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

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Oil Prices Subdued But Bearish Catalysts Loom

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Oil markets have been relatively subdued this week, with the prospect of Kurdish oil flows restarting adding some downward pressure to prices.

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Chart of the Week

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- Hurricane Hilary, the first tropical cyclone to hit southern California since 1939, seems to have spared US refiners along the West Coast, with the five refineries in the LA area reporting no major damage.

- Before landfall, Los Angeles gasoline and diesel differentials were at 40-45 cent per gallon premiums to NYMEX RBOB and NYMEX ULSD, aggravated by the 160,000 b/d Torrance refinery going into maintenance.

- As fears subsided that Hilary would damage the 1.1 million b/d refinery capacity in the region, gasoline premiums have started to slide back down, also buoyed by pipeline operators restarting oil product pipelines across the state of California.

- The oil import terminal in Long Beach is expected to resume discharge operations on crude tankers Tuesday, after port operations have been suspended since August 19, with the US West Coast relying on seaborne crude as it lacks pipeline connections to Texas and New Mexico. 

Market Movers

- US oil major ExxonMobil (NYSE:XOM) and its Stabroek block partners approved the 6th offshore oil project in Guyana called Whiptail, at a cost of $13 billion, with an expected commissioning in 2027.

- French oil major TotalEnergies (NYSE:TTE) teamed up with Japan’s oil company INPEX to buy 100% of the AC-RL7 permit in Australia’s part of the Timor Sea, eyeing future gas supply to the Ichthys LNG plant.

- US shale firm Permian Resources (NYSE:PR) agreed to buy peer producer Earthstone Energy (NYSE:ESTE) in an all-stock deal valued at $4.5 billion, creating a $14 billion powerhouse in the Delaware basin.

Tuesday, August 22, 2023

Oil prices have been trending sideways this week amidst subdued trading activity, with ICE Brent hovering around $84 per barrel. With both Iraq and Turkey striking a more conciliatory tone as they discuss the resumption of Kurdish crude flows, the short-term outlook is geared towards a slight downside. By early September, however, markets will be on edge to see if Saudi Arabia decides to extend its 1 million b/d production cut into October.

US Oil Majors Shift Payout Focus. For the first time on record, US energy companies last year paid out more of their earnings to shareholders than they invested into E&P, Ernst & Young reported, with spending on dividends and share buybacks by the top 50 US oil firms hitting $58.8 billion.

Iraq and Turkey Try to Find Common Ground. Iraq’s oil minister Hayan Abdel-Ghani traveled to Turkey’s Ankara this week, seeking to resume oil exports through the Ceyhan oil terminal as the 450,000 b/d crude flows have been shuttered since late March after an ICC arbitration ruling.

Ecuador Bans Drilling for Amazon Oil. A referendum held this weekend in Ecuador saw almost 60% of the population vote to ban oil drilling in the Yasuni Amazon reserve, a decision lauded by Indigenous groups and environmentalists, prompting Petroecuador to shut some 50,000 b/d of output by end-2024.

Another Push for Lake Charles LNG. US midstream operator Energy Transfer (NYSE:ET) filed for a new and expedited export license for its proposed Lake Charles LNG liquefaction terminal in Louisiana, several months after the DoE refused an extension of its 2025 deadline due to delays.

Prospect of LNG Strike Rattles Australia. With LNG platforms workers at Woodside Energy’s (ASX:WDS) NW Shelf platform expected to start striking from September 2, gas markets are bracing for the supply impact of industrial action, with TTF rising to a two-month high of €40 per MWh.

Texas Power Prices Soar on Endless Heat. Electricity prices in Texas have soared above $5,000 per MWh in intra-day trading last week as weak wind generation put the market premium on gas burn, with further peak load spikes expected this week as ERCOT power demand is set to break records this week.

Saudi Arabia’s Mega Solar Plant Dashes Ahead. Saudi Arabia’s 2.6 GW Al Shuaibah solar plant, the largest renewable energy project in the country led by oil giant Saudi Aramco (TADAWUL:2222), has secured $2.2 billion in financing and is moving ahead with a launch planned for 2025.

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Chinese Firms Eye Global LNG Trading Role. Having amassed a fair share of flexible-destination US and term Qatari LNG deals amounting to some 40 million tons LNG per year, Chinese gas buyers ENN Natural Gas and CNOOC (HKG:0883) are already expanding their trading desks in London and Singapore.

Lead Buying Bonanza Set to Trigger Price Rally. As open interest in lead futures at the Shanghai Futures Exchange doubled since June to 172,231 lots and the number of positions for physical delivery in September surpassed actual ShFE stocks, lead is up for a sizable price rally in the upcoming weeks.

Shell Faces Nigeria Nightmare Again. Merely days after UK-based energy major Shell (LON:SHEL) resumed loading operations at its Forcados export terminal in Nigeria, a reported leak might jeopardize oil transportation via its 180,000 b/d Trans Niger pipeline.

Vietnam’s Rare Earth Industry Boosted by China Sanctions. Several rare earth refining firms supplying magnets to electronics and EVs are set to open factories in Vietnam amidst an industry-wide push to diversify away from China, including Star Group Industrial and China’s Baotou.

Equinor Eyes Azerbaijan Exit. Norway’s national oil company Equinor (NYSE:EQNR) is reportedly considering the sale of its assets in Azerbaijan, including a 7.3% stake in the ACG fields as well as associated infrastructure, four years after US major Chevron (NYSE:CVX) quit the country altogether.

Reform of US Ozone Standards Delayed. A key policy measure suggested by the US Environmental Protection Agency, a tightening of air quality standards for ozone (impacting both power plants and vehicles), is likely to be delayed until the 2024 presidential election.

By Michael Kern for Oilprice.com

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