Oil Prices Climb as Sentiment Continues to Improve

Oil prices have bounced back after the last OPEC+ announcement sent them crashing, and the U.S. Federal Reserve could send them higher still with optimistic messaging.

- Oil markets were eagerly anticipating the start of peak driving season in the summer, but gasoline demand so far has been mostly disappointing, with US consumption some 2% lower year-over-year.

- Asia has been the first continent where gasoline weakness led to refinery run cuts, as a glut of light distillate supply has pushed Singapore gasoline cracks below the $5 per barrel mark.

- While US gasoline cracks are notably higher than elsewhere, currently around $22 per barrel, the high US refinery utilization rates create a lot of downside for gasoline, especially as gasoline stocks are the highest since 2021 for this time of the year.

- The pressure on gasoline might increase further down the line as this year's two main refinery newbuilds, Nigeria's Dangote and Mexico's Olmeca, are both delayed and will not start up in time for the summer season.

Market Movers

- US refiner Phillips 66 (NYSE:PSX) agreed to sell its 25% stake in the Rockies Express Pipeline for some $1.28 billion including debt to privately owned Tallgrass Energy which owns the remaining 75% stake.

- Commodity trading giant Trafigura has agreed to pay a $55 million fine to settle charges of fraud and manipulation from the US Commodity Futures Trading Commission, having traded misappropriated Mexican gasoline.

- French oil major TotalEnergies (NYSE:TTE) sold its Brunei upstream business to Malaysian exploration firm Hibiscus Petroleum for $260 million, using those funds for further Namibia drilling.

Tuesday, June 18, 2024

Oil prices have gradually recouped all their losses following the OPEC+ meeting and ICE Brent has silently moved back to $84-85 per barrel, without there being any notable change in fundamentals. Macroeconomics are starting to feel better, however, and should the U.S. Fed comments this week persuade the market that things will get better soon, the strength in oil could be maintained for longer.

Chinese Refinery Runs Disappoint Again. Chinese refinery output slid 1.8% year-over-year in May to 14.25 million b/d, driven lower by maintenance overhauls and shaky refining margins, with throughput in 2024 to date staying flat compared to the 2023 average of 14.48 million b/d.

Tensions Fly High in West Africa. Niger has shut off oil exports via the 1,240-mile pipeline connecting it to Benin's coast, having loaded only one cargo since its launch, after Benin arrested five Niger nationals for allegedly entering the Seme loading terminal under false pretenses.

US States Defy White House's Decommissioning Rules. The states of Texas, Louisiana, and Mississippi sued the US government to block the Biden administration's proposed rules that require offshore producers without sufficient reserves to provide some $7 billion in decommissioning funds.

Russia Becomes Europe's Largest Gas Supplier Again. Overtaking the United States, Russia has become the largest supplier of natural gas to Europe despite having curbed pipeline deliveries to a trickle, accounting for 14% of the continent's imports in May.

Serbia Makes U-Turn on Lithium Mine. According to media reports, Serbian President Aleksandar Vucic is readying to approve the development of Europe's largest lithium mine at the Jadar site in the west of the country, two years after Belgrade called off Rio Tinto's (ASX:RIO) megaproject.

Saudi Arabia Hunts for Mining Deals in Chile. Saudi Arabia's mining minister Bandar al-Khorayef is expected to travel to Chile in July, as the Middle Eastern kingdom is nearing deals to source lithium abroad and potentially enter Chile's mining sector.

Singapore Offers Rebates for Oil Refiners. As Singapore is preparing to launch its carbon tax scheme, with costs estimated at around $1 per barrel of crude or a quarter of current refining margins, the city-state is offering refiners rebates of up to 76% in 2024-2025 to remain competitive.

Chinese Solar Producers Beg for Government Intervention. Chinese manufacturers of solar panels have asked Beijing for immediate government intervention to halt a plunge in prices of solar cells and modules amidst rampant overcapacity, having already plunged 50% last year.

UAE Eyes Rapid LNG Growth. Abu Dhabi's state oil firm ADNOC has taken a final investment decision on its 9.6 mtpa liquefaction terminal in Ruwais, having already signed three 15-year term supply deals with Germany's SEFE and EnBW as well as China's ENN Natural Gas.

Strikes Rattle Argentina's Upstream Industry. Sending shockwaves across Argentina's prolific Vaca Muerta shale play, the Latin American country's oil union has called for strikes this week to demand higher salaries just as production in the country rose to multi-year highs of 680,000 b/d.

Copper Prices Keep on Sliding Lower. As metals markets were disappointed by China's slowdown in industrial production growth, as attested by May statistics published this week, copper prices traded on LME fell to their lowest in eight weeks at $9,630 per metric tonne.

ExxonMobil One Step Closer to Nigeria Exit. Nigerian upstream firm Seplat Energy announced that its agreed $1.28 billion purchase of ExxonMobil's (NYSE:XOM) shallow water assets in the country is no longer blocked by the state oil producer NNPC, bringing closer the US major's exit.

Shell Bets Big on LNG Expansion. UK-based energy major Shell (LON:SHEL) agreed to purchase Singaporean LNG firm Pavilion Energy from investment firm Temasek, taking over its 6.5 mtpa portfolio of long-term supply contracts and fortifying its position as the world's top gas trader.

By Michael Kern for Oilprice.com

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