Bullish sentiment has been growing in oil markets this week, with inflation in the U.S. slowing dramatically and markets tightening on the back of supply disruptions and production cuts.
Friday, July 14th, 2023
News of a marked drop in US inflation growth this week has boosted oil prices, pushing ICE Brent above $80 per barrel for the first time since May. Further buttressed by the market’s tightness coming from Saudi Arabia’s production cuts and Russia’s export curbs – backwardation is steepening again – this week is set to witness the largest gain in months, brushing aside the bigger-than-expected build in US crude inventories.
OPEC Remains Upbeat About 2024 Demand. In its most recent monthly Oil Market Report, OPEC predicted demand growth next year will amount to 2.25 million b/d, only slightly lower than its revised figure for 2023 (2.44 million b/d), double that of the International Energy Agency.
Libya On The Brink of Another Escalation. Oil production has been stopped at Libya’s 70,000 b/d El Feel oilfield on Thursday after tribal protests over the kidnapping of a former finance minister grew into larger unrest that could soon impact the adjacent El Sharara field, too.
Heatwaves Crimps Europe’s Power Generation. France announced output cuts at two nuclear plants – the 3.6 GW Bugey and 2.6 GW Saint Alban - along the Rhone River as unprecedentedly low water levels combined with high temperatures at cooling ponds hinder electricity generation.
Oil Majors Splash the Cash for German Wind Power. European oil majors BP (NYSE:BP) and TotalEnergies (NYSE:TTE) emerged victorious from Germany’s 7 GW offshore wind auction, clinching rights for 4 GW and 3 GW, respectively, as the auction garnered a total of $14 billion.
China to Reform Its Power Sector. China’s Commission for Deepening Reform, a key CCP policymaking body, outlined broad proposals to upgrade the country’s electricity sector which continues to struggle with provincial protectionism and lack of interconnection between regions.
Pakistan Wants Second Russian Cargo. The government of Pakistan is negotiating to buy a second shipment of discounted Russian crude, with private refiner PARCO reportedly asking to buy Russian oil, too, as talks have so far been focusing on the state-owned PRL refinery.
Namibia’s Oil Bounty Grows by the Day. UK-based energy major Shell (LON:SHEL) confirmed another oil discovery in Namibia’s Orange Basin, the fourth in the country since its first exploration well drilled in February 2022, with the recently spudded Lesedi-1X well hitting good quality reservoirs again.
Exxon Invests in CCS Future by Buying Denbury. US oil major ExxonMobil (NYSE:XOM) agreed to buy Denburg (NYSE:DEN) for 4.9 billion, greatly boosting its expertise in carbon capture and storage as the latter owns the largest network of CO2 pipelines in the United States spanning 1,300 miles.
Mexico’s Regulator Pressured Not to Sue Pemex. Mexico’s National Hydrocarbons Commission (CNH) gave up on its intention to fine the national oil company Pemex for repeated violations such as inadequate drilling permits and excessive flaring, peculiarly after President AMLO fired the head of CNH.
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Norway’s Refinery Cuts Runs After Lightning Strike. Equinor’s 226,000 b/d Mongstad refinery, the only operational refinery in Norway, has been running at reduced levels of operations ever since a lightning strike disrupted power supply to the plant earlier this week.
California Stopped Approving New Oil Permits. California’s Geologic Energy Management Division, the state’s oil permit issuing body, has approved a mere 7 new well permits in 2023 so far, compared to more than 200 it had issued by this time last year, despite having some 1,400 permit applications awaiting approval.
Iraq and Iran Agree Crude-for-Gas Swap Deal. Iraqi authorities have reached an agreement with Tehran to swap their crude oil for Iranian natural gas, seeking to ease the power supply crisis in the country and at the same time avoid US sanctions levied on Iran by means of barter deals.
UN Proposes SWIFT Access for Russia’s Grain Deal Extension. As the prospects of Russia extending the Black Sea Grain Deal are becoming increasingly unlikely, the UN General Secretary reportedly suggested connecting Russia’s agricultural bank Rosselkhozbank to SWIFT in return for an extension.
Venture Global LNG Is In Big Trouble. Oil industry heavy-hitters such as BP (NYSE:BP) and Shell (LON:SHEL) are suing US LNG developer Venture Global LNG for failing to supply contracted cargoes of liquefied gas, even as it sold to non-contract customers as LNG prices soared to 90 per mmBtu last year.
By Michael Kern for Oilprice.com
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Now that these fears have subsided noticeably with US inflation slowing dramatically thus possibly obviating the need for more Federal Bank hikes, oil bulls are at last able to subdue these fears, hence the surging Brent crude price.
If this rally strengthens further, prices will recoup all their previous losses and resume their surge with Brent crude going beyond $90 a barrel before the end of this year.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
Brutal week for US Dollar bulls interestingly. Might start getting a whiff of "beggar thy neighbor" given how outsized a role the US economy is playing upon the entire Global economy at the moment. Can't imagine Russia Brazil South Africa etc are very happy to see a huge sell off in the US Dollar right now anyways. Brazil has already complained about this in the recent past meaning not the past 9 Months of course mind you..