Oil & Energy
Standard Chartered: Oil Demand Not As Bearish As Imagined
Oil prices have been on the backfoot in the current week, pulling back from gains in recent weeks, thanks to easing geopolitical fears and seemingly never-ending demand concerns.
On Monday, United States Secretary of State, Antony Blinken, announced that Israeli Prime Minister, Benjamin Netanyahu, had accepted a cease-fire proposal to stop the war in Gaza, but on Thursday, sources close to the White House reported that such a deal is once again out of reach as Hamas is unlikely to accept the Israeli terms, which include the occupation of the Philadelphi corridor, which Israel claims has given Hamas a strategic lifeline.
Crude oil futures fell significantly on Wednesday, with WTI crude falling to $72 per barrel and Brent crude falling briefly into the $75 dollar handle. Prospects of weak demand in China offset any gains from risks to supply, with government data showing that crude demand in the country fell 8per cent Y/Y in July.
Commodity analysts at Standard Chartered have been able to gauge crude demand on a global scale following the release of Joint Oil Data Initiative (JODI) data on 19 August.
According to StanChart, global oil demand in June clocked in at a healthy 103.01 million barrels per day (mb/d), an all-time high.
Following JODI revisions, StanChart estimates that May demand came in at 102.68 mb/d, the second-highest monthly average after June. The average demand growth for the second quarter was 1.521 mb/d y/y, close to StanChart’s forecast for 2024 full-year growth (1.514 mb/d).
The only bearish data point in that report is that demand growth has been slowing, with June demand growth clocking in at 788 thousand barrels per day (kb/d), a deceleration from 1.267 mb/d in May and 2.129 mb/d in April. StanChart has predicted that global demand will remain above 103 mb/d for the rest of 2024, before falling to 101.9 mb/d in January due to seasonality.
Meanwhile, global crude supply growth remains muted, with June supply increasing by 160 kb/d m/m to 102.097 mb/d, well below December 2023’s all-time high of 103.162 mb/d.
Constrained global supply growth can largely be chalked up to weak non-OPEC growth, particularly by the U.S. Oil production in the United States is set to grow just 2.3per cent in the current year as shale producers stick to production discipline and goal to return capital to shareholders.
Crude exports from U.S. ports have averaged 4.2 million barrels per day so far this year, up a mere 3.5per centY/Y compared to a robust 13.5per cent growth in 2023. This year’s growth clip is the lowest since 2015, when the country lifted a 40-year federal ban on the export of domestic crude.
U.S. shale producers are simply not willing to drill more. High decline rates for shale wells usually sets in soon after commissioning, meaning extra well completions are required to offset declines from existing wells if output is to be maintained.
Earlier in the year, StanChart reported that the horizontal rig count started to decline sharply in early 2023 and is currently 20per cent below its post-pandemic peak after flatlining for the past six months.
The analysts point out that whereas the completion of previously drilled wells and technical change provide an offset, a significant fall in activity, more often than not, leads to a lagged decline in growth.
The big rally in Europe’s natural gas prices that kicked off in July appears to have run out of steam thanks to high inventory levels and easing supply jitters. Dutch front-month futures, Europe’s gas benchmark, were quoted at €37.22 per megawatt-hour on Monday at 1315 hrs ET, largely unchanged over the past 10 days but considerably higher than the price a month ago at €30.10 per megawatt-hour. The gas price rally in the United States has been more subdued, with Henry Hub prices trading at $2.15/MMBtu from $2.01/MMBtu a month ago.
According to the latest Gas Infrastructure Europe (GIE) data, EU gas inventories are on the verge of moving above the EU Commission’s 90% of capacity target 10 weeks earlier than the 1 November deadline.
Gas inventories stood at 104.23 billion cubic meters (bcm) on 18 August; good for a fill rate of 89.8per cent. German storage is already at 93.3per cent of capacity, well ahead of the country’s 1 September target of 65per cent.
Last month, the U.S. Energy Information Administration predicted that U.S. natural gas prices will rally strongly in the second half of the current year thanks to production cuts.
According to the EIA, the Henry Hub natural gas spot price will average almost $2.90 per million British thermal units (MMBtu) in 2H24, up from $2.10/MMBtu in 1H24, good for a nearly 40 per cent increase.
Kimani writes for Oilprice.com.
By: Alex Kimani
The Nigerian Navy Units under the auspices of Operation Delta Sanity says it has recorded significant successes against crude oil theft and illegal refining sites in the Niger Delta.
The Navy, in an updated operations, said the successes were recorded between Thursday August 29 and Monday September 2, 2024.
According to the information, on 29th August, seven large cotonou and two fibre boats operated by heavily armed oil thieves loading crude oil from an illegal loading point around Botokiri axis of Nembe Local Government Area of Bayelsa State were seized.
Also, on 31st August, six suspected crude oil thieves with 109 sacks of illegally refined petroleum products, four fibre boats and two wooden boats were arrested and seized along Ogboinbiri-Kasama-Azama-Isoni of Bayelsa State.
Again, on 1st September, two wooden boats and 328 sacks of illegally refined automated Gas Oil were seized at Otuogori community’s river bank in Yenagoa, Bayelsa State.
