorizing oil regulator ANP to impose reductions in natural gas reinjection into new oil wells in an effort to make more gas available for the domestic power generation market and to cheaper energy.

Canada to impose punitive tariffs on Chinese goods. The Trudeau administration has imposed a 100 percent tariff on Chinese electric vehicle imports, as well as a 25 percent tax on steel and aluminum produced in China, with Beijing calling the measure protectionist and in defiance of WTO trade rules.

California refiners revolt against Newsom Bill. California refiners disagree with Gov. Newsom’s proposal, which would allow the state to force refiners to sell their gasoline stocks during periods of short supply, saying it misdiagnoses the problem instead of focusing on poor infrastructure and restrictive quality specifications .

The quality switch left potential sellers confused. Sellers of battery lead metal on the Shaghai Futures Exchange are being forced to change trading strategies after the ShFE cut the bismuth content of the deliverable metal in its contracts, reflecting China’s stricter emissions standards.

ExxonMobil seeks investment in oil. The US oil major’s global outlook ExxonMobil (NYSE:XOM) oil production declines at a rate of 15% per year without new investment, doubling the IEA’s estimate of 8%, assuming that oil demand will stabilize after 2030 and remain more or less stable until 2050.

Canada’s rail unions are considering resuming the strike. Defying the government’s mandatory arbitration procedures, Canadian rail workers’ unions continue to issue strike notices to Canadian National because they believe the Ottawa mandate circumvented the collective bargaining process and jeopardized workers’ rights.

Improving iron ore eases China’s worries. Iron ore inventories held at Chinese ports fell for four straight weeks, indicating that a period of severe oversupply could soon ease as steel demand improves, lifting iron ore futures above the $100 per metric ton threshold.

Ukraine’s energy sector has been affected by Russian strikes. In one of the biggest strikes ever in the Russia-Ukraine war, Russia launched more than 100 missiles at Ukraine’s energy infrastructure, triggering nationwide blackouts and damaging Kiev’s hydroelectric power plant and water supply.

US slaps sanctions on Russia’s next big project. The US Treasury Department has announced new sanctions on Russia’s flagship Arctic upstream project, Vostok Oil, targeting 10 companies associated with pipeline construction and the export terminal, as Rosneft appears to be falling short of its commissioning goal for 2024.

Brazil wants a bigger share of Argentina’s shale. Brazil’s national oil company Petrobras (NYSE:PBR) is actively seeking shale gas deals in Argentina as part of a larger plan to increase the company’s exposure to the Vaca Muerta shale, potentially by acquiring a stake in upstream firm Tecpetrol.

By Michael Kern for Oilprice.com

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