The latest oil price crash appears to be over

Oil prices have fallen dramatically in recent weeks, but supply disruptions and optimism about a potential U.S. interest rate cut appear to have halted that downward momentum.

– The recent significant shift in oil sentiment was largely driven by widespread concern that Chinese demand will peak this year or next as LNG replaces diesel in long-haul trucks, with electric vehicle sales overtaking conventional cars from July and the expansion of railways affected airplanes. fuel recovery.

– China’s refinery runs have fallen for five straight months, with the National Bureau of Statistics reporting production rates at 13.91 million b/d in August amid a widespread decline in Shandong teapot runs, down as much as 55% last month.

– Meanwhile, margins at Asian refiners fell to their lowest seasonal levels since 2020 as high diesel and gasoline inventories become a growing concern as peak summer demand wanes.

– China’s crackdown on tax evasion increases pressure on refiners after a court in Shandong ruled that two refineries run by state firm Sinochem, the Huaxing and Zhenghe plants, with a combined capacity of 220,000 bpd, were completely bankrupt.

Market movers

– Upstream US company APA (NASDAQ:APA) said it will sell non-performing assets in the Permian Basin to an undisclosed buyer for about $950 million, reducing its debt following its $6.7 billion acquisition of Callon Petroleum.

– Japan’s largest trading company Mitsubishi (TYO:8058) signed a framework agreement with ExxonMobil to join the Baytown blue hydrogen and ammonia project, soon after ADNOC also signed on.

– China National Petroleum Company PetroChina (SHA:601857) signed two oil sharing contracts with Suriname’s state oil firm, Staatsolie, for two shallow water blocks, saying they missed out on the Guyana bonanza and didn’t want to miss out on Suriname.

Tuesday, September 17, 2024

After a tumultuous few weeks, the downward slide appears to have ended for crude oil futures, with ICE Brent trading at a relative low of $72.50 a barrel. Supply disruptions in Libya and the US Gulf of Mexico prevented worries about China’s economy from triggering a further decline, and a long-awaited interest rate cut by the US Federal Reserve could lift market sentiment.

Bearish bets hit all-time lows. Short positions held by hedge funds and other money managers in ICE Brent futures exceeded longs for the first time on record, with a net short of 12,680 contracts reflecting widespread concerns about Chinese demand and the US economy.

Petrobras’ new strategy refocuses on oil and gas. The new top financial officer of Brazil’s state oil company Petrobras (NYSE:PBR) Fernando Melgarejo said the company’s new 2025-2029 strategic plan would take a more focused view upstream to prevent a decline in oil and gas reserves around 2030.

The US Gulf is recovering from the impact of Hurricane Francine. Oil and gas producers are resuming output in the US Gulf of Mexico, with just 12% of output (and 24 rigs) shut in since Monday, about 213,000 bpd, as peak shutdowns reached 732,000 bpd last week, or 42% of total offshore production.

Brazil moves closer to resolving dam disasters. The Brazilian government has confirmed it is in talks with the mining giants Vale (NYSE:VALE) and BHP (NYSE:BHP) over a potential $18 billion payout for the 2015 Brumadinho dam collapse, ending one of the longest-running mining disputes.

Colombia implodes after court blocks offshore drilling. A Colombian court has ordered a halt to drilling operations at the Uchuva-2 offshore well in the country’s gas-rich, untapped offshore area, the operator said Ecopetrol (NYSE:EC) failed to consult a local indigenous community.

Egypt awards 20 LNG tenders for winter cargo. As Egypt tries to meet its energy needs amid a sharp drop in domestic gas production, the country’s state-run energy firm EGPC bought 20 LNG cargoes for the winter, the first such auction since 2018, when Zohr began to increase production.

US oil majors fight back against consumer lawsuits. US oil majors included ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) defeated a consumer appeal that accused them of colluding with former US President Donald Trump and OPEC+, citing a lack of evidence of antitrust violations.

Saudi NOC builds LNG portfolio. The national oil company of Saudi Arabia Saudi Aramco (TADAWUL:2222) will raise its stake in LNG investment firm MidOcean Energy to 49%, jointly owned with EIG, and will also fund its acquisition of a new 15% stake in Peru LNG from Hunt Oil Company to bring its stake to 35%

Can gold production peak soon? According to S&P Global, the relative rarity of new gold discoveries in 2020 could result in gold production peaking in 2026 at 110 million ounces, driven mainly by Australia and Canada, then falling to 103 million ounces in 2028.

The UAE is eyeing expansion into India’s SPR reserves. Following a visit to India by senior UAE officials, oil major ADNOC is looking at opportunities to expand its crude oil storage volumes in India’s SPR underground caverns as Delhi seeks to triple its reserves from the current 5.86 million barrels.

Germany’s wind power auction exceeds expectations. Germany’s Federal Grid Agency said it had awarded contracts for nearly 3 GW of onshore wind power in its latest annual auction, the largest volume ever, with the average awarded price reaching €7.33 cents/KWh, up a few cents below the maximum allowed limit.

Russia reaches landmark lithium deal in Bolivia. One of the most coveted lithium reserves globally, Bolivia’s Salar de Uyuni will see increased Russian involvement after the country’s lithium firm YLB signed a $976 million deal to build its first direct lithium extraction, with a capacity of 14 ktpa.

South Sudan resumes flows through war-torn Sudan. South Sudan’s presidential office has announced that the country and its northern neighbor, Sudan, have made progress in restarting the shut-down pipeline that brings its crude oil to export markets, repairing affected areas as government forces continue to clash with RSF forces.

By Michael Kern for Oilprice.com

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