Oil fell as Hurricane Beryl looked less likely to pose major disruptions to crude infrastructure in Texas. West Texas Intermediate as of this posting is trading. Around $81 a barrel at key support levels after four straight weekly gains. Concerns that Hurricane Beryl would impede oil operations in the Gulf of Mexico and Texas helped drive up futures last week. Still, weakening product spreads indicate the storm has been less disruptive to infrastructure than expected. Still, exports may face delays after the Port of Houston and Port of Corpus Christi were shut down — the Port of Houston will remain closed, but the Port of Corpus Christi has reopened. About 85% of Houston has lost power, forcing oil companies to adjust operations. In addition to Hurricane Beryl, wildfires in Canada have started to threaten output. Oil touched the highest since late April last week, with money managers increasing their net-long positions on Brent for a fourth week, on expectations for higher demand and lower stockpiles over the summer months. Still, the rally has faced resistance from signs of weakness in China. The push and pull have limited the number of big moves in prices and sent a gauge of volatility to the lowest level since 2019 on Friday. Traders are in line for multiple reports this week that will shed light on global crude balances. The Organization of Petroleum Exporting Countries — which has been choking off output to bolster prices — delivers its monthly outlook Wednesday, and the International Energy Agency releases forecasts Thursday. There will be a snapshot from the US Energy Information Administration as well.
Biden ‘firmly committed’ to staying in presidential race
United States President Joe Biden insisted in a letter he sent to the Democratic members of Congress and published on Monday that he is “firmly committed to staying in this race,” referring to this year’s election for head of state, “to the end, and to beating [his predecessor and the presumptive Republican nominee] Donald Trump.” “I have heard the concerns that people have … I am not blind to them,” Biden wrote. “I can respond to all this by saying clearly and unequivocally: I wouldn’t be running again if I did not absolutely believe I was the best person to beat Donald Trump in 2024. … Any weakening of resolve or lack of clarity about the task ahead only helps Trump and hurts us.” Biden’s letter came in response to concerns about his health and, therefore, ability to run in the election and resume his presidency following his performance in the first debate against Trump. NN: Only 2 people can get Biden out of the race…. GOD and Biden.
Number of China-Bound Oil Tankers Hits Two-Year Low
The number of supertankers headed for China dropped to the lowest in almost two years, adding to recent concerns about demand in the largest oil importer during the second half of the year. Only 86 of the tankers are indicating China as their next destination in the coming three months, shrinking by five from last week. That is the lowest weekly tally since August 2022 in data compiled by Bloomberg. The outlook for Chinese demand this half is showing signs of softness, potentially providing a headwind for crude prices. Concerns include slower-than-expected return of refineries from seasonal maintenance, softer purchases from some key suppliers in July, and a potential drop-off in monthly import volumes. Some 35 tankers are headed for the US, dipping by two from a week ago. Fourteen vessels sailed for Angola, the highest rate since late-April. The southern African producer has been targeting increased exports since it left the OPEC+ producer group. Click here for a PDF giving more details on destinations. A total of 546 vessels signaled future destinations on Friday in data based on vessels with arrival dates through Oct. 3 on MAP. Journeys are subject to change, and 37 of the tankers didn’t provide a clear destination. NN: After we get vacation time and the war out of the way we will be back to our CHINA binary trade,
Israel’s Smotrich says war must continue ‘until victory’
Israeli Finance Minister Bezalel Smotrich said on Monday that his country must continue with the war against Hamas in the Gaza Strip “until victory” is achieved. “Hamas is collapsing and begging for a ceasefire. This is the moment to squeeze the neck until we crush and break the enemy,” Smotrich posted on X, formerly known as Twitter. He pointed out that it would be “senseless” to halt the fighting now, “before the end” and let Hamas “recover to fight us again.” Smotrich’s comments come following reports claiming that Hamas gave initial approval to the ceasefire and hostage deal presented by United States President Joe Biden.
U.S. Oil and Gas Production Is Slowing Down
- Lower oil prices and a focus on shareholder returns are leading US oil companies to drill less, slowing production growth.
- Efficiency gains have partially offset the decline in drilling activity.
- Natural gas production has fallen year-over-year due to low prices earlier in 2024.
