Oil Prices Under Pressure Despite Israel Sending Troops Into Rafah

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International organizations are increasingly sounding the tocsin on shrinking crude inventories, with the IEA indicating Q2 2024 would see demand surpass supply by a whopping 900,000 b/d, the first two consecutive negative quarters since late 2021, OilPrice.com reports.

With OPEC+ curbing supply by means of Saudi Arabia’s and Russia’s voluntary production cuts, the end of refinery maintenance in Europe and Asia as well as recovering manufacturing activity in both the US and China would suggest an increase in fuel use.

According to Kpler, Chinese crude inventories marked a two-year low at the beginning of April and even though they have built since then, at 944 million barrels they are some 50 million barrels lower than a year ago.

With US refining back to running close to full capacity at 15.8 million b/d, US crude inventories should start their seasonal descent soon, currently trending around 460 million barrels, shot-for-shot replicating last year’s levels.

Just when it seemed that the geopolitical risk premium had all but evaporated from oil prices, Israel rejected the Egypt-brokered ceasefire proposal and its army started the long-mooted Rafah operation. The return of Middle Eastern tension and aggressive Saudi Arabian pricing for June cargoes, understood to be a harbinger of an OPEC+ production cut extension come June 1, should provide some resistance to the bearish pressure that has been building in oil markets.

Russia’s oil revenue more than doubled year-on-year to $11.5 billion in April, with higher crude differentials further boosted by a weakening national currency, as global insurance firms are calling the G7 oil price cap policy “increasingly unenforceable”.

This year’s most prominent addition to crude output in the US Gulf of Mexico, Chevron’s (NYSE:CVX) 75,000 b/d Anchor floating production unit located in the Green Canyon offshore area, is set to reach first oil by mid-year.

As India’s Modi government targets 9 million b/d of refining capacity by 2030, refiners are running into time overruns with Chennai Petroleum delaying the launch of its 180,000 b/d Nagapattinam refinery by the end of 2027.

US natural gas Henry Hub futures strengthened 3% on Monday to $2.2 per mmBtu amidst a higher domestic pull on feedgas to LNG export plants, as Trains 1 and 2 of Freeport LNG in Texas returned from inspection and repairs.

The Chinese government has introduced new supportive measures to boost investment into non-fossil-fuel vehicles, removing all restrictions on foreign investment, amidst rumors that Beijing would remove traffic restrictions on Tesla’s EVs.

According to Reuters, the national oil company of Abu Dhabi ADNOC has terminated talks to buy a controlling stake in Brazil’s top petrochemical producer Braskem (NYSE:BAK), sending the latter’s shares down some 15% in just one day.

India’s largest oil refiner Reliance Industries has resubmitted a request to the US Treasury for authorization to import crude from Venezuela, right after the White House granted upstream firm Maurel&Prom a 2-year waiver.

Azule Energy, a joint venture of oil majors BP (NYSE:BP) and ENI (BIT:ENI), farmed into Namibia’s offshore Orange Basin, signing up for a 42.5% stake in Block 2914A in the immediate vicinity of the recent multi-billion-barrel Mopane find.

Nigeria’s disgruntled oil producers such as ExxonMobil (NYSE:XOM) or Shell (LON:SHEL) would be allowed to exit the African country’s onshore fields quicker if they take responsibility for oil spills and pay up, said the country’s regulator NUPRC.

According to the White House, Russia has been silently shipping refined petroleum products to North Korea at a level higher than the US-imposed price cap, even though UN sanctions limit its imports at 500,000 barrels of refined producers a year.

The International Copper Study Group lowered its 2024 copper supply forecast, seeing the forecasted 467,000-ton glut decrease to 162,000 tons on the heels of First Quantum shutting the Cobre Panama mine, 5% of global production.

French prosecutors opened an investigation against oil major TotalEnergies (NYSE:TTE) after survivors of the 2021 Islamic State attack on the Mozambique LNG project accused it of negligence and indirect manslaughter, saying it failed to ensure the safety of subcontractors.

China’s Ministry of Commerce has granted product export quotas to 7 state-controlled and private sector companies, allocating 14 million tons and disappointing the market as the first batch is already used at 87% and refiners want to clear their high stocks.