Demand worries continue to weigh on oil ahead of Fed meeting

Oil prices are under pressure ahead of the next Federal Reserve meeting, and demand concerns continue to weigh on both WTI and Brent.

– The enormous price volatility of the past few months has made European natural gas futures one of the preferred trading instruments for hedge funds, as TTF futures continue to trade above €40 per MWh.

– The combination of rapidly depleting European gas stocks and still unclear prospects for Russian pipeline gas to Europe next year has lifted the total long positions of institutional investors to almost 500 million MWh equivalent.

– While the short-term outlook for European gas remains positive, there is still a risk that post-winter scare prices could collapse as hedge funds begin to unwind their positions, particularly on the back of new LNG supply into 2026.

– By comparison, net positioning in Henry Hub US gas futures remains overwhelmingly bearish, with a net shortfall of just under 80,000 contracts in the week to December 10, the 22nd straight week that hedge funds have shorted gas.

Market Movers

– American oil company Kosmos Energy (NYSE:KOS) reportedly has withdrawn from making a bid for another Africa-focused producer Tullow Oil, exacerbating the latter’s decline as its shares fell 44% this year.

– American refinery giant Phillips66 (NYSE:PSX) announced it would sell its 25% stake in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $865 million, putting it on course to exceed its asset sale target.

– QatarEnergy has boosted its presence in Namibia by cultivating in Chevron’s (NYSE:CVX) operated license PEL90, acquiring a 27.5% non-operated interest as it already co-owns blocks containing the giant Venus and Graff discoveries.

Tuesday 17 December 2024

ICE Brent continues to trade within a narrow range of $72-74 a barrel as the previous week’s slightly bullish sentiment, stemming mainly from US and EU sanctions against Russia, has hit another roadblock. It’s China again depressing the demand outlook, with November data for industrial production and retail sales both coming in below expectations, so only the Fed can add some upside now.

Trump wants to roll back Biden’s EV policies. According to a Reuters reportDonald Trump’s incoming administration is proposing eliminating Biden’s $7,500 tax credit on electric cars, easing mandates on exhaust pollution and imposing tariffs on all battery materials globally to jump-start American manufacturing.

Chinese coal production hits new record. China’s coal production rose to an average daily rate of 14.27 million tonnes in November, the highest pace on record, up as much as 7% month-on-month as state-controlled producers ramped up production ahead of winter heating demand.

The world’s best retailer burdened by fraud. The global trading house Trafigura saw a steep decline in its 2024 earnings on the heels of its billion-dollar fraud scheme in Mongolia, down 60% year-on-year to $2.8 billion, even as its traded oil and fuel oil volumes rose to 6.8 million b/ d.

China is building up raw material stocks. As November data on Chinese imports and refinery operations trickled in, China imported and produced 1.77 million b/d more than the be consumed last month, and even with some missing information, this seems to indicate a huge stock build across the country.

UAE pledges to export less oil. In line with OPEC+’s push for stronger discipline in meeting joint production targets, the UAE’s state oil company ADNOC has promised to reduce exported volumes by up to 230,000 b/d in Q1 2025, mostly to reduce flows of light Murban and medium sour Upper Zakum.

Venture Global Starts Plaquemines. Venture Global LNG produced its first commercial LNG from its 20 mtpa Plaquemines facility, the first new U.S. facility to produce the supercooled gas in two years, reaching first production just 30 months after the project got the go-ahead.

Libya’s key refinery damaged by gunfire. Libya’s state oil company NOC declared force majeure at its 120,000 b/d Zawia refinery after several storage tanks were ‘severely damaged and caught fire’ following direct hits from nearby armed clashes, halting operations two months after it was fully repaired.

US sanctions Serbia’s only refinery. Serbian authorities said the White House will impose sanctions on Serbia’s oil company NIS because of its Russian ownership, potentially disrupting oil flows to the 96,000 b/d Pancevo refinery fed through the Croatian port of Omisalj.

Gallium prices rise to 13-year high. Prices for gallium, a rare metal used mostly in semiconductors and radar equipment, have jumped to their highest since 2011 on the back of China’s tightening of export restrictions, selling at $595 a barrel. kg, as Beijing still controls 98% of global production.

Russian oil spill pollutes the Black Sea. A Russian oil tanker carrying several thousand tons of fuel oil in the Kerch Strait in the Black Sea share apart after running aground, where the 136-metre-long tanker triggered an oil spill amid a powerful winter storm that made environmental containment difficult.

Oman Woos Investors for Next LNG Project. Oman is ready to go conversations with key investors BP, Shell and TotalEnergies over whether they could commit to gas supplies for a mulled 3.8 mtpa fourth train at the Oman LNG site, which seeks to expand the country’s LNG production capacity to 15.2 mtpa.

Southeast Asia Sees Biofuel Bonanza. Malaysia’s state-owned oil company Petronas and Italian oil major ENI (BIT:ENI) awarded a $1 billion contract to Korean engineering firm Samsung to build a 650,000 mtpa biorefinery in Johor, Malaysia, focusing on the production of SAF and HVO.

US drillers are testing liquid coke instead of sand. American oil major ExxonMobil (NYSE:XOM) announced that it had developed a drilling process to use liquid petroleum coke instead of sand as a proppant for hydraulic fracturing, with the refinery product reportedly improving recovery by up to 15%.

By Michael Kern for Oilprice.com

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