WTI crude found resistance at $81 per barrel this morning,
countering a sell-off as traders discount geopolitical risk.

Despite Strong Production Momentum, US Oil Majors Fail to Impress

- ExxonMobil and Chevron reported a combined net profit of $13.7 billion in their Q1 2024 earnings, $8.2 and $5.5 billion respectively, as oil majors saw squeezed natural gas prices and lower refinery margins, marginally offset by higher oil production. 

- ExxonMobil’s Q1 results have disappointed the market, prompting the largest intraday decline since the announcement of its $60 billion Pioneer takeover, after lower-than-expected refining results. 

- Chevron, on the other hand, posted better-than-anticipated results with adjusted Q1 profits of $2.93 per share, producing more than 2 million b/d of crude despite a stagnant Permian basin output. 

- Overperforming their European peers, Exxon and Chevron manage to fight over the future of Guyana’s Stabroek block in a soon-to-start arbitration, following Chevron’s takeover of Hess Energy and its 30% stake in the project. 

Market Movers

- Brazil’s national oil company Petrobras (NYSE:PBR) is looking for four drilling rigs to be used in onshore exploration wells planned for 2025, marking a U-turn from its previous divestment of onshore assets.

- US oil major Chevron (NYSE:CVX) signed a development deal with Namibia’s state-owned NAMCOR, taking a 80% working interest in the offshore block 82 in the Walvis Basin, seeking to join TotalEnergies and Shell in the country. 

- US activist investor Elliott Management has reportedly bought a minority stake in Japanese trading house Sumitomo (TYO:8053) worth several hundred million dollars, joining Warren Buffett whose Berkshire Hathaway (NYSE:BRK) owns 9% by now. 


Tuesday, April 30, 2024

The de-escalation of the Israel-Iran conflict and ongoing ceasefire talks in the Egyptian capital city of Cairo that could potentially halt hostilities in Gaza have lowered the geopolitical risk priced into oil prices, dragging Brent back to the $88 per barrel mark. Higher crude supply thanks to Mexico’s U-turn on its export cuts and hotter-than-expected US inflation data have added some bearish sentiment into the markets, with no real macroeconomic or geopolitical upside on the horizon now. 

Houthis Strike Ships Again. Yemen’s Houthi militias have targeted four ships in a string of missile attacks this week, including the MSC Orion container ship partly owned by Israeli businessman Eyal Ofer, the Greek-operated Cyclades commercial tanker and two US destroyers passing through the Indian Ocean. 

G7 Agrees on 2035 Deadline for Coal. Energy ministers from G7 countries reached an agreement to shut down their coal-fired power plants by 2035, with Germany and Japan expected to do most of the heavy lifting with coal currently accounting for more than 25% of their electricity generation. 

Doubts Emerge on TMX May 1 Start. As shippers have expressed their concerns regarding the readiness of the TMX pipeline to start commercial operations on May 1, Canada’s CER said there are still six leave-to-open applications left to consider for pump stations and pipeline spreads. 

Mexico Reverses Crude Export Cuts. Mexico’s state-controlled oil company Pemex has walked back its crude export cuts for May after both the Salina Cruz and Veracruz refineries suffered fires over the past two weeks, eliminating the necessity to lower May exports by the planned 330,000 b/d.

India Goes for Canadian Crude. Reliance Industries, India’s largest refiner, bought a VLCC cargo of Canadian crude from Shell (LON:SHEL) for July delivery, marking the first ever purchase of TMX volumes by an Indian buyer, with reports suggesting the price was set at a $6 per barrel discount to ICE Brent. 

Saudi Arabia on the Hunt for Lithium. As Riyadh builds up its muscle in the metals industry, Saudi Arabia is looking to lock in supply deals to source lithium into its nascent EV battery industry, with media reports suggesting Chile might be the preferred country for future investments. 

ExxonMobil Eyes Turkish LNG Opportunities. Turkey is negotiating with US oil major ExxonMobil (NYSE:XOM) to derisk its LNG supply from the usual sellers (Algeria, Qatar, US) and create a “new supply portfolio”, aiming for a 2.5 mtpa LNG term deal should they agree on commercial terms. 

Fading Middle East Risks Lower Oil Appetite. Hedge funds and other money managers sold the equivalent of 95 million barrels in the six key crude options and futures in the week ending April 23, the largest weekly drop since October 2023 as lower Israel-Iran war risks led to weaker risk appetite.

Drought Risks Loom Large Over Copper. According to a PWC report, more than half of the world’s copper mines in Chile, Zambia and elsewhere are in areas exposed to drought risks over the next decades, stoking fears that climate-related disruptions could add to the already bullish case on copper prices.

Argentina Could be The Next Oil Frontier. A consortium led by Norway’s Equinor (NYSE:EQNR) will drill a deepwater exploration well off Argentina’s northern coast, with the Argerich wildcat becoming the first ever deepwater well in the country, potentially opening up an untapped frontier. 

Southeast Asia Struggles with Scorching Heat. Record temperatures across Thailand, the Phillippines, Vietnam and other Southeast Asian countries have brought regional power grids to their limits, with PTT and PetroVietnam looking to procure prompt LNG cargoes to alleviate the pressure. 

Australia Tightens Mining Investment Rules. In a thinly veiled rebuke to China, Australia’s government is set to tighten scrutiny of foreign investment into the mining and refining of critical minerals, having already blocked such a stake purchase into Northern Minerals last year. 

Cocoa Prices Continue Their Wild Ride. The best-performing commodity of 2024 so far, cocoa futures saw their largest intraday drop in 65 years this week, dropping 17% on Monday to $8,930 per metric tonne, after ICE increased margin requirements for market participants. 


Tom Kool
Editor, Oilprice.com

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