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Global Oil Markets Hit by Weakening Demand and Resurgent Supply Outlook
The global oil market has been hit hard over the past week, with crude oil futures tumbling more than 6% as concerns over weakening demand and a resurgent supply outlook weigh on sentiment. The decline comes despite China's recent efforts to boost the market through negotiations over tariffs with the US. With OPEC+ cuts set to continue, Saudi Arabia is signaling its readiness to handle a prolonged period of lower prices.
China Offers Lifeline to Oil Markets
In an effort to prop up the oil markets, Beijing has begun evaluating a proposal from the Trump administration to hold negotiations over tariffs. This move comes as US-Iran nuclear talks have seemingly hit a temporary impasse, and ICE Brent is set to start May trading with a second consecutive weekly decline. The price of Brent crude is currently trading slightly above $61 per barrel.
Saudi Arabia Seeks Lower Oil Prices
In a bid to regain lost market share and stymie non-OPEC+ production growth, Saudi Arabia has been signaling its intent to continue unwinding output cuts. Riyadh is ready to handle a prolonged period of lower prices after five years of OPEC+ cuts. This move is seen as an attempt to counter the growing influence of US shale oil production.
Texas LNG Project Hit by Deadly Incident
The 13 million ton per annum (mtpa) Port Arthur LNG project, developed by Sempra, has been suspended following a scaffolding accident that killed three people and injured two others. The incident occurred at 2 am on [insert date], according to contractor Bechtel.
Pemex Posts Another Quarterly Loss
The world's most indebted oil company, Mexican state oil firm Pemex, has posted another quarterly loss after its Q1 performance showed a $2.1 billion shortfall. Pemex attributed the disappointing results to falling production from mature wells and delays in new well completions.
US Ethane Exemption Provides Relief
Chinese petrochemical producers have been informed that ethane will be exempted from Beijing's 125% tariff on all US goods, providing some relief as the US accounts for 99% of global ethane trade. This move is seen as a response to the declining trade between China and the US.
Scotland No Longer Has a Refinery
Scotland's only refinery, the 150,000 barrel per day (b/d) Grangemouth plant operated by Petrochina and Ineos, has ceased all crude oil processing this week. The plant will be refurbished into an import terminal as plans for a biorefinery never really took off.
Ukraine Signs US Minerals Pact
Kyiv signed the oft-mulled minerals deal with the Trump administration following two months of hesitation. This pact gives the US preferential access to Ukraine's energy resources, including rare earth metals and natural gas.
Spain Mulls Nationalization of Grid Operator
Alerted by the possibility of another nationwide blackout, Spain's deputy Prime Minister has suggested that Madrid fully take over the Mediterranean country's power grid operator REE, currently 20% owned by the state with the rest held in private hands.
Refiners Warn of California Gasoline Shortages
PBF Energy chief executive Matthew Lucey warned that the closure of P66's Los Angeles refinery and Valero's Benicia plant would create a gasoline shortage in California. The state could lose 17% of its current capacity, equivalent to around 250,000 barrels per day.
China Courts Europe as Its Next UCO Market
Chinese producers of used cooking oil (UCO) are targeting Europe as their next market after Trump's 145% tariff on China killed any market economics in supply. Chinese producers aim to maintain steady export flows and take advantage of a growing demand for biofuels in the region.
Chevron-Exxon Arbitration Set to Begin
The Paris-based International Chamber of Commerce has scheduled the first hearing of ExxonMobil's arbitration dispute against US peer Chevron, claiming it has right of first refusal over Hess' Guyanese assets. This move is seen as an attempt by ExxonMobil to protect its interests in the region.
Malaysia Turns Against Petronas
Malaysia's Sarawak state warned national oil firm Petronas that its Miri crude oil terminal operates without a regulatory license and questioned its distribution rights. This move endangers Petronas' revenues as the state is home to 60% of Malaysia's reserves.
Asia Starts to Pull LNG Cargoes Away from Europe
Four LNG carriers that were en route to Europe have changed course to Asia over the past week, according to media reports. The decline in European gas prices and the return of Asia's gas premium led sellers of US LNG to look eastward again.
Shell Plays Down Talk of BP Takeover
Wael Sawan, chief executive of UK-based energy major Shell, said he would rather ramp up the company's share buyback than launch a takeover bid over peer major BP. This move comes after Q1 net profit fell 28% year-over-year to $5.6 billion.
Conclusion
The global oil market continues to be hit by weakening demand and a resurgent supply outlook, with crude oil futures tumbling more than 6% in the past week. China's recent efforts to boost the market through negotiations over tariffs have provided some relief, but OPEC+ cuts are set to continue. Saudi Arabia is signaling its readiness to handle a prolonged period of lower prices as it seeks to regain lost market share and stymie non-OPEC+ production growth. The Texas LNG project has been hit by a deadly incident, while Pemex continues to post quarterly losses. US ethane exemption provides relief for Chinese petrochemical producers, but the Scotland refinery closure and Ukraine-US minerals pact have significant implications for the global energy market.