Good morning Both Barrels crew. This is your daily dose of all things oil, gas, and energy, without the hot air.

Some highlights of the day:

• 💲 $80-$90/bbl a “fair price”

• 🛍️ CrownRock up for grabs

• 🇮🇷 How high can Iran go?

plus a lot more. Let’s get to it…

📈 The numbers

Not much movement across the board for energy prices today.

🗞️ Well-headlines

 🗽 North America

• Vital Energy has announced three acquisitions in the Permian basin for a total value of ~$1.2bn. The assets, bought from multiple sellers, will add 35 kboe/d of production, 53,000 net acres, and 248 mmboe of proved reserves to Vital’s portfolio.

• Permian player CrownRock is rumored to be exploring a sale that could value the company at ~$10bn.

• Mexico’s new Dos Bocas refinery is expected to reach its full 340 kb/d capacity by the end of this year. The project, which has suffered delays and cost overruns, is seen as a flagship project for AMLO’s government.

• The US Energy Dept. has been talking to oil producers and refiners to “ensure stable supply” in a time of high gasoline prices. This administration can’t seem to decide whether it wants more US oil production or not…

• US crude inventories rose last week for the first time in a month, according to the EIA. Stocks climbed by 4 mmbbls, compared with an expected decline of 1.9 mmbbls. Gasoline stocks jumped by 5.6 mmbbls, analysts had expected a 0.2 mmbbls increase.

🏰 Europe

• Total has kicked-off a tender for production of 500,000 tonnes of green hydrogen to help decarbonise its European refineries. “We need electrolyzers in massive quantities. This is also the purpose of this call for tenders: to give a boost to this sector”, said a Total exec.

🕌 The Middle East

• A senior official at KPC has commented that $80-$90/bbl is a “fair price” for crude and that he doesn’t expect prices to rise much further. The era of $50/bbl is over, he said. Barring a sharp economic recession, we’d agree.

• OPEC data has shown that Iran’s crude production hit 3 mmb/d in August, a monthly increase of ~150 kb/d. Iran’s oil minister said earlier this month that production will hit 3.4 mmb/d by the end of September. At the start of the year it was ~2.5 mmb/d, and back in 2018 during the final days of the JCPOA it sat at 3.8 mmb/d, so there’s plenty more room for Iranian production to run.

⛩️ Asia

• Where’s all this sanctioned Iranian crude going? To Chinese “teapot” refineries apparently. Less fearful of US repercussions than larger refineries, these smaller independent operations are making the most of the big discounts on Iranian oil and mopping it up.

📍Everywhere else

• Ongoing strikes have had no impact so far on LNG production at Chevron’s Gorgon and Wheatstone facilities. However, the strikes are due to escalate further today, when unions plan a complete stoppage of works at the plants.

• Total is beginning studies into a $9bn development of offshore oil and gas Block 58 in Suriname. FID is expected later next year. Appraisal drilling has confirmed resources of 700 mmboe which could produce ~200 kboe/d of mostly crude. Some of Suriname’s O&G discoveries are adjacent to the booming Stabroek block in Guyana.

• Speaking of Guyana, its president said he’s “very happy” after the country’s first O&G auction attracted bids for 8 of 14 offshore blocks on offer. Bidders included Exxon, Total, Hess, CNOOC, and others.

🌍 Geopolitics & macro

• US consumer prices rose by 3.7% in August year-on-year, slightly surpassing expectations, and driven mainly by an increase in gasoline prices.

💨 Carbon, Climate & other energy stuff

• WoodMackenzie estimates that US “renewable” capacity could triple in 10 years to 110 GW thanks to the support provided to the sector by the Inflation Reduction Act.

• It’s been a bad year for wildfires in Canada. The fires have emitted 410 mtCO2 since May, the equivalent of Mexico’s entire annual emissions. Canada’s human annual emissions are around 550 mtCO2. Elsewhere around the world, wildfires this year have been below or in line with annual averages.

• Another day, another EU climate bill. Under the new laws, 2% of fuel made available at EU airports must be sustainable aviation fuel (SAF) by 2025, 6% in 2030, 20% in 2035, and 70% by 2050. SAF is generally 3-5x more expensive than standard jet fuel and fuel is typically 20-40% of an airline’s operating costs, so expect to pay more for your European city breaks in the future.

🛢️Bottom of the barrel

Iran has regained its position as the third largest producer in OPEC.

Having endured decades of wars, revolutions, and sanctions, it’s a country that is no stranger to sharp swings in oil production.

When the JCPOA was signed in 2015, there were questions around how quickly Iran could ramp up its cash-strapped, neglected oil sector. Such concerns were unfounded and production quickly rose by 1 mmb/d in two years before sanctions were slapped back on when Trump pulled out of the accord in 2018.

This time around, the drop in production was deeper, but the recovery equally as fast.

The question for oil markets is how high can Iran go? And at what point will Saudi and OPEC+ tell them to ease off? The US will likely be urging them on as it turns a blind eye to sanctions in favor of maximum oil supply.

Judging by previous peaks, Iran probably has another ~0.7 mmb/d in short term space capacity. Going much beyond that will require significant investment and time.

***

There’s nowhere to hide from the long arm of the environmental agenda.

Here’s a sign from a parking lot in the UK where higher emissions cars have to pay more for parking.

🙏 Correction corner

In yesterday’s edition we mistakenly put a story about the Tengiz oilfield in Kazakhstan in our “Everywhere else” section. Kazakhstan is, of course, proudly in Asia. Oops. Apologies to our Kazakh readers!

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