Uncertainty in Oil Markets Amid Rumors of a Ceasefire in Gaza

Politics, Geopolitics, and Conflict

Oil prices had a particularly volatile Thursday, tanking on Qatari rumors that Israel and Hamas had agreed to a ceasefire deal, and then recovering shortly afterward when the source of the rumor, Al Jazeera, removed the tweet suggesting the ceasefire. The markets are particularly sensitive to rumors these days, making them extremely volatile. While there has been no confirmation of any ceasefire deal, later on Thursday night, UK Foreign Secretary David Cameron told reporters that Britain might officially recognize a Palestinian state without waiting for the outcome of talks between Israel and the Palestinians if a ceasefire were to be forthcoming.

The other big market-moving geopolitical news is tensions with Iran, following the death of three American soldiers at a base in Jordan, which the U.S. has blamed on the Islamic Resistance in Iraq, which is linked to Iran-backed Kata’ib Hezbollah. The drone used in the attack is also said to have been Iranian-made. Earlier this week, Biden said he had determined a response for these deaths, with officials confirming later that there would be a series of targeted attacks on Iran proxies in Syria and Iraq. However, following the incident, Kata’ib Hezbollah said it had suspended attacks under pressure from Tehran and Baghdad. The group has launched dozens of attacks against U.S. forces in Iraq and ultimately it will be blamed for the death of the three soldiers in Jordan. The group’s suspension of attacks further indicates (as we noted in a previous briefing) that Iran is not prepared to go to war and will rein in its proxies if they cross a line that is too dangerous for Tehran.

On the Ukraine war front, the EU has agreed to extend $54 billion in new aid to Ukraine this week, despite pushback from Hungary. On the front line, Zelensky is moving to replace his commander-in-chief, which could be a destabilizing factor. The reasons behind this move remain unclear at this time. Polling data (to the extent this can be trusted) has suggested that the commander is a more popular figure right now in Ukraine. Also this week, Ukraine claimed to have destroyed a Russian warship off the Crimea coast with waterborne drones.

A new development threatens to further erode U.S.-Venezuela relations following Maduro’s banning of the opposition presidential candidate from elections and the U.S. response to reinstate some financial sanctions and threaten to renew full oil sanctions when the six-month trial period ends in April. This week a leaked memo showed that the U.S. has been conducting an undercover operation against Venezuelan leaders in a DEA drug-smuggling investigation since 2018. Some of those targeted in the covert operation were close allies of Maduro.

Energy Earnings

US refiner Phillips 66 beat analyst expectations for Q4 profit thanks to strong refining markets and its midstream unit. Its market capture increased to 107% in the quarter. Its revenue came in at $38.74B, compared to expectations of $36.50B, with adjusted EPS of $3.09, beating analyst estimates of $2.35. Its midstream segment’s adjusted pre-tax income was $754 million, compared to $569 million in the quarter prior. Its refining segment was $797 million, from lower realized margins.

Marathon Petroleum’s Q4 net income attributable to MPC was $1.5B, or $3.84 per diluted share. Its full-year 2023 net income attributable to MPC was $9.7 billion, with $12.8B returned to shareholders in the year. Its 2024 standalone capital spending outlook is $1.25B.
Enterprise Products Partners reported that its Q4 crude oil volumes increased 15% to a record 2.6 million bpd, with net income rising to $1.6 million, or $0.72 per share. Growth capital investments this year are expected to be between $3.25B and $3.75B–above its previous forecast. The company is expecting a U.S. license for its Sea Port Oil Terminal this quarter.
Deals, Mergers & Acquisitions

Permian Resources Inc. has parceled off $67 million of its non-core assets in the Eagle Ford that it acquired last year when it picked up Earthstone Energy. After divesting the Eagle Ford assets, it purchased 15,500 net acres in two separate transactions in New Mexico’s Eddy County valued at a total of $175 million. It also finalized an acreage trade that added to its position in Lea County, New Mexico.

Discovery & Development

China says it has discovered 107 million tonnes of oil in the Henan province (central China), with analysts claiming that the new discovery could account for nearly one-third of the country’s total oil and gas production.