Author: BlackMask Financial

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Biden Strategy to Tame Gas Prices Is in Peril as Iran Sanctions Pressure Mounts

Recent oil price easing could perhaps be seen as a sign of greater maturity in the oil market when it comes to geopolitics, analysts at Standard Chartered said in a report sent to Rigzone last week. “After jumping at geopolitical shadows and overreacting in 2022, the market has been more stoic in 2024 so far,” they noted. Alternatively, the fall in prices could be seen as a sign of increasing immaturity in relation to geopolitics, the analysts stated in the report. “This is a market that does not price geopolitical risk unless there is something observably on fire and on fire right now,” they added.In the report, the Standard Chartered analysts revealed that they think “the truth is probably somewhere in the middle of those two interpretations”. “It may be unwise to attempt to extract a convincing geopolitical narrative from recent oil market reaction; we think it has always had difficulty in pricing any relatively slow-moving geopolitical narrative correctly,” they said. “We think it is reasonable to conclude from the price fall that traders are less concerned than before about short-term supply risks; however, we do not think anything can be concluded about the market’s view of any permanent shifts in geopolitics or on whether longer-term risk has been elevated,” they added. “In short, geopolitical risk is still both large and intact, in our view,” they went on to state. The analysts highlighted in the report that their view is that longer-term supply risk has become elevated by the events of the past seven months.

“The long-running dispute between Iran and Israel has, up to now, been largely covert, hardly acknowledged by either side and often carried out through proxies,” they said. “That confrontation is now more explicit and direct; Iranian red lines have been redrawn in a way that will likely make the diffusion of future tension harder, and there is no likely resolution of the tension in sight,” they noted.

“Further, we do not think U.S. policy towards Iran oil exports will remain quite as circumspect as it currently is, regardless of the result of November’s presidential election,” they added.The analysts stated in the report that the election may influence the timing of the next swing down in Iranian exports but added that they think increased pressure on Iran is highly likely in any event. “The latest additions to U.S. secondary sanctions on Iranian oil exports may add to the instruments available, although we note that existing U.S. policy instruments were enough to drive Iranian exports down to close to zero in late 2020 before the international context, and the associated implementation policies, changed,” the analysts said. The reduced market focus on Middle East developments is likely to bring fundamentals back to the fore, the Standard Chartered analysts said in the report. “Short-term spreads, which were key to price progression in Q1, are likely to remain so in Q2,” they added. “Our balances imply that April will show the typical shoulder-season characteristics, with a tendency towards inventory builds before demand picks up for the rest of the quarter,” they continued. “Our model shows a small 74,000 barrel per days global inventory build in April, significantly less than the 2.2 million barrels per day build in April 2023 and the 1.4 million barrel per day build in April 2022,” they said. “Nevertheless, it is likely to feel like a significant relaxation in the physical market after the strong counter-seasonal Q1 inventory draws.

However, we forecast global oil demand will pick up strongly in May and June, exceeding 103 million barrels per day for the first time in May (at 103.15 million barrels per day) and then surpassing that record with 103.82 million barrels per day in June,” they went on to state.

The analysts highlighted in the report that they expect global inventory draws of 1.53 million barrels per day next month and 1.69 million barrels per day in June, which they said should tighten physical spreads significantly. “While our balances indicate there is room for at least one million barrels per day of extra OPEC output in Q3 without increasing inventories, we think the latest pull-back in prices re-opens the question of the timing of any output increases,” they analysts noted. “The next key ministerial meeting is just six weeks away; we think that if the market is still trading weakly then and market concerns about demand and the macroeconomic environment persist, ministers are very unlikely to want to add oil back onto the market immediately,” they added. The analysts said in the report that they think the next few weeks will be key in determining how tight Q3 will be.

 Standard Chartered projected in the report that the ICE Brent nearby future crude oil price will average $94 per barrel in the second quarter of this year, $98 per barrel in the third quarter, $106 per barrel in the fourth quarter, $107 per barrel in the first quarter of 2025, $103 per barrel in the second quarter, and $111 per barrel in the third quarter.

