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🛢️This Week’s Oil Market Updates

Oil prices extended gains for the seventh consecutive week after reports of tightening supplies and record global demand forecasts from the International Energy Agency (IEA).

On Friday, Brent futures climbed 0.5% to $86.81, and WTI futures matched with a 0.5% gain to $83.19.

This week’s updates include new economic data out of China, rig counts from Baker Hughes Co,  and reports from the IEA, OPEC, and the Energy Information Administration (EIA).

Friday’s report from the IEA said supply cuts from OPEC+ could force a sharp decline in crude inventories through 2023. The IEA forecasted that August could surpass June’s record global oil demand of 103 million barrels per day (bpd).

The IEA lowered its 2024 demand growth forecast by 150,000 bpd to 1 million bpd. The IEA cites headwinds like EV adoption and sluggish macroeconomic conditions for the decrease.

The IEA’s 2024 demand forecasts starkly contrast with OPEC’s monthly report released on Thursday. OPEC maintained its previous oil demand figures, expecting growth of 2.44 million bpd in 2023 and 2.25 million bpd in 2024.

OPEC raised its world economic growth forecasts by 0.1% for 2023 and 2024 to 2.7% and 2.6%, respectively.

OPEC’s report confirmed that Saudi Arabia followed through on its pledge to voluntarily cut production by 1 million bpd in July. Saudi Arabia reported output cuts of 943,000 bpd for the month, maintaining total output of 9.013 million bpd. Saudi Arabia extended its voluntary cut through August and September.

The EIA released its monthly report on Tuesday, and the administration forecasts that US crude production will rise by 850,000 bpd to a record of 12.76 million bpd in 2023. The EIA expects crude production to increase by 330,000 bpd to 13.09 million bpd in 2024. The previous record was set in 2019, with output reaching 12.3 million bpd.

The EIA’s report acknowledged Saudi Arabia’s extended voluntary cuts and increased global demand as driving factors for oil’s continued price gains through 2H23. This month’s EIA report reversed a previous forecast of a supply deficit in 2023 based on increased output from non-OPEC OECD producers.

Other Oil Market Updates:

This week’s Baker Hughes Co rig count held operational US oil rigs steady at 525.

Economic data from China showed a 14.5% decrease in overall exports in July, a larger-than-expected drop from June’s decline of 12.4%. China’s July oil imports fell 18.8% MoM to 10.29 million bpd – the lowest reading since January but 17% above July 2022.

⚛️ Repeating Nuclear Fusion

Last Sunday, scientists at the Lawrence Livermore National Laboratory announced a successful repeat of December’s first-ever net-energy-gain nuclear fusion reaction.

The researchers said their July 30th experiment resulted in a higher energy yield than December’s experiment. The fusion reaction produced 3.15 megajoules of energy from a laser’s 2.05 megajoules.

🏭 Department of Energy Awards DAC $1.2B

On Friday, the Department of Energy (DOE) announced over $1 billion in federal grants for two direct air capture (DAC) carbon removal projects – the first funding from the $3.5 billion in grants that the DOE received from Congress for regional DAC hubs.

DAC technologies harness liquid solvents or solid sorbents to react with carbon dioxide, pulling CO2 out of the air for underground storage or use in products like cement.

The DOE selected Climeworks-Battelle-Heirloom Carbon Technologies’ Project Cypress in Louisiana and 1PointFive’s South Texas DAC Hub. 1PointFive is a subsidiary of Occidental Petroleum.

In addition to funding the two DAC projects, the DOE allocated grants for carbon removal credits and DAC feasibility studies.

The DOE set a cost target of less than $100/metric ton CO2e for DAC before 2030.

🏡 Texas Power Demand Hits Record (4x This Week)

The Electric Reliability Council of Texas (ERCOT) reported record-breaking power demand throughout The Lone Star State four times this week.

Monday broke the previous power demand record of 83,593 megawatts (MW) set on August 1st after hitting 83,854 MW. ERCOT reported new records on Wednesday (83,961 MW) and Thursday (85,435 MW), and the operator forecasted another demand record of 86,621 MW on Friday.