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Oil Markets On Edge As OPEC+ Meeting Looms

Just days ahead of the July 1st OPEC+ meeting, all eyes are firmly on Vienna, and much less so on the incomprehensible back-and-forth between the U.S. and Iran. Traders are banking on production data that shows U.S. sanctions on Venezuela and Iran have managed to reduce OPEC’s oil production by more barrels than OPEC’s own self-imposed restrictions. The total decline in supply to date has been 2.5 million bpd, while OPEC cuts had only 800,000 bpd on the books from members and total OPEC+ cuts were to be 1.2 million bpd. This, of course, gives rise to predictions that OPEC could change its mind about extending cuts, even though the rumor on the street is a deal has already been agreed - even if Russia remains reluctant. We’ll find out in Vienna next week. But the Saudis still need oil to be $70+ a barrel, and data suggests they won’t get it through production cut extensions thanks to the continually rising US shale output, which is expected to top a record 8.5 billion bdp next month.

Haftar’s Calculated Move to Control Libyan Oil Revenues

Media has not figured out what to make of the NOC’s recent statement condemning calls for a shut down of Libya’s entire oil flow. That’s because it’s a tricky backstory to follow. It’s a stroke of genius on the part of General Haftar in his push to take control of Tripoli and the central bank that controls all the oil revenues.

According to our sources, Haftar has convinced the UN’s Support Mission in Libya (UNSMIL) to examine the books of the Tripoli-controlled National Oil Company (NOC) and the Tripoli-controlled central bank. Why? Because Haftar largely controls the oil, but the revenues are going to the Tripoli-controlled central bank, and those revenues are likely being used to pay off militias that are fighting for the GNA against Haftar.

The UN, which has supported the GNA - its own creation - against Haftar vociferously, is now in a difficult position. It can’t be seen to be supporting payments out of the Libya’s oil revenue to local militias. Last week, Agila Saleh, the head of the House of Representatives (HoR) of Libya in Tobruk, in the country’s far east, threatened to halt all oil exports by force in order to prevent oil revenues from going to those militia leaders in Tripoli.

In a major victory for Haftar, the UNSMIL is now demanding that the Central Bank of Tripoli account for the use of oil revenues. A UNSMIL official even met this week with Central Bank Tripoli governor Al-Sediq Al-Kabir and demanded that he provide financial reports for the NOC and the Central Bank. Right before this, the UNSMIL head in Libya, Ghassan Salame, paid a visit to Benghazi, the main city in the east, where he and his senior economic advisor, Robert Walker, met with officials from the parallel central bank. The parallel government, loyal to Haftar, has convinced Walker that oil revenues are being siphoned off to militias.

Haftar can turn off the taps if he so chooses but having the justification of a UN investigation into militia payments would be a brilliant move. At this stage in the game, there is no suggestion that the UN would support a shutdown of Libyan oil flow; however, if they examine the books, they will have to be transparent about what they find and this will play directly into Haftar’s hands.

In the meantime, GNA-backed forces claim to have ‘liberated’ Gharyan from Haftar on Wednesday, claiming this as a game-changing victory. Gharyan is the forward-base for Haftar and a strategic town south of Tripoli. Our sources on the ground indicate that the taking of Gharyan was not a major battle and that the LNA forces withdrew early, which they call a tactical measure. The GNA is overplaying this victory and the LNA is downplaying it.

Carbon Capture Back On Our Radar With Exxon Deal

Exxon has announced a joint development agreement with a startup called Global Thermostat, co-founded by a former Exxon scientist, and the deal brings the idea of capturing CO2 emissions from the air back into clear, money-making focus.

Exxon is under immense pressure these days from its shareholders to address climate change and scaling up carbon capture tech is one of the preferred methods for appeasing shareholders these days. (Occidental and Chevron are also in this game).

For carbon capture technology, it’s a boon: It will take someone like Exxon to prove it up on a large scale. It’s also a preferred method because it won’t interfere with oil and gas at all. It’s a way to contribute without diminishing the oil and gas industry along the way. (In fact, it’s also used for CO2 injection techniques for enhanced oil recovery - a market segment that is tipped to grow at a decent pace over the next five years).

The potential here is for Exxon to build a carbon capture plant in cooperation with Global Thermostat, but we still don’t know how much money may be involved, or how much Exxon is willing to invest. For now, there will be plenty of skeptics who say will criticize this announcement an empty appeasement tactic. Once the money becomes real, then the jury can deliver its verdict.

As it stands, the global carbon capture and storage market is set for a 9.22% CAGR for 2019-2024. Holding it back are massive implementation costs; nonetheless, it is expected to reach $7.8 billion by 2027.

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