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Bullish sentiment is fading slightly in oil markets despite the production cuts from OPEC+ and global inventories being tapped.



Friday, August 18, 2023

While backwardation in oil markets has reached the widest level since April and inventories are declining globally, the upside for crude oil prices is no longer as evident as it was a couple of weeks ago. The Federal Reserve minutes, showing Fed members divided over the need for further rate hikes, cooled down expectations of a soft landing, and China’s ongoing macroeconomic woes resurfaced again, seeing Brent edge lower week-on-week to $84 per barrel.

LNG Price Rally Is Up for Vote. As employees of Chevron’s (NYSE:CVX) Gorgon and Wheatstone LNG terminals offshore Australia begin their vote on industrial action, LNG prices in Asia and Europe might be up for a huge rally as an all-out strike could shut in 10% of global LNG supply. 

Australia LNG Strikes Looming Large. With 99% of offshore platform workers seeking industrial action, the NW Shelf liquefaction terminal operated by Australian oil producer Woodside Energy (ASX:WDS) is getting increasingly closer to supply disruptions as unions bemoan lack of progress on wages. 

Energy Transfer Expands into New Basins. US midstream giant Energy Transfer (NYSE:ET) agreed to buy rival company Crestwood Equity Partners (NYSE:CEQP) for $7.1 billion including debt, boosting its gas-gathering capacity by 2 bcpfd and expanding into new frontiers such as the Powder Basin in Wyoming. 

Mexico Is Failing the War on Taps. Even though the Mexican government promised to fight back against illegal taps in fuel pipelines across the country, the midstream grid operated by national oil firm Pemex saw a 12% year-on-year increase in taps in H1 2023, soaring to 6,006 cases.  

Oxy Doubles Down on Carbon Capture. US oil producer Occidental Petroleum (NYSE:OXY) agreed to purchase Canadian direct carbon capture tech company Carbon Engineering for $1.1 billion, part of the oil giant’s plan to build 100 direct air capture plants as the US government already promised grants.

Germany to Audit Finances of LNG Operator. The German government will look into the financial background of Deutsche ReGas, the private operator of two planned LNG terminals in northern Germany, as local authorities continue to oppose the plants on environmental grounds along the Baltic Sea coast. 

Congress Urges Biden to Get Iranian Tanker Discharge. A bipartisan group of US lawmakers is urging President Joe Biden to expedite the discharge of crude from an Iranian vessel seized in April as sanction enforcement, with the Suez Rajan tanker anchored near Galveston for almost three months.

Venezuela Fails to Curb Flaring. Despite pledges to clean up Lake Maracaibo and utilize more of the routinely flared gas, Venezuela’s increasing oil production has led to higher levels of flaring with PDVSA’s Monagas plant alone burning some 1.7 billion cubic feet per day, still lacking any means of processing. 

Kuwait Petchem Plant Fails to Spark Investor Interest. Having recently launched its 615,000 b/d Al Zour refinery, Kuwait was mulling the construction of an adjacent petrochemical plant, but an advisory study by Ernst & Young showed a lack of investor appetite amidst consistently weak petchem margins. 

Citi Launches Huge Zinc Stock Gamble. US investment bank Citibank (NYSE:C) amassed large amounts of zinc on the London Metal Exchange (LME), believed to be the mysterious 141,750 metric tons appearing this week in Singapore warehouses, just as prices dropped to $2,265/mt this week, down 35% since January.  

Chile’s Copper Champion Seeks Change. The world’s largest copper producer, Chile’s Codelco, is reportedly at risk of insolvency as cost overruns have inflated its debt to $19 billion currently and the company will have its third CEO in a year after the previous head resigned over weak copper output.

India Mulls Wheat Imports from Russia. According to Reuters, India is in advanced talks with Russia to import wheat at a discounted rate to curb food inflation in the country ahead of state and national elections next year, just as domestic wheat prices soared to a 15-month high in July. 

Key Stakeholder Can’t Finance Largest Oil Find of Decade. As the global upstream community heaps praise on the 6-billion-barrel Venus discovery offshore Namibia, Impact Oil & Gas, a key partner in the TotalEnergies-led (NYSE:TTE) project, said its development is way beyond its funding capacity and it would seek to sell its 20% stake.

By Michael Kern for Oilprice.com

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