Oil Erases Gains In World Markets Despite Flurry Of Bullish News

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Crude erased gains in the morning of the first trading session of 2024 despite mostly bullish news.

The Chinese economy has been sending mixed signals to the oil markets as Caixin manufacturing PMI indicated a strong recovery in industrial sentiment with the index rising to 50.8 in December, the strongest since August, OilPrice.com reports.

The problem with that is that Beijing’s official data paint the exact opposite, dropping to the weakest level since June at 49.0, suggesting SMEs are feeling better about the economy than state-surveyed industry majors.

Following months of quota-capped trading, Chinese refiners are now allowed to go big with their crude purchases after the Chinese Ministry of Commerce allocated 1.34 billion barrels of 2024 import allowances.

With Shandong utilization rates back above 70% and state-owned refiners Sinopec and PetroChina ramping up output before the lunar New Year holiday, Chinese crude imports are expected to increase to 12 million b/d, for the first time since August.

The first US-Yemen naval clash in the Red Sea, followed by the arrival of an Iranian warship into the Bab-el-Mandeb strait, has prompted an increase in geopolitical risks again, lifting Brent back to the $79 per barrel mark. China issuing its crude import quotas for 2024, coupled with product export allowances, will reinvigorate Chinese buying in the markets, so for the first time in several weeks, the immediate outlook seems more bullish than bearish.

According to EIA figures, US crude oil production fell to 13.248 million b/d in October, the first monthly decline since April even if the month-on-month change was a mere 4,000 b/d, with all tight oil plays posting increases expect North Dakota.

The world’s second-largest container line Moller-Maersk (CPH:MAERSK) halted transit through the Red Sea less than a week after it had decided to resume navigation, with its Maersk Hangzhou tanker coming under attack by Houthi militias.

Nigerian oil producers will be required to supply 483,000 b/d of crude to local refineries in the first six months of 2024, of which 325,000 b/d should be allocated to the largest refinery project currently built, the Dangote refinery.

ADNOC, the national oil firm of UAE, and China’s utility major ENN (SHA:600803) are close to signing a preliminary deal for the supply of 1 million tonnes LNG per year for 15 years, the first deal from ADNOC’s Ruwais LNG project, expected to be launched in 2028.

Chinese EV carmaker BYD (HKG:1211) sold 526,109 fully electric vehicles in Q4 2023, aided by aggressive year-end discounting, suggesting Tesla would need record quarterly sales if it wants to remain the world’s largest electric automaker.

Following several days of force majeure at Ecuador’s Ishpingo oil field, Ecuadorian authorities have reached an agreement with Indigenous communities that blocked the site since last week, restarting some 20,000 b/d of production.

Mexico’s government has mandated that the national oil company Pemex take temporary control over Air Liquide’s hydrogen plant located within the confines of the Tula refinery, calling stable hydrogen supply a “matter of public interest”.

Various Libyan top officials have called for the halt of negotiations over the transfer of the Ghadames NC-07 block from state-owned Agoco to an international consortium led by Italy’s ENI (BIT:ENI), saying the 40% share of production to be given to the consortium is too high.

China’s state-owned energy company Sinopec expects the country’s coal consumption to peak around 2025 at 4.37 billion metric tonnes, with oil hitting a plateau in 2026-2030 at 16 million b/d and natural gas reaching a climax only by 2040.

Nickel became the worst-performing industrial metal of 2023, posting a 45% year-on-year decline, its largest since the financial collapse of 2008, as new supply from Indonesia and weaker Chinese demand growth halted the price growth of 2019-2022.

In an unexpected move, Norway’s largest pension fund KLP, overseeing $70 billion in investment, blacklisted Saudi Aramco and other Middle Eastern companies, citing an “unacceptable” risk of contributing to human rights abuses.

Exports of Russian pipeline gas to Europe plunged by a further 56% year-on-year in 2023, coming in at a mere 28.3 billion cubic metres as Gazprom’s options were narrowed down to TurkStream and one remaining pipeline via Ukraine.

Morocco, a country that has no production of hydrocarbons at this point, has been pinning its hopes on ENI’s much-hyped Cinnamon prospect in the country’s territorial waters, however the release of the rig suggests the wildcat was dry.