OPEC saw its crude oil output rise by as much as 160,000 bpd last month compared to November.
A S&P Global Platts survey sees OPEC+ production rising by 130,000 bpd in December 2023.
December was the last month of the OPEC+ cuts for 2023, before new reductions of a total of around 900,000 bpd are coming into force in January for the first quarter of 2024.
WTI down by 2.5% after US inventories data
The prices of oil futures continued to decline on Wednesday after the Energy Information Administration (EIA) reported a weekly rise of 1.2 million barrels in the United States commercial crude inventories. Previously, China posted a decline in its manufacturing activity in January, signaling a drop in production and, hence, oil demand. West Texas Intermediate (WTI) for deliveries in March plunged by 2.42% at 11:58 am ET, having lost more than 2.5% moments earlier, to sell for $65.96 per barrel. At the same time, Brent for that month’s settlements fell by 1.35% to go for $81.76 per barrel.
Saudi Aramco confirms manageable risk for its tankers navigating the Red Sea despite ongoing conflicts.
Houthi rebels explicitly allow Chinese and Russian vessels to pass safely, reflecting geopolitical alignments.
Iran’s recent diplomatic rapprochement with Saudi Arabia possibly contributes to the ‘free pass’ for Riyadh’s oil transits.
China and Russia aren’t the only countries being given a “pass” from Yemen’s Houthi rebels, but Saudi Arabia is also exporting crude oil through the Red Sea as if in perfectly normal times At a moment that especially Western and any and all Israeli-linked vessels are being targeted by rocket and drone attacks out of Yemen, the head of Aramco’s refining, oil trading and marketing division Mohammed Al Qahtani has confirmed to Bloomberg, “We’re moving in the Red Sea with our oil and products cargoes.” He added that the risks remain “manageable” On January 19 a senior Houthi official, Mohammed al-Bukhaiti, mentioned these US rivals by name in an interview with the Russian outlet Izvestia. “As for all other countries, including Russia and China, their shipping in the region is not threatened,” he said, stipulating this will remain in effect as long as they are not linked to Israel or its supporters
The Saudi Arabian Oil Group, also known as Aramco, announced on Tuesday that the Kingdom’s Energy Ministry ordered it to keep its maximum sustainable capacity (MSC) at 12 million barrels per day (bpd) and not raise it as planned to 13 million bpd. “It is to be noted that MSC is determined by the State pursuant to the Hydrocarbons Law, enacted by Royal Decree M/37, dated 12/20/2017. The Company will update its capital spending guidance when its full-year 2023 results are announced in March,” Aramco said in a written statement. Back in November, Saudi Arabia extended its voluntary oil production cut of 1 million bpd until the end of March 2024 in an effort to contribute to stability in the global energy market. NN: Another red herring. we are talking about nothing here. This expansion in production at best would hit in 2025.
Qatari Prime Minister and Foreign Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al-Thani revealed on Monday that progress is being made in discussions on the release of hostages held by Hamas, which is expected to “lay the foundation” for “the way forward.” “We are hoping to relay this proposal to Hamas and to get them to a place where they can engage positively and constructively in the process,” the Qatari prime minister told the Atlantic Council. In addition, al-Thani expressed concern about a potential escalation of tensions in the Middle East following the attack on United States troops near the Jordan-Syria border, which could undermine Qatar’s efforts to stabilize the situation in the region.Earlier, it was reported earlier that Israel agreed on the framework for hostage release and a potential ceasefire in Gaza.
