Are we starting to see a crackdown on Iranian oil exports? Finally.
Oil prices are trying to break higher on the backs of another rate cut in China and ongoing and rising geo-political risk factors. The market is also preparing for what should be yet another crude oil and product fall in tonight’s American Petroleum Institute (API) report as the drumbeat of war is banging more loudly.
Secretary of State Antony Blinken is back in Israel to try to plead for a ceasefire between Israel and Hamas, something that will not happen unless Hamas releases all hostages and lays down their arms. He also may want to apologize for the leak of the Israeli war plans, assuming that it was not done on purpose.
The possibility of a longer-term war between Israel and Iran is very real. It was reported that retired IDF Brig. Gen. Amir Avivi told ABC News that Israel’s upcoming strike on Iran will signal the “start of a war” and is expected to last “many months.”
The hottest barrel of oil in the world has been Malaysian oil. In fact, it’s so hot that countries are buying more barrels than the country can ever produce. The Malaysian crude oil scam to launder Iranian and Russian oil may be finally coming to an end which would be another supportive factor for oil. OIL PRICE reported that:
“The United States is monitoring ship-to-ship transfers involving tankers from shadow fleets in Southeast Asia, which pose safety and environmental hazards, Geoffrey Pyatt, U.S. Assistant Secretary for Energy Resources, told Bloomberg on Tuesday.”
“A significant consideration for the maritime states of Southeast Asia is the risks that come from some of these shadow fleet operations, where you have older vessels, often with questionable insurance coverage and uncertain safety records,”
Pyatt told Bloomberg on the sidelines of an energy conference in Singapore. Iran, Venezuela, and most recently, Russia, have resorted to using the so-called dark, or shadow fleet, to ship their sanctioned oil to customers willing to take the risk of doing business with them and paying less for the cheaper sanctioned crude.
China demand and OPEC Unity seems to be the key bearish argument for crude. The bears say ignore current record oil demand and instead focus on weak oil demand prospects from China and expectations that the OPEC tapering of production cuts will lead to a supply surplus. Well, perhaps, but then why has China been drawing down its oil inventories and why then are they raising their quota?
Reuters reports that China has set the crude oil import quota for non-state-owned firms at 257 million metric tons (5.14 million barrels per day) for 2025, the commerce ministry said on Tuesday. The figure is higher than the 243 million tons quota set by the world’s largest oil importer for this year.
The increase comes as China’s newest refiner Shandong Yulong Petrochemical started one of its two 200,000-barrels-per-day crude units in late September. The independent refiner requires a crude import quota to buy oil. The first batch of import quotas will be given to the qualified applicants by 2024-end.
Later, the ministry will add and adjust quotas based on companies’ demand and new capacity, according to a statement from the commerce ministry. Companies with no import record in recent two years will not be granted any quotas, the ministry said.
The other point about OPEC is that anybody who underestimated OPEC's resolve has been rung up until this point. While there definitely has been some cheating within the OPEC cartel it’s very clear that the over-producers have been reigning in that overproduction. I think people are overestimating the amount of oil that is going to come back online with the tapering of production cuts and based on global oil inventories, we’re going to need the extra oil.
We also need Gulf of Mexico oil. In a win for oil sanity, it is being reported that a federal judge has given the National Marine Fisheries Service five more months to complete a new biological opinion on protecting species in the U.S. Gulf of Mexico, averting what the oil industry had warned was a potential halt of new and existing oil and natural gas production and activity in the region.
Natural gas should see a 55 injection this week and the market is focusing on the possibility of a cold November. An interesting story about natural gas was in Bloomberg. They wrote:
“The Climate Scientist Who Leads Mexico Is Betting on Decades of Fossil Fuel.”
They say that “A new natural gas pipeline could help reduce poverty in the underdeveloped Yucatan — but it poses a challenge to Sheinbaum’s push to cut emissions. Under the crystalline waters off southeast Mexico, workers are laying a pipeline that President Claudia Sheinbaum is counting on to underpin an economic boom and lift millions from poverty.”
The $4.5 billion Southeast Gateway Project will deliver up to 1.3 billion cubic feet of natural gas per day from Texas to the Yucatan Peninsula when it’s completed next year, fueling power plants and a proposed trans-continental rail corridor intended to rival the Panama Canal. But the project Sheinbaum inherited from her predecessor, Andres Manuel Lopez Obrador, also threatens to undercut one of her other key goals: cutting Mexico’s greenhouse gas emissions. A good read.