2024.11.18

Oil Prices Fall 2% on Weak Chinese Demand and Fed Rate Uncertainty

Oil prices dropped over 2% as weak Chinese demand and uncertainty over U.S. Federal Reserve rate cuts raised concerns.

China's crude processing fell 4.6% in October, highlighting its economic slowdown.

Global oil demand forecasts weakened, with oversupply expected by 2025.

Strong U.S. retail sales added to doubts about a December rate cut, leaving the market uncertain.

[SLOW] Oil Market

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US Drillers Cut Oil and Gas Rigs as Output Declines

For the first time in four weeks, U.S. drillers reduced the number of active oil and gas rigs by one, bringing the total count to 584, the lowest since September, according to Sources.

This represents a 6% year-over-year decline, reflecting a broader trend as rig counts fell 20% in 2023 due to lower prices, inflation-driven costs, and a focus on debt reduction over output growth.

Despite these cuts, U.S. crude output is projected to rise to 13.2 million barrels per day in 2024, while natural gas production is expected to decline slightly to 103.4 billion cubic feet per day, marking the first drop since 2020.

Lower gas prices earlier in the year also led producers to scale back drilling activities.

[SLOW] Oil Rig Count _ North America

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Shadow Fleet VLCC Facilitates Russian Oil Transfers Near Ceuta

The Seychelles-owned VLCC Atila has reportedly loaded 2 million barrels of Russian Urals crude from two shadow fleet suezmaxes, Sakarya and Cankiri, near Ceuta after a year-long pause in ship-to-ship transfers.

These tankers had earlier loaded crude from Russian ports and are operated by Hong Kong-based Prominent Shipmanagement. The Atila, flagged in Cameroon and valued at $31 million, is en route to Cape Town, likely for refueling before heading to eastern Asia.

This resumption follows a crackdown on such activities by Spanish authorities in 2023. The ship's ownership ties include Grat Shipping of Seychelles and Meridian Navi Shipmanagement of Kazakhstan. Its insurance details remain undisclosed.

Greek naval exercises have also disrupted transshipment of Russian oil in other areas, such as off Greece's coast.

[SLOW] Flow

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Russian Refineries Struggle Amid Losses and Closures

At least three Russian refineries—Tuapse, Ilsky, and Novoshakhtinsky—have cut operations or halted processing due to heavy financial losses driven by export restrictions, high crude costs, and soaring interest rates.

Struggling with drone attacks, sanctions, and falling profit margins, the refineries face reduced fuel exports and financial strain, potentially impacting Russia's state budget.

Smaller, low-tech plants are hardest hit, operating at losses and seeking government support.

Rising crude prices and high borrowing costs, alongside weak global diesel prices, have compounded challenges, with possible refinery closures expected early next year.

 [SLOW] Trade Flow - From Tuapse, Novorossiysk Product To World Monthly Trade Flow

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China's Refinery Output Declines for Seventh Consecutive Month

China's refinery throughput in October dropped 4.6% year-on-year, marking the seventh consecutive month of decline. Refiners processed 14.02 million barrels per day (bpd), down from both September’s 14.3 million bpd and October 2023's 15.05 million bpd.

The decline persisted despite increased operations at the newly launched Yulong Petrochemical complex and higher holiday travel demand. Contributing factors include shutdowns at smaller "teapot" refineries, bankruptcies, and maintenance closures.

For the first ten months of 2024, refinery throughput fell by 2% year-on-year. Meanwhile, domestic crude production rose 2.5% in October, and natural gas output expanded by 8.4%.

 [SLOW] Trade Flow - From China To World Monthly Trade Flow

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Russia Halts Gas Supplies to Austria via Ukraine

Russia will stop gas deliveries to Austria via Ukraine on Saturday as Kyiv ends its transit agreement with Gazprom.

Austria, once heavily reliant on Russian gas, has secured alternative supplies from Germany, Italy, and the Netherlands.

This move marks a further decline in Europe’s dependence on Russian energy, which previously met 40% of EU gas needs.

Meanwhile, Hungary and Slovakia continue to receive limited Russian gas through other routes.