23rd August 2024

Another week bites the dust. Another seven days of good livin’ thanks to the humble hydrocarbon.

Here’s what went down over the past couple of days in oil, gas, and energy:

• 😬 Squeaky-bum time for OPEC

• 🥶 Beware global cooling

• 📉 A rough week for oil prices

• 🚗 Ford’s EV cash incinerator 

• ➕ plus Total lays out Suriname plan; Fed rate cut imminent; exploring for CCS; peak US crude exports?; ex-trader faces 40 years behind bars; Ovintiv seeking $2bn sale; and plenty more

Have a top weekend

📈 THE NUMBERS

Another rough week for oil prices, with Brent falling to ~$75/bbl at one point, its lowest levels since January. Why?

A touch of febrile Chinese economic sentiment, a large dollop of spare capacity, and a sprinkle of ceasefire possibilities in the Middle East.

🗞️ WELL-HEADLINES

 🗽 North America

• Have US crude exports peaked? - some analysts think so. A combination of slowing domestic production and tepid demand in Asia has meant that US exports are set to average 4.2 mmb/d this year, just a 3.5% increase on last year, and the slowest rate since US exports kicked off in 2015.

• Ovintiv mulling $2bn Utica sale - the Denver-based company is rumoured to be joining the US M&A party by selling its Utica assets so it can focus on the Permian.

• Halliburton hit by cyber attack - the extent of the disruption is unclear but the attack reportedly has impacted business operations at the company’s Houston campus, as well as some global connectivity networks.

• Crude inventories resume fall - after a surprise build in the previous week, US commercial crude stocks fell last week by 4.6 mmbbls. Gasoline declined too.

• Surge Energy secures $175m refinancing - the Canadian indy has issued a 5 year, 8.5% bond to pay down an existing credit facility.

🏰 Europe

• Ex-Vitol trader faces 40 years - after pleading guilty to various corruption charges involving bribing Ecuadorian and Mexican government officials to win $500 million in business for Vitol, the former trader is looking at decades behind bars.

• UK companies sound the alarm, again - 42 UK O&G companies wrote to the government about the destructive impact that new taxes will have on jobs, investment, tax revenue, and the economy. In response, a gov’t spokesman said: “We are strengthening the previous government’s windfall tax to ensure North Sea O&G producers contribute their fair share towards our energy transition. Our plans for a new National Wealth Fund and Great British Energy will create thousands of new jobs in the industries of the future”. No it won’t. Fools, fools, fools.

• OMV strikes lucky at Haydn - the exploration well at the offshore Norwegian field hit gas with estimated recoverable volumes between 30 and 140 mmboe. The hope is that the find will extend the life of the Aasta Hansteen gas hub.

• Balder X misses weather window - hold ups with the construction of the Jotun FPSO mean the ~80 kb/d field offshore Norway will now see first oil in Q2 2025 rather than Q4 2024. They can’t install it during the bitter winter weather and so have to wait until spring.

⛩️ Asia & Oceania

• Exploring for CCS - Chevron and Woodside have been granted approval to explore an offshore region near their Gorgon LNG facility in Australia for potential CCS locations. Usually, depleted O&G reservoirs are used for CCS so it’s rare to see companies out exploring specifically for CCS sites.

🦁 Africa

• Oando completes Eni buy - getting approvals in Nigeria is no mean feat so this will be a huge relief to all involved! The $783m deal includes ~490 mmboe of reserves and is part of a broad trend of IOCs streamlining their global portfolios.

🗿 Central & South America

• Total lays out Suriname plans - the major is planning a 32-well campaign to develop Suriname’s first offshore field, with production due to start in 2028. FID on the $9bn Sapakara South-Krabdagu project is due later this year. Suriname borders Guyana and its Block 58 alone is estimated to hold 6.5 bnbbls of oil resources.

🌍 GEOPOLITICS & MACRO

• Crunch time for OPEC - BP’s chief economist doesn’t think the cartel can afford to unwind their planned production cuts later this year due to falling crude prices and supply growth elsewhere. OPEC+ is currently throttling about 5.5 mmb/d and given the fragility of oil markets right now, even a small fraction of that released into the market could be bad news for crude prices (and OPEC members’ budgets).

• Gaza peace deal hangs in the balance - the key sticking point is apparently over Israeli demands to keep troops in Gaza along two narrow corridors that intersect the Gaza strip. The next round of talks is expected in Cairo in the coming days

• Rate cut incoming - minutes from a Fed meeting this week show that a US interest rate cut in September from current levels of 5.25%-5.50% is highly likely. Some expect a full percentage of cuts by the end of the year as reduced inflation back towards the 2% target and rising unemployment give the Fed scope for some easing.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Ford losing $44k per EV - the automotive giant is axing various EV models as it hemorrhages $5bn a year ($44k per EV sold) in its EV unit. Ouch. Ford has lamented the lack of demand for EVs as if it’s surprised that consumers don’t want to buy a more expensive inferior product just because some newspapers and politicians label them “green”.

• Atlantic cooling at record rates - wait, what? I thought everything was always getting hotter thanks to big bad CO2. This doesn’t fit the narrative. Beware global cooling, everyone.

• Not dead yet - despite the past few years finally revealing the deep flaws in offshore wind, Rystad Energy reckons the offshore wind market will grow by ~10x between now and 2040, with most of the new capacity being built in Europe. But the sector will need “government support” (i.e. tax and bill payer subsidies) to reach these goals. No thanks.

• AI to drive “colossal” increase in power demand - “We’ve had electricity demand largely flat for decades here in North America. Our view is that [AI] will add somewhere between half a percent and 2%, which might not sound like much, but per annum through 2030, that’s a colossal move.” said the Enbridge CEO. Great news if you’re a gas producer.

• BP buys stake in Chinese SAF company - BP is coughing up $49m for a 15% stake in a company that is building a 500,000 tpa sustainable aviation fuel plant in the east of China.

🛢️ BOTTOM OF THE BARREL

Boom and bust is the name of the game…

And this is why OPEC can’t afford for oil prices to go much lower:

👋 BEFORE YOU GO 

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

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