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🛢️ This Week’s Oil Market Updates:

Brent and WTI futures boasted another week of gains after Saudi Arabia and Russia extended supply cuts through the end of the year.

Both benchmarks finished the week ~2% higher, with Brent picking up 0.8% to $90.65 and WTI futures rising 0.7% to $87.51 on Friday.

On Tuesday, the Saudi Press Agency surprised markets with a statement that the country will continue its 1 million barrel per day (bpd) voluntary cut until December. Total Saudi output will hold at 9 million bpd.

Russia’s Deputy Prime Minister Alexander Novak followed the Saudi statement with Russia’s plans to prolong its 300,000 bpd export cut for the same 3-month period.

Other supply-side updates this week include the first increase in US oil rig counts since June and reports from Chevron saying the firm plans to increase capital expenditures in the Permian Basin by 25% in 2024.

Baker Hughes Co.’s rig tally showed US oil rigs increased by one to 513 while US gas rigs decreased by one to 113.

On Wednesday, Chevron raised its 2024 Permian Basin capex forecast from $4 billion to $5 billion and expects to record higher output on improved efficiency.

On the demand side, data released Thursday showed China’s August imports and exports extended their slide on weak consumer spending and slowing overseas demand for manufactured products.

The dollar added modest headwinds to oil’s gains after rallying for the 8th consecutive week on robust US economic data.

Quick Shots:

📜 Chevron’s Australia LNG Strikes

Workers at Chevron’s Australian LNG facilities went on strike Friday after mediation talks ended without an agreement.

Chevron’s Australian plants produce roughly 5.1% of global LNG supplies, mainly exporting to Asian facilities in Japan, South Korea, China, and Taiwan.

Unions plan to escalate the strike, beginning with bans on overtime work and daily work stoppages. If a deal isn’t finalized within two weeks, union representatives say they will expand to a total strike.

Australia was the world’s largest exporter of LNG last year, with shipments of roughly 80.9 million metric tons (~4.18 billion mmBTUs).

🔥 Russia’s Gas Price Disparity

While the EU officially aims to ween off Russian fossil fuels by 2027, LNG imports are heading in the opposite direction.

In the first half of the year, Spain became the second-largest buyer of Russian LNG. July imports of Russian super-cooled fuel increased 65% YOY, pushing the total share of Russian gas to 28% of Spain’s overall imports for the same period.

EU countries have imported approximately 40% more Russian LNG in the first seven months of 2023 compared to the same period before the Ukraine conflict in 2021. This week, EU officials said the bloc has no short-term plans to ban Russian LNG over fears of disrupting markets.

On Friday, Bloomberg reported that Russia expects to sell pipeline natural gas to Europe at a 77% premium to its Chinese deliveries. Sales to European buyers for the next three years will average $481.7 per 1,000 cubic meters compared to $271.6 for China.

Last year, Russia sold pipeline natural gas at a steeper disparity of $983.8 per 1,000 cubic meters to Europe versus $277.1 to China.

⚡ German Parliament Passes Heating Reform

On Friday, Germany’s lower parliament passed reforms to phase out oil and gas heating systems.

The policy requires new installations of heating systems to use more than 65% renewable energy in areas that submit a binding municipal heating plan.

Binding heating plans are expected in 2026 for small districts and 2028 for larger ones.

Officials say the bill will cut approximately 40 million metric tons of carbon emissions by 2030

🏭 Australia Considers Delaying Largest Coal-Plant Closure

Australian officials are discussing plans to delay closing the nation’s largest coal-fired power plant over concerns that renewable electricity generation and storage capacity will fall short of growing energy demand.

Origin Energy Ltd.’s Eraring plant is scheduled to close in 2025 as subsidized solar and wind energy sources erode profitability.

Last month, the Australian Energy Market Operator cited energy reliability risks beginning in 2025 as a result of closing 62% of the coal-powered generation facilities that provide the majority of Australian electricity.