Iran Responds To Israeli Threat By Test-Launching Ballistic Missile

Politics, Geopolitics & Conflict

Iran's response to an Israeli threat to take unspecified action against Tehran's nuclear program was to test-launch a ballistic missile on Thursday, demonstrating a 2,000-km range and capable of carrying a 1,500-kg warhead. Tehran is keen to point out that its ballistic missiles can reach U.S. and Israeli bases in the region. That news would normally have pushed oil prices up; however, as of early Thursday, oil prices had failed to respond to this geopolitical threat.

Erodgan appears poised to win Turkey's run-off elections on Sunday as an otherwise inconsequential candidate (Sinan Ogan) who managed to win 5.17% of the vote in the first round has thrown his support to the incumbent, essentially rendering him the "kingmaker" in these critical polls. Erdogan has vowed to "erase" the opposition from Turkish politics completely. Interestingly, there appears to be a shift in attitude regarding Erdogan in Washington now that it has become clear he is on a path to victory again. The Republican Chair of the House Foreign Affairs Committee has told reporters essentially that he foresees Washington selling F-16 fighter jets to Turkey-a major sticking point with Erdogan for years, which Washington has been using for leverage. Of course, the tradeoff will be Turkey ratifying Sweden's NATO membership, but once re-elected, Erdogan will likely agree to that, as well.

In a major threat to Europe, Russian media, citing Belarus' dictator Lukashenka, claims that Moscow has already begun the process of transferring tactical nuclear weapons to Belarus. This announcement followed the signing of a deal on Thursday by Moscow and Minsk to store Russian nuclear warheads in a special facility that is currently under construction and said to be eyeing a completion date within a month.

At the time of writing, the export pipeline for oil from Iraqi Kurdistan to Turkey was still shut down, with Turkish elections holding up the process (Erbil and Baghdad have come to an agreement). That is some 450,000 bpd offline for export since late March.

Libya's still talking about trying to increase its oil output, with the latest interview with NOC chairman Farhat Bengdara saying that it will be up to 1.3 million bpd by the end of the year. Chaos in the country, however, has had a deleterious effect on its crude production ambitions. 1.3 million bpd would be a level that Libya has not reached in over a decade.

Deals, Mergers & Acquisitions

Italy's Enel has plans to invest $1 billion in solar cell and panel factories in Oklahoma. The plant will be one of the largest solar equipment manufacturers in the U.S. It is also one of the biggest investments in solar manufacturing since the IRA last year. The plant will have up to 3 gigawatts of production capacity by 2025, and a possible future expansion to 6 GW. Construction is scheduled to start later this year, with panels being ready for market at the end of next year.

Ford laid out plans to increase EV sales this week, but the company is dogged by high costs that are estimated to be about $7 billion higher than its peers. Ford has secured some new supply deals for lithium on its road to producing 2 million EVs by 2026. Ford said earlier this year that it expects to lose $3 billion on sales of EVs to consumers this year-equivalent to what it lost in total over the previous two years.

Chevron is looking to snap up PDC Energy Inc (PDCE.O) for $7.6 billion in a stock and debt transaction in a move that doubles down on its already strong U.S. presence. The deal values PDC at $72 per share, or a 14% premium to its 10-day average as of last Friday. For Chevron, the deal means adding 10% to its reserves. Mike Wirth said he was open to even more deals after this one.

The U.S. Energy Department canceled a $200 million grant to lithium battery company Microvast Holdings for its alleged links to China's government. The Energy Department conditionally selected Microvast last year for a grant to build a battery plant in Tennessee. Those negotiations have now ended without much explanation. Microvast is a publicly traded U.S. company with a subsidiary in China.

Oil India and ONGC Videsh-two of India's state-run oil companies-are in talks with Tullow Oil to buy a stake in Tullow's Kenya block. Tullow has been looking for an investor for its Kenya block since at least last summer. Tullow is operator of the block with a 50% stake, with Africa Oil Corp and TotalEnergies having a 25% share each.

Discovery & Development

Iraq's Oil Ministry is looking for investments in 13 oil and gas fields and exploration blocks, announcing a licensing round. It follows the country's fifth licensing round, for which contracts were awarded in 2018-but not signed until this year. The licensing round will be launched in the next two months and will cover three provinces in the Western region, focusing mainly on gas.

Equinor says it will look to keep Johan Sverdrup production at a new higher rate of 755,000 bpd after successful facilities tests. It previously had a target of 720,000 bpd. Equinor said that it and its partners in the field, Aker BP, Petoro, and TotalEnergies, have committed to trying to keep production at this level from now on.