Oil prices are set for a monthly decline as concerns over demand grow

Uncertainty continues to dominate oil markets, although demand concerns appear to be outweighing supply shocks to push oil prices to a monthly loss.

Friday, August 30, 2024

It was a volatile week for oil markets, with Libya’s oil embargo sending a supply shock through markets before traders refocused on concerns about Chinese demand. At the same time, Iraq increased pressure on Kurdish producers to cut production, and the US released some constructive macroeconomic data. Oil prices were back in the red early Friday morning, with Brent trading at $78.54 and WTI below $75.

US Oil Major Eyes Permian Divestment. Looking to focus on higher growth assets, top US producer ExxonMobil (NYSE:XOM) It is reportedly looking to sell about $1 billion worth of non-core assets in the Permian Basin, offering 14 asset groups, 8 of which are currently operated by Exxon.

Libya’s oil production falls as fields are shut down. More than half of Libya’s crude output, about 700,000 b/d, was offline by the end of this week after the government in eastern Benghazi halted production at key fields such as Sharara, Sarir, Abu Attifel and Amal and blocked most export terminals in the country.

US Midstream Giant gets even bigger. US Pipeline Operator ONEOK (NYSE:OK) said it would buy $5.9 billion of midstream assets across the country from Global Infrastructure Partners, less than a year after acquiring Magellan Midstream for $19 billion, boosting its position in the Permian.

Baghdad demands respect from the Kurds. Iraq’s federal government issued an ultimatum to the Kurdistan Regional Government to cut its crude output after market reports indicated the region’s output was up to 350,000 b/d, undermining Iraq’s commitments under the OPEC+ compensation plan.

Golden Pass LNG requests 3-year extension. The 18 mtpa Golden Pass LNG project jointly developed by ExxonMobil (NYSE:XOM) and QatarEnergyrequested a settlement extension until November 2029 after its contractor Zachry Industrial filed for bankruptcy following a row of more than $2.4 billion in cost overruns.

Shell is trying to cut exploration spending. According to Reuters, the UK energy major Shell (LON:SHEL) is considering cutting its oil and gas exploration and development workforce by 20 percent after cutting investment in renewables and low-carbon businesses, targeting $2-3 billion in cost cuts.

Raising Red Sea insurance on a sinking tanker. After the Houthis last week attacked the Greek-flagged tanker Sounion in the Red Sea, which was still leaking into the sea, the cost of extra war risk insurance for ships sailing through the Red Sea doubled to more than 1% of the ship’s value from 0.4% forward. the attack.

China maximizes summer coal production. Despite much more robust hydro and solar generation this year, China boosted its coal output to record highs as its output in July reached 390 million tonnes as it tries to avoid blackouts in a period of peak demand for air conditioning.

Baltimore sues shale producers over alleged reparations. The city of Baltimore sued US shale oil producers Occidental, Hess, Pioneer, Diamondback and others for conspiring to lower production and raise prices of petroleum products, even though most are not refiners, stemming largely from the FTC probe Pioneer.

Britain will not defend future oil projects. The UK government has said it will not defend its biggest future oil projects Rosebank and Jackdaw after Greenpeace won a High Court case seeking to overturn its development approvals on the grounds that emissions impacts were not properly assessed.

Qatar takes over a German refinery. Qatar is in talks with the German government over the possible purchase of Russian state oil company Rosneft’s 54.17 percent stake in the Schwedt refinery that supplies the capital Berlin, after Berlin placed the assets under government protection two years ago.

White House finalizes solar expansion plan. The Biden administration said it has finalized a plan to accelerate solar energy development on 31 million acres of federal land in 11 western states, aiming for high solar radiation and low conflicts with wildlife and plant habitats.

Drought again hampers European shipping. Dry weather in Germany has led to low water levels in the Rhine River, preventing cargo ships from sailing fully loaded and increasing freight rates as drought surcharges kick in, but the impact is not expected to be as substantial as in 2022-2023.

By Michael Kern for Oilprice.com

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