Supply Concerns and Demand Optimism Boost Oil Prices

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June 21, 2024/

Michael Kern

Oil prices surged this week as hurricane season began, demand improved, and both U.S. crude and gasoline inventories fell. Rising geopolitical risk around the world only added to bullish sentiment.

Friday, June 21, 2024

The onset of hurricane season in the US, improving demand figures that are corroborated by shrinking crude and product inventories, and more visible Chinese buying have come together to lift oil prices to their highest since early May. The market was also reminded of the dysfunctional Red Sea navigation with the Houthis sinking another bulker this week, adding upward pressure to oil prices.

Chevron-Hess Merger Stalled by Arbitrage Delays. Even though three months have passed since the case for a contract arbitration panel on Chevron’s planned takeover of Hess’ Guyana assets was filed, there is still no final arbitrator selected, delaying the $53 billion merger.

Alberto Becomes the New Scare for the Gulf. A storm system has made landfall in Mexico’s northeast regions, becoming the first named tropical storm of the 2024 Atlantic hurricane season, with Tropical Storm Alberto bringing heavy rains that disrupted lightering operations in Corpus Christi and Beaumont.

Here Comes the New PE-Backed Gas Giant. US private equity giant Carlyle Group (NASDAQ:CG) will form a new Mediterranean-focused oil and gas company after purchasing Energean’s (LON:ENOG) assets in Italy, Croatia, and Egypt for $945 million, naming former BP boss Tony Hayward as its new CEO.

Europe Approves 14th Russia Sanctions Package. The European Union approved a 14th package of sanctions against Russia that bans re-exports of Russian LNG in the EU, however steering clear of banning LNG imports per se, whilst also blocking any financing for Russia’s planned Arctic and Baltic LNG terminals.

Iran Boasts of Ever-Increasing Oil Production. Iran’s oil minister Javad Owji stated that the country’s crude output reached 3.6 million b/d, the highest level since the 2018 reimposition of US sanctions, with some 1.5 million b/d allocated for exports that still mostly revolve around Chinese buyers.

Italian Major to Farm Out Ivory Coast Finds. Italy’s oil major ENI (BIT:ENI) is reported to be looking into a partial divestment of its offshore exploration activities in Ivory Coast, seeking to sell up to 30% of its holding to garner some $1.1 billion from the emerging frontier, home to the largest oil find of 2021 (Baleine).

Oil Leaks Jeopardize Nigeria’s Supply. Nigerian upstream firm Aiteo was forced to shut down all oil production at its 50,000 b/d Nembe Creek facility, the largest of 11 fields operated by the company in Bayelsa state, after detecting a leak in the pipeline feeding the Bonny oil export terminal.

China’s Spike in Hydro Helps Non-Fossil Generation. Heavy rains across spring months have led to a notable resurgence in Chinese hydropower generation, skyrocketing to 115 billion KWh last month, up 40% year-on-year and potentially rising even higher as monsoon season promises to be above average.

European M&A Doesn’t Really Work. Protracted negotiations between the Dutch and German governments over the sale of the German arm of grid operator TenneT have collapsed after the two sides failed to agree on a price, estimated to be around $20-25 billion.

Chevron Eyes New Angola Opportunities. US oil major Chevron (NYSE:CVX) signed two risk service contracts with Angola for offshore blocks 49 and 50, located in proximity to its existing Cabinda concessions, pledging to undertake seismic surveys in the previously untapped area.

China Tames Its Coal Ambition. China’s coal production growth tapered off after rapid growth in 2022-2023, with Chinese miners producing 1,858 million tonnes of coal in January-May, down 3% year-over-year as Beijing sees the country’s energy supply as more comfortable.

Suriname Dreams of Repeating Guyana Success. The South American country of Suriname expects to produce 400,000 b/d of oil equivalent from its offshore fields by 2030, led by TotalEnergies’ fields in Block 58 that are expected to start producing in 2028 and account for at least half of that growth.

Mexico Refuses to Give Up on Dos Bocas. Chief executive of Mexico’s state oil firm Pemex Octavio Romero reiterated his promise to launch crude processing at Mexico’s new Olmeca refinery by end-2024 despite being almost three years overdue, eyeing a ramp-up to 163,000 b/d.

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