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Red Sea Disruptions Push OECD Crude Inventories Lower

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1. Red Sea Disruptions Shrink OECD Crude Inventories Further

- The price squeeze in the Atlantic Basin market has mostly stemmed from longer and costlier voyages of crude oil and products around the Cape of Good Hope, a direct consequence of Red Sea disruptions.

- According to Kpler data, onshore inventories in developed nations have plunged to their lowest for this time of the year in post-pandemic history, with buyers failing to purchase enough to replenish stocks.

- At the same time, the amount of oil that is sailing on water has risen to the highest level since the summer of 2023, indicating that temporary physical shortages might become more frequent as Europe needs to buy products from elsewhere.

- Shipping giant Maersk expects Houthi attacks to persist throughout the second half of 2024, with Red Sea transit volumes for oil products down 45% since last October and transited LNG volumes plunging to zero. 

2. US Gas Price Slump Puts Haynesville Producers in Jeopardy

- The collapse of US natural gas prices is ratcheting up pressure on Haynesville shale producers as mild weather and booming gas output is rendering production uneconomical and prompts shutdowns.

- According to S&P Global, even for the most efficient shale gas producers the Henry Hub breakeven in Haynesville stands at $2.67 per mmBtu; for producers seeking to return 30% of free cash flow that same metric rises to $3.2 per mmBtu.

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