BKR Rig Count | The total active drilling rigs in the United States increased by 7 last week, to 589. Oil rigs increased by 5 to 482, and gas rigs increased by 2 to 102. Rig count in the Permian Basin increased by 1 to 304 | Dec 6 | BKR NAM Rig Count
US Crude Inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by 5.1 MMbbl to 423.4 MMbbl (about 5% below the 5y average for this time of year). On the products side, gasoline increased by 2.4 MMbbl (4% below the 5y average). Distillate fuels increaesd by 3.4 MMbbl (5% below the 5y average). Total commercial petroleum inventories decreased by 4.7 MMbbl | Nov 29 | EIA Weekly Report
Opec+ delays oil production hikes after Trump wins US election | The group extended cuts of 2.2 million barrels per day of oil until the end of March, and those cuts will be phased out from September 2025 to September 2026. The producers also voted to extend an additional cut of 1.65 million bpd to December 2026 Dec 5 | Upstream
OPEC’s crude production increased for a second month as Libya continued to recover from a political feud that had shuttered its biggest oil field. The group pumped an average of 27.02 million barrels a day in November, up by 120,000 from the previous month, according to a Bloomberg survey. Libya, restoring output disrupted during a clash between rival governments, accounted for most of the addition | Dec 2 | Bloomberg
Syrian rebels seized the capital Damascus unopposed on Sunday after a lightning advance that sent President Bashar al-Assad fleeing to Russia after a 13-year civil war and six decades of his family's autocratic rule. In one of the biggest turning points for the Middle East in generations, the fall of Assad's government wiped out a bastion from which Iran and Russia exercised influence across the Arab world | Dec 8 | Reuters
The US sanctioned 35 entities and vessels Tuesday that it said play a critical role in the shadow fleet transporting illicit Iranian oil to foreign markets. The measures target oil tankers and ship management firms in several jurisdictions that are part of a network transporting Iranian oil overseas using false documentation, manipulation of vessel tracking systems, and constant changes to the names and flags of vessels, the Treasury Department said | Dec 3 | Bloomberg
Cuba is without power again after a failure at a key plant near the capital brought down the national electrical grid. The lights went out across the entire island of about 11 million people shortly after 2 a.m. on Wednesday when an automatic switch was tripped at the 330-megawatt capacity CTE Antonio Guiteras | Dec 4 | Bloomberg
European natural gas prices extended this week’s loss after the Kremlin changed procedures to pay for Russian gas, easing concerns that flows to the region will be cut off. Benchmark futures settled 0.2% lower on Friday for a fourth straight day of declines. The contract closed the week 2.8% lower, the first such loss since early November | Dec 6 | Bloomberg
Iran abandoned its short-lived pledge to stop enriching uranium close to levels needed for nuclear weapons, ramping up tension with the West just weeks before Donald Trump begins his second term as US President. The Islamic Republic has resumed production of the highly-enriched material and is capable of dramatically increasing its stockpile, according to the International Atomic Energy Agency | Dec 6 | Bloomberg
Looking ahead
OPEC+ Braces for a Much Longer Mission to Defend Oil Prices | OPEC+ is accepting that its mission to defend oil prices will drag on much longer than expected. At an online gathering on Thursday, the group led by Saudi Arabia and Russia agreed for a third time to delay the revival of halted production and slow it down. The group will unwind its current production cuts gradually from April 2025 until September 2026 — a full year later than originally envisioned. With oil demand faltering in China and supplies booming across the Americas…“OPEC+ has recognized there is no room to bring back barrels next year,” said Jorge Leon, at Rystad Energy, “The group is buying time.” Oil prices have plunged 18% since early July to trade near $72 a barrel in London. Citigroup Inc. and JPMorgan Chase & Co. have predicted that crude will keep sliding into the $60s next year. That poses a financial threat members like the Saudis, who have already been forced to cut spending on lavish economic transformation plans.
