Libya Supply Outage Sparks Uncertainty in Oil Markets

Oil prices started the week with a major spike on the back of Khalifa Haftar’s Benghazi-based government declaring a nationwide halt of all oil production and exports.

– One of the two rival powers in Libya, the Benghazi government run by Field Marshal Khalifa Haftar said it would shut down all crude output and exports in the country, declaring a nationwide force majeure.

– The decision comes amidst an escalating dispute over who should appoint NOC officials and control oil revenues, aggravated by the kidnapping of Central Bank officials and growing calls to investigate potential misuse of Libya’s financial resources.

– Even the Tripoli-based government has called for institutional change, demanding that central bank governor Sadiq al-Kabir be replaced, a key position given that all crude oil revenues flow into the central bank.

– Having recovered from the oil blockades of 2020 and 2022, Libya’s production has been relatively stable at 1.2 million b/d lately, with a little more than 1 million b/d exported to the global markets.

Market Movers

– Saudi Arabia’s shipping company Bahri has agreed to purchase nine scrubber-fitted VLCCs from Greece-based firm Capital Maritime & Trading for $1 billion, boosting its current fleet of 40 super-large tankers.

– Norway’s state energy company Equinor (NYSE:EQNR) will be closing down its Vietnamese office and canceling plans to invest in the Asian country’s offshore wind sector due to regulatory hurdles.

– Global oil trader Vitol is under investigation in the Netherlands pertaining to alleged bribery in Kazakhstan, with the country’s prosecutor’s office claiming it failed to disclose suspicious transactions to consultants.

Tuesday, August 27, 2024

Khalifa Haftar has become the savior of oil bulls this week, with Libya’s Benghazi-based eastern government announcing a nationwide shutdown of oil production and exports. Seeking to wrest control of the central bank and the national oil company from the Tripoli government, the current standoff could become the next phase in Libya’s high-stakes civil war. ICE Brent futures surged above $81 per barrel on Monday, but have since fallen back slightly.

UN Calls for Global Phaseout of Oil & Gas. UN Secretary-General Antonio Guterres has called on world leaders to phase out oil and gas and stop all new exploration in hydrocarbons, speaking on the Pacific island of Tonga and arguing that greenhouse gases are cooking our planet.

China Flags M&A Interest in Oil Projects. China’s national oil company CNPC said it is reviewing its global strategy and would seek to sign new deals, focusing on gas liquefaction capacity and deepwater offshore projects as it faces an uphill battle with maturing domestic production.

Kuwait Signs Long-Term LNG Deal with Qatar. Kuwait signed a 15-year term contract with Qatar to supply up to 3 million tonnes of LNG per year from 2025 onwards, to be delivered to the port of Al Zour as meeting Kuwaiti power generation became even harder amidst recurring power outages.

Brazil Allows Producers to Inject Less Natural Gas. Brasil’s President Lula da Silva signed a decree authorizing oil regulator ANP to mandate reductions in natural gas reinjection into new oil wells, seeking to make more gas available for the domestic power generation market and make power cheaper.

Canada to Impose Punitive Tariffs on Chinese Goods. The Trudeau administration has slapped a 100% tariff on imports of Chinese electric vehicles as well as a 25% levy on steel and aluminum produced in China, with Beijing calling the measure protectionist and defying WTO trade rules.

California’s Refiners Revolt Against Newsom Bill. California’s refiners are dissenting against Governor Newsom’s proposal that would allow the state to compel refiners to sell their gasoline inventories in times of undersupply, saying it misdiagnoses the problem instead of focusing on weak infrastructure and restrictive quality specifications.

Quality Switch Left Lead Sellers Confused. Sellers of battery metal lead on the Shaghai Futures Exchange are forced to change trading strategies after ShFE lowered the content of bismuth in the metal that can be delivered in its contracts, reflecting tighter emission standards in China.

ExxonMobil Calls for Oil Investment. The global outlook of US oil major ExxonMobil (NYSE:XOM) has oil production declining at a rate of 15% per year without new investment, double the IEA’s estimate of 8%, believing oil demand will plateau beyond 2030 and hold more or less steady until 2050.

Canada’s Rail Unions Mull Restart of Strike. Defying the government’s binding arbitration proceedings, Canadian labor unions of rail workers continue to issue strike notices to Canadian National as they believe Ottawa’s mandate sidestepped the collective bargaining process and jeopardized workers’ rights.

Improving Iron Ore Eases China Worries. Inventories of iron ore held at Chinese ports have been declining for four straight weeks, indicating that a period of severe oversupply might be easing soon as steel demand improves, lifting iron ore futures back above the $100 per metric tonne threshold.

Ukraine’s Power Sector Damaged from Russian Strikes. In one of the largest strikes ever in the Russia-Ukraine war, Russia launched more than 100 missiles on Ukraine’s energy infrastructure, triggering nationwide blackouts and damaging Kyiv’s hydroelectric plant and water supplies.

US Slaps Sanctions on Russia’s Next Big Project. The US Treasury Department announced further sanctions on Russia’s flagship Arctic upstream project Vostok Oil, targeting 10 companies associated with building pipelines and the export terminal, as Rosneft seems to be falling behind its 2024 commissioning target.

Brazil Wants a Bigger Share of Argentina’s Shale. Brazil’s national oil firm Petrobras (NYSE:PBR) is actively seeking out shale gas deals in Argentina as part of a bigger plan to increase the company’s exposure to the Vaca Muerta shale play, potentially by acquiring a stake in upstream firm Tecpetrol.