2024.08.07

EIA's lower outlook lower prices despite tight supply-demand balance

The U.S. Energy Information Administration (EIA) forecasts tighter supply and demand balances for U.S. oil markets this year while lowering its outlook for crude prices. The EIA increased its 2024 U.S. oil demand forecast by 100,000 bpd to 20.5 million bpd and left the 2024 world oil demand growth forecast unchanged at 1.1 million bpd to 102.9 million bpd. U.S. oil production is expected to grow by 300,000 bpd this year to a record 13.23 million bpd, slightly lower than the previous forecast. Permian Basin production is set to grow by 10,000 bpd this month to 6.39 million bpd. The EIA lowered its outlook for West Texas Intermediate crude prices to $80.21 a barrel, down 2.2% from the prior forecast, amid recent sell-offs due to economic concerns. Oil markets fell to their lowest level since January but were up slightly on Tuesday. Brent futures are expected to rise to between $85 and $90 by year-end due to OPEC+ production cuts. The EIA also cut its 2024 U.S. natural gas production forecast to 103.3 bcfd and anticipates 2025 production at 104.6 bcfd. Consumption forecast for next year was unchanged at around 89.2 bcfd.

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Israel Imposes First-Ever Shipping Sanctions on Iranian Oil Tankers

Israel has ordered the seizure of 18 tankers allegedly involved in selling Iranian oil to finance militant operations. The measures target vessels involved in covert ship-to-ship oil transfers with a US-sanctioned tanker off Syria’s coast. Overseen by Hezbollah’s Muhammad Qasir, the operation exported Iranian crude for refining in Syria, with refined oils transferred to smaller tankers for final delivery. The US sanctioned the Jasmine tanker in 2019, necessitating these operations. Amid regional tensions, Israel braces for potential attacks following recent killings of senior Hezbollah and Hamas officials. Eight tankers were blacklisted post-October 2023, with seizure orders on 10 more vessels revealed Tuesday. The targeted vessels include small product tankers and three VLCCs, mostly over 20 years old.

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Expanded Trans Mountain Pipeline Fails to Narrow Canadian Oil Discount

The Trans Mountain oil pipeline expansion (TMX) aimed to reduce the discount on Canadian oil versus U.S. crude. However, three months after starting operations, the price differential has widened. Analysts had expected the differential on Western Canada Select (WCS) versus U.S. crude to narrow due to the additional 590,000 barrels per day (bpd) of export capacity from TMX. Instead, WCS is trading around $15 a barrel below West Texas Intermediate (WTI) oil, compared to $11.75 a barrel under U.S. crude on May 1, the first day of TMX’s commercial operations. Factors such as increased competition from Mexican heavy crude imports, U.S. refinery outages, and weak demand from China have contributed to this outcome. Despite these challenges, company executives remain optimistic that the WCS discount will narrow in the coming months.

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Transpetro Prepares Tender for 21 Newbuildings

Brazilian tanker owner Transpetro is preparing tender papers for 21 newbuildings as part of its TP 25 expansion and renewal program, commemorating its 25th anniversary. This follows a tender for four handysize clean product tankers, inviting international and Brazilian yards. Plans include tenders for gas carriers and medium-range vessels. Transpetro, led by Sergio Bacci,  has a fleet of 36 Brazilian-built vessels, including six LPG carriers and product and chemical carriers. But the company also faced challenges like delayed deliveries, bankruptcies, and corruption scandals. Next tenders will be published late this year or in 2025.

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Fitch Downgrades Dangote Industries to B+

Fitch Ratings downgraded Dangote Industries Limited’s (DIL) credit rating to B+ and placed it on ratings watch negative due to liquidity concerns and challenges in raising funds. DIL, which operates Africa’s largest oil refinery and controls Dangote Cement, has seen significant liquidity deterioration, underperformance, and impacts from naira devaluation. The naira’s devaluation in 2023 led to a 2.7 trillion naira ($1.74 billion) foreign exchange loss for Dangote. The company faces a mismatch between dollar-denominated debt and naira revenue. The oil refinery operated at 50% capacity in the first half of the year, and the fertilizer business was affected by inadequate gas supply. Fitch expects Dangote’s cement margins to drop further this year due to limited ability to pass on higher costs and soft demand.