Oil prices are continuing to climb toward the $100 mark this week thanks to supply disruptions in Libya and expectations of a further U.S. inventory draw.
Chart of the Week
- Chevron’s (NYSE:CVX) Gorgon and Wheatstone liquefied natural gas facilities started short strikes last Friday after the last round of negotiations between the company and workers’ unions broke down without a deal.
- Loadings are still ongoing at the two LNG terminals, with 3 laden tankers departing since the short strikes began, however from Thursday onwards unions are preparing for full-blown industrial action that would halt exports altogether.
- The US major no longer expects a negotiated deal and filed three applications for an intractable bargaining declaration, with the dispute between Chevron and respective workers heard by Australia’s industrial relations tribunal on September 22.
- Accounting for 5% of global LNG supply, the prospect of Gorgon and Wheatstone facilities would mostly impact Japan’s gas imports as the East Asian country takes in almost half of their total volumes.
Market Movers
- US LNG developer Tellurian (NYSEAMERICAN:TELL) is set to drop its equity-ownership demands and offer up to 11 mtpa (out of 27.6 mtpa) of liquefied gas to non-equity holders from its long-delayed Driftwood LNG.
- Colombia’s government is looking to make state energy firm Ecopetrol (NYSE:EC) an obligatory partner in every offshore wind project to be developed in the country.
- US oil major ExxonMobil (NYSE:XOM) failed to find any commercial volumes of hydrocarbons with its closely followed Gale N-66 exploration well in Canada’s Newfoundland & Labrador offshore zone.
Tuesday, September 12, 2023
As the oil markets anticipate US inflation data for August and the ECB’s interest rate decision later this week, supply disruptions in Libya have added a little upside to prices again, with ICE Brent moving past the $91 per barrel mark. Expectations are that this week will bring about another US crude inventory drop, and absent any negative macro news, the climb toward $100 per barrel is set to continue.
Hurricane Disrupts Libyan Loadings. Battered by Hurricane Daniel for several days already, Libya has shut four oil ports – Ras Lanuf, Es Sider, Brega, and Zueitina - as state authorities kept oil infrastructure at maximum alert and mandated that workers restrict any movements between sites.
Oil Cuts Might Drag Saudi Arabia into Recession. As Saudi Arabia extended its 1 million b/d production cuts until December, the country is set for a 9% year-on-year drop in output, the largest decline in 15 years, with analysts expecting Riyadh to witness a slight 0.2% GDP reduction this year.
Freeport LNG in Trouble Again. Feedgas flows to the Freeport LNG facility, the second-largest liquefaction plant in the US, declined sharply from 1.640 mcf/day on September 8 to 284 mcf/day currently, reportedly due to a customer’s failure to take confirmed quantities to the terminal.
Europe’s Solar Industry Is on the Brink. Europe’s solar industry trade groups have warned the continent’s authorities that PV manufacturers are facing a "precarious situation” as photovoltaic unit prices plunged to all-time lows, with Chinese competition potentially bankrupting European firms.
East Coast Braces for Distillate Scarcity. As two key refineries across the East Coast, Irving Oil’s St. John refinery and Delta’s (NYSE:DAL) Trainer refinery, are set to go down for prolonged maintenance from mid-September, NYH ULSD diesel prices rose by 8% already amidst stubbornly low inventories.
South Sudan Walks Back Nationalization Threat. According to Bloomberg reports, South Sudan’s own national planning body acknowledged the African country’s plans to assume control of oil fields from foreign companies by 2027 cannot be feasibly carried out due to a lack of financing and know-how.
US Authorities Keep Dakota Access Pending. The US Army Corps of Engineers released a draft environmental statement of Energy Transfer’s (NYSE:ET) 750,000 b/d Dakota Access oil pipeline without making a recommendation on the five alternative route options for it, waiting for public and agency comments.
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Diamondback Mulls Coordinated Water Management. US oil producer Diamondback Energy (NASDAQ:FANG) formed a JV with private equity firm Five Point Energy to create a sustainable water management network for produced water in the Midland Basin, taking a 30% stake in the new project.
Turkish Mediation Fails to Revive Black Sea Deal. Despite assertive Turkish mediation that included an Erdogan visit to Russia, Turkish negotiators are failing to renew the Black Sea grain deal first brokered in July 2022 as Moscow demands market access for its own grain and fertilizer exports.
India Moves Against Chinese Steel Dumping. The Indian government introduced an anti-dumping duty on Chinese steel for five years after China became the second-largest steel exporter into India in Q2 with 0.6 million metric tonnes supplied.
Diluents Hamper Venezuela’s Oil Recovery. Whilst Chevron’s projects in Venezuela continue to churn out some 150,000 b/d of oil thanks to more than 2 MMbbls of US naphtha, the country’s national oil firm PDVSA is struggling to source enough diluents for its heavy production, limiting its production upside.
Brazil Starts Buying Russian Crude. Russia is shipping its first post-sanctions crude cargo to Brazil, a country that over the past year become the second-largest buyer of Russian diesel despite being a prolific oil producer and boasting a refining park capacity of more than 2.4 million b/d.
Malaysia Eyes Rare Earth Metal Ban. Joining the ranks of China and other Asian nations, Malaysia is intent on banning exports of rare earth raw materials, arguing the move would help develop a domestic mineral industry and prevent the exploitation of Malaysian resources.
By Michael Kern for Oilprice.com
More Top Reads From Oilprice.com:
- IEA Claims Global Oil Demand Will Peak Before 2030
- Hedge Fund Partner Blasts Oil Demand Decline Narrative
- The Oil Market Hasn’t Felt The Full Impact Of Saudi Arabia's Cuts Yet
I am also convinced that my arguments that the Saudi cut has nothing to do with the market and everything to do production difficulties are starting to seep into market fuelling more surge in prices.
Two supporting pointers are:
1- If the Saudi cut has anything to do with the market, Why is then Saudi Arabia sacrificing lucrative exports at a Brent crude price above $90 a barrel which is higher than the price the Saudis need to balance their budget estimated at $80-$83?
2- If the Saudi cut aims to push prices higher, then why tell its Asian customers yesterday that it will supply them of full crude volumes by October and not wait until December when Brent crude could be touching $100?
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert