Tensions Between The Wagner Group And Russia's Military Mount

Energy Markets

The biggest news of the week in oil markets is, of course, the newest round of OPEC+ production cuts that came out of the June 4 meeting, and which initially sent oil prices higher for the week but ultimately failed to really move the needle in a market distracted by China data that speaks to the overriding demand picture. While OPEC+ and the Saudis maintain that production cuts are only meant to "stabilize" markets and not to force prices higher to suit Saudi budgetary needs, the argument falls apart at the seams. The Saudis need higher oil prices to fund the Crown Prince's Vision 2030 plans.

Politics, Geopolitics & Conflict

Next up for a newly victorious Erdogan who won another 5-term as president (after leading the country for two decades) is how to avoid a massive financial meltdown as the lira hits new lows, and the million-dollar question is whether he will now choose a more orthodox monetary policy. Turkey is now almost completely out of foreign exchange reserves and will either have to sell off its gold or pander to the IMF (which would mean no more Erdogan-style monetary policy, which was never to raise interest rates, despite inflation. The balance sheet is shot due to Turkey's pattern of heavily borrowing foreign exchange and then using that to prop up the lira, which cannot go on indefinitely.

The emerging power struggle on the political front line in Moscow between Prigozhin and the Wager mercenary group on one side and the Russian Defense Ministry on the other added a few more twists this week, with Wagner capturing and torturing a Russian army commander who is forced to confess on video that he ordered his troops to shoot at Wagner forces on the Ukraine battlefield. The capture follows a statement by Prigozhin late last week that the Russian army was firing at Wagner mercenaries as they withdrew from the flashpoint city of Bakhmut to hand operations over after ostensibly taking control of the area. Wagner now says that Ukrainian forces have pushed back through Russian defenses in Bakhmut, signaling a major defeat. Wagner is also sounding the war cries in Moscow, calling for full-on mobilization to defeat Ukraine and attempting to set himself up as the real leader of a nation at war. "There is no management, there is no planning, there is no preparation, there is no mutual respect," he said. "And then all this is replaced by tantrums at the top...We will now suffer serious losses, I am absolutely sure of this. We will certainly lose part of the territories," he said on his telegram channel.

The latest in the ongoing saga of who blew up the Nord Stream 2 pipeline now has American media citing leaked documents allegedly showing that the U.S. had intelligence that Ukraine was behind the underwater attack, though Kyiv continues to deny this. We are not spending a lot of time on this issue because we do not see that it will change the narrative in any significant way.

Taxi drivers protesting a fuel price hike on Monday were gunned down by Angolan police, who shot and killed at least five people in Huambo province.

Discovery & Development

Chevron successfully started gas production at its Gorgon Stage 2 project in Australia. Stage 2 of the project includes 11 wells in the Gorgon and Jansz-lo fields-an expansion of its existing Gorgon project that produces 2.1 billion cubic feet of nat gas daily, and 15,000 bpd of condensate. The expansion project also includes offshore production pipelines. Chevron is an operator with a 47.3% stake, with partners Exxon, Shell, Osaka Gas, Tokyo Gas, and JERA.

ConocoPhillips has commenced work on its 20,000 bpd Nuna field project in Alaska. Construction is set to begin this year at 3T and continue on into next year with a pipeline and on-pad construction. Drilling is scheduled to begin late next year, with first oil by early 2025. Nuna comprises 29 development wells and pipelines that will connect to existing infrastructure.

Eni has completed its first utility-scale battery plant in Assemini, Italy through its renewable division, Plenitude. The plant will have an installed capacity of 15 MW with 9MWh of storage capacity. It will connect to the Italian power grid.

Aker BP has received approval from Norway's legislature to go ahead with developing parts of the North Sea holding 1.07 Bboe in combined reserves. Aker BP said the approval from Norway could lead to final approval for development plans of the Yggdrasil area and Valhall field extension project. Construction is expected to start this fall, with all major contracts already signed and "thousands" of orders placed.

Deals, Mergers & Acquisitions

The Democratic Republic of Congo is in the final stages of reaching an agreement with Angola over one shared offshore block that has caused rifts between the two for 50 years. The DRC and Angola and Chevron have proposed that each country have a 30% stake in block 14, with Chevron acting as operator with a 40% stake. There are still other blocks that have been the subject of disagreement, and those have yet to be settled.

Halliburton has reached a long-term deal with Var Energi for drilling services across the Norwegian Continental Shelf. The deal spans five years, with an option for another four.

Eni signed an MOU with Libya's Government of National Unity to study and identify opportunities to reduce greenhouse gas emissions and develop sustainable energy within Libya.

Harbour Energy is rumored to be in talks to merge with GoM-centered Talos Energy, offering Harbour an opportunity to list in NY. Harbour CEO has been disgruntled with Britain's windfall tax and has decided to cut back on its North Sea spending and branch out overseas.