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Michael Kern

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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com, 

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The Geopolitical Risk Premium Is Back in Oil Markets

Risk

The geopolitical risk premium returned to oil markets this week after Israel rejected a ceasefire offer and bombed Rafah. 

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Friday, February 9th, 2024

The geopolitical risk premium kicked back in big time this week after Israel rejected a ceasefire offer in Gaza and bombed the border city of Rafah, making it increasingly unlikely that the upcoming weeks would see any de-escalation of tensions in Gaza. Relatively bearish calls from the US Energy Information Administration, saying that US crude output is unlikely to surpass the current level of 13.3 million b/d until early 2025, have also buoyed oil prices, with Brent poised to end the week slightly below $82 per barrel.

Devon Energy to Kick Off 2024 M&A Season. US oil producer Devon Energy (NYSE:DVN) has reportedly approached Enerplus, a Calgary-headquartered upstream firm mostly focused on Bakken and Marcellus, with an acquisition offer that could go up to $3 billion.

India Courts Guyana for Oil Deals. The Indian government is seeking a multi-year oil purchase deal with Guyana and would be keen to buy into exploration blocks there, suggesting India’s state-owned companies might pick up some of the relinquished parts of the Stabroek block.

Sweden Doesn’t Want to Say Who Blew Up Nord Stream. Swedish authorities dropped their probe into the 2022 explosions on Nord Stream pipelines, saying they lacked jurisdiction on the case, and handed over collected evidence to Germany which is still carrying out its investigation. 

ExxonMobil Plays with Venezuelan Fire. US oil major ExxonMobil (NYSE:XOM) announced it would drill two exploratory wells north and west of its Stabroek block in the Essequibo offshore area disputed by Venezuela, triggering the ire of Caracas and raising tensions in the region again. 

Australia’s Giant Merger Collapses Amid Shareholder Pressure. Australia’s leading oil producers Woodside (ASX:WDS) and Santos (ASX:STO) called off their $52 billion merger as the two companies couldn’t agree on a valuation level and failed to pass due diligence. 

First Time in Six Years, Palladium Prices Fall Below Platinum. Palladium prices fell below the platinum price for the first time since April 2018 this week, dropping to $870 per troy ounce, as the automotive sector has been increasingly going for cheaper platinum option. 

Joining Shell, TotalEnergies Eyes Onshore Nigeria Sale. France’s energy major TotalEnergies (NYSE:TTE) is expected to unveil its divestment of onshore Nigerian assets, most notably a 10% stake in the heretofore Shell-operated SPDC, whilst keeping gas projects in the Niger Delta.

Europe’s Wind Generation Beats Gas in 2023. Europe’s wind power generation surpassed natural gas last year, accounting for 18% of the continent’s supply and only losing out to nuclear, however, gas’ 15% year-on-year drop might rebound this year as prices fell below $10/mmBtu.

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Activists Target LME for Trading Indonesian Copper. Two activist groups filed a legal action against the London Metal Exchange for allowing the sale of copper from the Freeport McMoran-operated (NYSE:FCX) Grasberg mine in Indonesia, allegedly polluting water sources with waste.

Brushing Aside Demand Worries, US Driving Hits Record. The US Transportation Department reported that travel on American roads rose 2.1% to 3.263 trillion miles, setting an all-time high, as offices and federal agencies prompted workers to return amid lower gasoline prices. 

Green Hydrogen Impact to Be a Part of LNG Assessments. The White House stated that the pause in LNG terminal approvals should weigh the impact of new gas projects on the green hydrogen market, saying the regulatory revamp should take months not years. 

Germany Mulls Nationalization of Russian-Owned Refinery. The German government said it is investigating the option of expropriating Rosneft Deutschland, a subsidiary of Russia’s state-run oil company that holds shares in three German plants and operates the Schwedt refinery.

Mexico’s Next Best Thing Delayed Again. Mexico’s embattled national oil firm Pemex delayed the launch of its largest untapped asset, the 675 MMbbls Zama field originally discovered by Talos Energy (NYSE:TALO), by one year to 2026 citing the need for further engineering appraisal. 

By Michael Kern for Oilprice.com

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