Oil Daily | Russian Attacks Disrupt Ukraine's Gas, China Absorbs Excess Oil, Russia Boosts Production

【Global Oil Supply and Demand】

After massive Russian attacks on Ukraine's energy infrastructure, about 60% of Ukraine's natural gas production is offline. Ukraine is forced to increase natural gas imports to meet winter demand. Recent discussions with G7 countries aim to boost imports by 30%, and a $349 million loan from the European Investment Bank has been secured to purchase gas.

Oil market players show varying degrees of bearish sentiment. Some doubt a $60 Brent crude floor would balance the global market, while others expect smoother corrections. Factors like non-OPEC growth, OPEC's production pace, and geopolitical risks influence price developments. Meanwhile, China absorbs most of the excess crude.

The UK's National Energy System Operator assures sufficient winter gas supply despite declining domestic production and increased reliance on imports. The country's natural gas market will see a slight supply-demand tightness, with 33% of gas expected to come from domestic fields. Electricity prices will be influenced by gas market developments.

Europe's wind power economies face record curtailment of renewable generation due to grid capacity limits. Spain, France, Germany, and Sweden report increased curtailment rates, with offshore wind in Scotland also affected. The EU plans to upgrade grids to address constraints and manage renewable electricity supply efficiently.

【Oil-Producing Countries Dynamics】

Guyana has strengthened military ties with France to protect its oil-rich Essequibo region amidst escalating tensions with Venezuela. ExxonMobil-led production in Guyana is rising, while Venezuela, with the world's largest crude reserves, remains under U.S. sanctions. The U.S. recently struck vessels near Venezuela, increasing regional tensions.

Russia is raising oil production to align with its OPEC quota, having averaged 9.173 million bpd in August, slightly below the target. Ongoing geopolitical tensions and drone attacks on Russian refineries have led to tighter domestic fuel shortages. Moscow has extended a gasoline export ban and introduced a diesel export ban on non-producers.

【Industry News】

Civitas Resources and SM Energy are reportedly planning a merger, potentially creating a $14 billion company with significant acreage across the Permian, Eagle Ford, Uinta Basin, and Denver-Julesburg Basin. Recent mergers in the shale industry have slowed, but smaller independents pursue consolidation to remain competitive.

EDF is considering an IPO for its Italian subsidiary Edison to raise funds for nuclear expansion in France. The IPO would value Edison between €7 billion and €10 billion. EDF's strategy aligns with President Macron's pressure to finance new reactors and upgrade the existing fleet, requiring significant investment.

【Company News】

Cenovus Energy has increased its takeover bid for MEG Energy, valuing the company at $6.16 billion. The revised offer, which includes a mix of cash and shares, aims to secure shareholder approval. MEG's board recommends accepting Cenovus's offer over a competing bid from Strathcona Resources.

【Others】

Gold prices surged above $4,000 per ounce due to U.S. political tensions and fears of global financial instability, prompting investors to seek safe-haven assets. The Federal Reserve's potential rate cuts and central banks' concerns over the dollar's stability have fueled gold's rally. U.S. gold reserves value now exceeds $1 trillion.