Oil markets have been on edge this week, with geopolitical risk and market tightness being counterbalanced by continued economic concerns. While prices are on course for a weekly loss, they spiked sharply early on Friday morning following U.S. airstrikes on Syrian territory.
Friday, October 27th, 2023
Oil prices have been relatively rangebound this week, with ICE Brent trending between $88 and $90 per barrel, but the constant ebb and flow of geopolitical fears has created a seesaw pattern in day-to-day trading. US military airstrikes on Syrian territory lifted Brent above $90 per barrel again on Friday market before falling back slightly. Market watchers are now anticipating an Iranian retaliation and a potential escalation into the wider region as Israel begins raids into northern Gaza. Yet even with this, oil prices are set for the first week-on-week decline since early October.
ConocoPhillips Eyes Third M&A Megadeal of the Year. According to media reports, US oil major ConocoPhillips (NYSE:COP) is considering an offer for privately-owned shale producer CrownRock LP, a Permian Basin specialist, in a deal that is valued between $10 billion and $15 billion.
India’s ONGC Mulls Venezuela Return. India’s state-owned oil firm ONGC (NSE:ONGC) aims to recover some 500 million in dividends pending since 2014 for its stake in two Venezuelan projects it co-operates with PDVSA, the San Cristobal field and the Carabobo production area.
EU to Set Methane Limits on Gas Imports. The European Union proposed imposing methane emission limits on EU gas imports starting from 2030, potentially impacting suppliers with frequent methane leaks such as Algeria or even the United States.
Shell Scales Back Low-Carbon Shift Ambition. UK-based energy major Shell (LON:SHEL) is considering cutting 15% of its workforce at the low-carbon solutions division and phasing down its hydrogen plans as CEO Wael Sawan seeks to focus on much more profitable oil and gas projects.
Australia Billionaire to Derail Another Merger. Having stymied Albemarle’s (NYSE:ALB) takeover of Liontown Resources (ASX:LTR), Australian billionaire Gina Rinehart is now looking to block Chile’s lithium champion SQM (NYSE:SQM) from buying Azure Minerals (ASX:AZS) for $1 billion.
Chinese Coal Prices Plunge on High Imports. As China’s power generators ramped up imports and replenished coal stocks for the winter, prices for thermal coal at the Asian country’s key Qinhuangdao trading hub dropped below ¥1,000 per metric tonne ($137/mt), halting a month-long rally.
Saudi Aramco Doubles Down on Gas Projects. Saudi Arabia’s national oil company Saudi Aramco (TADAWUL:2222) signed a $2.4 billion deal with South Korea’s Hyundai to develop the second phase of the 200 TCf Jafurah gas field, the largest non-associated gas field in the Middle Eastern country.
White House to Curb Aviation’s Lead Emissions. The US Environmental Protection Agency seeks to phase out the usage of leaded aviation fuel used in piston-engine aircraft and accounting for 1% of the country’s total jet fuel demand, having confirmed its adverse effects on public health.
China Boosts Coalbed Methane Reserves. China’s national oil company CNOOC (HKG:0883) announced the discovery of the country’s largest deep coalbed methane field, with the Shenfu coal seem in Shaanxi province believed to have natural gas reserves of some 100 bcm.
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Canada’s Teck Reiterates Restructuring Interest. Canada’s leading mining company Teck Resources (NYSE:TECK) said it was progressing expeditiously on the mulled split of its coal and copper businesses, promising a deal by end-2023 after twice rejecting Glencore’s (LON:GLEN) $22.5 billion bid.
Siemens Value Plunges on State Aid Talks. Stocks of Germany’s leading renewable energy developer Siemens Energy (ETR:ENR) plummeted by more than 35% on Thursday after it acknowledged that it is in talks with the German government about securing a $17 billion state guarantee to stay afloat.
Surprising No One, Guyana Finds Oil Again. The Lancetfish-2 appraisal well drilled by the ExxonMobil-led (NYSE:XOM) consortium in Guyana wielded another significant discovery of oil and gas, hitting a sandstone net pay of 81 meters and marking the 46th offshore discovery in the country since 2015.
Auditor Flags TMX Financing Problems. The Auditor General of Canada reported that the Trans Mountain Pipeline (TMX) might need more cash as it might exhaust its $11.6 billion credit facility over the upcoming months, just as the federally-owned pipeline aims for a launch in April 2024.
By Michael Kern for Oilprice.com
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Any direct or indirect involvement by Iran in the conflict will lead to wider war in the Middle East and a disruption of energy supplies but only if Iran succeeds in blocking the Strait of Hormuz. If it does, Brent crude could even rise to $150 but it won’t stay there for long because of measures the United States will take to clear the Strait and because of global oil demand destruction.
However, I tend to discount the possibility of a direct involvement by Iran or even an indirect one involving Iran’s allies: Hizbullah, Hamas and Syria.
Iran knows that the United States and Israel are looking for an excuse to attack and destroy its nuclear installations. It doesn’t want to provide them with one.
However, there is the possibility that both the United States and Israel could invent an excuse to attack Iran. US military airstrikes on Syrian targets used by Iran and its Islamic Revolutionary Guard Corps (IRGC) could be intended to draw Iran into retaliation against US troops in Syria and Iraq and thus provide the excuse Israel and the US are seeking.
In such a situation war will be forced upon Iran with implications affecting the whole Middle East and also the entire global energy scene.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert