Fighting Continues In Yemen Despite Saudi-Iran Détente

Politics, Geopolitics & Conflict

The U.S. Fed insists that the financial sector is "sound and resilient", despite the banking crises that started with the collapse of two regional U.S. banks, was followed by a share crash and buyout bid for Credit Suisse, and then proceeded to put major pressure on other small U.S. banks. The Fed then raised interest rates 25 basis points on Wednesday, a step back from the earlier string of 75-basis-point hikes.

The first agreement between Saudi Arabia and Iran after restoring diplomatic ties earlier this month was with regard to Yemen. There was some hope that this rapprochement between Riyadh and Tehran would ease war pressures in their proxy battlefield of Yemen; however, at this point, even a commitment from Iran to stop arming the Houthis and an agreement by the Saudis to withdraw would not necessarily spell peace for Yemen. Wednesday's violence was a prime example, with ten soldiers killed in renewed fighting in the oil-rich Marin province.

Opinion polls are not currently favoring Turkish President Erdogan, with the numbers showing that opposition candidate Kemal K?l?cdaroglu is leading by over 10 percentage points ahead of the May 14 early election. However, even more significantly, the pro-Kurdish Peoples' Democratic Party (HDP) and allies will not have a candidate in the May 14th election. For Erdogan, this is bad news because it gives the opposition a greater chance of uniting and renders the critical Kurdish vote a choice between Erdogan and a single opposition alliance candidate. In other words, the Kurdish vote would not split the opposition and weaken its chances.

Sevastopol, the home of Russia's Black Sea naval fleet in annexed Crimea, came under drone attack on Wednesday, with Moscow saying the attacks were "repelled". Ukraine has remained silent but it has attacked Russia's Black Sea fleet on several occasions since Putin launched his invasion. In response, Russia has stepped up its barrage of missiles, hitting civilian residential targets in Zaporizhzhia, killing 7 people. Still, the Russian missile strikes are not as high volume as they were in 2022, which has some analysts speculating that Russia is rationing its precision missiles. Earlier in the week, Russia claimed a Ukrainian drone attack near the border targeted an oil pumping station for the 2 million bpd Druzhba pipeline. The extent of the damage remains unclear as of the time of writing, and officials in Kyiv have not made any official statements.

Venezuelan Oil Minister Tareck el Aissami has resigned amid an intensification of the investigation into the country's state-run oil firm, PDVSA. The oil minister is a close ally of Maduro, who has had six people arrested in the investigation so far, hinting that more is to come. This is also the same Aissami who has been charged with international drug trafficking by the U.S.

Discovery, Development & Production

Italian Eni has made an oil discovery in Block 7 in the Surest Basin off the coast of Mexico. Eli's Yatzil-1 well was drilled to over 2,440 meters, encountering over 40 meters of net pay sands with good quality oil. Preliminary estimates suggest 200 million barrels of oil. This is Eli's 8th successful drill in the basin.

Israel's offshore Leviathan natural gas field (45% owned by Israeli NewMed Energy) will boost production and exports in 2025, which will render the reservoir worth $12.5 billion. To accommodate increased production, the Leviathan partners are working on plans for what would be their third subsea transmission pipeline from reservoir wells. Leviathan's current capacity is 1.2 billion cubic feet of nat gas per day.

Exxon has started up its 250,000 bpd Beaumont refinery expansion project on the U.S. Gulf Coast. Total capacity is now over 630,000 bpd, and Beaumont joins the ranks of the largest refineries in the country.

Chevron has suspended production at the Benchamas oil field in the Gulf of Thailand in the aftermath of a fatal explosion last week involving an oil storage vessel. One crew member died in the incident. The storage vessel has a capacity of 650,000 barrels. The cause of the explosion is still being confirmed, though initial investigation results point to a technical malfunction during maintenance.

Citing an investigation into a pressure surge in the loading line, Angola LNG's 5.2 mtpa liquefaction plant in Soyo has canceled tenders, most likely those for April loading.

Regulations

ESG stocks got a boost this week when Biden used his veto for the first time to veto an attempt to nullify a Department of Labor rule allowing retirement plan managers to consider ESG in their investment decisions.

Brazil, with Lula back at the helm, has implemented a 9.2% tax from March to July on crude exports, prompting foreign oil companies (Repsol, TotalEnergies, Shell, Equinor, Galp) to petition a federal court to suspend the new tax.