Oil prices tumbled early on Tuesday morning, with traders refocusing on fundamentals despite the continued geopolitical risk and threats of a full-blown war in the Middle East.
– China’s announcement of more economic stimulus to the country’s ailing real estate sector was well-timed, ahead of a week-long public holiday, however as normal business activity recovers in the country, the market faces further disappointment.
– Following the Tuesday briefing held by China’s National Development and Reform Commission, the country’s policy planner, iron ore futures plunged by more than $5 per metric tonne to $105/mt as the NDRC failed to provide specific stimulus steps ahead.
– Particularly, China seems to be taciturn on the pace of clearing its massive housing inventory, currently assessed at 43 million units with a further 8 million under construction, considering annual sales remain rangebound around 8 million units per year.
– Before the NDRC briefing, iron ore futures were soaring and added 18% over the past two weeks, with similarly robust gains seen across the base metal segment.
Market Movers
– According to market rumors, UK oil major BP (NYSE:BP) is set to abandon its 2030 target of cutting oil and gas output by 40% under new CEO Murray Auchincloss, eyeing new upstream opportunities in Iraq and Kuwait.
– Norway’s state oil company Equinor (NYSE:EQNR) bought a $2.5 billion stake in Denmark’s wind farm developer Ørsted, taking a 9.8% minority stake and becoming the second-largest shareholder after the Danish state.
– UK-based energy major Shell (LON:SHEL) won the bidding process for the coveted shallow water Block U in Trinidad and Tobago, beating BP and EOG Resources for the presumably gas-rich acreage.
Tuesday, October 08, 2024
The oil market was on a knife’s edge all weekend and early this week, with traders awaiting Israel’s riposte vis-à-vis Iran, but when no major supply disruption came, both WTI and Brent fell, with Brent breaking below $78. If there is no large-scale strike on Iranian oil infrastructure, prices could fall even further, with Libyan supply coming back online and Chinese demand yet to materialize.
China Disappoints as Imports Fail to Recover. According to Kpler data, China’s crude oil imports averaged only 10.8 million b/d in September, a more than 500,000 b/d decline compared to August numbers, indicating that even the promise of economic stimulus did not lift the country’s buying activity.
Europe’s Hydrogen Ambitions Weaken Further. One of Europe’s most ambitious hydrogen infrastructure projects, the cross-border pipeline between Denmark and Germany, has been postponed by three years to 2031, with seemingly little industry interest to book term capacity.
Everyone Wants to Market Guyana’s Oil. According to Guyanese government agencies, a total of 27 bidders have applied to market Guyana’s share of crude oil produced at the ExxonMobil-operated Stabroek block, equivalent to 33 shipments per year, pitting Exxon, Chevron, BP and Total against one another.
Libya Quickly Recoups Production Losses. Libya’s production rates are recovering after the month-long oil blockade, with current output nearing the 1.2 million b/d peak production level as Bloomberg reported that most of shut-in wells have been restarted and production hit 1.067 million b/d.
Norway’s New Oil Project Costs Balloon. Norway’s 2025 budget shed light on the country’s runaway project costs as the upcoming Johan Castberg project is now expected to cost $8.1 billion compared to its initial assessment of $4.6 billion, whilst Aker BP’s Yggdrasil skyrocketed to $12.6 billion.
Hurricane Milton Triggers Platform Evacuations. Even though the upstream impact of Hurricane Milton is expected to be less than that of Francine and Helene, US major Chevron (NYSE:CVX) has pre-emptively shut its 65,000 b/d Blind Faith platform some 150 miles southeast of New Orleans.
Mining Giants Set Sights on Lithium Expansion. Prompted by low lithium prices, Australia’s mining major Rio Tinto (NYSE:RIO) has approached lithium producer Arcadium Lithium (NYSE:ALTM), itself the result of the recent Allkem-Livent merger, in a deal that could be valued between $4 and $6 billion.
Chevron Cuts Down on Canada Ambition. US oil major Chevron (NYSE:CVX) agreed to sell its assets in Canada’s Athabasca Oil Sands and Duvernay Shale to Calgary-based Canadian Natural Resources (TSO:CNQ) for $6.5 billion, shedding assets that produced some 84,000 b/d of oil equivalent in 2023.
Colombia Celebrates Giant Offshore Gas Discovery. Partnering up with Brazilian offshore specialist Petrobras (NYSE:PBR), Colombia’s state oil firm Ecopetrol (NYSE:EC) announced the discovery of a giant 6 TCf gas field with its Sirius-2 well, more than doubling the nation’s 2.4 TCf current reserves.
US Jet Fuel Demand Reaches 23-Year High. According to US BTS data, the consumption of jet fuel by US airlines in August rose to the highest for the month in 23 years, a total of 1.69 billion gallons that is 1% higher than last year’s tally, with average jet fuel costs averaging $2.47 per gallon over the month.
Panama to Decide on Its Copper Future in 2025. The government of Panama is set to decide on the future of the giant Cobre Panama copper field next year, with the project equivalent to 5% of global production before its forced shutdown, after the Supreme Court ruled that First Quantum’s contract was unconstitutional.
Kazakhstan’s Nuclear Ballot Paves Way for New Plants. The Central Asian nation of Kazakhstan held a referendum on the construction of nuclear power plants in the country, and with 71% of the electorate voting affirmatively, the world’s largest uranium miner should soon start working on new capacity.
Russia Eyes Diesel Export Ban for Traders. The Russian government has held preliminary negotiations with its oil companies to decide whether firms that do not produce diesel should be banned from exporting middle distillates, with diesel exports averaging 920,000 b/d so far in 2024.
By Michael Kern for Oilprice.com
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