OIL PRICE INTELLIGENCE REPORT

 Oil prices remained under pressure on Tuesday morning, but Israel's decision to send troops into Rafah and Saudi Arabia's aggressive pricing of its June cargos should help to stop oil prices from falling. 

- International organizations are increasingly sounding the tocsin on shrinking crude inventories, with the IEA indicating Q2 2024 would see demand surpass supply by a whopping 900,000 b/d, the first two consecutive negative quarters since late 2021. 

- With OPEC+ curbing supply by means of Saudi Arabia’s and Russia’s voluntary production cuts, the end of refinery maintenance in Europe and Asia as well as recovering manufacturing activity in both the US and China would suggest an increase in fuel use.

- According to Kpler, Chinese crude inventories marked a two-year low at the beginning of April and even though they have built since then, at 944 million barrels they are some 50 million barrels lower than a year ago.

- With US refining back to running close to full capacity at 15.8 million b/d, US crude inventories should start their seasonal descent soon, currently trending around 460 million barrels, shot-for-shot replicating last year’s levels. 

Market Movers

- Colombia’s national oil company Ecopetrol (NYSE:EC) is preparing to participate in the Andean country’s first-ever offshore wind auction, looking for a bid partner that would have the technical experience.

- Energy major Shell (LON:SHEL) is negotiating a sale of its gas station business in Malaysia, the second-largest in the country, to Saudi Aramco (TADAWUL:2222) in a deal worth around $1 billion.

- Chinese oil giant Sinopec (SHA:600028) is reportedly in talks with Pembina Pipeline Corp. to buy a stake in Canada’s Cedar LNG project and guarantee a 1.5 mtpa offtake agreement from the facility, i.e. half its production capacity.

Tuesday, May 05, 2024

Just when it seemed that the geopolitical risk premium had all but evaporated from oil prices, Israel rejected the Egypt-brokered ceasefire proposal and its army started the long-mooted Rafah operation. The return of Middle Eastern tension and aggressive Saudi Arabian pricing for June cargoes, understood to be a harbinger of an OPEC+ production cut extension come June 1, should provide some resistance to the bearish pressure that has been building in oil markets.

Russia’s Oil Revenues Double Year-on-Year. Russia’s oil revenue more than doubled year-on-year to $11.5 billion in April, with higher crude differentials further boosted by a weakening national currency, as global insurance firms are calling the G7 oil price cap policy “increasingly unenforceable”. 

Chevron Eyes Gulf of Mexico Output Boost. This year’s most prominent addition to crude output in the US Gulf of Mexico, Chevron’s (NYSE:CVX) 75,000 b/d Anchor floating production unit located in the Green Canyon offshore area, is set to reach first oil by mid-year.

India’s Refining Buildout Slows Down. As India’s Modi government targets 9 million b/d of refining capacity by 2030, refiners are running into time overruns with Chennai Petroleum delaying the launch of its 180,000 b/d Nagapattinam refinery by the end of 2027.

US Natgas Prices Bounce Back from Slump. US natural gas Henry Hub futures strengthened 3% on Monday to $2.2 per mmBtu amidst a higher domestic pull on feedgas to LNG export plants, as Trains 1 and 2 of Freeport LNG in Texas returned from inspection and repairs. 

China Opens Up EV Sector to Foreign Investors. The Chinese government has introduced new supportive measures to boost investment into non-fossil-fuel vehicles, removing all restrictions on foreign investment, amidst rumors that Beijing would remove traffic restrictions on Tesla’s EVs. 

Braskem Shares Collapse on End of ADNOC Talks. According to Reuters, the national oil company of Abu Dhabi ADNOC has terminated talks to buy a controlling stake in Brazil’s top petrochemical producer Braskem (NYSE:BAK), sending the latter’s shares down some 15% in just one day. 

India Wants to Buy Venezuelan Oil Despite Sanctions. India’s largest oil refiner Reliance Industries has resubmitted a request to the US Treasury for authorization to import crude from Venezuela, right after the White House granted upstream firm Maurel&Prom a 2-year waiver.

European Majors Flock to Namibia’s Waters. Azule Energy, a joint venture of oil majors BP (NYSE:BP) and ENI (BIT:ENI), farmed into Namibia’s offshore Orange Basin, signing up for a 42.5% stake in Block 2914A in the immediate vicinity of the recent multi-billion-barrel Mopane find. 

Nigeria Hints at Easier Exit for Majors. Nigeria’s disgruntled oil producers such as ExxonMobil (NYSE:XOM) or Shell (LON:SHEL) would be allowed to exit the African country’s onshore fields quicker if they take responsibility for oil spills and pay up, said the country’s regulator NUPRC. 

Russia Ships Fuel to North Korea. According to the White House, Russia has been silently shipping refined petroleum products to North Korea at a level higher than the US-imposed price cap, even though UN sanctions limit its imports at 500,000 barrels of refined producers a year. 

Outlook for 2024 Copper Supply Downgraded. The International Copper Study Group lowered its 2024 copper supply forecast, seeing the forecasted 467,000-ton glut decrease to 162,000 tons on the heels of First Quantum shutting the Cobre Panama mine, 5% of global production. 

French Oil Major Accused of Terror Negligence. French prosecutors opened an investigation against oil major TotalEnergies (NYSE:TTE) after survivors of the 2021 Islamic State attack on the Mozambique LNG project accused it of negligence and indirect manslaughter, saying it failed to ensure the safety of subcontractors.

China Allocates More Product Export Quotas. China’s Ministry of Commerce has granted product export quotas to 7 state-controlled and private sector companies, allocating 14 million tons and disappointing the market as the first batch is already used at 87% and refiners want to clear their high stocks.