Oil prices continued their downward trend on Tuesday morning, with West Texas Intermediate (WTI) crude futures dropping 4.5%. This decline follows growing bearish sentiment among hedge funds and money managers. According to recent data from the Commodity Futures Trading Commission (CFTC), these investors have become the most pessimistic about crude oil since the CFTC began tracking market positions. Net long positions for both Brent and WTI were only 139,242 contracts for the week ending September 3.
At the annual Asia Pacific Petroleum Conference (APPEC) in Singapore, Ben Luckock, Head of Oil Trading at Trafigura, predicted that oil prices could soon fall into the $60s, citing weakened demand from China.
In response to the ongoing price decline, Citi has lowered its 2025 oil price forecast to $60 per barrel. This adjustment has led other financial institutions to revise their outlooks as well. Morgan Stanley and Bank of America have both reduced their forecasts to $75 per barrel.
Crude oil futures could potentially enter a contango market, where future prices are higher than current prices. This is indicated by the shrinking spread between the November 2024 and November 2027 Brent contracts, which has decreased from $9 per barrel last month to just $2 per barrel.
Market Movers:
A fire at Mexico’s largest refinery, the Salina Cruz refinery, operated by Pemex, resulted in the deaths of two workers. The blaze was triggered when a truck collided with waste that surfaced after heavy rain overwhelmed the sewers.
Pembina Pipeline of Canada has agreed to purchase infrastructure assets in Alberta’s Montney basin from Veren for $300 million, continuing the trend of mergers and acquisitions in the midstream sector.
ExxonMobil has reportedly decided against acquiring a portion of Galp Energia’s stake in the Mopane offshore discovery in Namibia, which is believed to hold up to 10 billion barrels of oil equivalent.
Additional Developments:
Despite the formation of Tropical Storm Francine in the Gulf of Mexico, oil prices have not reversed their decline. ICE Brent fell below $70 per barrel, reaching its lowest level since late 2021. Concerns about oversupply and a weakening economic outlook in China continue to pressure prices.
OPEC has revised its global oil demand growth forecast downward for 2024 and 2025. The forecast for this year has been adjusted to 2.03 million barrels per day, while next year’s forecast is now 1.74 million barrels per day.
Shell has halted drilling operations at its Perdido and Whale offshore platforms in the Gulf of Mexico in response to Tropical Storm Francine, which is approaching Texas.
The American Petroleum Institute has warned that delays in assessing protections for endangered species in the Gulf of Mexico could disrupt offshore oil and gas operations.
Hungary’s MOL has secured an agreement to maintain the supply of Russian oil via the Druzhba pipeline, shifting the delivery point from its border to the Belarus-Ukraine border.
The Biden Administration has accelerated the repurchase of oil for the Strategic Petroleum Reserve (SPR), with the Energy Department purchasing an additional 3.4 million barrels to be delivered alongside previously purchased barrels in early 2024.
Russian oil tankers are increasingly avoiding the use of Danish pilot services while navigating the Danish Straits, raising the risk of oil spills.
India’s Coal India is investing $8 billion to develop coal-fired power plants near its mines, adding 4.7 gigawatts of capacity over the next six years as part of a larger 88 gigawatt expansion.
Italy is considering lifting its ban on nuclear power and may establish a new company to build small modular reactors, led by Enel, with legislation expected to pass next year.
The UAE’s ADNOC has signed a 15-year deal with India’s IOC to supply up to 1 million metric tonnes of LNG per year starting in 2028.
China has launched a one-year anti-dumping investigation into Canadian canola imports, a response to recent trade actions by Ottawa against Chinese products.
QatarEnergy has named its new LNG carrier, built by Hudong-Zhonghua shipyard, after former Exxon CEO Rex Tillerson. The vessel will support Qatar’s North Field expansion.
Colombian oil producer Ecopetrol has faced board resignations following its decision not to acquire a 30% stake in CrownRock Energy, part of Occidental’s $12 billion acquisition.
India has introduced a draft policy to convert a third of its heavy-duty truck fleet to LNG over the next five years, though challenges such as a lack of infrastructure and high costs may hinder progress.