8th November 2023

Hello, hello Both Barrels crew. Here are today’s highlights in all things oil, gas, and energy:

• ⬆️ BIG build in US crude stocks

• ⬛ BlackRock’s $550m bet on direct air capture

• 🚢 Problems at parched Panama

• 🧠 JD Rockefeller’s life advice 

• ➕ plus oil prices fall sharply; Brazil to join OPEC?; Equinor farming down Rosebank.

Let’s dive in…

📈 THE NUMBERS

Oil prices dropped by ~$3/bbl yesterday to their lowest levels since July as global demand concerns outweigh fears of supply disruptions in the Middle East.

Prices have steadied today. So far.

🗞️ WELL-HEADLINES

 🗽 North America

• Crude inventories shoot up - the API estimates a huge build of 11.9 mmbbls in US commercial crude stocks last week. Analysts had expected a much more modest build. The official EIA numbers are released tomorrow.

• Come on Joe, let us drill in Alaska - the API has urged the White House to reverse lease cancellations in Alaska’s North Slope. The submission highlights the importance of Alaskan production to local communities and national energy security, and refutes the claims that O&G activity would harm wildlife in the area. Today, Alaska produces ~450 kb/d of crude, but has the potential to reach ~1.5 mmb/d.

🏰 Europe

• Equinor farming down Rosebank? - after getting the go-ahead for the development of the giant field from UK authorities, Equinor is rumoured to be selling a 20% stake (out of its existing 80%) in the project which could be worth ~$1.5 billion.

• Germany’s gas storage full ahead of winter - levels are at 100.14% (don’t know how that works), and storage operator INES said that “only extremely cold temperatures could lead to a shortage of supply”. Mild weather so far and low industrial demand is putting downwards pressure on gas prices across Europe.

• Finland wants to ban Russian LNG to Europe - fair enough, it makes little sense that EU countries continue to import Russian LNG while cutting off pipeline imports. Indeed, LNG is more expensive. The EU bought record amounts of Russian LNG in so far 2023.

🦁 Africa

• Meet Nembe, Nigeria’s new crude blend - the country has launched the new blend as it hopes to triple production of the low-sulphur grade in the coming years.

🗿 Central & South America

• Brazil to join OPEC? - OPEC’s Sec. General has hinted that Brazil could join the cartel. Would Brazil want to join a group that could restrict its fast growing crude output? I’m not so sure.

• New Fortress quits Lakach development - Pemex wants to continue with the development of the 900 bcf offshore gas field and is in talks with other potential partners. Development of the costly project has already been abandoned once before back in 2016.

• Venezuela’s impending deadline - while everyone’s licking their lips at the prospect of Venezuela’s oil sector opening up, there’s a good chance the sanctions may snap back pronto. The US has given Caracas until 30th November to make better progress towards free elections and release more political prisoners. Otherwise, the party will be over before it has even begun.

• Speaking of which - Maurel & Prom has signed a deal with PDVSA aimed at increasing O&G output in Venezuela’s western region.

• Suriname launches bidding round - 11 offshore areas will be open to bids, south of existing discoveries. Suriname is targeting its first offshore oil output by 2028.

🌍 GEOPOLITICS & MACRO

• Problems at the parched Panama Canal - two LPG tankers have had to turn around last minute before reaching the Panama Canal, presumably because of the restriction of traffic through the canal due to low water levels. The authorities at the canal are having to cut traffic by up to 50% and there are concerns some of the largest ships won’t be able to pass through at all, forcing them to add thousands of kms to their journeys. The El Nino weather phenomenon has contributed to the driest October in the region since records began in 1950.

• OPEC reiterates bullish demand outlook - focusing too much on slowing economic growth in China doesn’t tell the full story, said OPEC’s Sec. General. Growth in India and other parts of Asia will underpin the group’s high oil demand growth forecast of 2.2 mmb/d next year. In contrast, the perma-bears at the IEA see growth of 0.8 mmb/d in 2023. Time will tell.

• EIA sees declining US gasoline demand - the agency released its latest Short Term Energy Outlook today. It didn’t contain anything too radical but forecast that US gasoline demand will fall to its lowest level in two decades next year driven by the rise of remote work, fuel efficiencies, and high prices.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• BlackRock takes a punt on carbon capture - the world’s largest asset manager is investing $550m into Oxy’s STRATOS direct air capture (DAC) project in Texas. The $1.3bn facility is due to start operations in 2025 and has the potential to remove from the atmosphere and permanently store 500,000 tonnes per year of CO2, the largest of its kind in the world. I’m not yet convinced by energy-intensive expensive DAC. Yes, it’s permanent removal, but it costs at least $500/tCO2e, compared with nature-based solutions like reforestation at less than $50/tCO2e.

• China’s solar supply chain dominance - a new report by Wood Mackenzie believes that China and its low cost production will be able to satisfy most of global demand for solar panels for the next decade. That means the US will have to keep pumping subsidies into its domestic industry if it wants to compete…

• China’s long-awaited methane plan is a let down - China is by far the world’s largest methane emitter (14% of global total) but its action plan has been received as disappointing and vague. It doesn’t set any concrete targets for methane reduction, but promises to improve its monitoring systems.

🛢️ BOTTOM OF THE BARREL

J.D. Rockefeller.

The big daddy of the modern oil industry was one of the richest blokes to ever live, amassing a fortune of ~$410 billion in today’s money (compared to the relatively impoverished Bill Gates with a paltry $110 billion).

He was also a much-loathed ruthless badass.

So careful about taking all his advice at face value:

👋 BEFORE YOU GO 

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Thanks for reading. Have a day out there. 🛢️🛢️