Oil Prices Under Pressure Despite Major Upside Risk

Oil markets have been on edge all week, dealing with rumors of an imminent Israeli attack on Iranian oil infrastructure and the potential of a major hurricane-related outage in the U.S. Ultimately, Israel’s attack failed to materialize and Hurricane Milton’s impact on U.S. oil output was limited.

Friday, October 11th, 2024

Oil markets were anticipating an Israeli retaliatory strike on Iran all week and as time progressed and nothing happened, some of that disappointment nudged Brent futures lower, settling this week just below the $79 per barrel mark. As devastating as Hurricane Milton turned out to be for Florida, its oil-related impacts were relatively minor, allowing macroeconomics to play a more notable role in setting the tone of the week, especially on the back of US inflation dipping to an annual rate of 2.4%.

Oil Majors Signal Q3 Profit Weakness. UK oil major signaled a $500 million drop in refining margins and a weak performance from oil trading into its Q3 earnings, whilst its peer Shell quantified the decline in refining profit margins at 30% quarter-on-quarter, down to $5.5 per barrel compared to $7.7 per barrel in Q2.

Metal Markets Zoom in on Chinese Policy. Following the disappointing NDRC briefing earlier this week, copper prices rose slightly to $9,770 per metric tonne in anticipation of the Saturday briefing held by China’s Finance Minister Lan Foan, expecting clearer policy guidelines on Beijing’s infrastructure investment.

ExxonMobil Locks in Offshore Acreage in the Gulf. US oil major ExxonMobil (NYSE:XOM) said it purchased state leases for over 271,000 acres in Texas state waters for an offshore CO2 capture project, a year after it bid for 69 blocks in the shallow waters of the US Gulf of Mexico in the last lease sale.

Houthis Start Striking Russian Tankers. Yemen’s Houthi rebels claimed responsibility for a missile attack on Olympic Spirit, a chemical tanker carrying vegetable oils from Russia, striking it with at least four projectiles, simultaneously striking a container ship called St John sailing in the Indian Ocean.

Rio Tinto Clinches Its Lithium Megadeal. Australian mining giant Rio Tinto (ASX:RIO) confirmed it had reached a deal to buy Arcadium Lithium (NYSE:ALTM) in an all-cash deal for $6.7 billion, and its purchase of the world’s seventh-largest producer would propel Rio to the top of lithium producers globally.

East Timor Lures China to Lead Its Upstream Revival. The government of East Timor is reportedly negotiating with Chinese companies including Sinopec (SHA:600028) to develop its stalled Greater Sunrise gas field, containing some 5.1 TCf of natural gas, seeking to overcome Australia’s intransigence.

JPMorgan Warns of Metal Stocks Plunge. US investment bank JPMorgan warned that mining stocks could face a valuation drop of up to 20% if US tariffs are to be imposed after the November presidential election, potentially repeating the 10% plunge that took place in 2017-2018 after Donald Trump took office.

Libya Finally Returns to Pre-Embargo Output Levels. Libya’s total oil production reached 1.22 million b/d by the end of this week, restoring production to levels before the central bank crisis and subsequent oil embargo, with oil exports already picking up and seeing the first Mellitah export in two months.

Mexico Eyes Greater Control Over Pemex. A bill that would grant Mexico’s government greater control over state oil company Pemex was passed this week in the lower house of Congress, changing its status to a public company, and forcing it to prioritize the state’s social objectives over corporate profits.

Shell Suffers Setback as It Demands Transparency. The US Federal Energy Regulatory Commission denied the request of oil major Shell (LON:SHEL) to view non-public commissioning documents of Venture Global’s Calcasieu Pass LNG facility, still unable to obtain contract cargoes from the project.

Nigeria Ditches Costly Fuel Subsidies. Nigeria’s state-owned oil company NNPC has hiked gasoline prices by over 15%, marking the second increase in less than a month and the scrapping of the African country’s costly fuel subsidy, the first time that Nigeria is selling gasoline at market prices ($0.63 per liter).

China Doubles Down on Coal-to-Liquids. China’s state-controlled energy holding CHN Energy has started building a $24 billion coal-to-liquid project in Hami, Xinjiang, expecting the first phase of the project to be operational by end-2027 and increasing CTL output capacity by 50% to 12.2 mtpa.

Malaysia Eyes Launch of Pioneering UCO Futures. Malaysia’s stock exchange is seeking industry feedback on its plan to launch a new futures contract for used cooking oil, a key feedstock in the production of biodiesel, as Kuala Lumpur wants to use its clout as the world’s second-largest exporter of UCO.