The company expects the commodity to average $109 per barrel overall in 2025, $128 per barrel overall in 2026, and $115 per barrel overall in 2027, according to the report.

In a separate report sent to Rigzone last week, Ole R. Hvalbye, a Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), said, “fundamentals predominantly influence global oil price developments at present”. “Geopolitical ‘risk premiums’ have decreased from last week, although concerns persist, highlighted by Ukraine’s strikes on two Russian oil depots in western Russia and Houthis’ claims of targeting shipping off the Yemeni coast,” Hvalbey said in that report. “With a relatively calmer geopolitical landscape, the market carefully evaluates data and fundamentals. While the supply picture appears clear, demand remains the predominant uncertainty that the market attempts to decode,” he added. In a report sent to Rigzone on April 20, analysts at J.P. Morgan said their base case for oil “remains a $90 Brent through May and $85 in 2H24”.

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Oil Declines as US Steps Up Efforts to Secure a Truce in Gaza

Oil slipped as the US pushed to broker a peace deal between Israel and Hamas that would reduce geopolitical tensions in the Middle East.Brent crude traded below $89 a barrel after gaining 2.5% last week, while West Texas Intermediate dropped toward $83. US Secretary of State Antony Blinken will step up efforts to secure a truce in Gaza during a visit to the region. The White House said Israel has agreed to hear out its concerns and hold off invading Rafah until meeting with the Americans. Crude has risen this year on OPEC+ supply cuts and heightened tensions in the Middle East — the source of about a third of the world’s oil. Meanwhile, shifting expectations for US monetary policy are weighing on the demand outlook, and traders will look to a Federal Reserve meeting on Wednesday to gauge the prospects for rate cuts this year. Despite the uncertain outlook, timespreads continue to signal bullishness. The gap between the two nearest Brent contracts was still more than $1 a barrel in backwardation. While the figure has come off slightly from last week’s highs, it’s still more than double what it was a month ago.“Geopolitical risks have eased considerably,” said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. While the bank still expects a “deep deficit” this quarter, “the outlook for the second half of the year is less clear with it largely depending on OPEC+ policy,” he said. Russia attacked Ukraine over the weekend with  heavy missile barrage aimed at natural gas infrastructure and other targets. Kyiv struck back with drones targeting an oil refinery in the Krasnodar region, with state-run news agency Tass reporting that the Slavyansk plant had partially suspended operations because of a fire.

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Washington’s Pleas Fall on Deaf Ears as Ukraine Strikes Russian Refineries

  • Biden’s top officials have pleaded with Kyiv to stop attacks on Russia’s energy infrastructure.
  • A source in the Ukrainian defense sector confirmed to AFP on Wednesday that Ukrainian drones had carried out attacks on oil infrastructure in the Smolensk region.
  • The Financial Times, citing unnamed US officials, recently said long-range drones have hit at least 20 energy facilities deep within Russia so far this year.
Refinery Russia

Just days after the Biden administration signed a new military aid package worth billions of dollars to Ukraine, Kyiv launched a series of suicide drone attacks on Russian oil refineries. Biden’s top officials have pleaded with Kyiv to stop attacks on Russia’s energy infrastructure because of the fears that turmoil in crude markets would send pump prices in the US higher ahead of the presidential elections in November. 

“Our region is again under attack by Ukrainian UAVs,” Smolensk Governor Vasily Anokhin wrote in a post on Telegram on Wednesday. Kamikaze drones damaged oil facilities in western Russia.  Another drone attack hit the Lipetsk region further south, which is home to steel production plants and pharmaceutical sites, Governor Igor Artamonov said. “The Kyiv criminal regime tried to hit infrastructure in Lipetsk industrial zone,” Artamonov said.

The Moscow Times pointed out:

A source in the Ukrainian defense sector confirmed to AFP on Wednesday that drones in the service of the Security Service of Ukraine (SBU) had carried out the attacks.

