The U.S. Is Running Out Of Ways To Influence Oil Prices

Politics, Geopolitics & Conflict

The Biden Administration has moved to lift sanctions on Venezuela's oil industry under the guise of concessions from the Maduro regime, which now has said it could see new elections held in 2024. Meanwhile, crude oil prices are running hot after the war between Israel and Hamas raised geopolitical tensions in the Middle East, along with Russia and Iran falling under Western sanctions - although neither has seen much losses to their oil exports. With the SPR only half full and Cushing inventories operating near operational minimums, the Biden Administration is running out of options - and countries to sanction. Some analysts are estimating that lifting sanctions on Venezuela could boost production by 25%, but it is unlikely that a country such as Venezuela- which has mismanaged its oil infrastructure for decades - will be able to ramp up production in that quantity immediately. Venezuela's state-run oil firm is now reaching out to former refiner clients with which it has crude supply contracts in an effort to reestablish oil sales. The restrictions on Venezuela will be lifted for a period of six months.

Polish voters ushered out the country's ultra-conservative government this week and voted in the democratic opposition party led by former PM Donald Tusk, the president of the European Council.

Indications that the Israel-Hamas conflict is widening can be seen in both Syria and Iraq, where Iran-backed factions have launched drone attacks targeting bases with U.S. military forces. Iran-backed Iraqi militia Kataib Hezbollah has warned that its forces can target the U.S. anywhere in Iraq. In Yemen as well, where a proxy war between Iran and Saudi Arabia has recently cooled down as the two restored diplomatic ties in a historic movement, Houthi rebels are also rattling sabers, threatening missile strikes (without any details) should the U.S. move to intervene in the conflict. Tensions continue to flare on the border of Lebanon and Israel.

Discovery & Development

Exploratory drilling of Lebanon's offshore Block 9 proved a disappointment for TotalEnergies, ENI, and QatarEnergy after drilling began in August. Preliminary results were expected by the end of October or November, but anonymous sources suggest the consortium hit water. Block 9 lies along the new maritime border of Lebanon and Israel. The drilling campaign is a considerable loss for Lebanon, which was hoping oil and gas finds would pull it up out of economic hardships after it saw its currency lose 98%. The country routinely experiences rolling blackouts.

Portuguese-based Galp is getting ready to commence drilling a well offshore Namibia, near other significant discoveries in the area found by TotalEnergies and Shell. Galp is drilling two wells with the Hercules rig in blocks 2813A and 2814B under PEL 83. Hercules is currently en route to Walvis Bay in Namibia's Orange Basin, with an expected arrival of November 4. Mean estimated oil in place of the Mopane complex, which Galp is targeting, is 10 billion barrels.

Deals, Mergers & Acquisitions

Aramco is rumored to be eyeing Shell's unwanted Pakistan assets. Shell announced in June that it would bow out of Pakistan by selling off Shell Pakistan as the South Asian nation continues to go through economic turmoil. Shell Pakistan owns 600 fuel stations in the country, in addition to a lubricants business. So far, it's just a rumor-although last month Saudi Arabia said it would invest $25B in Pakistan over the next two to five years. There was also talk months ago about Saudi Arabia possibly investing in a new oil refinery in Pakistan. Pakistan remains a strategic-but quiet-security ally of Saudi Arabia, and one that routinely has soldiers on loan to Saudi Arabia. Shell is bailing on Pakistan as part of its refocus on its most profitable assets.

BP is holding talks about quitting the Yakaar-Teranga gas field in Senegal, handing the operatorship reigns over to Kosmos Energy and increasing the stake held by Senegal's state-run Petrosen. The asset reportedly no longer fits in with BP's long-term strategy.

Energy Earnings Beat

Kinder Morgan (NYSE: KMI) saw its revenues fall by 25% for Q3 to $3.91 billion, compared to $5.18 billion in Q3 2022. Net income attributed to shareholders, unadjusted, fell 8% to $532 million, even as operating costs and expenses fell 30%. Q3 earnings per share was $0.25.

Tesla lost more than $100B in market cap in a single day after disappointing Q3 results that were released Wednesday after the bell. Elon Musk's pessimistic comments regarding the EV maker contributed to the stock fall. By 3:00 pm on Thursday, Tesla's stock had fallen to $217.47-a 10.39% loss on the day. Production was up 18%, deliveries up 27%, with total revenues increasing 9% to $23.4B. Gross margin was down for the quarter to 17.9%, with operating income down 52% to $1.8B. Net income fell 44% to $1.8B for the quarter compared to the same quarter last year. Musk said high interest rates had proved to be a challenge for Tesla, while it raised vehicle prices and cut costs. The market cap is just over $681B.