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

Here’s what’s what today:

• 🔔 OPEC vs IEA Round 2

• 🤯 Chinese refiners in overdrive

• 💯 Crude to $100?

plus plenty more. Let’s get to it…

📈 The numbers

Oil prices continue their hot streak as solid demand in China keeps markets short of supply.

Are we heading to $100? Chevron’s CEO thinks so…

🗞️ Well-headlines

 🗽 North America

• The EIA forecasts that US shale oil output will fall by 40 kb/d in October, its third consecutive monthly decline, to 9.39 mmb/d. Output hit a record of 9.48 mmb/d in July. It can take up to 9 months for oil prices to impact US shale volumes so the recent climb in crude prices has yet to feed through into production.

• The US government is expanding its fleet of international oil tankers to ensure its military has sufficient emergency supplies. It’s also considering putting armed troops on commercial vessels sailing through the Strait of Hormuz to deter hijackers from Iran, and elsewhere.

• Santos is farming down half of its working interest in 148 exploration leases on the Alaska North Slope at its Pikka project to APA Corp and Lagniappe Alaska.

🏰 Europe

• The development cost for Equinor’s Johan Castberg project in the Arctic Barents Sea has jumped by $1.2bn since last year to $7.4bn. The field has recoverable reserves of 650 mmboe and is due onstream next year. The project and its infrastructure is seen as an important step in unlocking the potential of the Barents Sea.

• DNO has announced a play-opening gas and condensate discovery at its Norma prospect in the Norwegian North Sea.

• Cash strapped Orcadian Energy has found an undisclosed partner for the $1bn development of the Pilot field in the UK North Sea. Under the deal, the new party will take operatorship and an 81.25% stake in the asset which is estimated to hold P50 reserves of 97 mmbbls.

🕌 The Middle East

• Iraq is pulling together plans to drill dozens of new wells to maximize its productive capacity and increase revenues, according to an oil ministry spokesman. Iraq currently produces ~4mmb/d of oil and has ambitious plans to hit 7 mmb/d by 2027. At current high oil prices, Iraq is raking in a cool $9 bil a month. Wonder where it’s all going…?

⛩️ Asia

• A senior minister commented that Japan will ensure its reliable supply of energy, as new US sanctions complicate the Russia / Japan owned Arctic LNG 2 project. It’s not yet clear how the sanctions will impact Arctic LNG, but they may make it difficult for the Japanese partners to provide ongoing support to the project.

• China’s diesel exports are skyrocketing as refiners take advantage of big margins. In August, Chinese refiners processed a record high volume of crude.

• Russia and China are jointly investing in a ~$700m oil transshipment complex in Russia’s far east. Russia is hastily shifting its hydrocarbon exports towards China’s mammoth market after losing its European customers when it invaded Ukraine.

📍Everywhere else

• The long-awaited $19.5bn Dangote refinery in Nigeria, billed as a game-changer for Nigeria and sub-Saharan Africa, will receive its first cargo of crude in the next two weeks and begin producing up to 370 kb/d of diesel and jet fuel from October. Full capacity of 650 kb/d is expected to be reached in 2025.

• Egypt has outlined plans to significantly increase output from its giant offshore Zohr field in the eastern Med.

🌍 Geopolitics & macro

• Saudi’s Energy Minister, arguably the most important individual in the oil market, has had his say at the WPC in Calgary. Here are some highlights:

  • “[The IEA has] moved from being a forecaster and assessor of the market to one practicing political advocacy…it should be ashamed [of some of its past forecasts]”. Can’t argue with that.

  • “[OPEC+ cuts are] not about  jacking up prices, it’s about making the decisions that are right when we have the data”

  • On demand: “The jury is still out” on China, the US, central banks’ actions.

• Aramco CEO, perhaps the next most important individual in oil markets, believes that oil demand will hit 110 mmb/d by 2030 vs ~101mmb/d today.

  • “We need to invest, otherwise in the mid-to-long-term we’ll have another crisis and we will go backward in terms of using more and more coal”, he said.

  • “[The notion of peak oil demand] is wilting under scrutiny because it is mostly being driven by policies, rather than the proven combination of markets, competitive economics and technology,"

• Iran has expelled several nuclear inspectors from the country. It’s not clear why but it comes several days after Iran was asked to explain traces of uranium that were found at sites undeclared as nuclear energy development sites. That doesn’t sound too encouraging.

• Chevron’s CEO thinks oil prices are heading to $100/bbl.

💨 Carbon, Climate & other energy stuff

• Ahead of the UN General Assembly next week in Brazil, Brazil’s energy minister has said that wealthy countries need to finance the global energy transition. Developing countries “cannot finance an energy transition in the mould of Europe and the United States”, he commented. He’s quite right. Environmentalism is a rich man’s concern. You can’t expect developing nations to care about climate while they’re still fighting poverty.

• Orsted’s CEO said at Climate Week in NYC that it’s still possible but hard to reach the US’s offshore wind target. “We’ve seen dark clouds gather…[interest rates climbing to 4% is having] a very dramatic impact on renewables because the fuel of the renewable industry is capital.” Wind and solar are a low interest rate phenomenon.

• Greenpeace activists with their plastic boats, nylon shirts, and petchem paints, have blocked the arrival of Total’s new LNG FSRU at Le Havre port in France.

🛢️Bottom of the barrel

👋 Before you go

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