Oil Prices Drop as Hurricane Beryl Blows Over

The first major hurricane of the year has come and gone without causing any significant supply disruptions, leading oil prices to fall back on Tuesday morning.

- The landfall of Hurricane Beryl led to three casualties in Texas, leaving more than 2 million Houston homes without power, but first reports suggest damage to oil infrastructure has been limited.

- Since making landfall near the coastal town of Matagorda, Beryl has weakened to a tropical storm and is forecast to move across eastern Texas and into the lower Mississippi Valley later in the week. 

- Freeport LNG went offline for two days, the only major export terminals to be shut for Hurricane Beryl, sending US LNG feedgas demand to 11.1 BCf per day on July 8, down from the pre-hurricane level of 13.1 BCf per day. 

- The port of Corpus Christi reopened Monday afternoon after a three-day halt in operations, whilst the port of Houston is expected to return to the status quo ante Wednesday after officials confirm there is no large-scale material damage. 

Market Movers

- US shale producer Devon Energy (NYSE:DVN) announced it would purchase the Williston-focused firm Grayson Mill Energy in a transaction valued at $5 billion, lifting its oil output to 375,000 b/d. 

- Italy’s energy major ENI (BIT:ENI) made a hydrocarbon discovery in Mexico’s Sureste Basin, located in Block 9 and potentially containing 300-400 MMboe of recoverable reserves. 

- UK-based energy major Shell (LON:SHEL) is seeking the South African government’s permission to drill up to 5 offshore wells off the country’s west coast, to the south of its prolific Namibia discoveries. 

Tuesday, July 09, 2024

The oil markets have withstood the first hurricane test of this season, with oil prices falling back on Tuesday morning. Apart from shipping delays and platform evacuations, Hurricane Beryl seems to have led to relatively little physical damage to refineries and offshore platforms, most probably allowing the markets to focus again on fundamentals and geopolitics later this week. 

Kazakhstan Presents OPEC+ Compensation Plan. Kazakhstan’s Energy Ministry said that it would compensate for oil production exceeding its OPEC+ quota according to a new plan that runs all the way through September 2025, seeing its output rise further in June to 7.24 million tonnes. 

South Africa’s Power Sector Is Crumbling. South Africa’s state-controlled power company Eskom is reportedly set to publish 2023 figures showing a 15 billion rand ($823 million) annual loss, mostly stemming from its emergency use of diesel to avoid blackouts across the country. 

US Wind Ambition Unlikely to Reach Target. According to industry estimates, the US will fall short of the Biden administration’s 2030 offshore wind target of 30 GW, installing only 14 GW of capacity by the end of this decade as high interest rates and soaring material costs hamper development. 

Carlos Slim Builds Mexican Offshore Portfolio. One of the world’s richest men, Mexican billionaire Carlos Slim said his holding company signed a $1.2 billion exploration and services deal with state oil firm Pemex to develop the giant stalled Lakach natural gas project.  

Global Temperatures Hit All-Time High in June. The global temperature average rose to an all-time high of 16.66° C, 0.14° C above the previous record set in June 2023, with sea surface temperatures also hitting unseen heights as warmer oceans lead to stronger hurricanes. 

China Reports Giant Gas Discovery. Chinese state-owned giant Sinopec (SHA:600028) reported a giant oil and gas find after exceptional flow rates from its Hai-3 exploration well in the Beibu Gulf of the South China Sea, prompting it to consider using an FPSO for the deepwater project. 

Oil Majors Share the Emirates’ LNG Dreams. Less than a month after the UAE’s national oil firm ADNOC took an FID on Ruwais LNG, it is rumored that oil majors Shell, BP, TotalEnergies, and Mitsui have agreed to buy 10% each in the new 9.6 mtpa capacity liquefaction project.

Japan Power Prices Soar Amidst Scorching Heat. Day-ahead electricity spot prices in Tokyo have surged above ¥20 per kWh ($0.12/kWh) this week, the highest since February 2023 as heatwaves put Japan’s generation to a test, with several gas-fired plants halted due to unplanned maintenance. 

Northern Iraq Is Overflowing with Kurdish Crude. Just as oil production from Kurdish-controlled territories is nearing 300,000 b/d, output from the Kirkuk region that is controlled by the federal government has jumped to 360,000 b/d after NOC rehabilitated damaged wells. 

Nigeria Declares Emergency to Lift Production. Nigeria’s national oil company NNPC has declared a state of emergency as the country cannot even lift production to its OPEC+ production quota of 1.5 million b/d, obstructed by rampant theft and pipeline vandalism. 

Reformist Wins 2nd Round of Iran Elections. Former health minister in the Khatami government, reformist candidate Masoud Pezeshkian won Iran’s presidential election with a 54% result, promising to revive JCPOA negotiations and advocating for foreign investment into Iran’s oil sector. 

Canada Seals Off Its Mining Industry from Takeovers. Having greenlighted Glencore’s takeover of the coal unit of Teck Resources, Canada’s government indicated it would allow large mergers and acquisitions only under the most exceptional circumstances, worrying investors. 

China Back to Buying Saudi Crude Again. Chinese buyers lifted the lowest volume of Saudi term nominations in June at just 1.12 million b/d and were reported to seek even less in June, however drastic price cuts from the Saudi national oil firm will lift August demand to 1.4 million b/d.

By Michael Kern for Oilprice.com

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