Uncertainty has returned to the oil market this week, with the recent oil price rally having stalled due to renewed economic concerns in China and a large inventory build in the U.S.
Friday, August 11, 2023
Backwardation in Brent and WTI futures continued to widen this week as physical tightness was felt across all continents, but China’s uncertain outlook and a large US inventory build have capped oil prices. As of Friday morning, ICE Brent was trading at $86.44 per barrel and WTI below $83 per barrel. International organizations have been trying to influence the market sentiment, with OPEC raising its 2024 demand forecast whilst the IEA lowered it by 150,000 b/d, but the result (for now) is stagnation in prices.
OPEC Sees What It Wants to See. OPEC reiterated its upbeat oil demand outlook for 2024, expecting global crude consumption to rise by 2.25 million b/d in 2024, compared with growth of 2.44 million b/d this year, concurrently hiking this year’s GDP growth forecast to 2.7% from 2.6%.
Australian LNG Strikes Trigger Gas Rally. Terminal workers at Woodside’s (ASX:WDS) North West Shelf and Chevron’s (NYSE:CVX) Gorgon and Wheatstone LNG plants voted to start industrial action, jeopardizing some 11% of LNG flows globally and sending Europe’s TTF prices up by $3/mmBtu in just one day.
Iran Eyes Oil Production Ramp-Up. Buoyed by soaring crude exports to China, Iran’s oil company NIOC pledged to increase oil production by 250,000 b/d to reach 3.5 million b/d by the end of September, the highest production rate since US sanctions were re-introduced on Tehran in November 2018.
Texas Power Use Hits Record After Record. Demand for power in Texas is expected to hit 86,621 MW this Friday, the third all-time high figure this week as the lingering heat wave is straining the ERCOT power grid as temperatures went as high as 104 degrees Fahrenheit in Houston this week.
Copper Positioning Booms as Outlook Remains Uncertain. As the world’s leading copper producer Chile lowered its production forecast for 2023 amidst inclement weather and force majeure events, long positions held in the LME copper contract soared to the highest ever, but so did the total of short positions and open interest.
US Power Generators Warn Against Carbon Reform. US power generators have warned the Biden administration that recently proposed power plant standards are unfeasible as net-zero 2035 targets hinge on the widespread commercial availability of scalable CCS technologies, not yet proven at scale.
Canada Wants to Sell Pipeline Stake to Indigenous Groups. Seeking to safeguard the 23 billion invested into the soon-to-be-commissioned 890,000 b/d Trans Mountain Pipeline, Canada’s government reached out to Indigenous groups about potentially selling them a stake in the pipeline.
Colombia Strikes Oil Again, But Where. Colombia’s Ecopetrol (NYSE:EC) discovered natural gas and light crude with its Alcamari-2 exploration well in the Putumayo basin, but the successful find happens to be close to the 60,000 b/d Trans-Andean oil pipeline, routinely bombed by guerrilla groups.
Norway Dam Collapse Jeopardizes Hydro. As heavy rains across Norway have lifted river levels to their highest in at least 50 years, the Braskereidfoss hydro dam on the Glomma river, the country’s biggest waterway, collapsed amidst incessant flooding, adversely impacting the country’s key electricity source.
Panama Canal Delays Get Out of Hand. As drought conditions continue to disrupt navigation along the Panama Canal, waiting times at the crucial passageway have increased to 21 days currently, prompting owners of product tankers to avoid the canal altogether and stick to intra-Atlantic voyages.
Brazil Eyes World’s Largest Lithium Deposits. In yet another instance of oil majors turning towards lithium, Brazil’s national oil firm Petrobras (NYSE:PBR) signaled interest in developing Bolivia’s salt brines, the largest reserve of lithium globally, seeking to boost their transition metals portfolio.
US-Iran Prisoner Deal to Free Up Billions of Frozen Revenue. According to media reports, the United States and Iran will carry out a prisoner swap, to be complemented by the White House’s release of $6 billion of Iranian oil revenues currently frozen in South Korean accounts to a bank in Qatar.
Activist Investor Buys into Vale. Activist investment fund Engine No. 1, known for its protracted battle with ExxonMobil that ended in a shakeup of the company’s executive board, purchased a 3% stake in the base metals business of Brazilian miner Vale (NYSE:VALE), but said it won’t pursue an activist campaign.
By Michael Kern for Oilprice.com
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