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Oil Price Rally Meets Resistance Despite Bullish Catalysts

Despite plenty of bullish catalysts, oil prices are meeting resistance every time they break above $95, with traders nervous that Saudi Arabia may unwind its production cuts earlier than expected.

Friday, September 29th, 2023

The expiry of November ICE Brent futures has seen backwardation between the expiring month and the December contract shoot up to a whopping $2 per barrel. At the same time, despite some very bullish news this week, ranging from wafer-thin Cushing stocks to an improving macro outlook in China, oil prices have been rangebound lately as crude remains overbought and any surge above $95 per barrel triggers resistance. With OPEC+ meeting next week on October 4, focus will now move back to Saudi Arabia and the future of its production cuts.

Strained Cushing Stocks Stoke Fears of Shortages. As crude inventories at the key US storage hub of Cushing, Oklahoma fell to their lowest since July 2022, at 22.0 million barrels, operators are fearing operational risks as oil becomes difficult to remove if tank storage holds less than 20 million barrels. 

UK Approves Largest Oilfield in Years. The British government has greenlighted Equinor's (NYSE:EQNR) Rosebank oil field, the largest project in the UK North Sea in years despite its relatively meagre 300 MMbbls reserves, despite fierce opposition from environmentalists. 

Saudi Aramco Boosts Chinese Portfolio. Saudi Arabia's national oil company Saudi Aramco (TADAWUL:2222) signed a preliminary deal with China's Jiangsu Eastern Shenghong to buy a 10% stake in the petrochemicals-focused refiner, operating a 320,000 b/d plant in Lianyungang. 

IATA Warns of High SAF Prices for Aviation. The head of the International Air Transport Association Willie Walsh said sustainable aviation fuel (SAF) is likely to stay more expensive than kerosene even after large-scale production is brought in, creating upward pricing pressures for air travel. 

Argentina Offers Oil Drillers Preferential Currency Rates. Argentina's incumbent government will allow oil producers to tap into a preferential exchange rate for the next two months, double the value of the official rate of 350 ARS per USD, in the run-up to the October 22 presidential ballot. 

Iraq Eyes Maritime Demarcation Deal with Kuwait. Iraq's prime minister Shia al-Sudani signalled the Middle Eastern country's readiness to overcome a maritime border demarcation dispute with Kuwait, legacy of the UN's 1993 border settlement that only covered the land border. 

China Pours Cold Water on Hopes for Next Quota. According to Chinese reports, the country's economic planner NDRC does not intend to issue more oil product export quotas this year, sapping hopes for an additional 4-5 million tonne Q4 allocation to further China's diesel and jet exports. 

Iraq Has No Plans to Rush Pipeline Restart. Whilst both Ankara and Baghdad have been expressing their hopes for a timely restart of the Kirkuk-Ceyhan oil pipeline that brings Kurdish production to the Eastern Mediterranean, talks on Turkey's $1.4 billion compensation have seen little progress. 

Australia's Key Gas Project Back to Square One. Australia's Federal Court halted approval for Australia's largest upcoming gas project, the 12 billion Scarborough field developed by Woodside (ASX:WDS), to conduct another round of seismic surveying after a legal challenge by an Indigenous woman that claimed Woodside had not properly consulted her. 

Exxon Relinquishes Guyana's Oil Frontier. US oil producers ExxonMobil (NYSE:XOM) and Hess Corp (NYSE:HES) have relinquished the Kaieteur block in offshore Guyana abutting their multi-billion-barrel Stabroek Block, citing disappointing results of their exploration wells there. 
    
Nigerian Oil Workers' Strike Disrupts Drilling. Nigeria's leading oil and gas union NUPENG will join a nationwide strike to protest the Tinubu government's measures that worsened living conditions for Nigerians, most notably the scrapping of the $10 billion fuel subsidy that sent fuel prices soaring. 

Copper Contango Soars to Highest in 40 Years. Declining spot copper prices have pushed the spread between spot and LME 3-month futures to the widest contango since 1994, at $70/mt, with weakness in the prompt driven by surging inventories with LME stocks alone up 50% since the start of September. 

Biden's 5-Year Offshore Plan Sees No Leases Next Year. The Biden administration's 5-year plan for offshore oil and gas leasing does not include any auctions to be held in 2024 and features only three in the subsequent years of 2025-2028, marking the lowest leasing activity since at least 1992.

By Michael Kern for Oilprice.com

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Michael Kern

Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,  More