Slowing drilling activity in the U.S. shale patch is capping oil production growth while natural gas output is down from year-ago levels amid above-average inventories and unsustainably low prices earlier this year. Oil and gas prices have dropped since the highs from the summer of 2022 when they spiked following the Russian invasion of Ukraine. The decline in U.S. benchmark oil and gas prices over the past nearly two years has reduced – with a lag – drilling activity in the shale patch. America’s oil and gas production hit record highs at the end of 2023 and continues to be close to all-time highs, but growth has slowed down in oil output while gas production has started to fall after a mild 2023/2024 winter boosted inventories to above-average levels and sunk Henry Hub gas prices to $1.80 per million British thermal units (MMBtu) in February 2024, compared to $9 / MMBtu in August 2022. Crude oil production from the Lower 48 basins, which exclude the federal offshore Gulf of Mexico, increased by 500,000 barrels per day (bpd) in April 2024 from the same month in 2023. But in April last year, the annual growth in the Lower 48 output stood at 900,000 bpd, per EIA data cited by Reuters market analyst John Kemp. The number of oil rigs currently stands at 479—down by 66 compared to this time last year, according to the latest Baker Hughes data. Despite the decline in the number of oil rigs, U.S. oil production has grown compared to year-ago levels, mostly thanks to efficiency gains, analysts say. Amid the ongoing consolidation in the American oil and gas industry, producers have become bigger and are focusing on shareholder returns. They wouldn’t be inclined to respond to every price spike with a major boost in drilling that ultimately floods the market with oil and depresses prices. The big companies are looking to become bigger by adding premier assets of the takeover targets to their portfolios. And the key driver of the industry now is returning more to shareholders and preparing for inventory stacked up for years of production ahead, without the need to grow organically by investing too much cash flow into the drilling of new locations and wells. In the second quarter of the year, oil production was essentially unchanged from the first quarter, amid a modest rise in the overall business activity index, according to oil and gas executives responding to the latest Dallas Fed Energy Survey.
“WTI (West Texas Intermediate) crude and Henry Hub natural gas pricing directly affects our business as we are operating existing wells and providing cash flow to investors,” an executive at an exploration and production (E&P) firm said in comments to the survey.
Another E&P executive added, “The last few years of mergers and acquisitions have decreased activity in the oil patch. The majors are not going to exhaust reserves to raise domestic production until supply and demand curves meet their goals.” “They do not have to participate in treadmill drilling to keep incomes at a pace to develop reserves and pay back loans.” So, growth in shale production is set to slow down. Lower 48 oil production growth exceeded expectations in 2023, adding 900,000 bpd of supply last year, but Wood Mackenzie expects Lower 48 oil production to grow by just 270,000 bpd in 2024 and another 330,000 bpd in 2025. Major natural gas producers curtailed some output in the spring in response to the price slump earlier this year, which saw prices tumble to a three-decade low. In its latest Short-Term Energy Outlook, the EIA expects U.S. marketed natural gas production to drop by 1% this year, led by a 9% decline in the Haynesville region and 4% decline in the Appalachia region as some producers have limited development and production due to low natural gas prices. The current refill season has seen lower injections into storage so far, due to rising demand for gas-powered electricity in the summer heat waves. However, gas inventories are above average for this time of year, and working natural gas stocks for the week ending June 26 were 21% higher than the five-year average and 11% higher than last year at this time, per EIA data. The EIA expects storage inventories to end the summer injection season on October 31 at 6% above the five-year average. “If U.S. natural gas production is lower than our forecast and consumption in the electric power sector to meet air-conditioning demand increases more than we expect, natural gas prices could be higher than forecast,” the administration said. NN: After summer vacation driving/flying season is over the markets will be oversupplied. The next driver is the Jew Islam war.
Gallant: Hostage deal closer than ever……. Israel reportedly okays sending delegation for individual talks
Israeli Defense Minister Yoav Gallant told the families of hostages held by Hamas on Thursday that a deal to release them is “closer than ever.” “A month ago I was pessimistic about our chances of reaching a deal anytime soon. One of my prime goals in all of my meetings in the United States was to put pressure on Hamas to come to a deal with the understanding that there’s not going to be a better deal,” Gallant said as quoted by Channel 12. “Today, and I’m saying this cautiously, we’re closer than ever,” he added. The comments come after Israeli Prime Minister Benjamin Netanyahu confirmed he approved sending a delegation of negotiators to discuss Hamas’ latest proposal on a ceasefire and freeing hostages with the mediators from the United States, Qatar and Egypt. Earlier media reports suggested Israeli officials said the proposal is positive and allows the talks to move forward.
