Oil ricochets back
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Oil plummets on dollar rise and inventories, GOM hurricane rescues prices
Steve Sutherlin Petroleum News
Crude futures plummeted in early European trading Nov. 6 as the U.S. dollar firmed up in the wake of the Nov. 5 presidential election, but oil prices came roaring back after U.S. markets opened, to deliver a small loss.
Alaska North Slope crude pared away 36 cents to close at $74.35, as West Texas Intermediate trimmed 16 cents to close at $71.83 and Brent fell 35 cents to close at $75.18.
The U.S. dollar on Nov. 6 sprang to the highest level seen since September 2022, taking oil prices down by more than $2.00. Crude -- priced in dollars -- becomes more expensive for buyers that must exchange foreign currency to buy it, which exerts downward pressure on its price.
Later in the day, the U.S. Energy Information Administration reported a bearish build in U.S. commercial crude inventories for the week ending Nov. 1, up 2.1 million barrels from the previous week to 427.7 million barrels -- 5% under the five-year average for the time of year.
Analysts polled by Reuters had on average expected inventories to rise by just 1.1 million barrels.
Total motor gasoline inventories rose by 0.4 million barrels for the period to 211.3 million barrels, 2% below the five-year average for the time of year, the EIA said. Distillate fuel inventories jumped 2.9 million barrels to 115.8 million barrels, 6% below the five-year average for the season.
Hurricane Rafael looms The bearish effects of the supply build and the dollar were held in check however as Hurricane Rafael intensified into a category 3 hurricane, prompting a shut-in of some 17% of U.S. Gulf of Mexico crude production -- 304,418 barrels per day, the U.S. Bureau of Safety and Environmental Enforcement said at midday Nov. 6.
Personnel were evacuated from a total of 11 production platforms and one non-dynamically positioned rig, BSEE said, adding that one DP rig moved off location out of the hurricane's path as a precaution.
"There was an over-reaction to the election results, and that a Trump victory could have caused the U.S. industry to sort of drill itself into oblivion and cause a glut," said John Kilduff, partner at Again Capital in New York.
"But cooler heads have prevailed, and this market has a lot of problems on its hands," Kilduff was quoted in The Globe and Mail, adding that the Middle East hostilities are supportive because of potential supply disruption.
Trump's reelection could bring back sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, UBS analyst Giovanni Staunovo said.
ANS rose 47 cents Nov. 5 to close at $74.71, while WTI rose 52 cents to close at $71.99 and Brent rose 45 cents to close at $75.53.
Prices surged on Nov. 4, with ANS taking a $2.05 leap to close at $74.24, as WTI and Brent each jumped $1.98 to close at $71.47 and $75.08 respectively.
The price boost coincided with a Nov. 3 announcement by the Organization of the Petroleum Exporting Countries and its allied oil producing countries that the group would postpone a planned increase of oil production until the end of 2024.
ANS fell 56 cents Nov. 1 to close at $72.19, while WTI rose 23 cents to close at $69.49 and Brent slipped 6 cents to close at $73.10.
On Oct. 31, ANS jumped $1.06 to close at $72.75, WTI rose 65 cents to close at $69.26 and Brent rose 61 cents to close at $73.16.
ANS gained ground from Wednesday to Wednesday, up $2.66 from its close of $71.69 Oct. 30 to $74.35 Nov. 6.
On Nov. 6, ANS closed at a $2.52 premium over WTI, while Brent notched an 83-cent premium over ANS.
New wave of deepwater sanctioning Africa is at the cusp of a new wave of deepwater sanctioning activity, according to Rystad Energy.
This includes recent success in Namibia and progress in other discovered projects such as Area 4 in Mozambique, along with further phases of Baleine development in Cote d'Ivoire and several projects in Nigeria are driving deepwater interest, Rystad said in an Oct. 31 report.
"If project timelines follow through, Africa could see annual average deepwater resource sanctioning activity surpassing 2 billion barrels of oil equivalent in the 2025-29 period," Rystad said. "The continent hosts the potential to take the number above 3 billion boe."
From under-construction and pre-FID projects, Rystad Energy estimates call for some 3.5 million boe per day of new deepwater supply (pre-FID and under-construction projects) in Africa by 2035.
Rystad cautioned that deepwater projects would likely need more fiscal incentives and, in some cases, improvement in the security situation for associated facilities onshore. "Further, prioritization by Majors of the most lucrative projects in their portfolios, as they plan for an uncertain future, would also define the trajectory of such projects," Rystad said.
The contribution of deepwater in Africa's hydrocarbon production mix was between 20-25% last decade and is expected to increase to between 35-40% by 2035, the consultancy said.
Post-COVID-19, Africa has had a muted period of deepwater sanctioning activity, with the average annual deepwater resources sanctioned dropping to some 330 million boe, compared to an annual average of some 1,890 million boe in 2015-19, Rystad said.
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