El Taladro Azul Published originally in Spanish in LA GRAN ALDEA
M. Juan Szabo and Luis A. Pacheco
For the first time since the beginning of April, oil prices ended the week showing a gain, without exceeding the $90/BBL barrier (for Brent Crude). The EIA reported a reduction in US crude oil inventories, which coupled with rising tensions in the Middle East has provided support to oil prices. On the other hand, a slowdown in US manufacturing renewed hopes of an interest rate cut in June, although signs on this remain ambiguous.
Geopolitics
Tensions in the Middle East rose after Israel increased nighttime airstrikes on Rafah after announcing it would evacuate civilians ahead of the assault on what it claims is a stronghold of the armed group Hamas. For now, the Israeli government appears to be ignoring the Biden administration's advice to wait, and negotiations over the hostages continue. Additionally, the Houthi rebel group resumed attacks on shipping, after taking time to recover from US and UK bombing. The MV Andromeda Star, a tanker traveling in the Gulf of Aden, was attacked on Thursday, and suffered minor damage. This appeared to be the continuation of an attack on the MV MAISHA, an Antigua/Barbados-flagged cargo ship operated by Liberia, which was successfully defended by the US Navy. In any case, threats to shipping through the Red Sea remain in force.
In this context, it is worth mentioning the wave of protests around the world against Israel, particularly in US universities. These movements of students and faculty have left university authorities trapped between the defense of the right to free expression and the anti-Semitism that seems to have awakened in those august institutions; a governance crisis that further complicates the electoral panorama of the northern country.
On the other hand, the changing situation on the Russian/Ukrainian war front complicates the geopolitical situation in that Central European region. Moscow has renewed attacks on Ukraine's energy facilities, causing power outages and calls for the population to save on electricity consumption. During the week of April 18, Ukrainian missiles hit a Russian military airfield on the Crimean Peninsula (annexed by Moscow in 2014), managing to destroy part of the air defense equipment, as reported this Thursday by Ukrainian military intelligence. On Saturday the 27th, it was reported that Ukraine had attacked the Ilsky and Slavyansk oil refineries, in the Russian region of Krasnodar, causing fires at the facilities. The approval of $65 billion in US military aid gives important support to the Ukrainian counteroffensive.
Fundamentals
Regarding the discipline of compliance with OPEC+ cuts, Iraq reaffirmed its intention, after months of 200 MBPD of overproduction, to comply with OPEC+ guidelines. Iraq is committed to limiting its oil exports to 3.3 million b/d until the end of the year, regardless of the outcome of the OPEC+ meeting in early June. For its part, US production remains unchanged, even though the number of active rigs, according to the Baker Hughes report , was reduced by 6 rigs.
U.S. oil and gas industry consolidation continued at a high pace in the first quarter, with a geographic focus on the prolific Permian Basin. But activity lost momentum in the second quarter, according to a report from Enverus Intelligence Research.
On another page, the demand for crude oil has not behaved as predicted by the International Energy Agency (IEA), particularly in developed countries. A greater reduction was expected based on increases in efficiency and replacement of energy generated by fossils with renewable energy. In developing and underdeveloped countries, demand has risen proportionally to the increase in GDP per capita. Supply, on the other hand, has only grown in some countries such as: Brazil, Canada and Guyana, but below the growth in demand.
US manufacturing statistics indicated a reduction in activity, but US Treasury Secretary Janet Yellen, in an interview with Reuters, flagged the possibility of revising first-quarter GDP growth to higher levels. Data released on Friday revealed that the personal consumption (PCE) index, excluding food and energy, rose 2.8% in the year ending in March, while the PCE indicator of all items rose 2.7%., both slightly above forecasts. Both measures rose 0.3% month-over-month; some read this as a sign of a rate cut on the horizon.
The fundamentals continue to indicate a market without changes in the demand / supply equation, which supported prices, which also benefited from the geopolitical tailwind.
At the close of the markets, on Friday, April 26, the Brent and WTI crude markers were trading at $89.50/BBL and $83.85/BBL, respectively.
· Chevron's Permian Basin production in the first quarter fell less sequentially than the 2%-4% it had forecast three months ago, but it still expects to remain on a growth trajectory in the second half of 2024, its CEO said. , Mike Wirth, April 26. The 859 Mboepd (thousands of barrels of oil equivalent per day) that Chevron produced in the basin during the first quarter, were just 1% less than the volumes of the fourth quarter of 2023. A decrease that should persist in the second quarter of 2024 due to the company's intention to increase its inventory of drilled but incomplete wells during the first half of the year.
