Oil prices are under pressure as bearish sentiment grows as OPEC+ has subdued the market with its commitment to extend its voluntary cuts until the third quarter of 2024 and baseline cuts until the end of 2025.
– Combining an in-person meeting in Riyadh with a hybrid online option for smaller producers, OPEC+ has agreed to extend existing output cuts into next year while paving the way for a gradual easing of most cuts.
– The latest round of voluntary output cuts, agreed in November 2023, will be phased out over a 12-month period, lifting OPEC+’s collective target to 36.27 million bpd, up more than 2 million bpd higher than actual production.
– The United Arab Emirates was the big winner of the OPEC+ meeting, as it secured another upgrade to its official production quota, allowing it to increase production by 300,000 barrels per day in several steps throughout 2025.
– Although Saudi Energy Minister Prince Abdulaziz bin Salman asserted that OPEC+ has the choice to halt or even reverse future relaxations, the market generally saw it as a sign of more supply in a period of uncertain demand.
Market movers
– The shipping arm of ADNOC, the national oil company of the United Arab Emirates, has agreed to buy UK-based shipowner Navig8 for $1.5 billion, taking over a fleet of 32 tankers and the operation of six pools of transport.
– Mainstream in the middle of the American stream Energy Transfer (NYSE:ET) has agreed to buy Midland-focused pipeline operator WTG Midstream in a deal valued at $3.25 billion, including a $2.45 billion cash payment.
– Japan’s largest gas supplier Tokyo Gas (TYO:9531) is looking to invest in US natural gas assets, building on its recent $2.7 billion purchase of Rockcliff Energy and its 49% farm in trading firm ARM Energy.
Tuesday, June 04, 2024
The OPEC+ meeting over the weekend extended voluntary production cuts into the third quarter of 2024 and the original cuts of 3.66 million barrels per day until the end of 2025. That promise was not enough to convince market participants that the future of oil is bright, with Brent losing almost $3 a barrel. in just one trading day and slipping below the $77 per barrel level. With the promise of more supply returning to the market in 2025, the list of growth factors there has been reduced to a minimum.
OPEC+ extends voluntary production cuts through the third quarter. Quickly organizing an in-person meeting in Riyadh, OPEC+ members agreed to extend 2.2 million bpd of voluntary cuts until the third quarter of 2024, while also setting the course for a gradual easing of the remaining cuts through 2025.
Norway cut sends European gas to 2024 highs. European gas futures TTF rose to their highest level this year so far, at €37 per MWh, as Equinor’s (NYSE:EQNR) The Sleipner offshore center halted operations due to a rupture, also causing a shutdown at the Nyhamna processing plant.
Nationwide strike paralyzes Nigeria’s industry. Nigeria’s main labor unions have shut down the country’s electricity grid and grounded flights across the country as they demand a 1,500% increase in the minimum wage amid unprecedented inflation, sparing the country’s oil production so far.
Hedge funds return to oil speculation. After six straight weeks of shorting their positions, portfolio investors increased their net long holdings in the six major oil futures and options contracts in the week ending May 28, largely by closing their shorts ahead OPEC+ meeting.
South Korea may have found oil. One of the most import-dependent countries globally, South Korea has approved exploratory drilling for potentially large oil and gas reserves off the country’s east coast, with KNOC leading the estimate that could uncover up to 14 billion boe.
Exodus of UK North Sea Oil Majors Continues. Global oil majors Shell (LON:SHEL) AND ExxonMobil (NYSE:XOM) are close to a deal with UK independent producer Viaro Energy to sell their jointly owned gas fields in the southern North Sea for $0.5 billion, ending Exxon’s 60-year presence in the country.
Indonesia postpones copper concentrate export ban. Indonesia, one of the world’s biggest copper producers, has pushed back the start of a ban on copper concentrate exports until the end of 2024 due to delays in the construction of smelters, potentially depressing copper prices in the summer.
US resumes buying oil for SPR. The US Department of Energy has resumed buying 3 million barrels of oil for the nation’s Strategic Petroleum Reserve, buying at an average price of $77.69 a barrel for November deliveries, bringing the total bought back to 38.6 million barrels. .
Sheinbaum’s landslide victory worries Mexico’s oil industry. Mexico’s president-elect Claudia Sheinbaum’s landslide victory will allow the ruling party to formally dismantle the 2013 energy market liberalization by changing the constitution, limiting future increases in the country’s oil production.
Indian heat waves increase gas consumption. As heat waves across India have claimed dozens of lives, the country’s natural gas-based power generation rose to record levels in May, nearly doubling year-on-year to 4.7 million KWh, while coal still accounts for 75 % of generating capacity.
China’s emissions rules to curb fuel demand. Beijing is set to mandate a 5% cut from 2020 levels of carbon intensity by the end of 2025, lifting purchase limits for fossil-fuel-free cars and boosting the electrification of industrial vehicles, limiting growth of demand for gasoline and diesel.
US oil major takes Venezuela to court. A court in Trinidad and Tobago has approved the American oil company ConocoPhillips (NYSE:COP) the right to enforce a $1.33 billion claim against Venezuela for the appropriation of its oil and gas assets, potentially preventing the development of offshore gas fields such as Dragon or Cocuina-Manakin.
Australian LNG returns to power. American energy sign Chevron (NYSE:CVX) has restarted LNG production at its Gorgon liquefaction plant on Australia’s Barrow Island after a mechanical fault caused a month-long shutdown of operations, bringing back 5.2 mtpa of production capacity.
By Michael Kern for Oilprice.com
More top reads from Oilprice.com: