23rd November 2023

Rise and shine Both Barrels crew. Here’s what’s up in all things oil, gas, and energy today:

• 👀 OPEC bickering sparks panic

• 👴🏻 Opportunity in old age for the UKCS

• ⚛️ Uranium going vertical

• 🔃 Rigs down, inventories up

• ➕ plus goodbye to Grangemouth; BIG oil ETF outflows; Brookfield rejected again.

Let’s go…

📈 THE NUMBERS

Oil prices dropped by 4% yesterday - before almost entirely recovering - after OPEC+ postponed its meeting originally due for Saturday. It will now take place on 30th November.

The disagreement among the cartel is over “baselines”, the reference production level that each country cuts against.

In particular, Angola and Nigeria are said to be unhappy with the revised production quotas they are being given for next year.

Any signs that cooperation among OPEC is on the rocks sends oil markets into a panic because if the producers can’t reach an agreement then it’s a free for all and everyone opens the taps.

It happened in 2014 during the shale oil glut and again in 2020 during the COVID bear market. In both instances, oil prices plunged.

The group is currently holding back ~4.5 mmb/d of output so if OPEC+ cooperation falls apart again (which I think is very unlikely in this scenario given Angola and Nigeria aren’t critical members of the alliance) there’ll be carnage in oil markets.

🗞️ WELL-HEADLINES

 🗽 North America

• Oil spill shuts in 61 kb/d of output - the leak in the GoM, offshore Louisiana, is effecting operators including Oxy, Talos, and others. The source of the leak is still unconfirmed but it’s likely to be from the Main Pass Oil Gathering company's pipeline system.

• EIA confirms large crude build - oil inventories rose by 8.7 mmbbls last week, taking the total increase over the past 3 weeks to a whopping 26.2 mmbbls. Analysts had predicted just a 1.2 mmbbls rise.

• US oil rig count stays flat at 500 - the release came a day early this week due to the Thanksgiving holiday. The count is 127 lower than this time last year.

• Freeport LNG restart approval - the facility has got regulatory approval to return to full operations. Part of the US’s second largest LNG export terminal has been closed since a fire last year.

🏰 Europe

• UK’s Grangemouth refinery closing in 2025 - the 150 kb/d facility in Scotland is one of only 6 refineries in the UK and will be converted into a fuel import terminal, putting hundreds of jobs at risk. Owner Petroineos said the refinery can’t compete with “with bigger, more modern and efficient refineries in the Middle East, Asia and Africa”. The sorry de-industrialisation of Europe continues.

• Opportunity in old age for the UK North Sea - a report by OEUK estimates that by 2030 nearly half of the 283 active oil & gas fields in the UK North Sea will have ceased production. On the bright side, the decommissioning of all those platforms presents a £20bn opportunity.

• Serica acquires stake in Greater Buchan Area - it acquired the 30% interest in the 70 mmboe offshore UK pre-development field from Jersey Oil & Gas.

• Longboat discovers more volumes at Statfjord Ost - an infill drilling campaign found new reserves at the offshore Norwegian oil & gas field.

⛩️ Asia & Oceania

• Korea prefers short-term LNG purchases - unlike other major buyers which have recently signed long-term LNG supply contracts, South Korea’s energy ministry has said it would rather take its chances with short-term contracts in the spot market to get better prices.

• Brookfield’s revised Origin offer rejected again - the new offer of at least $10.2bn presented more upside to Origin shareholders but AustralianSuper, Origin’s largest shareholder, said the bid still substantially undervalues Origin. Looks like this one might be dead.

• Santos’s declining production - Australia’s largest producer expects its output next year to fall to 84-90 mmboe, compared with 89-93 mmboe this year. The fall is mainly due to declining output in its mature Bayu-Undan gasfield.

🦁 Africa

• Minor oil spill at Total’s Egina field in Nigeria - authorities are working to contain the spill which Total has said was minimal and hadn’t impacted production at the 200 kb/d oilfield.

🗿 Central & South America

• Equatorial Margin: to drill or not to drill - Brazil’s environment agency will decide by early next year if Petrobras can explore near the mouth of the Amazon River. The area is part of the Equatorial Margin, which Petrobras considers its most promising new frontier for oil and gas exploration.

• Venezuela’s output on the up - the country’s oil ministry said oil production had reached 850 kb/d, up from 786 kb/d in October, following the lifting of US sanctions. It’s targeting 1 mmb/d in the short term. Much beyond that will take longer as the country’s decrepit oil sector is in desperate need of investment.

🌍 GEOPOLITICS & MACRO

• Speculators bearish on oil - one of the biggest oil ETFs saw its largest single day outflow of funds earlier this week since 2016. It looks like traders don’t expect good news from the upcoming OPEC meeting. Time to buy?

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Uranium going vertical - uranium prices have continued their recent surge and passed $80/lbs. In 2020, they were as low as $25/lbs. Growing demand for nuclear power as a zero-carbon energy source and supply shortages have driven the price rise.

• Enel reining in renewables investment - one of the world’s largest renewables developers said it will take a more cautious approach to investing in wind and solar due to rising costs. It will instead increase its investments into its power grid.

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

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