Oil & Energy

Date Issued – 4th April 2024

Courtesy of?Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

PetroChina Rises to China's Second Top Market Position

PetroChina has risen to become China's second-largest company by market value, surpassing the Industrial and Commercial Bank of China, with a 42% increase in stock value since the year began, reaching a market cap of $244 billion. This surge is driven by higher oil prices and a recovery in domestic demand, leading to record profits and dividends. In 2023, PetroChina reported a net income of $22.3 billion, up 8.3% year-on-year, despite a 7% drop in total revenues due to lower international oil and gas prices. The company's strong performance reflects the broader resilience of the oil and gas sector, with CNOOC and China Merchants Energy Shipping Co. also seeing substantial stock gains.

China Increases Fuel Prices

China is set to raise gasoline and diesel prices by about $28 per ton, aligning with the recent surge in Brent and West Texas Intermediate crude oil prices due to global supply constraints and optimistic demand projections. This adjustment, announced by the National Development and Reform Commission, aims to ensure continuous fuel supply while navigating the energy transition, anticipating a peak in oil product demand by next year and a decline from 2030. Despite electric vehicle (EV) sales growth slowing down and intense domestic market competition, oil demand in China has reached record highs and remains strong, driven by economic revitalization.

Chevron-PDVSA Initiate Major Venezuelan Drilling Campaign

Chevron, in partnership with Venezuela's state oil firm PDVSA, has commenced their 2024 drilling campaign in the joint venture Petroindependencia, drilling the first of 17 wells aimed at increasing production. With U.S. authorization amidst sanctions relief for Venezuelan oil, this initiative targets boosting the joint venture's output significantly.

The drilling of well CMI14 in the Carabobo 2 Block of the Orinoco Belt represents a strategic move to enhance Chevron's production in Venezuela by 35% to around 250,000 barrels per day by the next year. This effort aligns with Chevron's expansion goals under U.S. guidelines against a backdrop of political challenges in Venezuela and considerations of the U.S. gasoline prices in light of upcoming elections.

Shell Contests Emissions Ruling's Impact on Energy Shift

Shell's appeal against the 2021 Dutch court ruling, which mandates a 45% emissions reduction by 2030, including Scope 3 emissions, was presented in court. Shell argued that the order undermines its contributions to the energy transition and is legally unfounded. They claimed that achieving such extensive reductions would necessitate severe measures and that their investments in low-carbon solutions already aim to exceed the court's demands.

The outcome of the appeal, with potential for further Supreme Court challenge, remains pending, as Shell modifies its 2050 net-zero ambition and adjusts its 2030 carbon intensity goal amidst a strategic pivot from clean power retailing.

SLB Secures $8-Billion Deal, Expanding Oilfield Services

SLB, a leading oilfield services provider, has agreed to acquire ChampionX Corporation in a strategic all-stock deal valued at $7.75 billion, signaling a consolidation wave in the energy services sector. ChampionX shareholders will receive 0.735 shares of SLB for each of their shares, ultimately owning about 9% of SLB post-transaction. Expected to close by the end of 2024, pending approvals, this deal aligns with SLB's strategy to enhance operational efficiency and support clients across all production stages.

CEO Olivier Le Peuch emphasized the commitment to energy demand, decarbonization, and shareholder value, announcing a plan to return $7 billion to shareholders by 2025. This acquisition reflects a broader industry trend towards consolidation, with over $100 billion in recent deals underscoring the sector's evolving landscape.

Europe Ends Winter with Record Gas Storage

Europe concludes the winter with unprecedented natural gas reserves, at 58.7% capacity, outpacing last year's record. This advantageous position allows for cautious LNG import management to avoid premature storage fill-ups. Despite historical concerns over shortages, particularly with reduced Russian exports, Europe now faces the challenge of surplus management. Analysts suggest a potential reduction in summer LNG imports to balance the market, with storage potentially hitting 90% by early August if current trends persist. However, natural gas prices remain 20% higher than last month, reflecting the dynamic energy landscape.

Russian Oil Exports Reach Yearly High

Russia's seaborne crude oil exports hit a yearly high in late March, surpassing commitments to cut exports under an OPEC+ agreement. Despite U.S. sanctions aimed at restricting Russia's oil trade, revenue from these exports rose to $1.9 billion in the final week of March, showing an increase in global trade dynamics.

As Russia plans to align its strategy more closely with OPEC+ by focusing on production cuts, the impact of sanctions is reflected in elevated freight costs, accounting for 6-8% of a barrel's price. Additionally, previously rejected shipments to India have been redirected to China, underscoring the adaptability of Russia's oil sector amidst geopolitical pressures.

Maduro's Russia Visit Confirmed

The upcoming visit of Venezuela's President Nicolas Maduro to Russia, confirmed by Kremlin spokesperson Dmitry Peskov, signifies a deepening of the strategic alliance between the two oil-rich nations amidst Western sanctions. This visit, aimed at reinforcing Russia-Venezuela ties, especially in the energy sector, follows a notable increase in bilateral trade, with plans being finalized around the leaders' schedules. The engagement underscores the countries' commitment to enhance cooperation, reflecting their strong partnership on the global stage.

[Disclaimer: This article provides financial insights & developments for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]

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