Oil & Energy

Date Issued – 4th March 2024

Courtesy of?Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

OPEC+ Oil Production Cut Extension

OPEC+ agreed on Sunday to maintain its production cuts for an additional quarter, a move anticipated by the market, resulting in a subdued reaction with Brent crude at $83.72 and West Texas Intermediate at $80 per barrel early Monday. This extension of the 2.2-million-barrel-per-day reduction underscores OPEC+'s cautious approach to increasing supply, aiming for a gradual reintroduction. Notably, Russia announced an unexpected deeper cut of 471,000 barrels per day for the second quarter, potentially tightening the market further and prompting price increases. However, the current stability in oil prices is also influenced by geopolitical tensions, with the situation in Gaza being closely watched. Analysts highlight that both the strategic cuts by OPEC+ and the geopolitical uncertainties are contributing to a tightening supply and potential upward pressure on oil prices.

Exxon and Petronas Prolonged Offshore Exploration Ventures in Suriname

Exxon and Malaysia's Petronas are set to continue their gas exploration efforts off Suriname's coast, aiming to replicate the significant oil and gas finds seen in neighboring Guyana. Despite initial challenges, including a commercially unviable gas discovery in 2020 in Block 52, the companies are now focusing on the Sloanea-1 discovery with hopes of developing it into a commercial project. The plan includes drilling the Sloanea-2 appraisal well, with potential production starting by 2031, contingent on proving its commercial viability and securing a 10-year tax exemption from the start of production. This exploration extension reinforces the commitment of Exxon, Petronas, and Suriname's Staatsolie to unlocking Suriname's offshore potential, amidst ongoing successful oil discoveries by TotalEnergies and Apache in the adjacent Block 58.

UK Government to Prolong Windfall Taxation on Oil & Gas Sector

The UK is set to extend its windfall tax on energy company profits to 2029, as revealed by Reuters citing sources briefed on the matter. This decision, expected to be announced by Finance Minister Jeremy Hunt in his budget speech, follows industry concerns over the tax's impact on investment and employment in the oil and gas sector. Initially introduced in May 2022 and increased in the fourth quarter of the same year, the tax has significantly raised the fiscal burden on North Sea oil and gas producers. Despite industry pushback, the government argues the tax is a temporary measure tied to extraordinary profit margins, aiming to balance fiscal needs with the transition to cleaner energy.

Russia's Production Constraints and International Sanctions

Russia's shift to prioritize oil production cuts over exports in the upcoming quarter within the OPEC+ framework is attributed to anticipated lower refining capacity and the impact of sanctions on its crude exports. Initially committing to a 500,000 barrel per day (bpd) reduction in the first quarter of 2024, Russia has adjusted its strategy to include a substantial reduction in production, particularly in the second quarter, with a detailed plan to scale back by 471,000 bpd through varying proportions of production and export cuts across April, May, and June. This move likely reflects constraints from reduced refinery operations due to maintenance and damage from attacks, coupled with limited crude storage capacity, signaling a strategic adaptation to both domestic challenges and international pressures.

European Union Advocates for Global Climate Fund

The EU is exploring the potential of funding from the oil and gas sectors to bolster UN climate finance for developing countries, addressing climate change impacts. Ahead of the COP29 conference in Baku, this initiative signals a shift towards integrating private sector contributions alongside public funding, aiming for carbon neutrality by 2050. The move comes amid discussions on securing at least $1 trillion annually from developed economies for climate action in developing nations, highlighting the critical need for diversified financial sources to support global climate goals and assist vulnerable countries facing severe climate adversities.

UN Watchdog urges Financial Institutions to Invest in Nuclear Energy Initiatives

Rafael Mariano Grossi, head of the International Atomic Energy Agency, advocates for international development banks to update their policies and support nuclear power projects, highlighting a disconnect between these institutions and the evolving positive stance on nuclear energy among their government shareholders. With the World Bank having not funded nuclear initiatives since the 1950s due to stakeholder opposition, Grossi emphasizes the need for a shift in perspective, especially in light of recent global events that have reignited interest in nuclear power for energy security and climate goals.

At the COP28 climate summit, the U.S. and 21 other nations committed to significantly expanding nuclear energy by 2050, underscoring its importance in achieving net-zero emissions. This call for a nuclear renaissance comes as countries like Japan revisit nuclear power to ensure energy stability amid rising fossil fuel costs and the quest for sustainable energy solutions.

[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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