Oil prices fell sharply on Tuesday morning as traders turned their attention back to market fundamentals, despite ongoing geopolitical risks and concerns of a potential conflict in the Middle East. China’s announcement of further economic stimulus for its troubled real estate sector came just in time ahead of a national week-long holiday, but as the country resumes normal business, the market is left facing more disappointment.
China’s Economic Stimulus Falls Short, Iron Ore Futures Drop
Following a briefing from China’s National Development and Reform Commission (NDRC), iron ore futures plunged by over $5 per metric ton to $105/mt. The NDRC failed to announce any specific stimulus measures, leading to the sharp decline.
China’s massive housing inventory, currently at 43 million unsold units, with an additional 8 million still under construction, remains a significant challenge. Annual sales remain at around 8 million units, limiting hopes of a faster recovery in the real estate sector. Before the NDRC’s briefing, iron ore futures had surged by 18% over the past two weeks, reflecting similar gains in base metals.
Market Developments
BP Adjusts Strategy: According to market rumors, BP (NYSE: BP) may abandon its goal to reduce oil and gas output by 40% by 2030 under its new CEO, Murray Auchincloss, as the company seeks new opportunities in Iraq and Kuwait.
Equinor Invests in Wind: Norway’s Equinor (NYSE: EQNR) has acquired a $2.5 billion stake in Denmark’s Ørsted, a wind farm developer, becoming the second-largest shareholder with a 9.8% share.
Shell Wins Gas Block in Trinidad: UK-based Shell (LON: SHEL) has won the bid for the shallow water Block U in Trinidad and Tobago, beating BP and EOG Resources for the gas-rich area.
Oil Prices Under Pressure Despite Middle East Tensions
Oil markets were on edge over the weekend and into the early week, with traders expecting a response from Israel to Iran. However, no major supply disruptions occurred, causing both WTI and Brent crude to decline. Brent crude dropped below $78 per barrel. Without a significant strike on Iranian oil infrastructure, prices may fall further as Libyan production resumes and Chinese demand remains weak.
China’s Crude Oil Imports Disappoint
China’s crude oil imports averaged 10.8 million barrels per day (b/d) in September, a drop of over 500,000 b/d from August, according to Kpler data. Despite promises of economic stimulus, China’s buying activity remains sluggish.
Europe’s Hydrogen Pipeline Delayed
Europe’s ambitious cross-border hydrogen pipeline between Denmark and Germany has been postponed by three years to 2031. Industry interest in booking long-term capacity has been lackluster, further delaying the project.
Global Energy Highlights
Guyana’s Oil Bidders: A total of 27 bidders, including ExxonMobil, Chevron, BP, and Total, have applied to market Guyana’s share of oil from the Exxon-operated Stabroek block, which produces 33 shipments per year.
Libya’s Oil Production Recovers: After a month-long blockade, Libya’s oil production is rebounding. Output has reached 1.067 million b/d, approaching its peak level of 1.2 million b/d, as most wells have resumed operations.
Norway’s Oil Projects See Cost Surge: Norway’s 2025 budget revealed skyrocketing costs for upcoming oil projects. The Johan Castberg project’s costs have risen to $8.1 billion, up from $4.6 billion, while Aker BP’s Yggdrasil project now costs $12.6 billion.
Hurricane Milton Spurs Platform Shutdowns: Chevron (NYSE: CVX) has temporarily shut down its Blind Faith platform, which produces 65,000 b/d, as Hurricane Milton approaches. The platform is located 150 miles southeast of New Orleans.
Rio Tinto Eyes Lithium Expansion: Australian mining giant Rio Tinto (NYSE: RIO) is in talks to acquire Arcadium Lithium (NYSE: ALTM), which was formed through the recent merger of Allkem and Livent, in a deal worth $4-6 billion. Low lithium prices are driving this expansion.
Chevron Sells Canadian Assets: Chevron (NYSE: CVX) has agreed to sell its assets in Canada’s Athabasca Oil Sands and Duvernay Shale to Canadian Natural Resources (TSO: CNQ) for $6.5 billion. These assets produced 84,000 b/d of oil equivalent in 2023.
Colombia’s Offshore Gas Discovery: In partnership with Petrobras (NYSE: PBR), Colombia’s state oil company Ecopetrol (NYSE: EC) announced the discovery of a massive 6 trillion cubic feet (TCf) gas field, more than doubling the country’s current gas reserves of 2.4 TCf.
US Jet Fuel Demand Hits 23-Year High: US airline consumption of jet fuel reached 1.69 billion gallons in August, the highest for the month in 23 years. Jet fuel prices averaged $2.47 per gallon, according to the US Bureau of Transportation Statistics (BTS).
Panama’s Copper Industry in Limbo: Panama’s government will decide the future of the Cobre Panama copper mine in 2025. The mine, responsible for 5% of global copper production, has been shut down since the country’s Supreme Court ruled First Quantum’s contract unconstitutional.
Kazakhstan Votes for Nuclear Power: Kazakhstan held a referendum on building new nuclear power plants, with 71% of voters supporting the move. The country, which is the world’s largest uranium miner, will soon begin developing additional nuclear capacity.
Russia Considers Diesel Export Restrictions: The Russian government is debating whether to ban companies that do not produce diesel from exporting it. Diesel exports have averaged 920,000 b/d so far in 2024.
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