Oil prices continue to face challenges, with Brent crude currently just above $71 per barrel. This decline follows a significant sell-off on Monday, driven by a sudden easing of tensions between Israel and Iran. As a result, many market participants canceled call options they had purchased to hedge against potential price spikes.
In early October, following Iran’s attack on Israel, trading in call options surged dramatically, tripling the average from September to 129,000 contracts per day. However, the heightened demand for these options has diminished, and hedge funds have reduced their net positions in West Texas Intermediate (WTI) futures for four consecutive weeks, returning to early September levels of 113,773 contracts.
Open interest in ICE Brent and WTI contracts remains low, with total positions at 4.08 million contracts. This represents a 5% decrease since market interest peaked in early June. In other industry news, mining giant Rio Tinto has halted operations at its Simandou iron ore project in Guinea after the death of a contractor, delaying progress on what is expected to be the world’s largest mining operation when production begins next year.
Portugal’s state oil company GALP has tempered expectations for an imminent farm-out of its Mopane offshore discovery in Namibia, stating that it will first complete a four-well appraisal program at the promising 10 billion barrel prospect.
Meanwhile, Malaysia’s Petronas plans to aggressively expand in Indonesia, focusing on developing the deepwater Bobara block and enhancing infrastructure in the East Java region.
Market Reactions to Israel’s Actions
On October 29, 2024, Israel executed a long-anticipated retaliatory strike on Iran. However, the response was less severe than expected, leading to a drop of $5 per barrel in ICE Brent futures during Monday’s trading. Although a recent solicitation for the U.S. Strategic Petroleum Reserve provided a brief boost, concerns about the macroeconomic landscape have again limited crude oil prices. Without a resurgence of conflict between Israel and Iran, the potential for price increases appears constrained.
In Russia, Gazprom reported a $3.2 billion net loss for January to September 2024, a stark contrast to a $4 billion profit during the same period last year. This loss occurred despite an 8% year-over-year increase in revenues.
The U.S. Department of Energy has announced plans for another round of SPR purchases, aiming to acquire up to 3 million barrels for delivery between April and May 2025. This could bring the total replenished volume to 58 million barrels, purchased at an average price of $76 per barrel.
Global Oil Production Trends
Mexico’s national oil company Pemex continues to see declines in crude output, which fell to a 45-year low of 1.452 million barrels per day in September, over 100,000 barrels per day lower than a year earlier. Further declines are anticipated due to planned cutbacks in upstream capital expenditures in Q4 2024.
QatarEnergy has made a significant move in Iraq’s solar energy sector, acquiring a 50% stake in the 1.25 GW Basrah solar project developed by TotalEnergies. This project aims to provide electricity to approximately 350,000 homes in southern Iraq by 2027.
In a warning to U.S. water supplies, JPMorgan Chase has highlighted concerns that the cooling needs of large data centers, driven by rising artificial intelligence demand, could strain water resources, potentially requiring up to 5 million gallons daily.
Assistance for Cuba and Renewed Exploration in Libya
In response to an acute energy crisis in Cuba, Mexico is sending a tanker with 400,000 barrels of oil. This comes as the island faces nationwide blackouts exacerbated by tropical storms, with Venezuela, a traditional ally, failing to deliver timely assistance.
Despite recent oil blockades in Libya, major European companies, including Italy’s ENI and the UK’s BP, are resuming exploration activities in the country after a hiatus since 2014.
In Russia, production at the Novatek-operated Arctic LNG 2 facility has been halted due to high inventory levels and restricted shipping options, following U.S. sanctions on its fleet. This shutdown affects 6.6 million tonnes per annum of capacity.
China’s PetroChina plans to close its largest refinery, the 410,000 barrels per day Dalian Petrochemical plant, in summer 2025 due to its proximity to the city center, while seeking to increase refinery operations elsewhere.
Recent legislative changes in New Mexico will restrict drilling within 2,250 feet of residential areas, educational institutions, and water bodies. This is expected to impact 15% of producing wells and reduce oil production by 5-6% starting in 2026.
Regulatory Challenges in Mali and Nuclear Developments in Japan
Mali’s military government has threatened to reclaim the Loulo mine from Barrick Gold once its permit expires in February 2026, accusing the company of financial misconduct.
Japan is preparing to restart the 796 MW Unit 2 of the Unagawa nuclear plant, which is situated near the epicenter of the 2011 Tohoku earthquake and tsunami. The government has spent 13 years retrofitting this unit for safety.
Finally, Houthi militias recently claimed to have targeted three ships in the Red and Arabian Seas, allegedly headed for Israel. However, two vessels were actually en route to Oman, while the third was traveling from Egypt to Shanghai.
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