Author: BlackMask Financial

Oil prices have remained rangebound in recent weeks, with macro concerns driving the direction of both Brent and WTI. Oil trading in the past weeks has seen remarkably little volatility, with Brent futures moving within a narrow bandwidth between $81 and $84 per barrel lately. Macro factors seem to be dominating the minor day-on-day moves in crude, with two Federal Reserve governors warning against interest rate cuts in the next two months. Consequently, oil prices are set to end the week at a slight decline, with Brent closing the week around $82 per barrel. Last week, the International Energy Agency reported that global oil demand growth is losing momentum, with demand growth clocking in at 1.4 mb/d in January, down from 2.8 mb/d in 3Q23 to 1.8 mb/d in 4Q23. According to the IEA, the expansive post-pandemic demand growth phase has largely run its course. Last year, Saudi Arabia’s sovereign wealth fund became the world’s top spender, accounting for a quarter of the $124 billion that sovereign wealth funds invested in total. Saudi Arabia has been spending heavily both abroad and at home—the home of the world’s megaprojects, such as the $500-billion futuristic Neom project and a whole new airline, among others. As a result, last year, the Public Investment Fund’s cash and treasury assets slimmed from over $105 billion in 2022 to some $37 billion as of September, according to official Saudi data cited by the Wall Street Journal this week. It’s getting harder to keep up with all the megaprojects—and oil prices remain stuck at around $80 per barrel. Saudi Arabia has tried its best to prop oil prices up and keep funding its ambitious Vision 2030 program—Crown Prince Mohammed’s plan for turning Saudi Arabia into a diversified economy. There is nowhere else this money can come from except oil. The kingdom is stretching itself thinner and thinner. The decline in sovereign wealth fund money was part of the reason why Saudi Arabia announced earlier this month it would cancel a planned oil production capacity expansion. Energy minister Abdulaziz bin Salman cited plans to redirect investments to other areas of Aramco’s business as one reason for the decision and intentions to invest more in the energy transition as another. Bin Salman also noted that thanks to the current production curbs, there is a pretty soft cushion of around 3 million barrels in spare capacity in case supply suddenly tightens elsewhere. But whether the Saudis would really use the capacity cushion in case of a supply disruption is quite another question. When you’re up to your neck in projects whose total price tag is well over a trillion dollars, letting a good supply disruption go to waste would be inadvisable.  But if thir is peace in the valley their is another solution, Debt!! It is certainly one way to keep funding the kingdom’s transformation projects. With the prospect of rate cuts on the horizon, debt markets would certainly begin looking a lot more tempting than they did over the past two years. More borrowing may be on the way. Oil prices may be doomed. Major acquisitions in the shale fields last year are now likely to have their own impact on production trends as more production in the shale patch becomes concentrated in fewer hands. Prices are  doomed as the cost of shake production plunge thanks to the economics of scale and technologies that increases yield proliferate.

https://youtu.be/FlIRGh9QqX4

RAFAH, Gaza Strip/CAIRO/JERUSALEM (Reuters) -Israeli bombing on Thursday flattened a mosque and destroyed homes in Rafah in a fierce surge of violence in the city, while the Hamas chief was in Cairo for talks Gazans hope could bring a truce and head off a full-blown assault on the city. In Khan Younis, the territory’s principal battlefield since Israel launched an assault on the city last month, Israeli forces withdrew from the Nasser Medical Complex a week after raiding it, the Palestinian enclave’s health ministry said. The World Health Organization had said earlier it aimed to evacuate some of the roughly 140 patients stranded there, where Palestinian officials said bodies of dead patients had begun to decompose amid power cuts and fighting. Israel gave no immediate comment. In Rafah the city hard against the Egyptian border, where over half of the Palestinian enclave’s 2.3 million people huddled, mostly in tents.  Israel has threatened to launch a full-blown attack on Rafah, the last city at Gaza’s southern edge, despite international pleas – including from its main ally Washington – for restraint. Residents who have fled to Rafah from elsewhere say there is nowhere left to go. Meanwhile, an already meagre aid flow has almost completely dried up. The heads of the main UN relief agencies, including UNHCR, UNICEF, WFP and the WHO, released a letter pleading for an immediate humanitarian ceasefire and warning that further escalation into Rafah would cause mass casualties. Talks to reach a ceasefire failed two weeks ago, when Israeli Prime Minister Benjamin Netanyahu rejected a counteroffer from Hamas for a four-and-a-half month truce that would end with an Israeli withdrawa. Hamas, still believed to be holding more than 100 hostages, says it will not free them unless Israel agrees to end fighting and withdraw. Israel says it will not pull out until Hamas is eradicated. The arrival of Hamas chief Ismail Haniyeh in Cairo this week for his first publicly announced visit since December was the strongest sign for weeks that negotiations remain alive. Haniyeh has met Egyptian mediators, but so far little has been said in public. Sami Abu Zuhri, a senior Hamas official, told Reuters that Israel was now backtracking on terms the country had accepted weeks ago in a ceasefire offer hammered out with U.S., Egyptian and Qatari mediators. NN: Hamas is losing control.Starving masses are  difficult to control. Soon the food riots will come. The longer Hamas waits to make a deal the  worse deal they will make.

