Oil Prices Fall as China Fails to Impress Markets With Growth Pledge

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March 5, 2024/Oilprice.com

Tom Kool
Editor, Oilprice.com

Oil prices have had a disappointing start to the week as markets were underwhelmed by China’s commitments to get its economy back on track and boost demand.

EQT, Chesapeake Become the OPEC+ of Natural Gas Markets

– The gas markets have been missing an OPEC-like instrument that could collectively curb supply whenever global balances indicate a huge glut, and it now seems leading US gas producers are considering taking on that role, albeit temporarily.

– Presenting its Q4 results, the US’ largest gas producer EQT announced it would cut some 30-40 Bcf of net production through March, equivalent to 5-7% of the company’s output.

– With Chesapeake pledging to cut 20% of its output, Comstock reducing the number of rigs in operation from 7 to 5 and suspending dividends, and Antero cutting its drilling budget by 26%, Henry Hub prices have rebounded to $1.9 per mmBtu.

– Net positioning in Henry Hub futures softened a little as hedge funds quit some 50,000 short contracts in the week to February 27, but the net short on US natural gas remains the largest since March 2020.

Market Movers

– Canada’s midstream giant TC Energy (NYSE:TRP) agreed to sell the Portland Natural Gas Transmission System to BlackRock for $1.14 billion as part of its divestment drive.

– The US solar business of energy major Shell (LON:SHEL), the Kansas City-based Savion, has put a quarter of its assets – totaling up to 10.6 GW – up for sale a little more than two years since the company’s acquisition.

– The world’s largest mining company BHP (NYSE:BHP) has launched a major restructuring of its operations, having already started to cut jobs in Australia after its net income plunged by 86% year-on-year in Q4 to $463.5 million.

Tuesday, March 05, 2024

Oil prices have started this week off on the wrong foot after bullish news of OPEC+ extending its voluntary production cuts was offset by an underwhelming set of commitments from China’s National People’s Congress. The markets expected promises of comprehensive stimulus packages but were met with vows of “prudent monetary policy” and acknowledgments of the difficulties ahead. With this, Brent continues to trade around the $82 per barrel mark, with WTI dropping to 78 per barrel.

OPEC+ Extends Voluntary Cuts into Q2. OPEC+ members agreed to extend voluntary oil production cuts of 2.2 million b/d, with Russia announcing an extra 471,000 b/d cut in the second quarter of 2024 and Saudi Arabia sticking to its $9 million b/d output rate.

Rubymar Becomes First Victim of Red Sea Warfare. The UK-owned bulk tanker Rubymar sank on March 2, two weeks after being severely damaged by a Houthi missile, becoming the first vessel lost since November and leaking fertilizer potentially causing an environmental crisis.

US Bans China Buying SPR Crude Barrels. The latest 2024 government funding bill contains provisions that would block Chinese companies from buying oil from the United States’ Strategic Petroleum Reserve, following several instances of Unipec buying SPRs in 2017-2022.

Europe Wants Oil Companies to Finance Its Climate Goals. The European Union is looking into ways to compel the fossil fuel industry to help pay for fighting climate change in poorer countries, with actual climate investment needs totaling $1 trillion per year by 2025.

Mexico Shutters Polluting Refinery. Regional authorities of Nuevo Leon state said they have closed the 275,000 b/d Cadereyta refinery over the refusal of state oil company Pemex to cooperate with environmental inspections. Despite this statement, continued flaring suggests the refinery is still running.

TMX Line Fills to Start in April. According to MEG Energy (ASX:MEG), line fill on Canada’s highly anticipated Trans Mountain Expansion pipeline will start in April, with the state-controlled pipeline operator of TMX calling for 2.1 million barrels in April and the same amount in May.

Gunvor Pays $662 Million to End Bribery Cases. Global trading firm Gunvor agreed to pay $662 million to close US and Swiss investigations into a scheme used to pay bribes to Ecuadorean officials to win business, ending a long-standing probe that started in 2020.

Rio’s Arizona Copper Mine Gets Judicial OK. The 9th US Circuit Court of Appeals narrowly ruled that the federal government may transfer land in Arizona to Rio Tinto (NYSE:RIO) for the Resolution Copper mining project, potentially 25% of future US copper supply, heavily opposed by Native Americans.

Chevron Gives Up on Biodiesel Expansion, For Now. US oil major Chevron (NYSE:CVX) has indefinitely idled two biodiesel plants – one in Ralston, Iowa, and another in Madison, Wisconsin – on the back of renewable credits falling to a three-year low as supplies keep on growing. 

Trafigura Moves into UK Biofuels Production. Global trading major Trafigura bought the European business of UK-based fuel supplier and biodiesel producer Greenergy, less than a month after it failed to take over Mediterranean refiner Saras, outfooted by Vitol.

Exxon Mulls Its Options in Suriname. According to Suriname’s national oil firm Staatsolie, US oil major ExxonMobil (NYSE:XOM) and Malaysia’s Petronas are considering the potential for a floating LNG unit after a 2020 gas discovery at the Sloanea prospect, initially having shelved the project.

Vitol Expands Further In the Med. VTTI, a subsidiary of global trading major Vitol, is reportedly close to buying a majority stake of 92.68% in Italy’s Adriatic LNG terminal from ExxonMobil (NYSE:XOM) and QatarEnergy for almost $900 million, as BlackRock bowed out of its bid.

BP Looks for Gas In Azerbaijan’s Waters. As legacy crude production continues to mature in offshore Azerbaijan, UK energy major BP (NYSE:BP) is eyeing the second half of 2024 to drill its first appraisal well in the ACG field, looking for deep gas reservoirs below the producing oil field.

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