Oil prices rise on supply uncertainty, demand optimism and geopolitical risk

Oil prices continued to rise on Tuesday morning, with Brent above $75 as another hurricane threatened output in the Gulf of Mexico, China implemented its stimulus measures and Israel targeted Hezbollah with strikes in Lebanon.

– Crude oil inventories in Cushing, Oklahoma, the delivery point for the NYMEX WTI futures contract, were recently unprecedented, near a ten-year low for this time of year.

– The launch of the Trans Mountain Expansion pipeline, with a nominal capacity of 590,000 b/d, about two-thirds of which is currently in use, has limited the flow of Canadian oil to Cushing and prevented any reasonable stockpiling during the summer.

– Cushing’s current inventories of 22.7 million barrels as of Sept. 13 are less than a third of the storage center’s operating capacity of 78 million barrels, raising concerns that tank bottoms could cause a sharp squeeze on refinery supplies.

– With Enbridge now operating the Mainline system to the US without congestion, the shortage of barrels in Cushing has widened the gap between NYMEX futures and WTI Houston, the September average so far at $1.50 a barrel.

Market movers

– Brazil’s state oil company Petrobras (NYSE:PBR) It is reportedly eyeing the entire 40% stake in Galp’s Mopane exploration block, which was put up for sale recently, keen to set foot offshore Namibia.

– Nigeria’s national oil company NNPC is in talks with investors to revive the dormant Brass LNG project, with a planned capacity of 10 mtpa, and potentially find partners for Olokola LNG.

– American oil major Chevron (NYSE:CVX) has said it has no plans to invest in new US liquefaction capacity and has ruled out taking a stake in Driftwood LNG, saying it can monetize its gas without additional LNG facilities.

Tuesday, September 24, 2024

The prospect of another hurricane in the US Gulf of Mexico, triggering further evacuations and rig closures, as well as China’s long-awaited stimulus measures have fueled oil prices, with ICE Brent breaking above $75 a barrel for the first time in more than three weeks. With Israel and Lebanon potentially adding some geopolitical risk as well, the advantage may be far from over.

China unveils huge stimulus package. China’s central bank unveiled its biggest stimulus package since the pandemic to support economic growth in the country, lowering borrowing costs and cutting mortgage interest rates, sending Chinese stocks and bonds to their highest levels in two years.

Oil producers are evacuating Gulf rigs again. US offshore oil producers have begun evacuating non-essential personnel from production platforms in the Gulf of Mexico amid rising risks of Hurricane Helena hitting the area, with Shell (LON:SHEL) announcing it will close its Stones and Appomattox facilities.

OPEC continues to woo Brazil. Presenting OPEC’s latest annual World Oil Outlook in Brazil, the organization’s secretary-general, Haitham al Ghais, said he looked forward to working with Brazil in the coming years, seeking to make the South American nation a full member of OPEC+.

FTC prepares to approve Chevron-Hess merger. The US Federal Trade Commission is expected to approve Chevron’s (NYSE:CVX) The $53 billion acquisition of Hess Corporation as soon as this week, leaving ExxonMobil–Chevron arbitrage over Guyanese assets, the last hurdle to clear.

Microsoft Eyes reboot of Three Mile Island. US energy operator Constellation Energy (NASDAQ:CEG) saw its stock rise 30% after striking a deal with Microsoft (NASDAQ:MSFT) to revive a unit of Pennsylvania’s Three Mile Island nuclear power plant to fuel an AI-driven demand surge in the region.

Russia sees lower oil revenues going forward. According to Russia’s draft three-year budget to 2027, the Kremlin anticipates a 14 percent drop in oil and gas revenues over the next three years, down from $118 billion expected in 2025, due to a more stringent tax regime. soft on Gazprom and the drop in oil. prices.

California Sues ExxonMobil Over Plastic Pollution California’s attorney general and several environmental groups have sued a US oil major ExxonMobil (NYSE:XOM) for alleged involvement in a decades-long campaign that helped fuel plastic pollution, filing in a state court in San Francisco.

The European hydrogen project pipeline is thinning. UK energy major Shell (LON:SHEL) has abandoned plans to build a low-carbon hydrogen plant in Norway less than a week after Equinor scrapped the idea of ​​a 10GW blue hydrogen plant in the country, citing a general lack of demand.

Canada is unlikely to recoup TMX’s investments. IISD, a Canadian environmental think tank, found that Canada’s federal government is unlikely to recoup its $25 billion investment in the TMX pipeline, saying it represents a $6.4 billion fossil fuel subsidy and should be compensated with additional fees.

Iron ore weakens further on soft Chinese data. After hitting a one-year low earlier this week on higher-than-usual Chinese steel production and exports, iron ore futures rose on news of China’s economic stimulus, futures in Singapore trading above $92 per metric ton.

US Natgas prices rise due to hurricane risks. Henry Hub natural gas futures rose about 7 percent this week to a 3-month high on early indications that U.S. oil and gas producers may be forced to shut production in the offshore gulf, the contract for delivery in the month October exceeding $2.6 per mmBtu.

Glencore is about to lose its Rosneft stake. Global commodity trader Glencore (LON:GLEN) is set to lose its 0.57% stake in Russia’s largest oil producer Rosneft after the Moscow Arbitration Court rejected his appeal to delay repayment of the $130 million he owes the state to Sberbank.

Offshore Canada is yet to become a new drilling frontier. Despite hopes that the high-impact Persephone well could hold up to 1 billion barrels of oil off Canada, Exxon’s spudded wildcat has proved dry, just as Equinor’s Sitka prospect has yielded no commercial reserves.

By Michael Kern for Oilprice.com

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