Oil Daily | OPEC Eyes Demand Uncertainty as Russia Pledges Further Cuts, Kazakhstan Intensifies Legal Battle
Saturday, Aug 10, 2024 4:00 am ET
【Global Oil Supply and Demand】
It is not certain that global oil demand is rising fast enough to allow the market to absorb the OPEC group’s planned increase in supply from October, analysts and industry sources have told Reuters. Concerns about underwhelming demand in China amid sluggish economic growth below expectations and fears of a recession in the U.S. have weighed on the market in recent weeks. OPEC continues to stick to its policy announced in June that it intends to begin easing part of the current production cuts in October this year. At last week’s meeting of the Joint Ministerial Monitoring Committee (JMMC), the OPEC panel monitoring market developments, the delegates reiterated their intention to begin adding oil supply in the fourth quarter. But they also reiterated that the gradual phase-out of the voluntary reduction of oil production could be paused or reversed, depending on prevailing market conditions. Global oil demand, including in the United States, is currently playing catch-up with forecasts, according to Reuters’s calculations of government data. In China, faltering overall oil demand and lower crude imports result from weaker economic growth and lackluster gasoline and diesel demand below expectations. OPEC continues to hold a much more optimistic view on oil demand growth than the International Energy Agency (IEA). The agency’s forecasts continue to diverge from OPEC’s estimates by more than 1 million bpd. In its July report, OPEC kept its global oil demand growth forecast for 2024 at 2.2 million bpd. It is not clear if third-quarter demand growth will match OPEC’s estimates for this quarter, two sources at OPEC have told Reuters. Demand growth needs to accelerate if OPEC wants to add more supply later this year without sinking oil prices, according to analysts. The world’s biggest oil firm and top crude exporter, Saudi Aramco, holds a demand view closer to OPEC’s. Earlier this week, Aramco’s chief executive Amin Nasser said that global oil demand is expected to rise by between 1.6 million bpd and 2 million bpd in the second half of the year, noting that the past week’s selloff doesn’t reflect fundamentals. 【Oil-Producing Countries Dynamics】
Russia’s crude oil production was down in July compared to June, the Russian Energy Ministry said on Friday, and more cuts are coming. Russia’s oil production came in at 67,000 bpd above its quota for July, but was down in July compared to June due to “one-off supply scheduling issues.” According to the Energy Ministry, August and September production levels will “remedy this.” Russia had already agreed to compensate for everything it has overproduced since April of this year. The compensatory cuts will come in October and November of this year, and from March to September next year, the Ministry said in the Friday press release. “Russia reaffirms its commitment to its compensation schedule which has earlier been submitted to the OPEC Secretariat and urges other OPEC Plus countries who have submitted their compensation plans to adhere to them,” the Ministry said. OPEC has had a difficult time getting all of its members to reduce production to the targeted levels that the group agreed to in April, with chronic laggards such as Iraq, the UAE, Kazakhstan, and Russia dragging down the performance of the group. The OPEC part of the OPEC group saw its production dip slightly for July, coming in at 26.99 million barrels per day, a Bloomberg survey showed earlier this month, but Iran and Venezuela carried the bulk of the reduced output, and they are exempt from the production quotas. OPEC is set to release its official production figures for July in its Monthly Oil Market Report on Monday. OPEC’s Joint Ministerial Monitoring Committee said in a press release following its most recent meeting that OPEC members achieved “high overall conformity” to production quotas both in May and June. Kazakhstan’s legal battle against international oil majors involved in the Kashagan oil field has intensified, with the nation’s claims now exceeding $160 billion. The dispute centers around allegations of corrupt deals and financial mismanagement, adding another $10 billion to the already massive demands. The Kashagan project, a massive offshore field in the Caspian Sea, has been plagued by delays and cost overruns since its inception over two decades ago. Major players in the industry, including Eni SpA, Shell Plc, ExxonMobil Corp., and TotalEnergies SE, are caught in the crossfire as Kazakhstan seeks compensation for what it claims are lost revenues and broken promises.【Latest Oil Policies】
