4th November 2024

Good morning ladies and gents. Let’s catch up on all that happened over the weekend in the world’s most important industry:

• ⛔ “A failed experiment”

• 📅 OPEC delays unwinding cuts

• 🦷 “Teeth-breaking” response

• ⚡ Transformer supply crunch

• ➕ plus another US refinery bites the dust; Shell fighting for Nigeria exit; Canada bracing for emissions cap; rig count still stubborn; Santos in court for greenwashing; and barrels more.

Here goes…

📈 THE NUMBERS

Oil prices got some support today from OPEC’s production unwind delay and fighting talk from Iran.

🗞️ WELL-HEADLINES

 🗽 North America

• Canada braces for new O&G emissions cap - details are set to be released today about a long awaited plan to reduce emissions in the country’s O&G sector. Industry groups strongly oppose the idea and warn that measures would result in reduced oil output.

• Another refinery bites the dust - LyondellBasell is closing its ~260 kb/d refinery in Houston in Q1 2025 amid tightening refining margins. Phillips66, Chevron, and Valero have all recently confirmed or hinted at refinery closures in recent months.

• Rig count still stubborn - the US oil rig count fell slightly by one last week to 479, while gas rigs rose by one to 102. The oil rig count has been stuck around the ~480 mark for months now.

• Some more Q3 earnings - Transocean beats estimates but books large impairment; Cenovus’ earnings drop on declining output; Kosmos more or less in line with forecasts.

🏰 Europe

• Gas storage full to the brim - determined to avoid shortages and accompanying price spikes like those seen in the winters of 2021/22 and 2022/23, Europe has made sure its gas storage has hit 95% of capacity by 1st November this year. Prices still remain relatively high though due to disruptions from Norway and a lull in wind generation.

🕌 The Middle East

• Oman’s OQ offloading methanol unit stake - the state-owned company is selling a 49% interest in the unit as the government pushes to privatize more of its energy sector and diversify away from oil and gas.

⛩️ Asia & Oceania

• Santos in court in world first greenwashing case - an activist shareholder is trying to sue the Australian E&P over its stated emissions targets and assertions that natural gas is a “clean fuel”. The plaintiff claims that Santos had little grounds to make and publicize emissions reductions targets and no solid plans on how to achieve them.

• Time for Aussie shale? - Empire Energy is set to spud a closely watched gas well as part of a pilot production project in the Beetaloo basin in Australia. The remote region is estimated to hold huge reserves of tight gas that will require fracking but has yet to produce any commercial volumes.

• Shelf bags $200m Chevron Thai contracts - the contracts for 2 drilling rigs in Thailand will be extended for two more years and start in 20225.

🦁 Africa

• Shell fighting for Nigeria exit - both Shell and the would-be buyer of its onshore Nigeria assets, Renaissance Africa Energy, are lobbying the Nigerian government hard after it rejected the $1.3bn deal. Apparently the regulator is concerned about Renaissance’s ability to manage the assets and fund the costs of environmental damage.

🗿 Central & South America

• Venezuela on the up - despite the dire state of its ageing and neglected O&G sector, Venezuela’s crude exports have hit a 4-year high of ~950 kb/d, boosted by increased sales to India and the US. Heavy Venezuelan crude is well suited to the specs of US refineries which were designed to process heavier conventional oil, rather than light US shale oil.

🌍 GEOPOLITICS & MACRO

• OPEC delays unwinding output cuts - in the least surprising news of the weekend, OPEC has pushed back its proposed oil production increases by a month. The group had planned to start gradually unwinding cuts of 2.2 mmb/d in December but says that it will now do so in January. I’m not sure one month is going to make much of a difference in this tepid market…expect more delays.

• US warns Iran - the US has told a belligerent Iran that this time it wouldn’t be able to restrain Israel if Iran attacks it again. Iran’s Supreme Leader vowed over the weekend a “teeth-breaking” response after recent strikes by Israel on various military sites. Yikes.

• Exxon unphased by election - reassuring to see Exxon’s CEO sharing our views about economics being a far greater driver of decision making in the oil patch than politics: “I'm not sure how 'drill, baby, drill' translates into policy…Certainly we wouldn't see a change based on a political change but more on an economic environment.”

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Transformer supply crunch - Hitachi Energy, the world’s largest suppler of transformers (vital bits of power infra that convert power into a form usable by end users), has warned it is “overwhelmed” by the demand. Roll out of new power capacity faces huge bottlenecks around a lack of necessary infrastructure like transformers and transmission. It’s all well and good building capacity but it’s useless if the power can’t reach consumers.

🛢️ BOTTOM OF THE BARREL

“I think wind is the biggest scam out there. It’s total bullshit…Failed experiment”

No matter your political allegiances, I’d strongly recommend listening to JD Vance on the Joe Rogan podcast.

The man speaks a lot of sense.

And whether he’s the next VP or not, I reckon we’ll be seeing a lot more of him in the years to come.

And this is one of many reasons why Vance is spot on about wind, it can’t be relied upon to power modern economies:

👋 BEFORE YOU GO

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

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