Attacks on shipping in the Red Sea continued over Christmas, but Brent crude failed to extend its rally on Wednesday morning.
Shipping Disruptions See Reversal in Hedge Fund Strategies
– Shipping disruptions in the Red Sea might be the bullish moment oil markets were waiting for as hedge funds stopped shorting crude futures for the first time since September. – After 10 consecutive weeks of hedge funds cutting their net length in the WTI contract, in the week ending December 19 that trend saw a reversal, even if coming from lower short positions (while long positions remained around 200 MMbbls).
– The 127 MMbbls in short positions that money managers held in WTI until this past week was the highest level since January 2019, signalling that hedge funds believe oil’s immediate future to be bearish. –
Reflective of investors losing some of their interest in the oil markets, open interest in the WTI contract dropped to 2,037 MMbbls, some 200 MMbbls below this year’s average, whilst open interest in ICE Brent remains in line this year’s trend curve.
Market Movers
– The world’s second-largest container shipper A.P. Moller-Maersk (CPH:MAERSK) announced it is preparing to resume shipping through the Red Sea with the help of the US naval task force.
– The UAE’s investment holding Mubadala Capital is in negotiations with Petrobras (NYSE:PBR) to sell back a stake in its fully-owned 333,000 b/d Mataripe refinery, two years after it bought it for $1.8 billion.
– Germany’s utility major RWE (ETR:RWE) acquired three offshore wind projects off the English coast from Sweden’s Vattenfall in a $1.2 billion deal, increasing German exposure to UK wind projects.
Wednesday, December 27, 2023
The post-Christmas resumption of trading was set to swing Brent above $80 per barrel, with a drone strike hitting an India-bound chemicals tanker far away from the Red Sea, in the middle of the Indian Ocean, however, Maersk’s announcement that it would resume shipping through the Bab-el-Mandeb strait has limited the upside. It remains to be seen whether the US-led naval coalition can curb the frequency of missile and drone attacks, however amidst weak trading activity it might be only in the first week of 2024 that we’d see notable price movements.
No Stopping to Missile Attacks on Commodity Tankers. Expanding the geographic scope of the Red Sea missile attacks, the Israeli-affiliated merchant vessel MV Chem Pluto carrying Saudi Arabian ethylene dichloride to India was struck by a drone, some 200 km from India’s southwestern coast.
Alaska’s Key Upstream Project Moves Ahead. US oil major ConocoPhillips (NYSE:COP) gave the financial approval to its long-stalled $8 billion Willow oil and gas project in Alaska, aiming for a 2026 start to production and a peak output plateau of 180,000 b/d, equivalent to 2% of US’ oil production.
Mozambique’s Idled LNG Hopes Get Revived. Idled since the 2021 Islamic State insurgency, work on Mozambique’s $20 billion LNG project in Cabo Delgado is expected to be restarted in the first quarter of 2024, spearheaded by project operator TotalEnergies (NYSE:TTE) and targeting a 2028 start-up.
Venezuela Greenlights Key Gas Project. Venezuela signed a 30-year term contract with Shell and Trinidad and Tobago’s National Gas Company to develop the Dragon offshore natural gas field, with Caracas’ license allowing for an initial output of 185 million cubic feet per day.
Investors Flee Russia’s Arctic LNG 2 Project. Russia’s LNG expansion plans hit a brick wall as the foreign shareholders of the Arctic LNG 2 plant – China’s CNOOC and CNPC, France’s TotalEnergies and a Japanese Mitsui-JOGMEC consortium – suspended participation in the project, halting their financing.
Little by Little, US SPRs Get Replenished. The US Department of Energy awarded contracts to Sonoco, Phillips 66 and Macquarie to buy 2.1 million barrels of sour crude for a February 2024 delivery to the SPR site in Big Hill, following up on the 4-million-barrel SPR replenishment in January.
PE Wants a Cake of Oil Majors’ Renewable Ambition. The Swiss energy-focused fund EIP has agreed to buy a 9% stake in the low-carbon and retail unit of the Italian oil major ENI (BIT:ENI) in a deal valued at $11 billion including debt, paving the way for a much-delayed IPO at some point in 2024.
Equinor Quits Azerbaijan. After more than 30 years in Azerbaijan, the Norwegian energy major Equinor (NYSE:EQNR) sold all its assets in the country to the state-owned oil firm SOCAR, including interests in the ACG oilfields and the BTC pipeline, posting a loss of up to $400 million on its value.
ET Fights Off Accusations of Anticompetitive Behaviour. A Louisiana natural gas pipeline developer is taking US midstream major Energy Transfer (NYSE:ET) to court, arguing it is denying competing projects to let them cross its own pipelines in an attempt to control 80% of the Gulf Run system.
Turkey Strikes Kurdish Oil Fields in Syria. Following intensified skirmishes in Kurdish-populated regions, Turkey targeted Kurdish-controlled oil facilities in northeast Syria that led to electricity blackouts, halting the operation of gas-fuelled power stations.
US Claims Huge Parts of Ocean Seabed. The government of the United States has formalized its claims to the so-called Extended Continental Shelf covering some 386,100 square miles, predominantly in the Arctic and Bering Seas with some parts also claimed by Canada and Russia.
India to Start A Domestic Carbon Trading Scheme. Indian authorities announced the creation of a carbon offset market that should start up in 2026, aiming to integrate the most hard-to-abate sectors first such as steel, iron ore, oil refining and petrochemical production.
African States Reaffirm Their OPEC Commitment. Following Angola’s exit from OPEC, other African members of the oil group – Nigeria and Congo – reaffirmed their readiness to follow 2024 production quotas, saying OPEC’s role is “pivotal in fostering stability in the oil market”.