The source made no mention of the attack on Lipetsk but claimed two oil depots were destroyed in the Smolensk region.

“Rosneft lost two storage and pumping bases for fuels and lubricants in the towns of Yartsevo and Rozdorovo,” the source said, referring to the Russian state-controlled energy giant.

The Financial Times, citing unnamed US officials, recently said long-range drones have hit at least 20 energy facilities deep within Russia so far this year. Kyiv’s drone attacks on Russia’s energy complex have been frightening for the Biden administration, as Brent prices have risen to the $90/bbl level on higher war risk premiums. Higher energy costs feed into inflation as stagflation concerns mount in the US. Also, gasoline pump prices in the US are inching closer to the politically sensitive $4 level.  According to AAA data, the average cost of gas at the pump across the US was $3.66 as of Thursday, up from $3.10 in mid-January.

“The recent uptick in US consumer price inflation, driven by services, housing and fuel, is already of concern to the Biden administration, which is hoping to secure a second term in the November election,” Markus Korhonen, senior associate at geopolitical risk consultancy S-RM, told Newsweek. In recent weeks, Brent prices jumped to the $90bbl to $92bbl range on a higher war risk premium as Israel and Iran volleyed missiles and drones at each other. Prices sank to as low as the $85bbl handle as the market saw the Middle East conflict was just theatrics. However, prices have increased from $85bbl earlier this week, to $89.50 on Friday morning – perhaps on new fears of tighter Russia supplies.

The latest Bloomberg data shows Russian seaborne crude exports hit a multi-month high in the four weeks to April 21. Refineries in the country have struggled to be repaired from the series of drone attacks as oil processing sinks to lows last seen in May 2023 when floods forced the Orsk refinery offline. So far, Ukraine has only attacked oil-processing facilities deep within Russia, avoiding crude and crude product export ports. “Should Ukraine begin also targeting crude oil facilities, this could threaten Russia’s overall production and exports and, more meaningfully, global oil prices would tick up, driving up inflation and cost-of-living pressures in the US and elsewhere,” said Korhonen, adding, “It would also raise the prospects of Russia retaliating, for example, targeting energy infrastructure that the West relies on.” The ultimate goal of Ukraine’s drone attacks is to reduce Moscow’s oil revenues that finance the war. This means that Russia’s crude export ports will be targeted at some point. And we’re 100% sure the Biden administration is terrified about this ahead of the elections.  If that happens, “it would not only bring up the price of oil, it would put a lot of pressure on inflation because of the impact on prices,” said O’Donnell. The question becomes when Kyiv begins hitting Russia’s crude export terminals.

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Israel okays Southern Command ‘continuation of war’ plans…… Abbas: Israel may launch Rafah operation ‘in coming days’

Israel Defense Forces (IDF) Chief of the General Staff Lieutenant General Herzi Halevi (pictured) approved “continuation of the war” plans with Southern Command Chief Major General Yaron Finkelman on Sunday, the military shared in the statement. The meeting was also attended by all division and brigade commanders, the IDF added. Halevi’s greenlight on battle plans comes amid the growing concern that the Israeli military could launch an operation into Gaza’s southernmost city of Rafah, where an estimated 1.5 million Palestinians are seeking refuge. Namely, Hamas is expected to respond to the latest proposal regarding the release of hostages from the Gaza Strip.

Abbas: Israel may launch Rafah operation ‘in coming days’

Palestinian National Authority (PNA) President Mahmoud Abbas said on Sunday that the Israeli Defense Forces are expected to launch a ground invasion on Gaza’s southernmost city of Rafah “in the coming days.” Speaking at the conference in Riyadh, Abbas called on the United States to prevent Israel from committing the “greatest disaster in the history of the Palestinian people” and stressed that Washington is the only country “capable” of stopping “this crime.” Israeli Foreign Minister Israel Katz previously stated that plans for the military ground operation in Rafah could be scrapped were the two warring parties to agree on the exchange of hostages.

