Oil Markets Are Fully Focused on Geopolitical Risk

Geopolitical risk has dominated oil markets this week, with both WTI and Brent up by roughly 8% since the start of the week when Iran fired at least 180 missiles at Iran in retaliation for Israeli strikes in Lebanon.

Friday, October 4th, 2024

Oil prices are set to post a solid $6 per barrel week-on-week increase as ICE Brent futures entrenched themselves around $78 per barrel. Iran’s missile barrage on Israel and a potential retaliatory action from the Netanyahu government boosted the geopolitical risk premium, in fact so much that the oil markets didn’t even notice the lifting of Libya’s oil embargo, returning some 700,000 b/d of crude to the market.

Libya Reopens After Haftar Lifts Oil Embargo. Libya’s Benghazi government announced that it would reopen all oil fields and export terminals after a protracted dispute over the Central Bank’s operations and staffing was resolved, with the new bank governor Naji Issa approved by both rival governments.

Israel Restarts Gas Fields After Iran Attack. Gas production from Israel’s Leviathan and Tamar fields has restarted after a one-day shutdown prompted by Iran’s large-scale missile attack, with US oil major Chevron (NYSE:CVX) reporting there was no physical damage to the Leviathan platform and the 22 TCf field.

Kazakhstan Continues to Defy OPEC+ Quotas. One of the most notorious overproducers of OPEC+, Kazakhstan produced 6.55 million tonnes of oil last month, equivalent to 1.64 million b/d, suggesting that the Central Asian country’s vows to curb output have failed as it exceeds its quota by 170,000 b/d.

US Dockworker Strike Ends After Three Days. US dock workers and port operators have reached a tentative deal for a wage hike of 62% over six years with the USMX employer group, ending a debilitating three-day strike that shut down shipping on the US East and Gulf Coast.

OPEC Calls Out Wall Street Journal. In a rare move for the market, OPEC issued a statement denouncing a Wall Street Journal article that alleged Saudi Arabia’s oil minister warned of oil prices dropping to $50 per barrel if the oil group’s members do not stick to production targets, calling it ‘inaccurate and misleading’.

Middle East Buys Up Europe’s Industrial Giants. ADNOC, the national oil company of the United Arab Emirates, has entered into an investment agreement to buy Germany’s chemical giant Covestro in a deal worth €11.7 billion, assessed at a premium of 54% over the firm’s pre-announcement share price.

IEA Sees Natural Gas Demand Soaring to Record Highs. The International Energy Agency expects global demand for natural gas to rise faster than in the past two years and move record highs in both 2024 and 2025, with the pace of demand growth accelerating to 2.5% this year, reaching 4,200 bcm overall.

Petrobras Doubles Down on South Africa. Brazilian national oil company Petrobras (NYSE:PBR) is set to purchase a 10% stake in TotalEnergies’ DWOB offshore block in South Africa, abutting the French major’s Namibian deepwater acreage that saw the discovery of the multi-billion-barrel Venus prospect.

US Renewable Diesel Capacity Collapses in the Summer. US renewable diesel capacity plunged in July, falling by almost 300 million gallons/year to 4.60 billion gallons/year, with Vertex Energy filing for bankruptcy, Chevron shutting two biodiesel plants and Delek also idling three of its renewable fuel plants.

Colombia’s Permitting Woes Delay Deepwater Drilling. The offshore drilling rig slated to spud the first exploration well in the untapped Col 1 block held by Occidental and Ecopetrol, aiming for the Komodo-1 prospect, is now leaving the country after the country’s environmental agency did not provide a permit to drill.

Trump to Ban EV State Mandates Once Elected. Republican presidential candidate Donald Trump promised that no state will be able to ban gasoline-powered cars or trucks once he’s elected, potentially even ending EV tax credits as he’s looking to win votes in Michigan, home to the Detroit Three.

Venezuela’s Exports Dip Lower on Outages. Venezuela’s crude and fuel oil exports declined 9% month-over-month in September, as two large electricity blackouts and equipment outages hindered normal operations, seeing outflows dip to 842,600 b/d, of which 212,000 b/d was lifted by US major Chevron.

Malaysia Tests Chinese Patience with Offshore Drilling. Malaysia is expanding offshore oil and gas exploration in the disputed South China Sea with Chinese coast guard vessels seeking to disrupt appraisal works at the Luconia Shoals, a group of submerged reefs some 80 miles northwest of Borneo.