Israel reportedly okays sending delegation for individual talks
Israeli Prime Minister Benjamin Netanyahu approved sending the country’s delegation for individual negotiations on the hostage deal, Axios reporter Barak Ravid shared citing sources from the prime minister’s office. According to the sources, the decision comes following Hamas’ latest response. “Important progress has been made, but there is still a significant way to go with serious challenges,” Israeli officials previously mentioned. Even with the most recent unfoldings, officials are still expecting the talks to be “tough” and last for a couple of weeks.
Netanyahu on Hezbollah: ‘Whoever harms us, his blood is on his head’
Israeli Prime Minister Benjamin Netanyahu underscored an aggressive stance in a recent briefing with national air force leaders on Thursday, emphasizing a new guiding principle in response to the ongoing combats with Hezbollah along the Lebanon border. “Whoever harms us, his blood is on his head,” Netanyahu declared, signaling a zero-tolerance policy towards any aggression and affirming Israel’s determination to retaliate decisively against any threats. “We have put this into practice,” said Netanyahu in Kirya in Tel Aviv, stressing that Israel is “determined to restore security to the north and return the residents safely to their homes.” Concerns of full-scale war between Israel and the Hamas-allied militant group Hezbollah in Lebanon have increased after an Israeli airstrike killed a senior Hezbollah commander. The US underlined there is no desire for war to spread in the Middle East while Iran said to be ready to support Hezbollah if needed.
Hezbollah fired over 200 rockets at Israel
Hezbollah says it launched more than 200 missiles and a “swarm of drones” targeting Israeli army positions, as hostilities between the two intensify. The Iran-backed group said it fired on targets in northern Israel and the Israeli-occupied Golan Heights. Hezbollah said it was responding to the assassination of a senior commander called Mohammed Nasser in southern Lebanon in Wednesday. The Israeli military reported sirens sounding in northern parts of the country and said it was striking launch sites in Lebanon. The two sides have been exchanging fire since the start of the Israel-Hamas war in Gaza, with Hezbollah acting in solidarity with the Islamist group. Hezbollah, like Hamas, is designated as a terrorist organization by the US. NN: Things are heating up. You will know it’s for real when they hit a few skyscrapers in Tel Aviv. . That is when the Lefty Liberals will figure surrendering to terrorists for hostages release only brings more terrorism.
Hezbollah unit commander killed in Israeli raid
BEIRUT/JERUSALEM July 3 (Reuters) – An Israeli strike killed one of Hezbollah’s top commanders in south Lebanon on Wednesday, prompting retaliatory rocket fire by the Iran-backed group into Israel as their dangerously poised conflict rumbled on.
The Israeli military said it had struck and eliminated Hezbollah’s Mohammed Nasser, calling him commander of a unit responsible for firing from southwestern Lebanon at Israel.
Nasser, killed by an airstrike near the city of Tyre in southern Lebanon, was the one of the most senior Hezbollah commanders to die yet in the conflict, two security sources in Lebanon said. And he have been engineering a lot of solutions and trying and testing and proving and failing at times. Sparked by the Gaza war, the hostilities have raised concerns about a wider and ruinous conflict between the heavily armed adversaries, prompting U.S. diplomatic efforts aimed at deescalation. Israeli Defence Minister Yoav Gallant said Israeli forces were hitting Hezbollah “very hard every day” and will be ready to take any action necessary against the group, though the preference is to reach a negotiated arrangement. Hezbollah began firing at Israeli targets at the border after its Palestinian ally Hamas launched the Oct. 7 attack on Israel, declaring support for the Palestinians and saying it would cease fire when Israel stops its Gaza offensive. Hezbollah announced at least two attacks in response to what it called “the assassination”, saying it launched 100 Katyusha rockets at an Israeli military base and its Iranian-made Falaq missiles at another base in the town of Kiryat Shmona near the Israeli-Lebanese border. Israel’s Channel 12 broadcaster reported that dozens of rockets were fired into northern Israel from Lebanon. There were no reports of casualties. The Israeli Defence Ministry said that air raid sirens sounded in several parts of northern Israel.
