Oil prices are under pressure as bearish sentiment strengthens due to OPEC+’s disappointment in its commitment to extend its voluntary cuts until Q3 2024 and its baseline cuts until the end of 2025.
– Combining an in-person meeting in Riyadh with a hybrid online option for smaller producers, OPEC+ agreed to extend existing production cuts until next year, while paving the way for a gradual disengagement from most restrictions.
– The final round of voluntary production cuts agreed in November 2023 is expected to be gradually lifted over a 12-month period, bringing the collective OPEC+ target to 36.27 million barrels per year. day, or more than 2 million barrels per day more than current production.
– The United Arab Emirates were the big winners of the OPEC+ meeting, having obtained a further increase in their official production quota, allowing them to increase their production by 300,000 barrels per day in several stages throughout the year 2025.
– Although Saudi Energy Minister Prince Abdulaziz bin Salman claimed that OPEC+ had the choice to suspend or even reverse future relaxations, the broader market saw this as a sign of more supply in a period of uncertain demand.
Market Decision Makers
– The maritime division of ADNOC, the UAE’s national oil company, has agreed to buy UK-based shipping company Navig8 for $1.5 billion dollars, taking over a fleet of 32 oil tankers and the operation of six maritime pools.
– The main American actor of the mid-stream, Energy Transfer (NYSE:ET) agreed to buy Midland-focused pipeline operator WTG Midstream in a deal valued at $3.25 billion, including a $2.45 billion cash payment these.
– Japan’s largest gas supplier, Tokyo Gas (TYO:9531) is looking to invest in natural gas assets in the United States, building on its recent $2.7 billion purchase of Rockcliff Energy and its 49% stake in the company. ©ARM Energy.
Tuesday June 4, 2024
The weekend OPEC+ meeting extended voluntary production cuts through Q3 2024 and initial reductions of 3.66 million barrels per day through the end of 2025. This commitment was not enough to convince market participants that the future of oil is bright, with Brent losing almost $3 per barrel in a single trading day and slipping below the mark of 77 dollars per barrel. With the promise of more supply returning to the market in 2025, the list of available bullish factors has narrowed considerably.
OPEC+ Extends Voluntary Production Cuts Until Q3. Quickly convening an in-person meeting in Riyadh, OPEC+ members agreed to extend the 2.2 million barrels per day of voluntary cuts until the third quarter of 2024, while charting a path forward for a gradual relaxation of the remaining cuts until 2025.
Outage in Norway Sends European Gas to 2024 Highs. European gas futures TTF hit their highest of the year so far, at 37 euros per MWh, after operations at Sleipner’s offshore hub were halted.Equinor (NYSE:EQNR) due to a crack, also leading to the shutdown of the Nyhamna processing plant.
National Strike Paralyzes Nigeria’s Industry. Nigeria’s main labor unions have paralyzed the country’s electricity grid and halted flights across the country as they demand a 1,500% increase in the minimum wage amid unprecedented inflation tooth, preserving until now the country’s oil production.
Investment Funds Return to Oil Speculation. After six straight weeks of bearish positioning, portfolio investors added to their net long positions held in the six major oil futures and options contracts during the week ending May 28, primarily in closing their selling positions before the OPEC+ meeting.
South Korea Reportedly Discovered Oil. One of the world’s most import-dependent countries, South Korea has approved exploratory drilling for huge potential oil and gas reserves off the coast. is the country, with KNOC leading the assessment which could reveal up to 14 billion barrels of oil equivalent.
Exodus of Oil Majors from the British North Sea Continues. The world’s oil giants Shell (LON:SHEL) And ExxonMobil (NYSE:XOM) are close to an agreement with British independent producer Viaro Energy to sell their co-owned gas fields in the southern North Sea for $0.5 billion, ending the presence of ‘Exxon in the country for 60 years.
Indonesia Postpones Copper Concentrate Export Ban. Indonesia, one of the world’s largest copper producers, has postponed the start of a ban on its copper concentrate exports until the end of 2024 due to delays in the construction of processing plants, potentially dampening copper prices until the summer.
US Resumes Oil Purchase for SPR. The US Department of Energy has resumed the purchase of 3 million barrels of oil for the country’s Strategic Petroleum Reserve, purchasing at an average price of 77. 69 dollars per barrel for delivery in November, bringing the total purchased to 38.6 million barrels.
Sheinbaum’s Crushing Victory Worries the Mexican Oil Industry. Mexico’s President-elect Claudia Sheinbaum’s landslide victory will allow the ruling party to officially dismantle the 2013 energy liberalization by amending the constitution, capping the future growth of oil production in the country.
Heatwaves in India Drive Up Gas Consumption. As heatwaves in India claimed dozens of lives, the country’s natural gas-based electricity generation soared to record levels in May, nearly doubling from a year ago on the other to reach 4.7 million KWhr, while continuing to represent 75% of coal generation capacity.
China’s Emissions Rules Will Limit Fuel Demand. Beijing plans to mandate a 5% reduction from 2020 carbon emissions levels by the end of 2025, removing purchase limits on vehicles not powered by fossil fuels and promoting the electrification of industrial vehicles, capping the growth in demand for gasoline and diesel.
An American Oil Major Sues Venezuela. A court in Trinidad and Tobago awarded the US oil major ConocoPhillips (NYSE:COP) the right to assert a $1.33 billion claim against Venezuela for the appropriation of its oil and gas assets, potentially jeopardizing the development of offshore gas fields like Dragon or Cocuina-Manakin.
Australian Liquefied Natural Gas Makes a Comeback. The big American energy group Chevron (NYSE:CVX) resumed LNG production at its Gorgon liquefaction site on Barrow Island in Australia after a mechanical fault led to the shutdown of operations for a month, bringing a production capacity of 5.2 mtpa.
By Michael Kern for Oilprice.com
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