Still, this outlook could be upended by the return of President-Elect Donald Trump, who has threatened both to impose sanctions on Iran, one of the biggest members of OPEC+, and punitive tariffs on China, one of its biggest customers. If Trump renews the campaign of “maximum pressure” that squeezed crude exports from Iran, deployed during his first term to curtail Tehran’s nuclear program, that could create the space for its Middle East adversaries to raise production. If his administration focuses instead on a trade war with China, that could reduce the demand for OPEC+ crude even further. If OPEC+ nations do need to persevere with their cuts well into 2026, that’s a big challenge for members such as Iraq and Kazakhstan, which have largely failed to implement their pledged supply curbs. Some market-watchers also estimate that the UAE, eager to monetize investments in new capacity, is pumping far in excess of its OPEC+ quota. Abu Dhabi’s exports surged to a seven-year high last month, tanker tracking by Bloomberg News shows. If OPEC+ were to abandon its cuts, the market could tip into a structurally bearish phase defined by years of low prices. That’s what happened in the late 1980s, and again after the US shale oil revolution of the mid-2010s | Dec 5 | Bloomberg
What happens if a 25% tariff is placed on Canadian and Mexican oil? | On Nov. 25, US President-elect Donald J. Trump announced he would impose tariffs on all products entering the US from Canada and Mexico on his first day in office. The tariffs, if enacted, would include crude oil and refined products. The main question is where the impact of the tariff will fall: on Canadian and Mexican producers, US refiners or consumers. The tariff analysis is complex because of the mutual structural dependency between Canadian producers and US refiners. Western Canadian producers sell almost all of their crude to the US, even with the recent startup of the Trans Mountain Expansion pipeline (TMX). On the other hand, many US Rocky Mountain (PADD 4) and US Midwest (PADD 2) refiners have “hardwired” pipeline supply from Canada, with no alternative sources of supply. Canadian producers are likely to shoulder most of the tariff because they have limited ability to export elsewhere and will be competing at the margin with untariffed heavy barrels on the Gulf Coast. Since Canadian producers need to keep their US markets, a tariff would largely manifest in a wider WTI-WCS differential. The case of tariffs on Mexican crude oil is more straightforward since Mexican crude exports are entirely waterborne and therefore have the flexibility to shift their exports away from the US. One key unknown is whether Canadian crude imported into the US and then re-exported would be subject to tariffs. Prior to the startup of TMX, more than 200,000 b/d of heavy Canadian crude was regularly re-exported from the Gulf Coast. If re-exported Canadian crude is exempt from tariffs, we would expect most of the crude currently transiting to US Gulf Coast refiners via pipeline to be exported | Dec 5 | S&P
Upstream declines in South Asia boost prospects of LNG import growth and Middle East contracts | South Asia's LNG importers — India, Pakistan, and Bangladesh — will play a key role in driving global LNG demand, accounting for 22% of total demand growth through 2035 in S&P current outlook. This surge is largely due to upstream production declines and structural gas demand growth, necessitating increased LNG imports to bridge the supply gap. This raises the prospects of South Asia’s LNG demand being increasingly met by new supply from nearby Middle Eastern projects. The South Asian LNG importers are all facing significant upstream challenges. India's natural gas production is projected to decline by 60% by 2035. Pakistan's production has decreased by 26% since its peak in 2012. Bangladesh's production has been declining since 2017 with a forecasted 50% drop by 2030. These declines are driven by aging fields and delayed projects, necessitating increased reliance on LNG imports to meet growing demand. Some challenges could prevent growth both in South Asian LNG demand and contracts with Middle Eastern producers. High spot prices, exacerbated by geopolitical tensions, have led to demand destruction and a cautious approach to long-term contracts, while delays in regasification infrastructure, particularly in Pakistan and Bangladesh, pose risks to meeting future demand. Credit issues and foreign currency risks complicate long-term agreements for South Asian buyers, while the need for flexible contract terms, such as volume and destination clauses, adds complexity to negotiations, potentially hindering the establishment of stable supply agreements | Dec 5 | S&P