Israel’s military did not give a number of rockets launched but said most of them fell in open areas, some were intercepted, while a number of launches fell in the area of Kiryat Shmona. It added that no injuries were reported but firefighters were working to extinguish a number of fires that were ignited by the rocket attack. Following the rocket salvos, it said, Israeli fighter jets struck a Hezbollah launcher that was used to fire the barrages toward Israel as well as two additional launchers. The sources in Lebanon said Nasser was responsible for a section of Hezbollah’s operations at the frontier. One of the sources said a second Hezbollah fighter and a civilian were also killed. Nasser was of the same rank and importance as Taleb Abdallah, a top commander who was killed by an Israeli strike in June, prompting Hezbollah to fire its largest barrages of drones and rockets yet in retaliation, the sources said. The Israeli military statement said Nasser and Abdallah “served as two of the most significant Hezbollah terrorists in southern Lebanon”. Senior Hezbollah politician Hassan Fadlallah said Nasser had known he was a target but had not left the battlefield in nine months. Hezbollah would inflict its “punitive response” on Israel for “its crime, so that this enemy understands that the arm of the resistance is long”, he said. The hostilities have inflicted a heavy toll on both sides of the frontier, forcing tens of thousands of people to flee their homes. Israeli attacks in Lebanon have killed more than 300 Hezbollah fighters and 87 civilians, according to Reuters tallies. Israel says fire from Lebanon has killed 18 soldiers and 10 civilians. NN: Another piece of shit sent to hell.
As Oil Struggles To Hit $90, Will OPEC+ Cut Production Again Soon?
- OPEC+ has extended its production cuts totaling 3.66 million bpd until 2025.
- Further production cuts by OPEC+ could impact global oil prices and economic stability, particularly affecting China and the U.S.
- Prominent OPEC countries may be reluctant to risk lower oil prices, as doing so could jeopardize the budgets for their ambitious national spending programs.
Early June saw OPEC+ extend its 3.66 million barrels per day (bpd) of production cuts to the end of 2025. It also announced that it would extend another 2.2 million bpd to the end of September 2024. Together, these cuts comprise around 5-6% of global oil demand. Despite this, though, the Brent oil price global benchmark has failed to break through the key US$90 per barrel (pb) level that was last achieved in September. This means that the two prime movers in the OPEC+ alliance – Saudi Arabia and Russia – are way off the oil price needed to balance their budgets. So will they cut production even more?It is a common misconception that Saudi Arabia is awash with oil money. This is not true at all, as the Kingdom is now battling with a 2024 fiscal breakeven Brent oil price of $96.17. It has forecast a budget deficit this year of SAR79 billion ($21.07 billion), which many oil market observers believe to be extremely optimistic. As in all situations where expenditure is greater than revenue, this situation will only become worse from here. Part of the problem is that the country has never fully recovered from the 2014-2016 Oil Price War or the short-lived 2020 Oil Price War, These two wars were aimed at destroying or at least seriously disabling the then-nascent U.S. shale oil industry, which the Saudi correctly saw as a direct threat to its key oil sector, and therefore to its power in the world. By dramatically increasing production from itself and from its OPEC brothers, Saudi Arabia intended to crash oil prices for long enough that the still-developing U.S. shale sector would see a high percentage of bankruptcies, with those few companies left taking years to recover. Unfortunately for it, the U.S. shale sector demonstrated an extraordinary ability to reorganise itself quickly into a lower-cost industry able to withstand much lower prices than any other producers, including those in Saudi Arabia and OPEC. As a result, it was the latter two players that suffered financially, to the tune of well over US$450 billion in collective lost oil revenues over that two-year period, according to the International Energy Agency, although other commentators believe it to be at least double that figure. Over the course of the 2014-2016 Oil Price War, Saudi Arabia moved from a budget surplus to a then-record-high deficit in 2015 of US$98 billion and spent at least US$250 billion of its foreign exchange reserves over what many senior Saudis said had been lost forever. Another part of the problem is the country’s spending history on various social projects that subsequently spiralled dramatically. These include US$5 billion spent on ship repair and building complex on the east coast, and billions contributed towards the US$23 billion King Abdullah University of Science and Technology. Other projects saw spending estimates spiral even more out of control, most notably the flagship