Oil Daily | U.S. Crude Inventories Drop Sharply; Gulf Hurricane Boosts Prices; New Permian Gas Pipeline Nears Completion

【Global Oil Supply and Demand】

Crude oil inventories in the United States fell by another 2.79 million barrels for the week ending September 6, according to The American Petroleum Institute API. Analysts had expected a 700,000-barrel build. API reported a 7.4 million-barrel decrease in crude inventories the week prior. So far this year, crude oil inventories are more than 12 million barrels under where they were at the start of the year. Gasoline inventories also fell this week, by 513,000 barrels, on top of last week's 300,000-barrel decrease. Distillate inventories rose by 191,000 barrels, while Cushing inventories saw another large draw, with a loss of 2.6 million barrels.

Natural gas pipeline capacity in the Permian Basin is gearing up for significant gains with the upcoming launch of the Matterhorn Express Pipeline. The 2.5 billion cubic feet per day Bcf/d pipeline will transport gas from the Permian Basin to Katy, near Houston, Texas. Additional pipeline projects are also in development to address price challenges at the Waha Hub. These new pipelines should relieve pressure on local prices and support more sustainable regional pricing dynamics.

The benchmark natural gas prices in the United States could be set for a jump next year, according to the futures curve of the Henry Hub contract. The forward strip suggests that U.S. natural gas prices could average $3.20 per million British thermal units MMBtu next year, a 44% increase compared to 2024. Higher U.S. LNG exports and producers recalibrating natural gas production in response to this year's multi-low prices could be setting the stage for a rebound in Henry Hub prices in 2025.

Oil market participants are "dramatically overestimating" a supply glut, as Chinese demand is not as doom-and-gloom as headline figures suggest and U.S. crude oil production is basically flat this year, Jeff Currie, chief strategy officer of energy pathways at Carlyle, said on Tuesday. According to Currie, Chinese "weaknesses in demand are being deeply exaggerated by base effects and by destocking." Rising global oil supply and weaker-than-expected demand have made traders increasingly bearish on oil prices.

【Oil-Producing Countries Dynamics】

Argentina’s market deregulation efforts are expected to raise energy investments in the country by about $2.5 billion to $15 billion next year. The government has pushed for new legislation offering tax breaks and incentives for major investors. Argentina expects a combined $30 billion in energy investments in 2025 and 2026. The country relies on the Vaca Muerta shale play to boost its oil and gas production. Supertankers could begin docking in Argentina to load oil from the country’s shale patch after a pipeline is set to connect Vaca Muerta with a terminal at Punta Colorada port.

【Latest Oil Policies】

Japan should prioritize economic growth over renewables and will continue to need coal-fired electricity, a candidate to lead the ruling party and become the next prime minister said on Tuesday. The former economic security minister emphasized the need for energy security and indicated he would revisit the country’s current energy strategy if he becomes prime minister. The current energy plan is seen as too biased toward renewable energy and needs to be overhauled.

【Industry News】

QatarEnergy has named a new LNG carrier after former Exxon chief executive and energy secretary Rex Tillerson. The tanker is part of a batch of 12 LNG carriers ordered to secure transport capacity for future LNG production expansion. Qatar has a huge expansion program underway to boost its export capacity by 85% from current levels by 2030. The state company has signed long-term time charter party TCP agreements with four international shipowners for the operation of 19 new LNG vessels.

Crude oil prices moved higher earlier today on anticipation that tropical storm Francine would disrupt oil and gas production in the Gulf of Mexico. News of Exxon cutting production rates at its refinery in Baton Rouge, Louisiana, helped prices move higher. Field operators in the Gulf were evacuating crews from offshore platforms ahead of the storm. Chevron, Shell, and Exxon paused work on some platforms in anticipation. Francine has strengthened to a Category 1 hurricane and will make landfall in Louisiana later today.

It’s not the primaries anymore. Tonight, the two U.S. Presidential hopefuls will face off in an ABC-hosted debate, and neither are expected to flaunt any radical policies—not even on energy. Fracking is likely to be raised, with Vice President Harris's change in policies already coming into question. The debate will also cover topics like permitting processes, LNG pauses, EV subsidies, and energy security. Former President Donald Trump is expected to hold similar energy policies to his prior campaigns, focusing on achieving the lowest cost of energy and electricity.

Regional banks in North America have been striking more deals to lend money to the oil, natural gas, and coal industry in recent years, while many European lenders have shrunk financing for fossil fuels. As a result of this shift, North American banks are not competing with European lenders for financing oil and gas anymore. Regional banks have significantly boosted their lending to oil and gas firms over the past two years, while major European banks are competing to announce new policies limiting funding to oil and gas projects.

【Company News】

Abu Dhabi’s national oil company ADNOC is expected to soon make a formal offer to buy Germany’s chemicals giant Covestro for $15.9 billion, including debt. ADNOC has been pursuing Covestro for a year. If the German firm accepts the offer, the deal would be one of the largest cash transactions in the chemicals industry ever and the first time a DAX 40 company would be acquired by a state company from the Gulf. The deal would expand ADNOC's downstream portfolio and lock in future demand.

【Others】

Argentina is moving a step closer to exporting LNG and monetizing its huge resource in the Vaca Muerta after maritime LNG infrastructure firm Golar LNG signed a 20-year deal with Pan American Energy PAE for the deployment of a Floating Liquefied Natural Gas FLNG vessel in Argentina.