Oil Daily | Chinese Refinery Slowdown and Hurricane Francine Drive Bearish Oil Market Sentiment

【Global Oil Supply and Demand】

Chinese refinery run rates decreased by 10% in August, causing bearish trends in oil markets. This decline contributed to a net short position in the market for the first time. Despite potential bullish impacts, such as anticipated interest rate cuts, market sentiment remains bearish.

Hurricane Francine led to significant production disruptions in the Gulf of Mexico, with 20% of oil and 28% of natural gas production still offline. These disruptions affected several refineries, causing operational adjustments. The Gulf's substantial contribution to U.S. production highlights the impact of such events.

Economic data from China indicates slower growth, with industrial output and retail sales below expectations. Despite some viewing this as steady growth, it has led to discussions about potential stimulus measures. The data adds to the bearish sentiment in oil markets.

【Oil-Producing Countries Dynamics】

U.S. LNG exports face competition from Canada and Mexico, aiming at the Asian market. Both countries have LNG projects under development on the west coast, bypassing the Panama Canal. However, their potential supply by 2040 remains much less than the U.S. estimates.

Permitting and cost challenges have delayed Canadian LNG projects. Notably, Shell-led LNG Canada plans to start in 2025, and the Cedar LNG project represents the first indigenous majority-owned LNG initiative. Mexico faces similar issues, affecting its LNG export capabilities.

Oil production in Libya remains unstable following unsuccessful negotiations between rival governments, further influencing market dynamics.

【Latest Oil Policies】

U.S. LNG development has suffered setbacks, with regulatory challenges adding to soaring labor and construction costs. A recent court ruling vacated the authorization for NextDecade’s Rio Grande LNG project due to environmental concerns.

【Industry News】

Hurricane Francine prompted operational changes in Gulf Coast refineries, including Exxon and Shell, which adjusted processing rates due to the storm. Francine's impact underscores the vulnerability of significant U.S. refining and gas processing capacities.

【Company News】

The status of Marathon Petroleum’s Garyville refinery is uncertain following Hurricane Francine. Power outages in the area have contributed to a lack of clarity about the facility's operational state.