Politics, Geopolitics & Conflict
Iran is offering large amounts of fuel to Lebanon directly, rather than the typical small amounts it has offered in the past through its proxy, Hezbollah. This direct overture is an attempt by Tehran to gain more leverage in Lebanon and to taunt Washington, which has warned Lebanon against accepting what is said to be an offer of over 660,000 tons of gasoline in violation of sanctions.
Fears are also still running high for the potential of an Iranian attack on Saudi oil facilities, with Iran continuing to maintain the high-level uncertainty to use to its advantage. On Wednesday, the Iranian intelligence minister warned Saudi Arabia that Tehran might not continue its “strategy of patience”, noting that any instability in the region (such as the unrest in Iran) could be contagious and spread to other countries of the region in a veiled threat.
In the time-honored give and take between Turkey and Russia, Turkey is appeasing Russia by beginning to partially pay for Russian gas supplies in rubles. In return, it is hoping to get the idea of a Turkish hub for Russian energy underway.
Italian Eni will take two million barrels of Venezuelan diluted crude for this month loaded, resuming the Italian oil company’s oil-for-debt deal with the sanctioned Venezuela. The destination for the two cargoes is Bilbao, Spain. The last time Eni took Venezuelan oil was in July, although most of the heavy crude taken in…
Politics, Geopolitics & Conflict
Iran is offering large amounts of fuel to Lebanon directly, rather than the typical small amounts it has offered in the past through its proxy, Hezbollah. This direct overture is an attempt by Tehran to gain more leverage in Lebanon and to taunt Washington, which has warned Lebanon against accepting what is said to be an offer of over 660,000 tons of gasoline in violation of sanctions.
Fears are also still running high for the potential of an Iranian attack on Saudi oil facilities, with Iran continuing to maintain the high-level uncertainty to use to its advantage. On Wednesday, the Iranian intelligence minister warned Saudi Arabia that Tehran might not continue its “strategy of patience”, noting that any instability in the region (such as the unrest in Iran) could be contagious and spread to other countries of the region in a veiled threat.
In the time-honored give and take between Turkey and Russia, Turkey is appeasing Russia by beginning to partially pay for Russian gas supplies in rubles. In return, it is hoping to get the idea of a Turkish hub for Russian energy underway.
Italian Eni will take two million barrels of Venezuelan diluted crude for this month loaded, resuming the Italian oil company’s oil-for-debt deal with the sanctioned Venezuela. The destination for the two cargoes is Bilbao, Spain. The last time Eni took Venezuelan oil was in July, although most of the heavy crude taken in the summer was delivered by Eni to Repsol, who is better equipped to process that grade.
Markets
China’s zero-COVID policy is the market’s main focus in terms of global oil demand growth. Last week’s unverified social media report, suggesting that Beijing would ease its zero-COVID policy, boosted Chinese stocks and oil prices, despite no indications of anything of the kind from the corridors of power. Beijing is under pressure, though. At the same time as the social media report, there was an uproar over the death of a 3-year-old boy due to a carbon monoxide leak. Because the boy was in a quarantined residential compound, the child's father has accused health workers of hindering the boy’s transport to the hospital. The incident illustrates the potential unrest that China faces in light of Beijing’s refusal to ease its highly restrictive COVID policy.
The oil and gas price cap plans are languishing in energy industry purgatory. The EC has just told member countries that the price cap plan for natural gas just isn’t possible because of the existing long-term contracts, which cannot be altered. The group will now consider some “market correction mechanism”, whatever that is. The oil price cap plan isn’t going well either, although perhaps faring better than its gas counterpart. The industry is nervous that the plan doesn’t have details yet, with no measures or procedures for how to deal with the vessels that are already on the water if it is later determined that the oil was purchased at a level above the price cap. As it stands now, should an oil cargo be discovered to have been purchased above the price cap, insurers must cease coverage for the cargo, and buyers cannot take delivery–this will leave cargo stranded at sea. The G7 is still working out the details, but there are only 3.5 weeks left before the Dec 5 deadline.
Discovery & Development
After five years of silence from the exploration playing field in Angola, Exxon has announced a major offshore discovery in the Bavuca South prospect in Angola Block 15, 365 kilometers northwest of the coast of Luanda in 1,100-meter-deep waters. Exxon encountered 30 meters of good-quality hydrocarbon-bearing sandstone. Exxon has a 36% interest in the block through Esso Exploration Angola and is the operator. Eni, Equinor, and Sonangol also have stakes.
CNOOC and ConocoPhillips China have announced a wind farm pilot project this week that will supply power to the Penglai oilfield in Northeast China. Penglai is the largest offshore oil and gas production base under a PSC. The project will include four wind turbines with a total installed capacity of 34 MW, covering roughly a third of the power needs from the Penglai field’s full-capacity operations.
Staatsolie has announced a competitive bidding round for six new blocks in the Demerara acreage in Suriname, east of the current offshore discoveries there. Data and info will be released on November 28, and will close to new bidders on April 28 next year. Bids will need to be submitted by May 31.
Italy’s largest utility, Enel, is considering asset sales outside the country, in Europe and in Latin America, as it tries to reduce its debt load and scrape together money for more investments. Expect Enel to come up with a new plan this month after cutting its profit target for this year in the wake of the energy crisis.
Companies & Earnings
Exxon could lose $2 billion from the sale of the Ynez oilfield off California’s coast to Sable Offshore for $643 million. The oilfield was the site of an oil pipeline spill in 2015, and operations were halted. Sable Offshore’s founder will borrow 97% of the money needed for the purchase under a five-year loan. The deal requires Sable Offshore to restart operations at Ynez by 2026, or Exxon will take back operations.
Diamondback beat analyst expectations for Q3, with adjusted net income at $6.45 per share. While oil volumes decreased for the quarter to 224,300 bpd, from 239,800 bpd in Q3 2021, its unhedged realized price rose to $89.79 per barrel, up from $68.27 per barrel in Q3 2021. Last month Diamondback said it would buy all leasehold interest and related assets of FireBird Energy for $1.6 billion. Diamondback raised its full-year net production guidance to 385,000 - 386,000 boepd, and its 2022 capex to $1.94 billion - $1.95 billion, from $1.82 billion - $1.90 billion as a result of that FireBird acquisition.
Aramco’s 630,000 bpd Motiva Port Arthur refinery has restarted after month-long maintenance. The refinery produces 275,000 barrels of branded fuel daily, and 40,000 barrels of base oil.
A fire broke out at Chevron’s 290,000 bpd refinery in El Segundo, California. The refinery supplies Southern California with 20% of all its motor vehicle fuels and 40% of the jet fuel. California’s gas prices are already out of control at more than $5.40 per gallon. California’s governor is still considering a windfall profit tax on oil companies.
Phillips 66 will return another $10 billion to $12 billion to shareholders between mid-2022 and the end of 2024 in an effort to reward shareholders. Phillips 66 adjusted earnings were $3.1 billion or $6.46 per share for the quarter, generating $3.1 billion in operating cash flow.
Argentina oil field YPF nearly tripled its Q3 profit from a year ago on increased prices and production. Net profit skyrocketed by 186%, to $678 million for the quarter, with revenues of $5.18 billion–a 43% increase and easily beating analyst estimates. YPF’s EBITDA climbed 26% to $1.53 billion due to price improvements and increased production, despite operating costs increasing.
Marathon Oil managed to beat analyst revenue expectations by 11%, though over the next three years, the guidance indicates that revenue should fall by 5% per year on average–1.5% lower than the average for the oil and gas industry overall. Marathon also beat out analyst expectations in EPS by 3.1%.