Crude oil prices moved slightly higher today, after the Energy Information Administration reported an inventory increase of 3.5 million barrels for the week to February 16. This followed a sizeable build of 12 million barrels for a week that also saw gasoline and middle distillate fuel inventories decline. For the week to February 16, the EIA also reported an estimated gasoline inventory draw of 300,000 barrels, which compared with a decline of 3.7 million barrels for the previous week. Gasoline production averaged 9 million barrels daily last week, which compared with 9.2 million barrels daily for the previous week. In middle distillates, the EIA estimated an inventory draw of 4 million barrels for the week to February 16, which compared with an inventory draw of 1.9 million barrels for the previous week. Middle distillate production averaged 4.2 million barrels daily last week, which compared with 4.1 million barrels daily for the week before. A week before the EIA released its weekly report, the American Petroleum Institute’s inventory estimates for the week to February 16 showed a build of 7.2 million barrels in crude oil, plus a minor build in gasoline stocks, of less than 500,000 barrels and a sizeable draw in middle distillates, by close to 3 million barrels. Oil prices, meanwhile, have been on the rise, mostly fueled by events in the Middle East, where the Israel-Hamas war shows no signs of progress toward peace. Despite the API’s report on Wednesday, prices gained, to end the session higher, with West Texas Intermediate settling 1.1% higher and Brent booking a 0.8% gain for the day. At the time of writing, the benchmarks were still trending higher, likely on indications of a tightening supply situation, as suggested by a Bloomberg report, citing timespreads on the oil market. Worries about oil demand in the light of signals from the Fed that it will not rush with rate cuts countered the bullish effect of Middle East affairs and the perception of a tightening supply situation. NN: Oil is oversupplied. And I believe Israel will be forced to stand down.

Prime Minister Benjamin Netanyahu reiterated his call for the IDF to draw up a plan for evacuating Palestinian civilians from the southermost city in the Strip.

Israeli officials have privately admitted that the IDF has no “precise” strategy for the invasion of the southern Gaza city of Rafah, Bloomberg reported Thursday. Bloomberg reported that “officials acknowledge in private they have no precise strategy for how to [attack in Rafah], how long it will take or where the people will go.” Speaking to Bloomberg on Wednesday, Prime Minister Benjamin Netanyahu reiterated his call for the IDF to draw up a plan for evacuating Palestinian civilians from the southermost city in the Strip.

Egypt: Israel must tread carefully before deciding on Rafah offensive

Earlier on Thursday, it was reported that Egypitan officials told Israeli counterparts to “carefully study any step” before launching a military offensive into Rafah.  The officials told their Israeli counterparts that encroaching into Rafah would “increase the risk to the lives of” the 132 hostages remaining in Gaza, and called on the IDF to “prepare to bear the consequences” of such invasion. NN:  Israel is trapped. It cannot invade Rafah with over a million displaced people Hamas will use as shields. And create a humanitarian crises that they will own.

Israeli Minister Without Portfolio Benny Gantz, who is also part of the Israeli war cabinet, said on Wednesday that “initial signs” show “progress can be made” toward a new hostage release framework.”We will not miss any opportunity to bring the [hostages] home,” Gantz underscored during the press conference in Tel Aviv, stressing that “no stone will be left unturned” until all those abducted on October 7 have safely been brought back home. However, Gantz clarified that without the outline of the possible hostage release deal, Israeli forces will continue to operate in Rafah during Ramadan. Gantz also expressed his support for the Knesset’s rejection of unilateral recognition of Palestinian statehood, stressing that establishing a Palestinian state would be a “reward” for terrorism. NN:  Getting closer all the time.

Oil prices up, WTI over 1%

Prices of crude oil for front-month settlements tumbled on Tuesday after data showed that economic growth in both Germany and Britain stagnated, with Berlin and London entering a technical recession in the closing quarter of 2023. Economic uncertainty appeared to raise concerns about the commodity’s demand thus briefly offsetting supply pressures driven by the Middle East turmoil. West Texas Intermediate (WTI) for April contracts dropped 1.96% to $76.91 per barrel at 10:44 am ET. Brent for the same month’s deliveries was down 1.66% to $82.14 a barrel. NN: Do not forget the slowdown in  China and the good ole USA. Add to all this the war premium coming out of oil  as Israel is forced into not only a cease fire but a complete withdrawal from Gaza.