· Furthermore, Wirth stated that Chevron is not affected by the reactivation of sanctions on Venezuela. “We are not investing new capital in Venezuela at this time,” he said. “All the spending is self-financed with cash flow from operations. “We have been extracting oil and bringing it to the United States, which has been helpful to the American refining system, not only ours, but others as well.” Wirth stated that, last year, Venezuela's production increased in the joint ventures in which Chevron participates from approximately 120,000 b/d to approximately 180,000 b/d; a figure that looks inflated.
· Payara, ExxonMobil's third Guyana producing field, came online in November 2023 and was producing at its full nameplate capacity of 220,000 b/d in January. It now appears to have boosted Guyana's total output even further, it suggested the company's first quarter earnings report, released April. 26.
VENEZUELA
THE CAROUSEL OF ELECTIONS, SANCTIONS, ECONOMY, AND REPRESSION
Political Aspects
The surprising agreement around the candidacy of Edmundo González Urrutia has once again left the regime in disarray. Not knowing the legitimacy of González Urrutia as a candidate is more complicated than simply preventing Corina Yoris from accessing the CNE registration system, or the disqualification of María Corina Machado. Any trick attempted against the opposition candidate, which is never ruled out, could have a high international cost, including the relation with President Lula da Silva or President Petro. There is also the repeated issue of the International Criminal Court and its investigations into the regime, and the repressive actions that continue despite this.
Sanctions and their effects
Regarding the reactivation of sanctions on the businesses of PDVSA and its subsidiaries, by replacing General License 44 with LG 44-A, we are in the transitional period of 45 days, which OFAC established to wind-down the activities authorized under LG 44. Let us remember that an individual license can be requested from OFAC, now or later; This new requirement could delay or suspend some activities currently in development.
The agreements that PDVSA has signed with private companies for the development of oil and gas fields, such as Repsol, Maurel & Prom will have to wait for authorization or confirmation that they only require a comfort letter from OFAC. The potential delay in receiving approval will limit the generation of new production potential for 2024.
The most important project, of those announced so far, is undoubtedly the development associated with the extension of the PetroQuiriquire block in western Venezuela. Repsol would have the opportunity to increase production by 50 Mbpd in the next 2 years to 3 years, if they are willing to invest around MM$2.,000.
The most significant impact of the new conditions will be on crude oil sales, which LG44 allowed to be carried out in legitimate markets, considerably reducing the discount required to place “sanctioned” crude oil in “gray” markets. For example, it is not known whether the Indian company, Reliance Industries Limited (NSE: RELIANCE), will continue buying Venezuelan crude oil covered by the transition period, or wait for a new authorization from OFAC. In summary, we project a hiatus in the sales prices achieved starting in October 2023, as well as in new investment activities in production fields and their respective marketing.
Electoral Economy
Meanwhile, the management of economic variables is developing as expected, but with restrictions. It is necessary to keep inflation at bay, keeping the exchange rate relatively constant, limit or avoid the issuance of money, and adjust the level of public spending to electoral needs. These requirements, with limited financial resources, are difficult to meet in parallel. In fact, public spending, although still high, has shown a clear decreasing trend and the exchange rate is beginning to rise discreetly, for now.
Hydrocarbon sector operations
Oil production began to reflect the results of the drilling activity in PetroMonagas and PetroIndependencia with an increase of 4 Mbpd. Thus, this week's production reached 778 Mbpd, distributed throughout the country, as follows:
• West 155 (Chevron 58)
• East 146
• Orinoco Belt 477 (Chevron 90)
• TOTAL 778 (Chevron 148)
The mixing operations of the Merey 16 segregation continued to have problems due to the lack of enough light crude oil.
Refining reached 212 Mbpd, with a gasoline production of 64 Mbpd, and around 74 Mbpd of diesel. The import of gasoline through barter maintained high levels, anticipating the possible hiatus due to the termination of LG44. The higher level of refining is due to the start-up of distillation unit No. 3 in Cardón.
Crude oil exports are also being accelerated in preparation for potential restrictions; However, we observed a decrease in tankers approaching the Jose terminal. The export of products is, from the perspective of volume availability, guaranteed by the higher levels of processing in Paraguaná. Our current estimate for average exports for the month is 660 Mbpd and 60 Mbpd for crude oil and products respectively.
No comments:
Post a Comment