The incoming Mexican government will encourage Pemex to partner with private oil companies to develop domestic resources, Reuters has reported, citing unnamed sources. The move would be a departure from the policies of the Andre Manuel Lope Obrador government and a return to the approach used by his predecessor, Pena Nieto, whose government enacted energy market reforms aimed at stimulating the participation of more foreign oil companies in Mexico's oil and gas development. When the Obrador administration took over, it focused on restoring Pemex’s dominance in the local energy market, launching investigations into partnership deals inked by the previous government, and discouraging new deals of this kind. Mexico currently produces around 1.5 million barrels of oil daily, down from a peak of 3.4 million barrels daily some 20 years ago. Underinvestment has plagued the industry for years, which was the motivation for the Pena Nieto reforms that invited foreign players into the local industry. According to the Reuters report, incoming president Claudia Sheinbaum has clear plans for growth in wind and solar energy but her stance on the local oil and gas industry has been less clear. The sources that the publication cited, said that the partnerships considered by the new government would be farm-outs, where Pemex and its partners would share both the risks and the rewards of a project. The purpose was to expand exploration. The Reuters sources also said that the incoming administration was studying the Trion deepwater field as a possible blueprint for future partnerships. Trion is a 60%-40% partnership between Australian Woodside Energy, which holds the bigger stake, and Pemex. Earlier this year, Mexico’s National Hydrocarbons Commission announced that the nation's total proven hydrocarbon reserves, encompassing both crude oil and natural gas, have increased to 8.383 billion barrels of crude oil equivalent. Proven crude oil reserves declined slightly to 5.978 billion barrels from 6.155 billion barrels the previous year. However, proven natural gas reserves saw a significant increase, rising to 12.297 trillion cubic feet from 11.029 trillion cubic feet.China has filed a formal complaint at the World Trade Organization (WTO), challenging the European Union’s decision to impose provisional anti-subsidy tariffs on imports of China-made electric vehicles. The EU launched in October 2023 anti-subsidy investigations into EU imports of EVs from China to determine whether the value chains in China benefit from illegal subsidies. In June, the European Commission “provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers." The provisional import tariffs – which come on top of an existing 10% duty – were imposed as of July 5 and are for a maximum
It is not certain that global oil demand is rising fast enough to allow the market to absorb the OPEC group’s planned increase in supply from October, analysts and industry sources have told Reuters. Concerns about underwhelming demand in China amid sluggish economic growth below expectations and fears of a recession in the U.S. have weighed on the market in recent weeks. OPEC continues to stick to its policy announced in June that it intends to begin easing part of the current production cuts in October this year. At last week’s meeting of the Joint Ministerial Monitoring Committee (JMMC), the OPEC panel monitoring market developments, the delegates reiterated their intention to begin adding oil supply in the fourth quarter. But they also reiterated that the gradual phase-out of the voluntary reduction of oil production could be paused or reversed, depending on prevailing market conditions. Global oil demand, including in the United States, is currently playing catch-up with forecasts, according to Reuters’s calculations of government data. In China, faltering overall oil demand and lower crude imports result from weaker economic growth and lackluster gasoline and diesel demand below expectations. OPEC continues to hold a much more optimistic view on oil demand growth than the International Energy Agency (IEA). The agency’s forecasts continue to diverge from OPEC’s estimates by more than 1 million bpd. In its July report, OPEC kept its global oil demand growth forecast for 2024 at 2.2 million bpd. It is not clear if third-quarter demand growth will match OPEC’s estimates for this quarter, two sources at OPEC have told Reuters. Demand growth needs to accelerate if OPEC wants to add more supply later this year without sinking oil prices, according to analysts. The world’s biggest oil firm and top crude exporter, Saudi Aramco, holds a demand view closer to OPEC’s. Earlier this week, Aramco’s chief executive Amin Nasser said that global oil demand is expected to rise by between 1.6 million bpd and 2 million bpd in the second half of the year, noting that the past week’s selloff doesn’t reflect fundamentals. 【Oil-Producing Countries Dynamics】
