Oversupply fears are pushing oil prices lower

Fears of an oversupply of oil amid reports that Saudi Arabia is considering a return to its strategy of chasing market share rather than supporting prices sent both WTI and Brent lower this week .

Friday, September 27, 2024

China’s economic stimulus measures and US hurricanes provided firm fundamental support for oil prices; but this week’s big story came from Saudi Arabia, with media outlets claiming that Riyadh is considering a reorganization of its strategy to regain market share in the oil markets. Fears of oversupply saw market participants down $3 a barrel from a week ago, with WTI falling back below $70 a barrel.

Saudi Arabia is looking at the advantages of higher production. According to the FT, Saudi Arabia is preparing to increase its crude output to regain market share, abandoning its unofficial oil price target of $100 a barrel, even if it means lower prices, raising hopes that OPEC+ will continue with its increases since December.

Libya is moving closer to a negotiated agreement. UN-brokered talks between Libya’s rival governments made substantial progress this week, apparently agreeing on Central Bank staffing and decision-making procedures in an attempt to defuse the ongoing oil blockade.

Eastern US ports are ready for attack. Port authorities in New York, New Jersey, Virginia, New Orleans, Louisiana and Texas have begun notifying customers that some operations will stop starting Sept. 30 as a regional strike by port workers threatens to slow container cargo traffic.

Key new UK upstream projects derailed by litigation. The two biggest future oil and gas projects on Britain’s continental shelf, Shell’s Jackdaw and Equinor’s Rosebank, could be blocked after environmental campaign group Greenpeace launched a legal review of the two fields in the Scottish courts.

FTC at Bar John Hess of Chevron Board. The US Federal Trade Commission is expected to bar Hess CEO John Hess from taking a seat on the US major’s board. Chevron (NYSE:CVX) as a condition of the latter’s $53 billion acquisition of Hess, as Pioneer CEO Scott Sheffield was ousted from Exxon’s board.

U.S. natural gas cuts to see phase-out. The executive director of EQT (NYSE:EQT) confirmed that the largest gas producer in the United States will reverse some production cuts implemented in early 2024 amid lower gas prices, preparing for an increase in demand for LNG feedstock.

Kazakhstan wants billions from oil companies. Kazakhstan’s Energy Ministry said it expects preliminary results of multibillion-dollar arbitration proceedings by the end of this year, launching claims against stakeholders in the Kashagan and Karachaganak fields, worth $13 billion and $3.5 billion, respectively.

The Brazilian major is looking for more domestic exposure. The upstream Brazilian firm Prio (BVMF:PRIO3) reached an agreement with the state-controlled Chinese commander Sinochem (SHA:600500) to buy its 40% stake in the Peregrino offshore oil field for $1.92 billion, increasing its own production from the field by 110,000 b/d.

BP wants to attract investors by eliminating US wind. British oil major BP (NYSE:BP) It has reportedly put its US onshore wind business up for sale in a bid to attract investor interest as it rethinks its vast portfolio of low-carbon assets, selling 1.7GW of gross generating capacity across seven states american

Copper rises above 10,000 on China Stimulus. Copper futures for December delivery breached $10,000 a metric ton as China unveiled sweeping stimulus measures to revive its struggling property market, pushing past $10,200/t and sending mining stocks higher by 6-7% this week.

Belgium calls for a European ban on Russian LNG. Belgium, the fourth largest recipient of Russian LNG in 2023, has called for a coordinated EU approach to end Russian LNG imports into the European Union, in addition to the expected ban on transshipment, which will take effect from the end of March 2025. .

The US Gulf is recovering from the impact of Hurricane Helene. At the peak of Hurricane Helene, about 30 percent of U.S. offshore oil production was offline as 27 producing platforms were evacuated, equivalent to a total impact of 510,000 bpd, but shutdowns eased by Friday, when oil companies resumed operations.

Sinking barge disrupts Venezuelan production. At least two people are dead and four are missing after an oil barge operated by a PDVSA contractor capsized in Lake Maracaibo, the country’s largest crude oil production hub, while carrying out maintenance services the wells.

By Michael Kern for Oilprice.com

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