Oil Prices Plunge on OPEC+ Production Cut Speculation

Oil prices tumbled on Tuesday morning as speculation continued that the eight leading OPEC+ producers would unwind their voluntary production cuts. 

Crude production in Iraq’s semi-autonomous Kurdistan region continues to increase as industry organizations have stated output surpassed the 350,000 b/d mark in recent weeks, the highest since early 2023.

– Iraq, the largest overproducer within OPEC+ that pledged to cut 1.44 million b/d of output over the next 12 months as part of a compensation plan, has now vowed to confront Kurdish authorities over surplus production volumes.

– International oil companies operating in Kurdistan have been expanding into new projects for the first time since the 2023 pipeline closure to Ceyhan, with DNO mobilizing a rig to drill a new well in the Tawke license and Gulf Keystone starting round-the-clock trucking operations.

– Baghdad has threatened to withhold the Kurdish Regional Government’s share of the federal budget if it does not reduce its production to a mere 46,000 b/d and cut back on a widespread net of smuggling to Turkey and Iran.

Market Movers

– The co-founder of US offshore producer Talos Energy (NYSE:TALO) abruptly quit the company without providing a reason for the move, believed to be linked to the company’s languishing stock performance.

– The US Commodity Futures Trading Commission has fined TOTSA, the trading arm of French energy major TotalEnergies (NYSE:TTE), for attempting to manipulate European gasoline futures, setting a $48 million fine.

– Energy major Shell (LON:SHEL) signed a 10-year term contract with Turkey’s Botas to supply up to around 4 billion cubic meters per year starting from 2027, diversifying Ankara’s options after a recent 10-year deal with ExxonMobil.

Tuesday, September 03, 2024

Libya’s upstream segment has gone almost completely haywire with 60% of production shut in because of a nationwide oil blockade, but that story has by now been overshadowed by wild speculation over OPEC+ policy. The eight leading OPEC+ producers are expected to start unwinding voluntary output curbs with a 180,000 b/d boost in October, sending oil prices tumbling with Bent plunging toward the $73 handle.

Chinese Crude Imports Recover After July Debacle. According to Kpler, China’s crude imports averaged 10.5 million b/d in August, up almost 1 million b/d compared to the 18-month low of July, but they remain well below any monthly average in February-June.

Libya Restart Unclear in Summer Fog of War. According to several sources, Libya’s Sarir, Mesla, and Nafoura oil fields have received instructions to resume production amidst an ongoing oil blockade by Field Marshal Haftar, however, only to feed local power plans and small refineries in the east.

Houthis Strike Again, Almost Hitting Saudi Tanker. Houthi militias have almost hit the Saudi-flagged tanker Amjad operated by the state-owned shipping firm Bahri (TADAWUL:4030) as they attacked the Blue Lagoon I vessel that was sailing next to it, carrying fuel oil from Russia.

North Sea Tax Hikes to Drain UK of Revenue. According to industry group Offshore Energies UK, the Labour government’s windfall tax hikes on North Sea oil and gas producers would lead to a $16 billion drop in state revenue in between 2025 and 2029, whilst also accelerating the UK’s production declines.

Power Blackouts Return to Venezuela. Venezuela experienced a nationwide blackout on Friday, blaming the disruptions in power supply on a cyberattack on the Guri hydropower dam, with operations at the José export terminal as well as crude upgraders disrupted for one day.

Teck Revamps Corporate Structure After Glencore Deal. Canadian mining giant Teck Resources (NYSE:TECK) will restructure its assets into two regional business units in North and Latin America after its $7 billion divestment of metallurgical coal assets to Swiss-based trader Glencore.

Nigeria’s Megarefinery Starts Gasoline Production. Nigeria’s 650,000 b/d Dangote refinery has started producing gasoline after several months of commissioning works, with the plant’s declared goal of ending the African country’s costly dependence on fuel imports now being within reach.

Qatar Doubles Down on Fertilizers. QatarEnergy has announced its 2030 target of doubling the production of urea, a key component in fertilizers, from 6 million tonnes annually to 12.4 mtpa, finding additional ways of refining natural gas into higher-value products.

India Mulls Building a New Refinery. India’s state-controlled refiner Bharat Petroleum (NSE:BPCL) and upstream firm ONGC are jointly exploring building a new refinery as the country’s demand continues to rise strongly and refining capacity is set to reach 9 million b/d by 2030.

Chevron Hopes to Solve Its Cyprus Conundrum. US oil major Chevron (NYSE:CVX) has amended its production plan for its long-delayed 3.5 TCf Aphrodite gas field in Cyprus and submitted it to Cypriot authorities, with costs rising to $4 billion as it seeks to build an offshore floating production unit.

Indonesia to Build Its Own SPRs. Indonesia wants to set aside some 10 million barrels of crude to create a strategic petroleum stock in a country that usually refines 800-900,000 b/d, with new government regulation also stipulating the creation of a 10-million-barrel gasoline reserve inventory.

ADNOC Taps into Bond Market. ADNOC, the national oil company of the UAE, has started an international roadshow as it is looking to raise 5-, 10- and 30-year debt, believed to be linked to the upcoming purchase of German chemical market Covestro in a deal worth $13 billion.

China’s Sinochem to Quit Permian JV. Chinese state-run oil company Sinochem is planning to quit its 40% stake in the Permian-focused upstream joint venture Wolfcamp that it operated jointly with US oil major ExxonMobil (NYSE:XOM), currently producing around 44,000 boe/d of which 75% is oil.