Israeli war cabinet reportedly considering 45 day ceasefire
Al Arabiya informed on Monday that the Israeli War Council is reportedly considering a plan for a 45 ceasefire in exchange for releasing 35 hostages. The media advanced that Israel will discuss today a plan that would signify liberating “100-250 Palestinians for every Hamas detainee.” Hours ago it was learned that Israel, Qatar, the United States, and Egypt would present a preliminary draft of the agreement to Hamas today. NN: Peace valley! in the valley
Crude oil prices started the week with a gain following a drone attack in Jordan that killed three U.S. military servicemen. The news added to the bullish momentum of continuing Houthi strikes on ships in the Red Sea to push Brent crude well over $80 per barrel, with the benchmark close to touching $84 in midmorning trade in Asia. West Texas Intermediate moved closer to $80 per barrel following the news of the deadly attack that led many to brace up for further escalation in the latest Middle Eastern conflict. “We believe the death of three U.S. service members today in Jordan marks a critical inflection point in the ongoing conflict in the Middle East and raises a specter of a more substantial U.S. involvement in the war,” RBC Capital Markets’ Helima Croft wrote in a note, as quoted by Reuters. “It does appear that even with any softening we’re seeing to demand, geopolitics is shaping up so that oil prices could have more upside risk in them,” Mizuho Bank Asia chief economist Vishnu Varathan told Bloomberg. Vandana Hari of Vanda Insights, on the other hand, noted that the price rise could have been more substantial: “The question is, why have we not seen Brent shoot up toward $90 or higher?” she told Bloomberg. “There would need to be a direct hit on a Middle Eastern oil cargo or oil production infrastructure for prices to skyrocket.” Indeed, there was a Houthi strike on a fuel tanker passing through the Gulf of Aden last week but while it helped prices go higher, it was not much higher. But this could yet change. “With oil tankers linked to the U.S. and UK now under threat of attack, the market is likely to reprice the risk of disruptions,” analysts from ANZ said in a note quoted by Reuters.NN: To date their has been no real affect on oil. Which means that things could get real ugly real fast
United States President Joe Biden confirmed three US service members lost their lives and numerous others were wounded in an unmanned aerial drone attack near the Jordan-Syria border on Saturday night. Biden attributed the attack to radical Iran-backed militant groups operating in Syria and Iraq and noted that the details are still being gathered. The president affirmed his commitment to combat terrorism and vowed to hold those responsible accountable. His statement did not specify the exact number of injuries, though CNN earlier reported at least two dozen service members were wounded in the assault.
Solid economic growth figures from the U.S. and news about China’s economic stimulus combined this week to push oil prices higher. Benchmarks could post their biggest weekly rise since October this week, Reuters said, with supply uncertainty in the Middle East contributing to the bullish sentiment. U.S. GDP in the fourth quarter of last year expanded by 3.3%, which was substantially higher than what analysts had expected, which was 2% growth. Meanwhile, in China, the central bank said it would inject the equivalent of $140 billion into the economy to stimulate faster growth by cutting the amount of reserves local banks need to hold. In the Middle East tensions continue running high, with the Yemeni Houthis striking a U.S.-owned cargo vessel this week following the second round of attacks on targets in Yemen by U.S. and UK forces. Earlier this week reports emerged that Washington had asked Beijing to talk to Tehran and get the Iranians to convince the Houthis to stop attacking ships in the Red Sea. These reports were followed by news, based on unnamed sources, that Chinese officials had approached Iran’s leadership with a request to tell the Houthis to dial down the anti-ship violence. “Basically, China says: ‘If our interests are harmed in any way, it will impact our business with Tehran. So tell the Houthis to show restraint'” one source from the Iranian government told Reuters. Chinese vessels are not targets for the Houthis but the disruption of traffic in the Red Sea has hurt Chinese exporters by significantly lengthening the time needed for their goods to reach their end destination in Europe, adding to costs. Oil traders appear to have finally started noticing these developments and have factored the disruption into their trading decisions. On Thursday, Brent crude topped $80, jumping above $82 before retreating somewhat, and West Texas Intermediate reached a two-month high of some $77 per barrel on Thursday. Prices fell back slightly on Friday morning but remained elevated for the week.
Negotiators reportedly closer to reaching Gaza hostage deal
American-led negotiators are moving towards a deal related to the issue of hostages between Israel and Hamas, The New York Times reported.
According to the media outlet, Israel is expected to agree to suspend its operations in the Gaza Strip for two months in exchange for the release of over 100 hostages being held by the militant group. The deal is anticipated to be reached in the next two weeks.
