Inventory Declines, Supply Disruptions Drive Brent Toward $80

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Oil markets appear to be back in recovery mode, with both Brent and WTI set for a second consecutive weekly gain. The combination of a supply disruption in Kurdistan and a significant drop in U.S. inventories has helped to push oil prices higher. Later today, bearish sentiment could well return when new U.S. inflation data is released.

The ongoing tug-of-war over Kurdistan’s oil exports continues to act as a major pricing upside for oil prices, with some 500,000 b/d of oil at risk of shut-ins after Iraq ordered a halt to all exports. The huge drop in US crude inventories, driven by stocks in the Gulf Coast, has buttressed the gradual return of ICE Brent to the $80 per barrel mark. New U.S. inflation data might derail that momentum today in a market that appears far more sensitive to sentiment than supply and demand fundamentals.

Oil companies active in Iraqi Kurdistan have shut in or reduced production at several oilfields in the region after pipeline transportation to the Turkish port of Ceyhan was halted over the weekend, impacting Norwegian producer DNO (OSL:DNO) and Genel Energy.

The US oil and gas activity survey published by the Federal Reserve Bank of Dallas indicates that activity stalled in Q1, with the index plummeting from 30.3 in the fourth quarter of 2022 to 2.1 currently amidst rising field costs, higher interest, and plunging gas prices.

Members of the European Union approved a long-debated bill that would end sales of new carbon-emitting cars in 2035 after Germany managed to soften the law by inserting an exemption for cars running on e-fuels, Poland being the only country to vote against.

The governor of California Gavin Newsom signed into law state legislation that caps gross gasoline refining profit margins and levies penalties for exceeding it, with Chevron (NYSE:CVX) warning the measure will make fuel “less affordable”.

US downstream giant Valero Energy (NYSE:VLO) has reportedly filed a waiver application to the Biden administration seeking to import Venezuelan crude, but unlike Chevron (NYSE:CVX) it would be buying crude directly from the national oil company PDVSA.

Kazakhstan’s Natural Resources Ministry sued NCOC, the operator of the Kashagan supergiant oilfield, for $5.1 billion in environmental protection fines, arguing that the joint venture has been allowing more than double the amount of sulfur permitted on the site.

QatarEnergy, the national oil and gas company of the Middle Eastern emirate, will buy stakes of US major ExxonMobil (NYSE:XOM) in two Canadian offshore exploration blocks, extending its geographic outreach as it seeks more upstream exposure.

Nigeria’s oil minister Timipre Sylva has resigned this week to seek a new term as governor of oil-rich Bayelsa State, anticipating a transition from the administration of outgoing President Buhari to a new team that would be appointed by President-elect Bola Tinubu.

US carmaker Ford(NYSE:F) has teamed up with the Indonesian subsidiary of ore miner Vale (NYSE:VALE) and China’s Huayou Cobalt to build a $4.5 billion nickel processing plant in Indonesia’s Sulawesi island, with commercial operation expected in 2026.

Several EU energy ministers suggested new gas market rules within the union should provide governments with the option to temporarily stop Russian gas exporters from bidding for LNG import capacity, a way to ban Russian LNG without a unanimous vote.

The first oil leasing round since late 2021 and presumably the last one under President Biden, this week’s Lease Sale 259 in the Gulf of Mexico saw US majors Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) take center stage as they won 75 and 69 offshore blocks, respectively.

The US and Japan signed a trade deal on EV battery metals that will grant Japanese carmakers access to a $7,500 tax credit as per the IRA legislation, as the two countries see increased cooperation on the issue as they way forward to reduce dependence on China.

India’s state-controlled oil refiner IOC (NSE:IOC) signed a term agreement with Russian oil major Rosneft (MCX:ROSN) to substantially increase oil deliveries into the South Asian country and diversify the oil grades delivered, securing India’s spot as the leading buyer of Urals.

US energy firm Venture Global LNG notified its long-term customers and US regulators that commercial operations at the Calcasieu Pass liquefaction terminal will be delayed for an undetermined period due to ongoing repairs at a power generation plant.