Russia’s crude oil production was down in July compared to June, the Russian Energy Ministry said on Friday, and more cuts are coming. Russia’s oil production came in at 67,000 bpd above its quota for July, but was down in July compared to June due to “one-off supply scheduling issues.” According to the Energy Ministry, August and September production levels will “remedy this.” Russia had already agreed to compensate for everything it has overproduced since April of this year. The compensatory cuts will come in October and November of this year, and from March to September next year, the Ministry said in the Friday press release. “Russia reaffirms its commitment to its compensation schedule which has earlier been submitted to the OPEC Secretariat and urges other OPEC Plus countries who have submitted their compensation plans to adhere to them,” the Ministry said. OPEC has had a difficult time getting all of its members to reduce production to the targeted levels that the group agreed to in April, with chronic laggards such as Iraq, the UAE, Kazakhstan, and Russia dragging down the performance of the group. The OPEC part of the OPEC group saw its production dip slightly for July, coming in at 26.99 million barrels per day, a Bloomberg survey showed earlier this month, but Iran and Venezuela carried the bulk of the reduced output, and they are exempt from the production quotas. OPEC is set to release its official production figures for July in its Monthly Oil Market Report on Monday. OPEC’s Joint Ministerial Monitoring Committee said in a press release following its most recent meeting that OPEC members achieved “high overall conformity” to production quotas both in May and June. Kazakhstan’s legal battle against international oil majors involved in the Kashagan oil field has intensified, with the nation’s claims now exceeding $160 billion. The dispute centers around allegations of corrupt deals and financial mismanagement, adding another $10 billion to the already massive demands. The Kashagan project, a massive offshore field in the Caspian Sea, has been plagued by delays and cost overruns since its inception over two decades ago. Major players in the industry, including Eni SpA, Shell Plc, ExxonMobil Corp., and TotalEnergies SE, are caught in the crossfire as Kazakhstan seeks compensation for what it claims are lost revenues and broken promises.【Latest Oil Policies】
The incoming Mexican government will encourage Pemex to partner with private oil companies to develop domestic resources, Reuters has reported, citing unnamed sources. The move would be a departure from the policies of the Andre Manuel Lope Obrador government and a return to the approach used by his predecessor, Pena Nieto, whose government enacted energy market reforms aimed at stimulating the participation of more foreign oil companies in Mexico's oil and gas development. When the Obrador administration took over, it focused on restoring Pemex’s dominance in the local energy market, launching investigations into partnership deals inked by the previous government, and discouraging new deals of this kind. Mexico currently produces around 1.5 million barrels of oil daily, down from a peak of 3.4 million barrels daily some 20 years ago. Underinvestment has plagued the industry for years, which was the motivation for the Pena Nieto reforms that invited foreign players into the local industry. According to the Reuters report, incoming president Claudia Sheinbaum has clear plans for growth in wind and solar energy but her stance on the local oil and gas industry has been less clear. The sources that the publication cited, said that the partnerships considered by the new government would be farm-outs, where Pemex and its partners would share both the risks and the rewards of a project. The purpose was to expand exploration. The Reuters sources also said that the incoming administration was studying the Trion deepwater field as a possible blueprint for future partnerships. Trion is a 60%-40% partnership between Australian Woodside Energy, which holds the bigger stake, and Pemex. Earlier this year, Mexico’s National Hydrocarbons Commission announced that the nation's total proven hydrocarbon reserves, encompassing both crude oil and natural gas, have increased to 8.383 billion barrels of crude oil equivalent. Proven crude oil reserves declined slightly to 5.978 billion barrels from 6.155 billion barrels the previous year. However, proven natural gas reserves saw a significant increase, rising to 12.297 trillion cubic feet from 11.029 trillion cubic feet.China has filed a formal complaint at the World Trade Organization (WTO), challenging the European Union’s decision to impose provisional anti-subsidy tariffs on imports of China-made electric vehicles. The EU launched in October 2023 anti-subsidy investigations into EU imports of EVs from China to determine whether the value chains in China benefit from illegal subsidies. In June, the European Commission “provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers." The provisional import tariffs – which come on top of an existing 10% duty – were imposed as of July 5 and are for a maximum