2024.08.02

US Shale Producers Boost Oil Output Forecasts Despite Pledging Restraint

Several leading US shale producers, including EOG Resources, Coterra Energy, and Civitas Resources, have increased their 2024 oil production forecasts, driven by stronger-than-expected well performance in the Permian Basin. This trend suggests that national oil supply could surpass initial growth expectations, potentially challenging OPEC’s efforts to manage global prices. Despite a decrease in drilling rigs, improved efficiencies are enabling higher output without significant increases in spending. The combination of increased US production and OPEC’s planned output revival could lead to an oversupplied market and lower prices if global demand does not rise accordingly.

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Trans Mountain Pipeline's Decent July Performance

In July, the Trans Mountain pipeline in Canada’s West Coast operated its second full month since expansion, with 19 Aframax ships loading approximately 330,000 barrels of crude oil per day. This figure is slightly lower than June’s performance. The pipeline’s operations are significant for global oil flow and freight rates and are integral to the Canadian government’s strategy to sell the line for $24.84 billion (C$34 billion). Analysts note that despite weaker demand from markets like China, the export levels are solid. The pipeline loaded around 350,000 barrels per day in June on Aframax vessels, which typically carry about 550,000 barrels each and sailed mostly to the U.S. West Coast and China. One tanker marked a first by heading to South Korea with a cargo of 550,000 barrels. U.S. refineries are testing heavy crude from Trans Mountain while considering transportation costs with different vessel sizes. Top U.S refiners were major buyers in July, with Marathon Petroleum’s Los Angeles Refinery and Valero Energy’s Benicia refinery among typical destinations. TMX is running close to capacity at an estimated 80% fullness and is expected to reach around 700,000 barrels per day by year-end.

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Scorpio Tankers Reassesses Scrubber Investments Amid Narrowing Fuel Spreads

Scorpio Tankers, a major adopter of exhaust-gas scrubbers, is reconsidering its investment in the technology due to the current narrow fuel spreads. Cameron Mackey, Scorpio’s COO, explained that while scrubbers were profitable when the spread between low-sulphur and high-sulphur fuel was wide, the current and forecasted narrow spreads make them less economically viable. Despite the initial success and significant returns from scrubbers, the company now sees limited financial benefits in continuing their use. This shift reflects broader market trends and regulatory considerations, as well as ongoing debates about the environmental impact of scrubbers.

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Colombia's oil and gas investment to fall 7% as country shifts away from fossil fuels as it transitions away from oil

Investment in Colombia’s oil and gas production is expected to decrease by 7% to $3.5 billion in 2024, according to the Colombian Petroleum Association (ACP). This decline aligns with President Gustavo Petro’s focus on reducing the country’s reliance on fossil fuels. Despite this, the ACP forecasts a 5% increase in exploration investment, reaching $1.1 billion, with significant funds directed towards gas exploration. The ACP also projects that Colombia’s oil production will average between 780,000 and 790,000 barrels per day, while gas production could reach 1.02 billion cubic feet per day. The government is urged to provide incentives to boost exploration and production, including lower pipeline tariffs and security guarantees.

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Oil prices fall despite unrest in the Middle East

Oil prices fell by over $1 on Thursday as global supply remained stable despite fears of a broader Middle East conflict following the assassination of a Hamas leader in Iran. Investors shifted their focus back to demand issues. Previously, oil prices had surged by about 4% due to heightened concerns over potential regional instability after the killing of Hamas leader Ismail Haniyeh in Tehran and Hezbollah’s top military commander in Beirut.