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Drone Attacks Take Khor Mor Gas Field Offline………. Russia’s Krasnodar oil refinery halts operations due to attacks

Four expatriate workers lost their lives, and two others sustained injuries in a recent drone attack on the Khor Mor gas field in Iraq’s Kurdistan region. This attack, reported by an advisor to the Iraqi Kurdish Prime Minister and a senior Kurdish political source, has also resulted in the suspension of production at the site. The ramifications of the assault extend beyond casualties, impacting electricity generation in the region. Kurdistan’s electricity ministry stated that the drone attack disrupted gas supplies to power plants, leading to an approximate 2,500 MW reduction in electricity output. Pearl Petroleum—a consortium comprised of Dana Gas and Crescent Petroleum (operators of the Kurdistan Gas Project), along with OMV, MOL, and RWE hold the rights to develop Khor Mor and Chemchemal, two of Iraq’s largest gas fields. Earlier this week, U.S. troops shot down two drones outside a base in Iraq, the Pentagon has said, although the U.S. military could not confirm whether the attack was targeting U.S. forces. No group has taken responsibility for Friday’s attack on the gas field that contains more than 7 trillion cubic feet of natural gas reserves. “Good efforts have been made in the past to improve the energy sector and economic infrastructure in Iraq, especially in the Kurdistan Region, and while steps are being taken to resolve the disputed, evil and destructive hands once again targeted the Khor Mor gas field in a terrorist act. These repeated strikes must be stopped, and we urge the Iraqi government to find the perpetrators of this terrorist act and bring them to justice,” Peshawa Hawramani, KRG spokesperson said in Friday a statement following the attack.

Russia’s Krasnodar oil refinery halts operations due to attacks

The Slavyansk ECO oil refinery in Krasnodar has temporarily halted its operations due to previous attacks carried out by the Ukrainian Armed Forces, according to a report by TASS on Saturday. “The work of the plant has been partially suspended. Exactly 10 UAVs flew into the plant, there was a strong fire. There may be hidden damage,” Eduard Trudnev, the security director at Slavyansk ECO Group, which manages the facility, told the media.

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Austin: Iran should check effectiveness of their weapons

US Defense Secretary Lloyd Austin says that Iran should question the effectiveness of its weapons systems after its failed attack on Israel earlier this month. “They should be questioning the effectiveness of their weapons systems and their planning,” Austin tells reporters. “Hopefully, they don’t walk away from this over-confident that they can do this at will, because I think Israel has demonstrated that it has a significant ability to defend itself,” Austin added.

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Houthis hit British oil tanker in Red Sea……… Houthis Shoot American MQ9 Drone Down

Yemen’s Houthi rebels claimed responsibility for striking a British oil tanker, the Andromeda Star, in the Red Sea. According to Yahya Saree, the Houthi military spokesperson, the attack involved multiple naval missiles and resulted in a direct hit on the vessel. Additionally, Saree announced that the group had successfully shot down an American unmanned aerial vehicle (UAV) in the airspace of Yemen’s Saada Governate.

Houthis Shoot American MQ9 Drone Down

Houthi spokesperson Yahya Saree announced the shooting down of american mq9 drone above Saada governorate. Houthis confirmed that they were targeting British oil vessels in the Red Sea. Saree said, “The naval forces of Yemen targeted the British oil tanker (ANDROMEDA STAR) in the Red Sea with several appropriate sea missiles, which directly hit the ship. The air defense forces of the Yemeni Armed Forces succeeded in shooting down an American MQ9 drone over the Sa’ada Governorate, during its hostile operations, and it was targeted with an appropriate missile .The Yemeni Armed Forces confirm their continued execution in support of the Palestinian people until the lifting of the siege and stopping the aggression against the Palestinian people in the Gaza Strip.”

NN: Audio File:
all hell is about to break loose

 

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Israel, Hezbollah continue to exchange fire……….. HOUTHIS THREATEN WITH CONFLICT EXPANSION IN INDIAN OCEAN Footage reveals Israeli strikes on southern Lebanon..

