Oil prices fall despite expectations of global Q3 supply deficit

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Oil prices are falling on Tuesday morning as weaker-than-expected economic data from China sparks demand concerns. WTI crude fell back to the $80 handle ahead of this week’s crude inventory data reports. Despite this, traders remain positive that the current quarter could be the tightest of the year for global crude supplies, with inventories depleting rapidly and Brent crude futures potentially rising to $90 a barrel.

Oil markets are increasingly counting on a September Fed interest rate cut, however, the tacit optimism coming from the United States has been somewhat muted this week on the heels of weak Chinese data. Whilst overall economic growth for H1 posted a neat 5% year-on-year move upwards, growth in the second quarter was already below the annual target at 4.7% and set to drop lower in Q3, OilPrice.com reports.

Kuwait has reported a giant oil and gas discovery in an offshore field estimated to contain 3.2 billion boe, with the al-Noukhitha find potentially allowing the Middle Eastern country to lift its production capacity to 4 million b/d.

Africa’s largest refinery, the 650,000 b/d Dangote plant in Nigeria, saw the stake held by state oil firm NNPC reduced to 7.2% from 20% after failing to pay the full $2.7 billion balance of funding owed as it grapples with debt.

Russia’s deputy prime minister Alexander Novak said that Russia might reinstate its gasoline export ban from August in case of supply shortages on the domestic fuel market, just as refiners started to export again in June-July.

Chinese coal production surged to a six-month high in June, hitting 405.38 million tonnes and rising 3.6% year-on-year, as heatwaves and rising air conditioning demand across the country prompted Beijing to ease security checks on coal miners.

China has requested arbitration from the World Trade Organization to help settle a dispute over EV subsidies under the US Inflation Reduction Act, saying the IRA sets up artificial trade barriers and pushes up the costs of green transition.

The Biden administration is considering adding more areas for protection from oil and gas drilling in Alaska’s National Petroleum Reserve, beyond the 40% already covered, despite a recently launched lawsuit from the Alaska state government.

The UN’s International Seabed Authority is meeting this week to discuss general rules allowing firms to extract minerals from the ocean seabed, triggered by the Pacific state of Nauru advocating for a mining code before it finalizes its 2024 seabed licensing.

Egypt’s Oil Ministry is looking into the possibility of converting the African country’s 7.2 mtpa Idku and 5.5 mtpa Damietta LNG export terminals into import facilities and possibly adding an FSRU at Ain Sukhna, as plummeting Zohr output will make Egypt a net importer for the first time since 2018.

Following recent rumours that mining giant Rio Tinto (ASX:RIO) may consider takeover bids for smaller rivals, the Australian company is said to be looking into Teck Resources (NYSE:TECK) after the latter’s rejected a $23 billion Glencore bid last year.

The US-based ICSID international tribunal rejected the $15 billion claim of Canada’s midstream giant TC Energy (TSE:TRP) against the US government over President Biden’s revoking the XL Keystone pipeline’s construction permit, arguing NAFTA was no longer in force.

As Canada’s new 590,000 b/d Trans Mountain Expansion pipeline ramps up operations, South Korea’s refiner GS Caltex and Japan’s Eneos will split a 550,000-barrel cargo of heavy sour Cold Lake blend, the first foray into TMX for both countries.

Yemen’s Houthi militias targeted three vessels in the Red and Mediterranean seas with missiles, drones and booby-trapped boats, including the Chios Lion tanker carrying Russian fuel oil to China and the Olvia shuttle tanker servicing Israeli ports.

Freeport LNG, the second-largest US exporter of liquefied gas, expects to restart the first train of its 15 mtpa