A written draft agreement has been made and will be discussed on Sunday in Paris, The NYT added.
The International Court of Justice ruled on Friday that Israel must “take all measures within its power to prevent the commission of all acts within the scope of Article two of the Convention on the Prevention and Punishment of the Crime of Genocide” in the Gaza Strip. Israel is also ordered to take measures to prevent “group conditions of life calculated to bring about its physical destruction in whole or in part” and to enable the provision of “urgently needed basic services and humanitarian assistance,” among others. Israel will have to submit a report to the court within a month.South Africa, which brought the case before the ICJ in December, asked that the court take a provisional decision ordering Israel to halt operations in Gaza. However, the ICJ noted that “the measures indicated need not be identical to those requested.”
An uncertain supply picture has oil markets on edge, with disruptions and geopolitical risks being counterbalanced by rising production in Norway and Libya. Economic uncertainty is adding downward pressure to oil prices. The continued rerouting of ships from Asia to Europe has been greatly reducing the availability of spot tankers that could be chartered, lifting the price of shipping, especially when it comes to clean products. As Bloomberg reports, the day rate for shipping a cargo of gasoline from northwest Europe to the US East Coast has tripled since the start of the year, nearing $38,000 per day this week. US and UK forces conducted strikes on eight Houthi targets late Monday, making it even more likely that Red Sea disruptions will be longer than expected as the previous attack on January 11 had triggered a round of retaliatory strikes. Routing tankers carrying refined products through the Cape adds $1 million to freight costs, equivalent to a $1.5/bbl premium, despite the fact there is no canal passing along the way (the Suez Canal has just hiked its 2024 prices to roughly $500-600,000 per passage). Fitch Ratings estimated on Wednesday that the ongoing shipping disruptions in the Red Sea will maintain the oil price premium, as well as premiums in the wider commodity markets, including gas, chemicals, and fertilizers. Many companies are choosing to reroute vessels via the Cape of Good Hope in the very south of Africa to avoid possible attacks by Houthis in the Red Sea.However, Fitch is currently keeping its 2024 Brent oil price projection of $80 per barrel barring any “material disruptions to actual oil production, or a wider escalation of attacks to more vital oil transport routes in the region.” The ratings agency said it expects the global oil market to remain well-supplied in 2024, which should “cushion any impact from potentially protracted or escalated disruptions.” Its TTF gas price assumption for 2024 is also unchanged at $12/mcf.
Saudi Arabia’s crude oil exports inched up in November from October to reach a five-month high, data from the Joint Organizations Data Initiative (JODI) showed on Monday. Crude oil exports from the world’s top crude exporter rose by 39,000 barrels per day (bpd) to around 6.34 million in November, up from October’s 6.3 million bpd level, according to the latest available data in JODI, which compiles self-reported data from many countries. Yet, Saudi crude oil production fell in November by 122,000 bpd to 8.82 million bpd—the lowest level so far for 2023, per the data in JODI, as the Kingdom continues to cut production as part of the OPEC+ agreement and reduces voluntarily output by an extra 1 million bpd. Saudi Arabia’s crude oil production in November was below the five-year average range for the period 2018 through 2022, the data showed. The volume of direct burn of crude fell slightly in November, and so did refinery runs, according to JODI. Saudi crude oil and oil products closing stocks fell by 4.05 million barrels to 230.4 million barrels in November. Of these, product inventories dropped by 4.19 million barrels, while crude inventories increased by 140,000 barrels. Saudi Arabia’s crude oil production and exports in early 2024 are expected to be around the levels reported in the most recent JODI datasets as the Kingdom has pledged to continue its voluntary production cut of 1 million bpd by the end of the first quarter of the year. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said at the end of 2023 that the OPEC+ production cuts could extend beyond March 2024 if the market requires it. The Saudi energy minister also criticized in early December commentators for failing to understand the group’s output agreement and suggested that this would change once “people see the reality of the deal.”