 

Israeli Defense Forces (IDF) said on Friday in a statement that overnight, anti-tank missiles were launched from Lebanon toward Mount Dov. As a result, one individual died. Meanwhile, Israel’s Air Force struck Hezbollah sites in “the Shebaa area in southern Lebanon.” IDF specified that a weapons depot was one of the targets. IDF further confirmed that the militant group’s infrastructure in the Kfarchouba area was hit.

Footage reveals Israeli strikes on southern Lebanon

Video footage obtained by Al Jazeera Arabic revealed Israeli military strikes on the southern Lebanese town of Chebaa. According to reports, Israeli fighter jets targeted “terrorist infrastructure” in the Kfarchouba area, adjacent to Chebaa. Additionally, a “military structure” near Markaba village, further south, was also struck. Lebanese and Israeli authorities have yet to provide official statements regarding the attacks.

Houthis threaten with conflict expansion in Indian Ocean

Yemen’s Houthis leader Abdul-Malik warned Thursday that the military organization is seeking to expand its operations against international vessels in the Indian Ocean. In a video speech, Malik reaffirmed the group’s objective to continue carrying on with strikes in the aforementioned ocean, besides the Red Sea as long as Israel persists in “war and siege on the Gaza Strip.” He claimed that the rate of targeting Israel-linked ships increased to one vessel every two days, impacting 102 Israeli vessels while causing damage worth $50 million to US ships. He stated that a longer-lasting conflict in Gaza will have an impact on the economic situation of “the enemies.”

BlackMask Pod Cast

War is Coming And It Will Spread

 

 

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Standard Chartered: Global Oil Demand Will Pick Up Strongly In May And June

  • The crude inventory build at the middle of the month triggered fears that oil demand could be weakening.
  • StanChart has forecast that global oil demand will pick up strongly in May and June, exceeding 103 mb/d for the first time in May.
  • With the next key ministerial meeting just six weeks away, concerns about demand and the macroeconomic environment are likely to dominate the meeting.

Oil prices have held steady week on week despite a significant inventory build in U.S. crude two weeks ago, which was countered by a draw in U.S. crude stockpiles for the week ending April 19th. Next to this, traders have become less concerned about a potential supply disruption in the Middle East.  The crude inventory build at the middle of the month triggered fears that oil demand could be weakening; however, Standard Chartered estimates that global inventories will increase by only 74,000 barrels per day in the month of April, a much smaller build compared with 2.2 million barrels per day (mb/d) build in April 2023 and the 1.4 mb/d build in April 2022. StanChart notes that the markets could be more sensitive to this change in trajectory following the strong counter-seasonal inventory draws during the first quarter of 2024. Even better for the bulls, StanChart has forecast that global oil demand will pick up strongly in May and June, exceeding 103 mb/d for the first time in May (at 103.15 mb/d), increasing further in June to 103.82 mb/d.  The commodity experts have predicted global inventory draws of 1.53 mb/d in May and 1.69 mb/d in June, tightening physical spreads significantly. StanChart also says that OPEC is unlikely to increase output in the near-term thanks to the stall in the oil price rally despite having room for at least 1 mb/d of extra OPEC output in Q3 without increasing inventories.  With the next key ministerial meeting just six weeks away, concerns about demand and the macroeconomic environment are likely to dominate the meeting. StanChart says we are likely to record a 1.6 mb/d Q3 draw in stocks if there is no increase in OPEC output, compounding the price effect of a H1-2024 draw of 1.1 mb/d. Recently, the Biden administration passed new sanctions on Iran’s oil sector as part of the $95-billion foreign aid package to Ukraine, Israel and Taiwan. In a move aimed at reducing Iran’s oil trade with China, the broadened sanctions now target Chinese banks that conduct transactions involving Iranian crude and products. The sanctions now include foreign refineries, vessels, and ports that knowingly process, transfer, or ship crude oil in violation of existing sanctions. The new sanctions could prove significant in disrupting market fundamentals considering that  Iran currently produces about 3 million b/d and is expected to increase output by a further 280,000 b/d this year. StanChart has predicted that whereas the upcoming U.S. presidential election may influence the timing of the next swing down in Iranian exports, Iran’s oil flows are bound to take a hit regardless of who ascends into the Oval Office in 2025. The analysts note that existing U.S. policy instruments were enough to drive Iranian exports down to close to zero in late 2020, before the international context, and the associated implementation policies, changed. StanChart has argued the Biden administration has room to start implementing the sanctions immediately despite the risk of increased fuel prices during an election year. StanChart notes that the record-high on the day of a U.S. presidential election is $3.492/gal in 2012 (when the incumbent won), equating to about $4.80/gal in 2024 money terms after adjusting for consumer inflation. That’s $1.14/gal higher than current prices, with the U.S. national gasoline price average at $3.66 per gallon. StanChart says that whereas recent U.S. international oil policy has clearly been designed with a view to moderating oil price effects, it does not mean that the U.S. has necessarily chosen a policy of minimum pressure on Iranian and Russian oil exports.