Additionally, on 2nd September, 35 sacks of illegally refined Automotive Gas Oil in a wooden boat were seized at Gbaraun area of Southern Ijaw Local Government Area of Bayelsa State.
These successes indicate the effectiveness of Operation Delta Sanity, and the resolve of the Nigerian Navy to sustain current efforts to rid Nigeria’s maritime environment of the menace of crude oil theft and enhance crude oil production for the overall growth of the economy.
The Eko Electricity Distribution Company Plc. has clarified that the Ministries, Departments, and Agencies of the Federal Government, including the military, owed the power distribution company N42billion as the cost of electricity consumed and not N144billion.
The Bureau of Public Enterprise(BPE), disclosed this in a Statement signed by the Head, Public Communications, Amina Othman, at the Weekend.
According to the Statement, the Disco affirmed that its total outstanding debt was N144billion, of which the MDAs and the military owe N42billion.
“The Eko Electricity Distribution Company Plc has clarified that contrary to earlier reports, the aggregate outstanding debt owed by consumers is N144billion, out of which, ministries, departments, and agencies including the military owe N42billion”, Othman stated.
The Statement said this was against prior reports that the MDAs, including the army, police, and other government agencies, were owing N144billion and had refused to pay.
The Disco said, “the clarification became necessary for proper reportage on the matter and to put the records straight”, it stated.
Recall that during a recent oversight visit by members of the House of Representatives Committee on Privatisation and Commercialisation, led by its Chairman, Ibrahim, the Acting Managing Director of the EKEDC, Mrs. Rekhiat Momoh, among other things, informed the members about the legacy debts owed the company by MDAs.
The committee had reported the acting MD as stating that the company was owed N144billion by MDAs within its operational area, saying she mentioned that the military, police, and various state government agencies failed to settle their debts, creating financial difficulties for the distribution company.
Energy infrastructure, a crucial part of global oil and gas supply and the energy transition, are set to get a boost after a heavy lifting equipment provider unveiled the world’s strongest crane-equipment capable of lifting 6,000 tons, or 15 fully loaded Boeing 747 aircraft.
Dutch heavy lifting and transport services company Mammoet has launched a new type of crane, the SK6,000, which, the firm said, could be used for modules to be built faster and also “bigger than ever before”.
As oil and gas continue to be a key part of the world’s energy system—and likely will continue for decades to come—and as renewable energy developers aim for bigger wind turbines, the support equipment for installing oil and gas platforms, offshore wind equipment, and even nuclear power stations is becoming bigger.
Bigger cranes such Mammoet’s SK6,000 could remove some of the limitations of engineering and construction firms. These firms are generally limited by how much weight can be lifted when installed on a platform or turbine.
Cranes that can carry 5,000 tons and more can shorten the time of a project being erected on a site, onshore or offshore, Mammoet says.
“Limitations on lifting capacity force engineers to fabricate smaller modules than would be optimal; tying up site space and increasing the complexity and duration of projects,” the company notes.
“This limitation can also narrow the execution choices available during each project’s planning stage and the percentage of each project that can be executed locally.”
These days, energy companies and their contractors seek faster deployment of energy infrastructure, be it wind turbines or floating production storage and offloading (FPSO) vessels and platforms for oil and gas production.
“There are so many supply chain constraints at the moment that need to be de-bottlenecked,” Gavin Kerr, Mammoet’s director of global services, told Bloomberg, commenting on the new crane.
“The bigger everything gets, you need bigger cranes.”
Moreover, the SK6,000 is containerised and can be assembled quickly on-site. This feature allows it to deliver heavy lift capability wherever it is needed, giving contractors greater flexibility in where and how energy projects are completed” Mammoet said.
“With the innovation of the SK6,000 crane, our customers can think bigger than ever before; pushing modules beyond the 4,000t and even 5,000t barriers. Its low ground bearing capacity also means the crane can be used all over the world”, said Mammoet’s Sales Director Giovanni Alders.
“With its long outreach, small minimum footprint and relatively small site impact, the SK6,000 greatly reduces the topside integration time.
“Needless to say, with larger building blocks you spend less time connecting and testing, and more time producing” Alders added
Energy companies do need faster permit-to-production times in both oil and gas and renewable energy to provide the conventional and green energy sources the world will need.
Wind turbine technology is evolving and making the hub height increasingly taller. According to the Office of Energy Efficiency & Renewable Energy at the U.S. Department of Energy, the hub height for utility-scale land-based wind turbines has surged by 83per cent since 1998–1999, to about 103.4 meters (339 feet) in 2023. That’s taller than the statue of Liberty.
The average hub height for offshore wind turbines in the United States is projected to grow even taller from 100 meters (330 feet) in 2016 to about 150 meters (500 feet), or about the height of the Washington Monument, in 2035, DOE said.
In the oil and gas industry, new resource development is needed as demand for LNG grows and legacy oilfields mature and output declines.
If contractors can bring energy projects on stream faster, both oil and gas supply and the energy transition will benefit.
By: Charles Kennedy