Oil Prices Drop as Bearish Sentiment Builds

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The OPEC+ meeting over the weekend extended voluntary production cuts into Q3 2024 and the original 3.66 million bpd cuts until the end of 2025. That pledge was not enough to persuade market participants that the future of oil is bright, with Brent shedding almost $3 per barrel in just one trading day and sliding below the $77 per barrel mark. With the promise of more supply coming back to market in 2025, the list of bullish factors out there has shrunk to a bare minimum.

Swiftly organizing an in-person meeting in Riyadh, OPEC+ members agreed to extend the 2.2 million b/d of voluntary cuts until the third quarter of 2024, whilst also charting the course for a gradual relaxation of remaining cuts into 2025.

Combining an in-person meeting in Riyadh with a hybrid online option for smaller producers, OPEC+ has agreed to extend existing production cuts into next year, whilst also paving the way for a gradual unwinding of most curtailments.

The last round of voluntary production cuts agreed in November 2023 are set to be phased out over a 12-month period, lifting OPEC+ collective target to 36.27 million b/d, more than 2 million b/d higher than current output.

The UAE was the big winner of the OPEC+ meeting, having secured another upgrade to its official production quota, allowing it to ramp up output by 300,000 b/d in several steps throughout 2025.

Even though Saudi energy minister Prince Abdulaziz bin Salman maintained that OPEC+ has the choice to pause or even reverse the upcoming relaxations, the market at large saw it as a sign of more supply in a period of uncertain demand, OilPrice.com reports.

European TTF gas futures soared to their highest this year so far, at €37 per MWh, after Equinor’s (NYSE:EQNR) offshore Sleipner hub halted operations due to a crack, also prompting a shutdown at the Nyhamna processing plant.

Nigeria’s main labor unions have shut down the country’s power grid and halted flights across the country as they demand a 1500% increase in minimum wage amidst unprecedented inflation, so far sparing the country’s oil production.

After six straight weeks of shorting their positions, portfolio investors have ramped up their net length held in the six main oil futures and options contracts in the week ending May 28, mostly by closing out their shorts ahead of the OPEC+ meeting.

One of the most import-dependent countries globally, South Korea has approved exploratory drilling for potentially huge oil and gas reserves off the country’s east coast, with KNOC leading the appraisal that could unearth as much as 14 billion boe.

Global oil majors Shell (LON:SHEL) and ExxonMobil (NYSE:XOM) are nearing an agreement with independent UK producer Viaro Energy to sell their jointly-owned gas fields in the southern North Sea for $0.5 billion, ending Exxon’s 60-year presence in the country.

Indonesia, one of the largest copper producers globally, has postponed the start of a ban on its copper concentrate exports until the end of 2024 due to delays in the construction of smelters, potentially deflating copper prices into the summer.

The US Department of Energy has resumed purchasing 3 million barrels of oil for the country’s Strategic Petroleum reserve, buying at an average price of $77.69 per barrel for November delivery, taking the repurchased total to 38.6 million barrels.

The landslide victory of Mexico’s president-elect Claudia Sheinbaum will allow the ruling party to officially dismantle the 2013 energy market liberalization by changing the constitution, capping future oil production growth in the country.

As heatwaves across India have claimed dozens of lives, the country’s natural gas-based power generation has surged to record highs in May, almost doubling year-on-year to 4.7 million KWhr, all the while coal still accounts for 75% of generation capacity.

Beijing is set to mandate a 5% cut from 2020 levels of carbon emissions intensity by the end of 2025, removing purchase limits on non-fossil-fuel cars and boosting the electrification of industrial vehicles, capping growth in gasoline and diesel demand.

A court in Trinidad and Tobago has granted US oil major ConocoPhillips (NYSE:COP) the right to enforce a $1.33 billion claim against Venezuela for the appropriation of its oil and gas assets, potentially derailing the development of offshore gas fields such as Dragon or Cocuina-Manakin.

US energy major Chevron (NYSE:CVX) has resumed LNG production at its Gorgon liquefaction facility on Australia’s Barrow Island after a mechanical fault prompted a halt in operations for a month, bringing back 5.2 mtpa of output capacity.