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Israel Steps Up Cross-Border Strikes on Hezbolla……. IDF ready for Rafah operation, just waiting for green-light from gov’t h in Lebanon

The Israeli military said it struck about 40 sites linked to Hezbollah in southern Lebanon, an apparent escalation of the near daily skirmishes between the two sides since the start of the war in Gaza. The Israel Defense Forces said its rockets hit storage facilities, weaponry and “additional targets used by Hezbollah” in the area of Ayta ash Shab, a village near the Israel-Lebanon border. The barrage came a day after the Iran-backed militant group staged the deepest attack inside Israel since their exchanges began in October. There was no immediate response from Hezbollah or reports of any casualties. The shekel reversed its gains, trading 0.4% weaker as of 5 p.m. in Tel Aviv on Wednesday. The US and European allies have long been concerned that tension between Israel and Hezbollah could evolve into a full-on front in the broader Middle East conflict, which has seen Israel clash with both Iran and its various proxy militias around the region. Hezbollah, which like Hamas is dedicated to the destruction of the Jewish state, is the most powerful of those Islamist groups, which also include the Houthis in Yemen. Israeli Defense Minister Yoav Gallant said the army has already killed half of Hezbollah commanders in southern Lebanon and its goal is to restore border security and allow tens of thousands of evacuated residents to return home. “We are dealing with a few alternatives to make this a reality, and the coming period will be decisive,” he said in a video statement.

IDF ready for Rafah operation, just waiting for green-light from gov’t 

Israel is also readying its military to start a major ground invasion of Rafah, the southern Gazan city where more than 1 million Palestinian civilians have taken refuge from the ongoing war with Hamas. Prime Minister Benjamin Netanyahu’s government believes the remaining Hamas fighters and some leaders are holed up there. The Israel Defense Forces said it hit storage facilities, weaponry and “additional targets used by the Hezbollah” in the area of Ayta ash Shab. Hezbollah is thought to have more than 100,000 fighters, many of which are situated close to the border with Israel. The group has a far bigger and more sophisticated arsenal of missiles and other weapons than Hamas, which Israel is trying to destroy in retaliation for the Oct. 7 deadly attacks on the south of the country. Hezbollah and Hamas are considered terrorist organizations by the US. On Tuesday, the Lebanese militia fired explosive-laden drones at two army bases on Israel’s northern coast after Israeli strikes killed two of its key operatives. It was the farthest it has struck inside Israeli territory since the start of the Gaza war, with Israel intercepting what it described as three “suspicious aerial targets” and sirens sounding in several coastal cities including Acre. Earlier on Wednesday, Hezbollah hit two houses with missiles fired toward Avivim, an Israeli settlement near the Lebanese border.

NN: Audio File:

Israel Massing Troops for Rafah Invasion