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Oil Erases Gains Despite Flurry of Bullish News


Crude erased gains in the morning of the first trading session of 2024 despite mostly bullish news.

China Might Become the Swing Factor for Oil Sentiment

 - The Chinese economy has been sending mixed signals to the oil markets as Caixin manufacturing PMI indicated a strong recovery in industrial sentiment with the index rising to 50.8 in December, the strongest since August.

- The problem with that is that Beijing’s official data paint the exact opposite, dropping to the weakest level since June at 49.0, suggesting SMEs are feeling better about the economy than state-surveyed industry majors.

- Following months of quota-capped trading, Chinese refiners are now allowed to go big with their crude purchases after the Chinese Ministry of Commerce allocated 1.34 billion barrels of 2024 import allowances.

- With Shandong utilization rates back above 70% and state-owned refiners Sinopec and PetroChina ramping up output before the lunar New Year holiday, Chinese crude imports are expected to increase to 12 million b/d, for the first time since August.

Market Movers

- The $8.3 billion takeover of US utility firm PNM Resources (NYSE:PNM) by its Spanish peer Iberdrola (BME:IBE) fell through after the latter couldn’t get all necessary regulatory approvals before December 31.

- Chinese private refiner Rongsheng and Saudi Aramco (TADAWUL:2222) are in talks to buy 50% stakes in each other’s refining units, the Saudi-run SASREF and the Rongsheng-operated Ningbo Zhongjin Petrochemical company.

- US oil major ExxonMobil (NYSE:XOM) has formally exited the West Qurna-1 oil field in Iraq and transferred its 22.7% stake to BOC and Pertamina, as well as handing over operatorship to China’s state-owned oil firm Petrochina.

Tuesday, January 02, 2024

The first US-Yemen naval clash in the Red Sea, followed by the arrival of an Iranian warship into the Bab-el-Mandeb strait, has prompted an increase in geopolitical risks again, lifting Brent back to the $79 per barrel mark. China issuing its crude import quotas for 2024, coupled with product export allowances, will reinvigorate Chinese buying in the markets, so for the first time in several weeks, the immediate outlook seems more bullish than bearish.

US Oil Output Starts to Decline. According to EIA figures, US crude oil production fell to 13.248 million b/d in October, the first monthly decline since April even if the month-on-month change was a mere 4,000 b/d, with all tight oil plays posting increases expect North Dakota.  

Maersk Halts Red Sea Transit, Again. The world’s second largest container line Moller-Maersk (CPH:MAERSK) halted transit through the Red Sea less than a week after it had decided to resume navigation, with its Maersk Hangzhou tanker coming under attack by Houthi militias.  

Related: Iran Deploys Warship to Red Sea Amid Rising Tensions

Nigeria Sets the Deal for Dangote Supply. Nigerian oil producers will be required to supply 483,000 b/d of crude to local refineries in the first six months of 2024, of which 325,000 b/d should be allocated to the largest refinery project currently built, the Dangote refinery.

ADNOC Eyes First LNG Supply Deal. ADNOC, the national oil firm of UAE, and China’s utility major ENN (SHA:600803) are close to signing a preliminary deal for the supply of 1 million tonnes LNG per year for 15 years, the first deal from ADNOC’s Ruwais LNG project, expected to be launched in 2028.

Record BYD Sales Create China’s EV Champion. Chinese EV carmaker BYD (HKG:1211) sold 526,109 fully electric vehicles in Q4 2023, aided by aggressive year-end discounting, suggesting Tesla would need record quarterly sales if it wants to remain the world’s largest electric automaker.

Indigenous Blockades Hamper Ecuador Production. Following several days of force majeure at Ecuador’s Ishpingo oil field, Ecuadorian authorities have reached an agreement with Indigenous communities that blocked the site since last week, restarting some 20,000 b/d of production.

Mexico Orders Pemex to Take Over Hydrogen Plant. Mexico’s government has mandated that the national oil company Pemex take temporary control over Air Liquide’s hydrogen plant located within the confines of the Tula refinery, calling stable hydrogen supply a “matter of public interest”.

Libya’s Growth Marred by Discord. Various Libyan top officials have called for the halt of negotiations over the transfer of the Ghadames NC-07 block from state-owned Agoco to an international consortium led by Italy’s ENI (BIT:ENI), saying the 40% share of production to be given to the consortium is too high.

China Coal Demand to Peak in 2025. China’s state owned energy company Sinopec expects the country’s coal consumption to peak around 2025 at 4.37 billion metric tonnes, with oil hitting a plateau in 2026-2030 at 16 million b/d and natural gas reaching a climax only by 2040.

Nickel is the Worst-Performing Metal of 2023. Nickel became the worst-performing industrial metal of 2023, posting a 45% year-on-year decline, its largest since the financial collapse of 2008, as new supply from Indonesia and weaker Chinese demand growth halted the price growth of 2019-2022.

Norway Starts to Pull Investments Away from Middle East. In an unexpected move, Norway’s largest pension fund KLP, overseeing $70 billion in investment, blacklisted Saudi Aramco and other Middle Eastern companies, citing an “unacceptable” risk of contributing to human rights abuses.

Russian Pipeline Gas Exports to Europe Collapse. Exports of Russian pipeline gas to Europe plunged by a further 56% year-on-year in 2023, coming in at a mere 28.3 billion cubic metres as Gazprom’s options were narrowed down to TurkStream and one remaining pipeline via Ukraine.

Dry Well Saps Moroccan Hopes of Oil Bonanza. Morocco, a country that has no production of hydrocarbons at this point, has been pinning its hopes on ENI’s much-hyped Cinnamon prospect in the country’s territorial waters, however the release of the rig suggests the wildcat was dry.

By Tom Kool for Oilprice.com

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