Neom City development. Initially-costed at US$1.5 trillion the linear city project located has been cut back in size from 106 miles long to just 1.6 miles long. Added to these huge overspends, the ill-received Aramco initial public offering in December 2019 meant that the Saudis had to commit to a massive dividend expenditure to sweeten the flotation. More specifically, it guaranteed a US$75 billion dividend payment in 2020, which then rose in 2023 to US$97.8 billion. For 2024, Saudi Aramco expects to pay US$124.3 billion in dividends. Given that Saudi Arabia – along with Iran and Iraq – have the lowest lifting cost per barrel of oil in the world (at just US$1-2 a barrel) it might be though that a temporary solution for its financial woes might be found in simply producing more oil. Although such an increase would push oil prices down, it could be gauged so that they were not pushed down to anywhere near the level of Saudi Arabia’s lifting cost, so allowing it a healthy profit per barrel and plugging the fiscal deficit. However, it remains the case that there is no genuine evidence of Saudi Arabia having the capacity to increase its crude oil production much above 10 million bpd for any sustained period without damaging the long-term integrity of its wells, The fact is that Saudi Arabia produced an average of 8.267 million bpd of crude oil from 1973 to 1 May 2024, according to figures from OPEC itself. In its entire history, it has only managed to produce 12 million bpd on one occasion – in April 2020 – after which it immediately went back down to 8.49 million bpd. The inability of Saudi Arabia and its OPEC brothers to do anything meaningful further to push oil prices much higher is also a profound concern for Russia. In the first 100 days of its war in Ukraine, it earned nearly $100 billion from oil and gas exports – considerably greater than its cost for continuing to fight the war. As prices spiked, Russia was able to keep its earnings per barrel of oil much higher than the US$60 or so cap in effect around that time as part of various international sanctions by doing off-the-grid deals. These were priced higher than the $60 level, but still undercut the prices of oil from Saudi Arabia and OPEC members. However, as prices dropped, this margin for Russia shrank. After the initial jump in its oil revenues following the 24 February 2022 invasion of Ukraine, Moscow’s fiscal breakeven Brent oil price officially jumped to $115.However, as wars do not adhere to easily quantifiable and strictly adhered to budgets, the unofficial fiscal breakeven oil price is whatever President Vladimir Putin thinks it should be at any given moment.
All this would point to both key countries in OPEC+ likely push for greater production cuts from the cartel sooner rather than later. However, there are two problems for them if they do this. The first is that although Saudi Arabia’s and Russia’s key geopolitical sponsor China can buy oil and gas at 30 percent or more discounts from its core Middle Eastern suppliers through various deals agreed upon in the past few years, the economies of the West remain its key export bloc.
In fact, the U.S. alone still accounts for over 16 percent of China’s export revenues. Any significant increase in oil prices would damage the demand for its products from the West, adding to an already fragile post-Covid economic rebound. Indeed, according to a senior source in the European Union’s energy security complex, the economic damage to China would dangerously increase if the Brent oil price remained over $90-95 for more than one quarter of a year. Even this range is below Saudi Arabia’s fiscal breakeven price and is of little use to Russia either.The other problem is that the U.S. is in the run-up to the 2024 Presidential Election, and it is highly to sitting President Joe Biden’s advantage that oil (and therefore, gasoline) prices remain where they are or lower (historically around 70 percent of the price of gasoline is derived from the oil price). Longstanding estimates are that every US$10 change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline rises, more than US$1 billion per year in consumer spending is lost. Politically, since the end of World War I in 2018, the sitting U.S. president has won re-election 11 times out of 11 if the economy was not in recession within two years of an upcoming election. Moreover, according to a 2016 study by Laurel Harbridge, Jon A. Krosnick, and Jeffrey M. Wooldridge called ‘Presidential Approval and Gas Prices’, a 10 cent increase in gasoline prices correlated with a 0.6 percent decrease in presidential approval over the study period from January 1976 to July 2007. There are multiple direct and indirect mechanisms that a U.S. President in the midst of a close election could bring to bear on the oil price – economic and political pressure on China and Saudi Arabia, more sanctions on Russia, and increasing its own production and those of its allies, among others), many of which these countries would be keen to avoid.